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The following chart shows the returns on average equity for two companies over a decade. Returns on Average Equity Each company begins in the same spot, yet one begins an inexorable decline while the other maintains enviable performance. High and sustainable returns on equity are desirable and are one indicator of a business with a competitive advantage, so . . . The markets have been brutal for the last few weeks, with a never-ending supply of negative news from Europe overshadowing positive economic news out of the US and a strong earnings season. This kind of climate can present great opportunities for investors to find companies that are doing well but are being pummeled in the markets due to largely unrelated issues. Consider the case of Tessera Technologies, Inc (NASDAQ: TSRA), which I have written about . . . Dolby Laboratories, Inc. (NYSE: DLB) develops and markets audio and video technology. The company earns the bulk (~80% or more) of its revenue from licensing its intellectual property to OEMs and software companies. This segment is also the greatest source of profits, with a gross margin of around 97% in recent years. Uncertainty over this segment has sent the company’s share price into a tailspin, falling more than 30% since the company made this announcement . . . PMC Commercial Trust (AMEX: PCC) is a real estate investment trust (REIT) that specializes in loans to small businesses operating in the hospitality industry. Though the commercial real estate market and hospitality industries have been hurting (perhaps more than most other industries) due to the recession, PCC appears to have the makings of a compelling value opportunity due to the following: Safe asset base unlikely to be overvalued on the books Cyclically low earnings expected to . . . A reader recently passed along a link to a recent Barron’s interview with Steven Romick of First Pacific Advisors’ “contrarian value” Crescent Fund, suggesting that I might be interested in reading what Mr. Romick had to say, given our shared interests in Microsoft (NASDAQ: MSFT) and Cisco (NASDAQ: CSCO). The reader was correct, and I enjoyed reading the interview. It appears that Mr. Romick saved best for last, ending the interview with . . . |
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