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    Stock Idea Series

    Every now and then an idea strikes me, and I wonder if it would be worth trying.  Here’s one: much of the stuff that passes for analysis of stocks on the web leaves me cold.  It feels like a computer spit out a few ratios, with standard verbiage.

    What if I chose some stocks at random, and analyzed them?

    I set up a random selector for 10 stocks relative to their market capitalization.  My first group of 10 came out as follows:

    1. Sun Life Financial Inc. (USA)
    2. Vodafone Group Plc (ADR)
    3. ORIX Corporation (ADR)
    4. C.H. Robinson Worldwide, Inc.
    5. Nippon Telegraph & Telephone C
    6. Ms&Ad Insurance Group Holding
    7. National Grid plc (ADR)
    8. Greenhill & Co., Inc.
    9. Carnival Corporation
    10. TTM Technologies, Inc.

    I’ve heard of #10, but don’t know what it does.  I have not heard of #6, despite my knowledge of the insurance industry.  The other 8 I know something about.  My inclination would be to go for the ones I know nothing about.  Odds are there is no coverage of them at all, at least in the US.  I would likely choose #6.  So what is it?

    MS&AD Insurance Group Holdings, Inc. is a Japan-based holding company. Through its subsidiaries and associated companies, the Company operates four business segments in both domestic and overseas markets. The Domestic Non-Life Insurance segment is engaged in non-life insurance businesses. The Domestic Life Insurance segment is engaged in the life insurance businesses. The Overseas segment is engaged in the overseas related businesses. The Financial Service and Risk Related segment is involved in two divisions. The financial service division is engaged in the asset management, financial security, 401 k, alternative risk transfer (ART), personal loan and venture capital businesses. The risk related service division is engaged in the risk management, nursing care and asset evaluation businesses, among others. As of March 31, 2011, the Company had 121 subsidiaries and 28 associated companies.

    It’s not a small company.  The market cap is $11 billion.  This one seems complex — looks like fun. 

    Run the random selector again, and I get this:

    1. Gladstone Commercial Corporati
    2. Alliant Techsystems Inc.
    3. Cemex SAB de CV (ADR)
    4. 3D Systems Corporation
    5. Canandaigua National Corporati
    6. Goodyear Tire & Rubber Company
    7. PHI Inc.
    8. Royal Bank of Canada (USA)
    9. Edison International
    10. Rayonier Inc.

    I know something about 7 out of 10. Numbers 1, 4, and 5 are a mystery to me, and respectively, they are a REIT, a 3D printer company, and a small bank holding company.  I would probably choose #4 for the analysis, because it is more fun for me to analyze a nonfinancial company.  Maybe I should choose differently because I understand financials better than many.  Advice is requested.

    I filter out companies with less than $10 million of market cap, and CEFs & ETFs.  Now, I’m not sure how much time it would take me to write these out.  If it’s too much, I won’t do it.  But if I did do it, how much interest would you have?

    Now, the natural inclination is for those with some interest to write me, and those with no interest to be silent.  I’d really like to hear from those with no interest.  Regardless, let me know in the comments section.  Thanks.

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    David J. Merkel, CFA, FSA — 2010-present, I am working on setting up my own equity asset management shop, tentatively called Aleph Investments. It is possible that I might do a joint venture with someone else if we can do more together than separately. From 2008-2010, I was the Chief Economist and Director of Research of Finacorp Securities. I did a many things for Finacorp, mainly research and analysis on a wide variety of fixed income and equity securities, and trading strategies. Until 2007, I was a senior investment analyst at Hovde Capital, responsible for analysis and valuation of investment opportunities for the FIP funds, particularly of companies in the insurance industry. I also managed the internal profit sharing and charitable endowment monies of the firm. From 2003-2007, I was a leading commentator at the investment website RealMoney.com. Back in 2003, after several years of correspondence, James Cramer invited me to write for the site, and I wrote for RealMoney on equity and bond portfolio management, macroeconomics, derivatives, quantitative strategies, insurance issues, corporate governance, etc. My specialty is looking at the interlinkages in the markets in order to understand individual markets better. I no longer contribute to RealMoney; I scaled it back because my work duties have gotten larger, and I began this blog to develop a distinct voice with a wider distribution. After three-plus year of operation, I believe I have achieved that. Prior to joining Hovde in 2003, I managed corporate bonds for Dwight Asset Management. In 1998, I joined the Mount Washington Investment Group as the Mortgage Bond and Asset Liability manager after working with Provident Mutual, AIG and Pacific Standard Life. My background as a life actuary has given me a different perspective on investing. How do you earn money without taking undue risk? How do you convey ideas about investing while showing a proper level of uncertainty on the likelihood of success? How do the various markets fit together, telling us us a broader story than any single piece? These are the themes that I will deal with in this blog. I hold bachelor’s and master’s degrees from Johns Hopkins University. In my spare time, I take care of our eight children with my wonderful wife Ruth.


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