Robert A. Olstein is the Chairman and Chief Investment Officer of the Olstein Financial Alert Fund (OFALX). He is considered to be an expert in corporate financial disclosure and reporting practices. In 1971, he co-founded the "Quality of Earnings Report" service, which pioneered the concept of using inferential financial screening techniques to analyze balance sheets and income statements to alert institutional portfolio managers to positive or negative factors affecting a company's future earnings power and value of a company's stock. Since inception in 1995, his Olstein Financial Alert Fund had returned an annualized 13.82% through the end of 2007.
Investing Philosophy:
Robert Olstein selects stocks by looking behind the numbers. He emphasizes a detailed look behind the numbers of a company's financial statement to assess the company's financial strength and assess potential downside risk. He believes that the Fund’s objectives are best met by a “defense first” approach – an approach aimed at minimizing investment errors as opposed to finding companies with the highest appreciation potential without regard for downside risk. To qualify for his selection, a company must generate more cash flow than necessary to sustain the business, avoid aggressive accounting practices, demonstrate balance sheet fundamentals that are consistent with his defense first approach, and be selling at a discount to the private market value. Robert Olstein sells a stock when the stock appreciates to his appraised value.
(GuruFocus, October 13, 2009) Investment Guru Robert Olstein had an interview with Fox Business News. YTD his fund is up 30%, beating the S&P 500 by about 10%. More...
Corporate turnarounds are among the most intriguing of investment opportunities: They offer both the potential of market-beating performance and the satisfaction thatcomes with backing an underdog and then seeing it prevail—of finding value where others did not. More...
The credit crisis will eventually end, housing prices will reach a trough and oil prices cannot continue to climb at the current rate. It is our opinion that oil is in the process of topping for many years to come, housing should bottom within the next six months (but take a few years to turn up again), the financial crisis is in the final innings and the credit markets will return to normal within the foreseeable future. More...
Bob Olstein is considered to be an expert in corporate financial disclosure and reporting practices. In 1971, he co-founded the "Quality of Earnings Report" service, which pioneered the concept of using inferential financial screening techniques to analyze balance sheets and income statements to alert institutional portfolio managers to positive or negative factors affecting a company's future earnings power and value of a company's stock. Since inception in 1995, his Olstein Financial Alert Fund had returned an annualized 13.82% through the end of 2007. More...
How does Gurus read financial reports? Robert Olstein is a CPA-turned money manager. The key to his success is his capability of looking behind the numbers. Robert Olstein detailed how he looks behind the numbers with financial reports. More...
The quality of earnings is critical to the valuation of a company. CPA turned money manager Robert Olstein gave his top 20 quality of earning alerts, and how he looks through the numbers and find out the quality of earnings. It works for him. What can we learn from it? More...
Accountant turned money manager Robert Olstein does not talk to executives, he looks at the numbers instead. He has achieved a ten year annualized return of more than 15%. These are his buys and sells during the first quarter. Robert Olstein owns 88 stocks with a total value of $1.8 billion. More...
Consider the efforts of Robert Olstein, the mutual fund manager and accounting expert who runs the $1.7 billion Olstein All Cap Value fund, formerly the Financial Alert fund. In recent years, he has waged a letter- writing campaign on executives serving companies whose shares he owns, advising them on how to enhance their performance. More...
On Wall Street, common sense and intelligence can easily be replaced by greed, fear, apathy, anger, etc. generated by the irrational behavior of investment crowds. These emotions and behavior stay in the same direction for long periods of time until and if some easily understood “in your face” catalyst disproves the misperceptions of the crowds. However, the emotional thinking of crowds creates opportunities for value investors. Unfortunately, in most circumstances, periods of pain are attached to such opportunities. When we believe the crowd is wrong because of misperceptions or short-term thinking (and they are not always wrong and thus we need to do our homework), the crowd benefits either on the upside by continuing to buy or on the downside by continuing to sell until a catalyst appears which changes the direction of crowd thinking. Sometime we experience wobbly knees waiting for a catalyst. More...
Finish Line (FINL) is a mall-based retailer offering men’s, women, and children’s brand-name athletic, lifestyle, and outdoor footwear. FINL has done an outstanding job of expanding its franchise over the last ten years despite many fashion trends and cycles. FINL sales for the last 12 months ended August 2006 were $1.3 billion, more than $1 billion higher than in 1996, and earnings power increased from $0.40 per share in 1996 to over $1.25 per share today. Yet, the stock languishes at the same price it was ten year ago. Apathy and negativity, two emotions that can create value, currently surround the company. We would love to tell you that the company is running on all its cylinders but it is not. Same store sales turned negative in the last year, markdowns increased, gross profit margins declined, and Wall Street has run for the hills. FINL recently traded at under $10.00 a share, down from a high of over $22.00 a share in 2005, upon reporting poor third quarter results. As value investors, we always look at stocks that experience price declines similar to FINL and ask the question, “Is this market decline a fair assessment of value, or is the market overly negative?” More...
