Not sure if this has ever been posted, but this link is for the members who are new to Buffett's approach to investing.

http://video.google.com/videoplay?docid=-6231308980849895261


After watching the video, I have a better understanding of simple businesses with economic moat.

"Our principal asset is the Grasberg minerals district, which based on available year-end 2005 copper reserve data and year-end 2006 gold reserve data provided by third-party industry consultants, contains the largest single copper reserve and the largest single gold reserve of any mine in the world."

"The combined company has long-lived, geographically diverse reserves, totaling approximately 77 billion pounds of copper, 38 million ounces of gold and 2 billion pounds of molybdenum, net of minority interests as of December 31, 2006. Additionally, the combined company has rights to significant mineralized material that could add to reserves."

So I suppose if Copper price dropped from their current $3.XX level down to $1.00 per pound then this company is worth twice more than it's market cap and you would get the gold and molybdenum for FREE?!?!?!

Looks like our buddy Jay Schottenstein, Chairman of Board of American Eagle, has turned up again gobbling up shares of his own company.  Do a search of American Eagle on this forum and you will be quite impressed with the results and reading material that show up from the last time Mr. Schottenstein started buying shares of his own company.

Here are his most recent purchases:

Aug 22 '07 - 23,900 shares @ $23.00 = $678,488.18
Aug 23 '07 - 122,000 shares @ $24.16 = $2,947,946.98
Sep 7 '07 - 415,400 shares @ $23.97 = $9,957,137.71
Sep 7 '07 - 433,100 shares @ $24.22 = $10,488,729.24

I am a huge fan of insider buying from the head honchos who run the company.  One of my strategies is to find large (>$5 million) insider buying by the heads of the company with their own money along with the company being on the magic formula investing list.  This one fits both...

I am personally going to wait until this stock dips back to the $23.00 mark or below that level.  Last time Jay started buying up shares, the price of the stock plummeted by 10% and then took off.  I will be taking chances with this one for waiting for a good price point but I believe the current pessimism in the market will bring the price of this stock down.  Hopefully it is true... I have my fingers crossed!!

I have been learning about various forms of investing tactics and have fallen in love with value investing and insider buying.  One of the strategies that I have seen become really successful is the approach of combining stocks where insiders have been buying more than $10 million dollars of shares with their own money (no phantom stocks) and those same companies are listed in the MagicFormulaInvesting website.  Some of the stocks that fit the category in the past have been well known within this community.  Some examples I can give are AEOS, FOSL, and most currently FCX.  FCX was being bought by insiders at $55 per share and was trading at P/E ratios less than Teck Cominco was and both companies were in the MFI list.  Teck Cominco is still a part of the list but did not have major insider purchses and now that FCX has climbed to $93, I see that it is no longer a part of the list.  Luckily I was able to purchase shares of FCX at $70.  I think that when insiders are purchasing a significant amount of stock of a company and that company tends to be listed in the MFI list...it gives a slight margin of safety along with knowing that the company is somewhat of a value without doing any sort of valuations.  I am a huge fan of Mohnish Pabrai and he has openly admitted that he looks at the MFI list.  Three of his stock picks from the top of my head are apart of the list and he has made good amount of money from them.  IPS, PNCL, and currently RAIL was purchased by him and all are part of the list.

Please provide feedback on this topic as I am eager to learn about the different opinions.

Hey everyone,

I haven't posted much on this site, but here is a little info about me.  I am fairly young (24 years old) and am extremely eager to learn about the financial markets.  I have been an avid reader of this great website (Stokblogs) and many other value investing websites always trying to find something new regarding stock valuations.  I am a huge proponent of  buying undervalued securities based upon insider buying.  Theo has illustrated the advantages of buying undervalued securities with strong insider buys.  As many of you know the great Peter Lynch was quoted: "Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise".  I don't think this is true at all times because of phantom stocks and newly issued shares.  I am heavily in favor of Planned Purchases or Open Market Purchases by C level officers or directors with ownership of a large percentage of common shares.  I try to avoid purchases made regarding phantom stocks, newly issued securities, purchases for trusts, 401k, IRA etc... Please read all SEC Form 4 filings when investing based on insider purchases or sales.  I wish to help and hope to recieve feedback and insight from fellow members of this website regarding my findings.

Now that you guys know a bit about my philosophy I want to introduce you to my analysis of a company I believe the market has overreacted upon and an insider shows a strong indication of this belief.

NewMarket Corporation is the parent of Afton Chemical Corporation and Ethyl Corporation.  As a parent company, NewMarket provides the leadership and guidance for these two companies.  Afton Chemical and Ethyl Corporation manufacture, develop, and distribute fuel additives that help improve fuel performance and efficiency.

Recently, the company had a press release for the earnings regarding the year 2006 Q4 and full year 2006.

"In December 2006 in a tender offer, we purchased $149.75 million of the outstanding $150 million aggregate principal amount of our 8.875% senior notes due 2010. As a result of the transaction, we recognized a loss of $11.2 million ($7.0 million after tax) on the early extinguishment of debt for both the twelve months 2006 and fourth quarter 2006. This loss included the write-off of unamortized deferred financing costs of $2.6 million and cash paid associated with the purchase of $8.6 million. Subsequently in December 2006, we issued $150 million aggregate principal amount of 7.125% senior notes due in 2016."

This one time $11.2 million cost reduced the Net Income of the company by 59% from Q4 of 2005.  The stock took a beating based on this news and lost close to 15% value in one day.

Now the reason's why I think the market has overreacted and think this stock will bounce back:

1) Company has a pretty strong balance sheet and good valuations compared to other companies in it's industry.
    See - Analysis.JPG  -   (I created this on an excel spreadsheet where I input values and the formula's calculate the ratios that are most important in my analysis.)  I can provide more information upon request regarding my computations.

2) Insider Purchase by Chairman Of The Board and Director Bruce C Gottwald.
    See - Insider Purchase.JPG  (This JPG is not entirely accurate so please review Form 4 filings.)

Bruce has been a director since 1962 and Chairman of the board since 2001.  He Owned 1,580,335 shares before February 6th, 2007 and purchased 200,000 shares ranging from $46.50 - $50.00 the next two days.  This makes him owning 10.3% of the outstanding shares of the company.  He has a lot to lose if this company does not prosper.

Bruce has made other market purchases in Feb, March, and August of 2006 also and those have shown relatively good returns.

3)  The earnings per share have increased each year since 2002!  If this debt buyback is just a one time cost and the EPS has increased in 2006 compared to 2005, imagine the increase in the stock price if this trend continues and 2007 earnings beat 2006.  I beleive this company can increase earnings for another year based on the industry they are in.

4)  Congress is controlled by the Democratic party now and they are advocating effiecient fuel performance.  They have been proposing adding additional fuel additives such as ethanol to gasoline and NewMarket's patented fuel enhancing additives may help future sales.

The only potential downside to this company is that they are going through some legal proceedings that are described in the most recent 10-Q report.  It does not seem to be a huge deal since they claim they are fully insured based upon the costs that they have estimated for these trials.  Please read all the reports carefully before considering NEU as a possible investment.

Happy Investing Everyone
-MPatel

P.S.  Theo, Can you please tell me how to implement the image files as an image in the blog entry and not as an attachment?  The files are stored on my computer hard drive.  And also how do I add a link to another website?