Ronald Muhlenkamp

Ronald Muhlenkamp

Last Update: 02-13-2015

Number of Stocks: 71
Number of New Stocks: 5

Total Value: $499 Mil
Q/Q Turnover: 9%

Countries: USA
Details: Top Buys | Top Sales | Top Holdings  Embed:

Ronald Muhlenkamp Watch

  • Ron Muhlenkamp - First Quarter 2015 Letter

    By Anthony Muhlenkamp, featured in Muhlenkamp Memorandum Issue #113


    Tony had some ideas and observations he wanted me to share, but I thought it made sense for him to tell you directly in this edition of our Quarterly Letter. -— Ron

      


  • Ron Muhlenkamp - Fourth Quarter 2014 Letter

    By Ron Muhlenkamp


    My first draft of this letter, which I wrote three weeks ago began with:

      


  • ADS: Earnings Keep Growing, But the Price Remains Range-Bound

    You may not know the name, but this company likely knows you, or at least the details of your spending. It gathers all kinds of data about our buying, works with and makes sense of that information, and then passes it along to its clients. Those clients, in turn, can personalize the offers they make to us in retail and other arenas.


    Alliance Data Systems Corporation (ADS) deals in credit cards obviously, loyalty cards, and more. It’s part of the new world of digital or data marketing that has made huge strides in the past few decades.

      


  • Ronald Muhlenkamp Buys 5 New Stocks in Q4

    Ronald Muhlenkamp (Trades, Portfolio) founded Muhlenkamp & Company in 1977, which today remains a family owned and operated firm. Muhlenkamp is the portfolio manager of the Muhlenkamp Mutual Fund, with his son Jeffery as co-manager.


    The fund’s strategy is to find highly profitable companies as measured by the ROE, that sell at discounted prices according to the P/E ratio.

      


  • 5-year lows: Rex Energy Corp, Liquidity Service Inc, Petroquest Energy Inc, MVC Capital Inc.

    According to GuruFocus' list of 5-year lows, these Guru stocks have reached their 5-year lows: Rex Energy Corp, Liquidity Service Inc, Petroquest Energy Inc, MVC Capital Inc.


    Rex Energy Corp (REXX) Reached $4.73

      


  • Ron Muhlenkamp - Third Quarter Letter 2014

    Ron Muhlenkamp


    Ron's Quarterly Letter July, 2014.

      


  • Ron Muhlenkamp - Second Quarter Letter 2014

    Ron Muhlenkamp


    Most of the economic and market trends we’ve been discussing for the past few years remain in place.

      


  • Annual Letter from Ron Muhlenkamp 2013

    January 6, 2014


    Dear Clients and Shareholders:

      


  • Ron Muhlenkamp Fourth Quarter Letter

    As reported, we had a good year in 2013.



     

      


  • Thrifting for Billionaire Bargains 47% Off or More Since Gurus Bought

    Thrifting for billionaire-qualified buys can provide some level of assurance and indicate a probability that these companies could be finds.

    The GuruFocus Guru Bargains feature reveals that these four stocks are 47% or more off since a number of billionaires bought them in the second quarter of 2013. Consider the value of knowing that the following billionaires remain invested in these stocks even after taking the sting.  


  • Surfing for Billionaire Bargains

    Here’s an update on four companies using advanced and niche technology and science. These companies are backed by billionaire investors. The company stocks selected have decreased by 20% or more since billionaires bought them in the second quarter of 2013.

    First up is a solar power company, First Solar:  


  • Ron Muhlenkamp - Q1 2013 Quarterly Memorandum

    Quarterly Letter

    Ron Muhlenkamp

    [i]  


  • Guru Stocks at 52-Week Lows: AAPL, EC, EMC, BIDU, APA

    According to the GuruFocus list of 52-week lows, these stocks have reached their 52-week lows.

    Apple Inc. (AAPL) Reached 52-Week Low of $423.2  


  • Guru Stocks at 52-Week Lows: APPL, BIDU, ABX, GG, NEM

    According to GuruFocus list of 52-week lows, these Guru stocks have reached their 52-week lows.