Gap Stores (GPS) is an example of a stock surrounded by apathy and disgust which was recently added to our portfolio. GPS has similar characteristics to McDonald’s and Hasbro when we purchased these companies many years ago. Apathy and investor disgust created by consistent earnings and sales disappointments have resulted in the stock selling at the same price it traded at in 1997. Yet, between 1997 and 2005, earnings and sales have more than doubled. The stock peaked in the late 1990’s near $50.00 a share when the company earned $1.26 a share. We believe prospects are better now than they were in the late 1990’s, although we are not projecting a move back to $50.00 a share in the next few years. The company has adopted a back-to-basics strategy, consisting of closing down unprofitable stores, simplifying the product line, and de-leveraging the balance sheet (all actions focused on improving operating margins and generating excess cash.) In addition, over the past three years, GPS has moved from a net debt position to a net cash position of approximately $3.00 per share. The excess cash provides management with the leeway to fully execute their strategy, repurchase the company’s More...
Hasbro: Apathy and disgust also surrounded Hasbro (HAS) stock in 2002, which provided the Fund with an opportunity to establish a position at an average price of approximately $14.19 a share HAS last reached the $14.00 a share level in 1992. Over the ensuing ten years, earnings per share never grew past the 1992 levels. However, free cash flow moved up by 30% (from $1.00 per share to $1.33 per share). In 2002, we determined that free cash flow was above reported earnings, which was due to a deviation between excess depreciation and amortization and capital expenditures. More...
McDonald’s The Fund purchased McDonald’s (MCD) in 2002 at an average price of approximately $17.50 a share. MCD last sold at about $17.50 a share in 1995 and reached a peak in the high 40’s in 1999. We were able to purchase MCD at the same price it had sold seven years earlier, despite the fact that over the sevenyear period earnings increased from $0.99 a share to $1.32 a share, sales increased from $10 billion to approximately $15 billion and book value moved from $5.36 a share to $8.11 a share. More...
Robert Olstein buys Phelps Dodge Corp., Cheesecake Factory Inc., Univision Communications Inc. etc., sells Abercrombie & Fitch Co., Tupperware Corp., PerkinElmer Inc., Diebold Inc. etc during the 3-months ended 09/30/2006, according to the most recent filings of his investment company, Olstein Financial Alert Fund. Robert Olstein owns 58 stocks with a total value of $1.5 billion. More...
Although Marsh McLennan stock has declined since our initial purchase, we believe that the company’s capable management team is making long-term decisions that should result in future free cash flow exceeding $2.00 per share. At the present time, there are no indications that our future expectations are not achievable. Marsh McLennan is already achieving free cash flow and the balance sheet has begun to improve. Our valuation remains above current prices. We have continued to add to our position, despite the short-term negativity surrounding the stock that has resulted in the stock declining below our initial purchase price. Our discipline dictates that we usually add to positions as stock prices fall further from our valuation as long as our future free cash flow expectations are continuing to support our valuation. Thus, as the probabilities of success increase (market price falls further from our estimate of private market value), we increase our positions. As the spreads narrow, we decrease our position. More...
When we originally purchased Pier One, at what we believed were discount prices created by an initial miss of product trends, the company had material excess cash balances and was still generating excess cash flow (although diminished). We believed the out of favor product line was temporary, and if the company was successful in turning around its merchandise selection, a return to normalized margins could create excess cash flow potential of over $1.50 per share on a stock we purchased for an average cost of $14.76 a share between June 2004 and September of 2005. The company’s balance sheet had net cash of $100 million with no debt, and even though earnings were below former levels, the company was continuing to generate excess cash flow. The balance sheet and cash flow metrics provided the company with a financial cushion while it sought to redesign its merchandise selection and return earnings to former levels. As Pier One continued to struggle to find the right merchandising mix, excess cash flow turned negative, the excess cash margin was being drawn down and our margin of safety was being reduced. We began to worry about both the company’s ability to produce free cash flow More...
How do we determine when a stock is falling whether we believe it is temporarily out of favor or has turned into a value trap? There are two main risks that we assess when valuing a company. Financial risk relates to how a company is capitalized (debt ratios, excess cash, etc.), the realism of its reporting practices, and most importantly its ability to withstand bad times without having to resort to short-term solutions that are not in the long-term interests of the company. Operating risk relates to the accuracy of future estimates of a company’s ability to produce free cash flow from its basic business. Thus, the accuracy of our valuations is based on our ability to accurately predict future excess cash flow. More...
Robert Olstein buys Abercrombie & Fitch Co., Apple Computer Inc., Pitney Bowes Inc., Nash Finch Co., Hugoton Royalty Trust, sells Patterson-UTI Energy Inc., Gannett Co. Inc., Plantronics Inc., Tommy Hilfiger Corp., NCR Corp., Phelps Dodge Corp., Technitrol Inc., Mattel Inc., FTD Group Inc., AVX Corp. during the 3-months ended 06/30/2006, according to the most recent filings of his investment company, Olstein Financial Alert Fund. As of the end of July, the Olstein's fund returned -0.73% this year. These are the details of his purchases and sales. More...
Rober Olstein: One stock in our fund which I'd like to talk about is Xerox. Xerox is a company we identified early as paying down a lot of debt. Plus they have a good leader in [Chairman and CEO] Anne Mulcahy and great free cash flow. More...
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