Archive for April, 2009

First Quarter 2009 Quarterly Review and Outlook

With the launch of our new website, my brilliant web designer (Buck Sharp) imposed some lofty goals onto the marketing of Alberty Financial. We are supposed to blog and tweet and fb and link-in. AND, we are supposed to do it ALL of the time. I thought he was a bit overboard and maybe just exuberant about his job? However, I now see the importance of social media and will always be grateful he pushed me off that cliff.

As instructed, I put the tagline on my email to sign up for my blog. And here comes the confession, I had not tried it myself! In my defense, I did sign up for the email version of the blog which I guess is technically the same thing. But, I was intimidated by the RSS feeder (just because I did not know what it was) and was even too afraid to click on the button on our website. Silly, I know. I finally tried it today and could not be more embarrassed by how easy it was. So, if you are like me and hiding from feed burners, follow these simple instructions and you will be freed.

Click on the button that says “Subscribe to your favorite reader”

Then choose the web based news reader you like best. I use Google for most things related to the internet, so I clicked on the Google button.

And right before my eyes, the Alberty Financial blog appeared on my Google page.

OK, so I’m laughing at myself a little about being so intimidated. I know Buck and the other techies out there are either rolling on the floor…lol or horrified that there are people like me out there….and even worse that I’ve gone public with it.

But, I KNOW that I am not alone…so I confess: It took me four months to sign up for my own blog in a news reader.

Tonight, Katie Couric covered the squeeze that credit card companies are putting on their customers with higher interest rates, more fees, higher minimum payments and lower credit lines. Just when customers need credit as a safety net the most, the credit card companies are leaving them unprotected. Our troubled economy is proving to be a triple threat with lower home values, lower investment accounts and now less access to credit.

Some local banks have done a fantastic job of weathering this storm and are still lending. Fortunately, local banks still see their customers as individuals and have the ability to lend in a way that big banks may be limited. Local banks are not loaning recklessly, so you still have to be a good fit. It is their conservative and customized (some might even say old fashioned) approach that has left these financial institutions at the top of the pack.

If your bank is in good standing, (Bankrate.com) consider calling your banker for a credit card alternative.

Safe Practices of IT Computing

Getting Smart About Annuities
by Anne Tergesen and Leslie Scism

Jeff Immelt, chief executive officer of General Electric Co., spoke at the annual Business for Social Responsibility conference last November. The association comprises about 250 companies that are looking for more sustainable ways to do business. Immelt was quoted as saying, “we are in an emotional, social and economic reset.”

The term “reset” resonated with me as it applies to our community and the world at large. Rather than a reset, we really have come full circle. Hitting the reset button is like starting over, but haven’t we learned from our experiences in the recent past? Shouldn’t we take what we have learned and apply a modern approach to tried and true methods of the past? The mere existence of a conference geared toward social responsibility is evidence that our global community can apply what has been learned and move forward in a positive direction.

An everyday example of this movement clearly is demonstrated at the grocery store. Despite the added expense and the challenges of arguably one of the toughest economic climates, consumers still are buying organic products. On a local level, the demand for organic products is so prevalent that Athens Locally Grown emerged and answered the call.

Athens Locally Grown is a group of nearly a hundred small farms and gardeners located in and around Athens. Each grower farms his or her land using strict standards to ensure that everything produced is chemical-free. While not a true cooperative, Athens Locally Grown uses cooperative efforts to achieve steady and dependable means of supplying the highest quality produce and other products. Athens Locally Grown works to find new and innovative methods to preserve greenspace, protect our natural resources, support our local economy, provide meaningful work and return to a more self-sufficient community life.

Being socially responsible, though slightly more expensive on the front end, is an investment that pays strong dividends over the long term. As we come full circle, we will purchase goods and services with a modern approach. If we apply the wisdom of experience to protect our Earth, we ultimately will protect our health and our wealth as a nation and as individuals.

• Laurel S. Alberty, CFP, is president of Alberty Financial Planning Services Inc. in Watkinsville.

Originally published in the Athens Banner-Herald on Sunday, April 19, 2009

AACA Serving Up A Cure Tennis Tournament

JRF High Hat Tea Party and Silent Auction

Luka’s Fund Spring 2009 Newsletter

Reading Between the Lines

It’s that time of the year again, when investors start receiving colorful annual reports from companies in which they own stock. As I start opening these envelopes, I notice subtle little changes. They are smaller and thinner. Maybe this is to cut down on costs, or perhaps the management has very little cheer to share with us this year.

I like to read the annual reports, because they give me a picture of the health of the company, and they help me determine whether a company is a good fit for the investment philosophy I pursue on behalf of my clients.

I turn first to the statement of financial position to look at the changes in the cash on hand, and at the debt structure to see if there are any big changes in the levels year over year. Next I look at the statement of earnings to see changes in sales/revenue and costs — which eventually gets us to the net earnings. Because of course, in the end, profitability is the key indicator of health of a company.

As I have discussed in previous newsletters, I want to buy good quality companies. There have been “broad” definitions of quality when describing a company, but I believe a quality company is one that has a high return on capital.

Buying a share of a good business obviously is better than buying a share of a bad business. One way to do this is to buy shares of a business that can invest its own money at high rates of return rather than a business that can only invest at lower ones. I have found that Value Line gives me a clean snapshot of companies for the past 15 years. Within the snapshot, I can zero in on the return on capital line and see the trends for the companies (good or bad).

For instance, the January 23, 2009 publication of Value Line gives a 15-year “snapshot” of the General Electric Company. It shows that in 2000, the year that the stock multiple peaked at 40.1 times earnings, the company had a return on capital of 9.6% and long-term debt of $82.132 billion. At the end of 2008, the multiple had been reduced to 14.7 times earnings — possibly because they had more than $345 billion in debt with a return of capital of only 4%. In other words, they leveraged their finance unit up during the good times, but with our “new new economy” they are literally choking on all their debt.

The Financial Times reported on March 30 that GE has started to see the first “glimmers of hope” in the world economy. GE points to positive data, including the recent rise in the Baltic dry shipping index, which acts as a proxy for global trade, and increasing housing sales in the United States in February. We will have to wait and see if these “glimmers” become beacons of hope.

On the other hand, look at the financials of the McDonald’s Corporation. Over the past decade they have increased their dividend eight-fold (I want my cheese!) and repurchased more than 25% of their stock. Since 2002, they have almost doubled their return on capital. (That’s a lot of Big Macs!)

I also stay with companies that are generating free cash flow. This allows them all sorts of flexibility — such as dividend increases, buying back stock, debt payment — and it also allows them to make “strategic” acquisitions. Exxon Mobil is a classic example of a company with tremendous financial flexibility. Back in 1999, Exxon issued more than 2 billion shares to purchase Mobil Oil, the No.2 U.S. oil company. Since that time, Exxon has retired all 2 billion shares and more while increasing the annual dividends to stockholders because of the company’s strong free cash flow.

So when someone tells you to invest your money in quality companies, ask about the financial returns of these companies and whether they pay a dividend — especially important because a third of total equity-market returns since the late 1920s has come from dividends rather than share-price gains.

There are many good “quality” companies that don’t need to finance and leverage their balance sheets to produce healthy profits for their stockholders. A little research and reading between the lines will help identify those companies.

Garry K. Schaefer
Atlanta, Georgia
April 7, 2009