    Apple Inc. (AAPL) Reached the 52-Week Low of $431.8  


  • Weekly Guru Bargains Highlights: PANL, THRX, ZNGA, LORL, AMRN

    According to GuruFocus updates, these stocks have declined the most since Gurus have bought.

    Universal Display Corporation (PANL): Down 24% Since Ronald Muhlenkamp Bought in the Quarter Ended on 2012-09-30  


  • Muhlenkamp - Transcript of Q3 Conference Call with Investors



  • Ron Muhlenkamp Q4 Letter

    For over a year, we’ve been discussing Europe, China, and U.S. Politics as the major drivers of the markets. On September 7, 2012, we published a Market Commentary, headlined “Threat of European Banking Crisis Recedes.” In it, we discuss the Outright Monetary Transactions (OMT) program, introduced by the European Central Bank (ECB). We think this program makes credible the ECB’s promise to do all it can to keep the Eurozone together. And we believe this action mitigates some of the risk of investing in U.S.-based international banks. As for China, we continue to monitor the country as its leaders turn their economic focus from building infrastructure toward ‘building the consumer.’ We don’t think that China has turned the corner.

    We think some of the uncertainty surrounding U.S. levels of taxation and regulation will be resolved when we find out which direction the voters choose for the U.S. on November 6. In the meantime, on September 13, in addition to keeping short-term interest rates near zero until mid-2015, the Federal Reserve announced a third round of Quantitative Easing (QE 3). The Fed has stated it will purchase $40 billion worth of mortgage-backed securities every month until unemployment declines to a reasonable level. We don’t think these purchases will help lower unemployment much, and contend that keeping interest rates low is hurting the retirees/savers in this country. Further, past attempts to reflate the housing market and spur the economy through record-low interest rates and quantitative easing have not been very effective. (Mortgage lending in 2011 declined to its lowest level in 16 years, according to a report from federal regulators.) What we do see is that the Fed’s actions are boosting the equity markets. The DJIA (Dow Jones Industrial Average) hit an annual high after the Fed’s announcement.  


  • Ron Muhlenkamp Memorandum: Third Quarter

    After returns of 8%-12% (DJIA and S&P 500 Index) in the first quarter, the market declined 2%-3% in the second quarter, netting year-to-date returns of 6%-9 percent.

    The same three topics that we’ve been talking about for almost a year continue to drive the markets: Europe, China, and the United States—with the current emphasis on Europe for debt and equity markets, and China for commodity markets. Let’s review what’s taking place.  


  • Ron Muhlenkamp - July 5, 2012 Market Commentary

    What’s driving the markets lately? As near as we can tell, the same three topics that we’ve been talking about for almost a year: Europe, China and the U.S. — with the current emphasis on Europe for debt and equity markets, and China for commodity markets. We’ll start with Europe.

    Muhlenkamp20120705 Mkt Commentary  


  • Muhlenkamp Semi-Annual Investment Seminar Presentation and Video

    At their semi-annual Investment Seminar Presentation Ron Muhlenkamp and his Investment Analysts presented The Market DriversEurope, China and U.S. Politics: Recent Changes and Impacts to an audience of clients, shareholders and prospects.

    Here is the link to the video:  


  • Ron Muhlenkamp’s Favorite Stocks are Companies He Thought He Would Never Own

    - Thinks China stepped on the brakes about a year ago so he expected a slowdown  


  • Top Buys in the Last Quarter from Ronald Muhlenkamp

    Rondal Muhlenkamp founded Muhenkamp & Company Inc. in 1977 and since then he has served as its president. The company manages accounts for individuals and institutions.

    The business is committed to making money for its customers within the bond and stock markets. Generally, the company prefers stocks to bonds because they prefer to own than to lend. Its strategy is based on finding good companies with sound balance sheet, lots of cash and doing useful things.  


