Tag Archives: understand
The Market Doesn’t Understand This Stock Right Now
The market gets it right about 90% of the time. That's been my experience with stocks that take a big hit or post a big rally. The other 10% of the time: the market reaction appears simply misplaced, and investors need to be patient and wait for logic to eventually prevail.
I've been thinking about that as I review quarterly results for Zipcar (NYSE: ZIP), which is a member of my $ 100,000 Real-Money Portfolio. The car-sharing company posted a solid quarter, issued (likely conservative) 2012 guidance that is roughly in-line with current forecasts, and the stock got crushed on the news, falling a stunning 15%.
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This is a stock that calls for a level of meta-analysis, and not just plain old analysis, divining what investors are thinking rather than the business this company is actually doing.
In recent weeks, a few analysts issued research updates that predicted that Zipcar would post a strong quarter. For example, Needham & Co. issued a report last month, noting that "Based on our proprietary utilization checks, we believe Zipcar's 4Q11 revenue should exceed expectations."
How to understand Teak Investments
Teak Investments – An Intransparent Market
Teak is a prime tropical hardwood and requires 20 to 25 years to grow in a commercial forestry plantation. The plant origins from Asia but today teak plantations can be found in various tropical climates such as Central and South America, Asia and Africa. Teak investments in a plantation are said to be one of the most attractive investment opportunities in the long term, avoiding deforestation of natural prime forest and producing investor returns in excess of 10% and thus are claimed to beat the stockmarket.
When looking at concrete available teak investment opportunities, the individual investor is faced with a jungle of different providers and ‘Best Buy’ options. Doing a proper comparative analysis is difficult, requires too much time and also there is a lack of data making it very hard to actually understand and evaluate the available options. For the non-expert it is nearly impossible to compare the various teak investment offerings and shortly the investor is lost and faced with the only option to trust in whatever he was told.
IRR
Most teak investments highlight the return potential of such investments and use the Internal Rate of Return (IRR) as best proxy (or sometimes also referred as the Return on Investment ROI). The IRR is a subjective forward-looking estimate, derived from expected cash flows. Showing a stream of cash in and out flows does not necessarily mean the financials are put in stone, in contrast those estimations are heavily dependent on the underlying assumptions. For teak, only a few assumptions already define most of the cash flows:
- Price inflation estimate