  • Muhlenkamp December 5, 2011 Market Commentary - Fear of Recession Largely Over

    Below is the latest market commentary from Ronald Muhlenkamp. In it, he comments on why he believes fears of recession have subsided due to improved data, why demand out of China will increase, and how the potential fallout from the European crisis will affect investing in the U.S.

    MulhenkampDecember 5 2011 Market Commentary   


  • Muhlenkamp and Company - October 31 – Market Commentary

    I read the most recent market commentary from guru Ron Muhlenkamp that is included below. I thought this portion was especially interesting:

    As the concerns about the U.S. economy and China have diminished, we have put some cash back to work, but still have a bit over 15% in cash. We anticipate putting more cash to work when it becomes apparent that the Chinese Central Bank stops constricting its money supply, and we continue to watch Europe.”  


  • Ron Muhlenkamp Q3 Letter

    http://www.muhlenkamp.com/investment/memorandum/issue_100#section_1

    Stock prices were down in the third quarter. Lack of confidence in European government finance and in the U.S. government actions—combined with signs of slowing in China—drove down prices of stocks and, by the quarter end, of commodities, as well. During the quarter, we consistently sold cyclical stocks and held increasing amounts of cash, but it wasn’t enough to protect us.  


  • Ron Muhlenkamp on Bloomberg – Federal Reserve Actions Are Counterproductive

    My favorite comment. Muhlenkamp is looking for companies with a better balance sheets than the U.S. government. But that is a pretty low bar these days.

      


  • Helix Energy Solutions President and CEO Buys 67,000 Shares

    President & CEO of Helix Energy Solutions Group (HLX) Owen E. Kratz bought 67,000 shares on 06/17/2011 at an average price of $14.9. The total transaction amount is $998,300. Helix Energy Solutions Group Inc. is a marine contractor and operator of offshore oil and gas properties and production facilities. Helix Energy Solutions Group has a market cap of $1.67 billion; its shares were traded at around $14.83 with a P/E ratio of 21.53 and P/S ratio of 1.39.

    Owen Kratz is the president and CEO of Helix. He was named executive chairman in October 2006 and served until February 2008 when he resumed the position of president and CEO. From 1982 to 1983, he owned an independent marine construction company. He was also superintendant of various diving companies. He graduated from the State University of New York with a bachelor’s degree in science.  


  • Ronald Muhlenkamp Buys AT&T Inc., State Street Corp., Abbott Laboratories, Sells Cemex S.a.b. De C.v., The Home Depot Inc., Legg Mason Inc.

    Ron Muhlenkamp’s fund recovered a lot of loss in 2007 and 2008. Now he is worried that the current government policies penalize employers and it is hard for investors to find companies that can thrive despite these penalties. This is the Q4 portfolio update of Muhlenkamp Fund.

    Ronald Muhlenkamp owns 52 stocks with a total value of $737 million. These are the details of the buys and sells.  


  • Fortune Roundtable: Experts Recommend Schlumberger, CocaCola Company, Colgate Palmolive Company, International Business Machines, Hewlett Packard Company, Time Warner

    Fortune Magazine had a roundtable of experts discussing next year’s economy and stock market. A full write-up can be found here.

    Introduction to the experts via Fortune:
    Susan Kempler is a portfolio manager for the giant TIAA -CREF organization, which invests nearly $400 billion of retirement plan assets. Ron Muhlenkamp, who runs his own fund firm, has been a student of investing for 40 years; this is his seventh recession. Barry Ritholtz is chief executive of Fusion IQ, an online quantitative research firm that is constantly screening thousands of stocks. Steve Romick manages the high-performing Crescent fund for First Pacific Advisors. And Jason Trennert, often ranked among Wall Street's top strategists, guides investing strategy at Strategas Research Partners, which advises institutional investors.
      


  • Ron Muhlenkamp Quarterly Letter

    Over the past two years in our newsletters and seminars, we’ve discussed three major topics: the recession, bailouts and the credit markets, and changes in the regulations and structure of the financial markets.

    Our first topic was the recession. By the economist’s definition, the current recession is probably over. By the media’s implied definition (GDP is still well below its prior peak and unemployment is well above its prior trough), the current recession will last a while, as it always does. By the investor’s definition (a chance to buy good companies cheap), the current recession has been fulfilled. The 50% rebound in the stock market since March is a sizable move by any definition. (You can access our presentation by clicking this link: Recessions: What Do They Look Like?)  


  • Ronald Muhlenkamp Top Purchases: AFLAC Inc., Amedisys Inc , China Medical Technologies Inc., Reliance Steel & Aluminum Co. , The Hartford Financial Services Group

    (GuruFocus, September 11, 2009) As we stated in the previous article on his top holdings, Investment Guru Ronad Muhlenkamp is a very patient investor. His average holding is over 10 years. He developed a formula to evaluate stocks 30 soe years during the 1972 to 1974 financial stock crisis, based on Graham and Dodd formula with a a few tweaks to reflect inflation and interest rate, and he has been using that since then. So said he in the book “Value Investing with Masters” by Kirk Kazanjian.

    Here is the story how he invented his formula according to the book:
      


  • Ronald Muhlenkamp Top Holdings: International Business Machines Corp, Bank of America Corp. ,Oracle Corp. , Cisco Systems Inc. , UnitedHealth Group Inc. , Philip Morris International

    (GuruFocus, September 11, 2009) Investment Guru Ronald Muhlenkamp’s mutual fund Muhlenkamp fund took a beating lately. The newly available Guru Fund Performance Data shows he has been lagging the market for 2006, 2007 and 2008. That is three years in a row. Before this down period, Muhlenkamp beat the market typically by a large margin 6 years in a row from 2000 to 2005.

    Year Return (%) S&P500 (%) Excess Gain (%)
    2008 -40.39 -37 -3.4
    2007 -9.66 5.61 -15.3
    2006 4.08 15.79 -11.7
    2005 7.88 4.91 3.0
    2004 24.51 12 12.5
    2003 48.07 28.7 19.4
    2002 -19.92 -22.1 2.2
    2001 9.33 -11.9 21.2
    2000 25.3 -9.1 34.4
    1999 11.4 21 -9.6
      


  • Ronald Muhlenkamp Buys Amedisys Inc, Reliance Steel & Aluminum Co., The Hartford Financial Services Group In, Sells ConocoPhillips, Eaton Corp., The Manitowoc Company Inc.

    Ronald Muhlenkamp believes that the crunch is over, but he does not yet have conviction in what the new norm will be. He thinks that with ample capacity in every industry, maybe corporate ROE (return on shareholder equity) averages 11% instead of the historic average of 13 percent. Ron Muhlenkamp is heavy in technologies and healthcare. This is his Q2 portfolio update.

    Ronald Muhlenkamp buys Amedisys Inc, Reliance Steel & Aluminum Co., The Hartford Financial Services Group In, China Medical Technologies Inc. ADS, AFLAC Inc., Principal Financial Group Inc., Harris Stratex Networks Inc., sells ConocoPhillips, Eaton Corp., The Manitowoc Company Inc. during the 3-months ended 06/30/2009, according to the most recent filings of his investment company, Muhlenkamp Fund. Ronald Muhlenkamp owns 50 stocks with a total value of $660 million. These are the details of the buys and sells.  


  • We think many of the specific fundamentals that drove the forced selling have been alleviated

    Ron Muhlenkamp's review of events that impacted the markets during the past quarter. "Most of the selling should now be completed, but if there is another round, it should occur in Q-1 ’09 as people respond to yearend statements and companies satisfy their auditors. Meanwhile, we think many of the specific fundamentals that drove the forced selling have been alleviated."

    Read the complete commentary  


  • Steven Forbes Interviews Ron Muhlenkamp

    We like to invest in good companies when the price is right. We prefer stocks to bonds because we want management working for us as opposed to against us. There's two ways you can put money into a company. You can loan them money, in which case the management's job is to minimize your return. Or you can actually be an owner of the business, in which case their job is to maximize return. We like management working for us.

    We think in terms of investing in companies as opposed to buying and selling stocks. Now, we're small enough that we can't really buy companies like Warren Buffet might. But that's the philosophy we come with. So we always want to own good companies. And we start with our definition as return on shareholder equity.  


  • How did we get to where we are today

    Ron Muhlenkamp shareholder letter: In 2005, the Financial Accounting Standards Board (FASB) issued FASB #157 which states that banks, insurance companies, and brokers must mark the value of the assets to market prices in their quarterly and annual reports.

    Regulations for each of these industries limit the amount of business they can do and the liabilities they can carry is a multiple of the assets and/or equity. Thus, FASB #157 allowed firms to expand their business as the market prices of their assets moved up, and forced them to contract their business as market prices moved down. This has become self-feeding.  


  • The pain continues

    Commentary of Ron Muhlenkamp: The pain continues. The focus has shifted somewhat from financial concerns to the price of commodities, particularly energy and food.

    One reason this is important is that increasing prices for food and energy affect nearly everyone worldwide, including people in the emerging countries including (and maybe especially) China and India which have provided strong economic growth over the past number of years. This increases the odds for a worldwide slowdown/recession which could be longer and deeper than one in the United States, if the U.S. was going through this recession alone.  


  • Ronald Muhlenkamp Buys Amgen Inc., Berkshire Hathaway Inc., The Boeing Company, Sells Fidelity National Financial Inc., Allstate Corp. The, Fannie Mae

    Ron Muhlenkamp likes to buy stocks when its p/e ratio is lower than the percentage of return on equity. His recent performances have been hurt by the housing slowdown. These are his buys and sells during the first quarter. Ronald Muhlenkamp owns 54 stocks with a total value of $1.4 billion.

    Ronald Muhlenkamp buys Amgen Inc., iShares Russell 1000 Growth Index Fund, sells Citigroup Inc., Allstate Corp. The, Fannie Mae, Capital One Financial Corp., Countrywide Financial Corp., Fidelity National Financial Inc. during the 3-months ended 03/31/2008, according to the most recent filings of his investment company, Muhlenkamp Fund. Ronald Muhlenkamp owns 54 stocks with a total value of $1.4 billion. These are the details of the buys and sells.  


  • We may have passed the point of maximum pain in the debt and equity markets.

    Ron Muhlenkamp commentary: In the U.S., we’ve had ten recessions since WWII. In each case, the slowdown was triggered on purpose by the Fed, which acted according to its charter in containing inflation. But they also squeeze out the excesses of the prior expansion."

    "We may have passed the point of maximum pain in the debt and equity markets. "  


  • The investment climate is good, giving us opportunities we haven’t seen in 6-7 years

    In 2007, we had a lousy year. The transition period we’ve been discussing for two years is lasting longer than we expected, and having greater negative effect on some of our companies than we expected.

    Nevertheless, the general pattern is familiar. After a period of economic and market expansion, the Fed raised interest rates to contain inflation and slow the economy. Subsequently, it has lowered rates to start a new cycle. We covered this pattern in some detail in Muhlenkamp Memorandum #84,  


  • Muhlenkamp book

    I just started on Ron's Road to Wealth, a collection of Muhlenkamp's essays. I'll do a book report when finished, but I can already tell you it is very interesting.

    A great quote to tantalize you: "In 2005, somebody asked me what it would take to turn me bearish; I said that I would turn bearish if I could think of something to worry about that people weren't already worried about."  


  • Ronald Muhlenkamp Buys The Boeing Company, Corning Inc., Kinetic Concepts Inc., Sells YRC Worldwide Inc., Chaparral Steel Company, Eagle Materials Inc.

    Ronald Muhlenkamp's starting point for researching a stock is its p/e ratio is lower than the percentage of return on equity. His fund gained 13.79% a year during the past 15 years. His recent performances have been hurt by the housing slowdown. These are his buys and sells during the third quarter.

    Ronald Muhlenkamp buys The Boeing Company, Corning Inc., Kinetic Concepts Inc., The Goodyear Tire & Rubber Company, Amedisys Inc, Innovative Solutions and Support Inc., Lowe's Companies Inc., sells YRC Worldwide Inc., Chaparral Steel Company, Eagle Materials Inc., PattersonUTI Energy Inc., Kraft Foods Inc., Meritage Homes Corp., OpenTV Corp., Polaris Industries Inc., RTI International Metals Inc., Black & Decker Corp. The, Toll Brothers Inc., Alaska Air Group Inc. during the 3-months ended 09/30/2007, according to the most recent filings of his investment company, Muhlenkamp Fund. Ronald Muhlenkamp owns 65 stocks with a total value of $2.3 billion. These are the details of the buys and sells.  


  • Ron Muhlenkamp Quarterly letter

    The U.S. economy and the capital markets continue to work their way through the transition period which we’ve been discussing for nearly two years. We continue to believe that the economy will experience a “soft landing,” not a recession. Our mistake has been to believe that the markets would have a soft landing as well. That has been true for some industries but not for housing and financials, of which we’ve owned too much.

    read more  


  • Top investor hangs tough with Countrywide

    Veteran stock picker Ron Muhlenkamp first bought Countrywide shares in 2002 when they were getting crushed - and he's not ready to sell now.

    Muhlenkamp, who runs the $1.9 billion fund that carries his name, first bought into the mortgage lender when the stock was languishing at $11 a share amid a bear market.  


  • The Current Market and What We’re Doing about It

    The Federal Reserve’s interest rate actions would bring about a “soft landing” in the economy as opposed to a recession. Unfortunately what often occurs in these periods is that the stock market acts like a recession is imminent, even though the economy doesn’t.

    Good companies get caught up in either quality perception issues or in the tidal wave of selling just because they’re liquid. We think this provides an opportunity to buy good companies at a discount, including those companies that may benefit going forward by acquiring these mortgage-related securities at lowball bids. Right now, there are good companies selling cheap because some investors don’t know how to price them. Therefore, this is a great opportunity but it does take its toll on the stomach. Often In the past, a good  


  • Ronald Muhlenkamp Buys Harris Corp., Wesco International Inc., Burlington Northern Santa Fe Corp, Sells American Express Co., Houston Exploration Co., Pulte Homes Inc.

    Guru Ron Muhlenkamp's recent performances lagged the market, due to his large exposures to homebuilders. Over long term, he still beat the market by wide margains. He thinks now it is the ideal time to buy the good companies cheap. These are his buys and sells during the first quarter. Ronald Muhlenkamp owns 72 stocks with a total value of $2.7 billion.

    Ronald Muhlenkamp buys Harris Corp., Wesco International Inc., Burlington Northern Santa Fe Corp, sells American Express Co., Houston Exploration Co., Pulte Homes Inc., Pfizer Inc., Mohawk Industries Inc., Lone Star Technologies Inc., Lamson & Sessions Co., Johnson & Johnson, Goodyear Tire & Rubber Co., El Paso Corp., Dollar Thrifty Automotive Grou, Beazer Homes Usa Inc., Texas Industries Inc. during the 3-months ended 03/31/2007, according to the most recent filings of his investment company, Muhlenkamp Fund. Ronald Muhlenkamp owns 72 stocks with a total value of $2.7 billion. These are the details of the buys and sells.  


  • Ronald Muhlenkamp: The ideal time to buy the good companies cheap

    A shareholder recently asked, “In light of last year’s performance, do you intend to take any action to modify the current investments in the Fund?”

    My response was (is) “Do you really want me to change a philosophy and discipline that’s worked well for 40 years because we could have done better in a transition year like 2006?”  


  • Muhlenkamp Loses Ground in Mortgage-Market Shakeout

    Ronald Muhlenkamp's $2.4 billion Muhlenkamp Fund, which lost value just once in the past 12 years, is getting hurt by the shakeout in the U.S. mortgage market.

    Muhlenkamp's mutual fund dropped 4.8 percent since the start of the year, the worst performance of 90 competing funds tracked by Bloomberg that buy shares of companies perceived as being undervalued. The manager counts Countrywide Financial Corp., the biggest U.S. mortgage lender, among his 10 largest holdings.  


  • Ronald Muhlenkamp Buys Fidelity National Information Services, Inc., Alaska Air Group Inc., Goodyear Tire & Rubber Co., Sells Dynegy Inc., EResearchTechnology Inc., GAMCO Investors, Inc.

    Ronald Muhlenkamp buys Fidelity National Information Services, Inc., Alaska Air Group Inc., Goodyear Tire & Rubber Co., Home Depot Inc., sells Dynegy Inc., EResearchTechnology Inc., GAMCO Investors, Inc., MasTec Inc., WYNDHAM WORLDWIDE during the 3-months ended 12/31/2006, according to the most recent filings of his investment company, Muhlenkamp Fund. Ronald Muhlenkamp owns 83 stocks with a total value of $3.4 billion. These are the details of the buys and sells.

    New Purchases: ALK, FIS, GT, HD,  


  • Ronold Muhlenkamp: 2006 was a difficult year for us; We are seeing an expansion

    2006 was a difficult year for us. Although our expectations on the economy were reasonably accurate (a soft landing), our expectations for the performance of some of our stocks were not. Specifically, we did not anticipate the degree and rapidity in which orders for new homes evaporated and the backlogs of homebuilders shrank. We also did not anticipate the repeat of unusually warm winter weather, causing the price of natural gas to fall dramatically. We have been encouraged by the action of the management of our companies. As their businesses slowed, they’ve used the resulting cash flows to buy in stock. We do think this will benefit us going forward.

    When I write these Quarterly Letters, my challenge always lies in how best to describe to you what we’re seeing in the economy and the marketplace. To do that, I find that I have to put current observations in context of what went before. It helps me a lot to read our prior newsletters. It particularly helps to understand a “transition” year like 2006.  


  • Housing Still Not Bottomed Yet

    2006 was marked by a nation-wide housing slump. Sales were down, and the Y-o-Y price comparison followed suit. A weak housing sector is painful to many parties of the economy: the homebuilders, the realtors, the construction workers, the homeowners who maxed out their home equity line of credit. The worst off among them in 2006 were probably the home builders. To reduce the inventory build-up, they often slashed prices by double digits. Their profits plummeted, so did their stock prices.

    Under these dark clouds, it is natural for people to look for a silver lining, no matter how faint it is. For example, a month ago, the CEO of Toll Brothers (TOL) Robert Toll said that the market for new homes might finally be leveling off after more than a year’s worth of declines (see article). Is this the first light of a housing recovery, or just a head-fake of the market, a dead cat’s bounce, that will lead to a further decline?  


  • Muhlenkamp Is Still a Great Fund

    Not everybody had a great 2006. Ron Muhlenkamp -- and shareholders in his Muhlenkamp fund (MUHLX) -- are nursing wounds. The fund returned a miserly 4% -- 12 percentage points less than Standard & Poor's 500-stock index. The performance was bad enough to put Muhlenkamp in the bottom 1% among all value funds.

    My advice: Put some money in this loser. Like every first-rate manager, Muhlenkamp has a bad year once in a while. Just ask Bill Miller, whose streak of beating the S&P ended at 15 years in 2006 when his Legg Mason Value Trust returned just 6%.  


  • Ronald Muhlenkamp Buys AMR Corp., Dollar Thrifty Automotive, Lowe's Companies Inc., Sells Telefonos de Mexico SA de CV, Sprint Nextel Corp., REALOGY CORP

    Ronald Muhlenkamp buys AMR Corp., Dollar Thrifty, Lowe's Companies Inc., sells Telefonos de Mexico SA de CV, Sprint Nextel Corp., REALOGY CORP, Avis Budget Group, Inc., Mellon Financial Corp., Maverick Tube Corp., Nokia Corp., Schlumberger Ltd., Tidewater Inc. during the 3-months ended 09/30/2006, according to the most recent filings of the Muhlenkamp Fund. These are the details.  


  • Ronald Muhlenkamp: Economic transition period is coming to an end

    Ron Muhlenkamp's comment on economy: For the past year we’ve been saying that the economy was in “transition” after recovering from the recession of 2001. We’re now seeing signs that the transition period is coming to an end. From 2002 through 2005, the economy was in a recovery mode. The recovery was strong enough that many people, including members of the U. S. Federal Reserve Board, became worried about inflation. In response to their fears, the Fed followed a policy of steadily raising short-term interest rates; first back to normal levels and then to a level designed to slow the economy to a sustainable non-inflationary pace. As short-term rates approached 5%, inflationary fears boosted long-term rates above 5%, causing the prices of long-term bonds to decline.

    Meanwhile, the price of many raw materials, especially oil and gas, were bid up on the strength of the world economy. Last year’s hurricanes in the Gulf of Mexico decreased available supplies of energy, resulting in further price increases and fears of inflation. The stock market reflected these fears. For the past couple years, strength in the stock market was concentrated in a mix of industries including commodities, energy, and real estate.  


  • Ronald Muhlenkamp: Recent Trends in the International, Commodities, Bond and Stock Markets

    Several trends have been in evidence over the last six to nine months, some of these trends going back several years. Most of these trends have several things in common. They started from a “value” base, their prices rose to value levels but they kept climbing based on momentum. In our view, the public has insisted on playing each of these trends until it lost money.

    In particular:  


  • Ronald Muhlenkamp Buys Cendant Corp., Embarq Corporation Common Stock, Goldman Sachs Group Inc., Sells Tyco International Ltd., Lennar Corp., PHH Corp.

    Ronald Muhlenkamp of The Muhlenkamp Fund buys Cendant Corp., Embarq Corporation Common Stock, Goldman Sachs Group Inc., OpenTV Corp., American Express Co., Chevron Corp., Mellon Financial Corp., Schlumberger Ltd., sells Tyco International Ltd., Lennar Corp., PHH Corp., Dollar Thrifty Automotive Grou, Procter & Gamble Co. during the 3-months ended 06/30/2006, according to the most recent filings of his investment company. Muhlenkamp Fund has lagged the market this, largely due to his holdings in homebuilders. These are the details of his most recent purchases and sales.  


  • Ronald Muhlenkamp: It’s an opportune time to be investing

    I have frequently been asked to compare the current economy and markets to prior periods. In this vein, I believe the following:
    • The economic and investment climate is most similar to the early 1960s; good GDP growth and contained inflation.
    • The current stage of the business cycle looks most like 1994-1995 —  


  • Ronald Muhlenkamp: Harvesting Profits With Patience And Careful Attention To Valuation; What you have to realize is that P/Es went from 17 to 7

    What you have to realize is that P/Es went from 17 to 7 in the '70s for a reason. Most people like dividends, or they like interest payments, because they trust that the money is coming back to them. They don't trust that they'll get paid for the money that companies retain in book value. I think that distrust grew out of the experience of the 1970s, when the great question was, “Earnings are up, how can my stock be down?” Everybody had been taught that 17 was a normal P/E and that if earnings went up, stocks would go up. In fact, a research study I've been carrying around for 30 years literally said just that.

    That's why I wrote chapter 4 in my book, "Why The Market Went Down." It turns out that the critical question is why. That's what you have to focus on. When inflation and interest rates went up, market P/Es had to go down to get prospective returns up. Once I came to trust that relationship, I could trust that if companies retain earnings (as long as they don't do something dumb with them)- if they do retain earnings, those values do accrue and, at some point, the company's price will reflect those values-to a competitor, if not to the public marketplace. In fact, I have a level of confidence in that, which a whole lot of people don't have, because I've gone through the numbers. I've seen that it makes absolute sense. Based on that, I first wrote a paper about "Why The Market Went Down" in 1979 and in 1981 we told our clients that if Reagan and Volcker could get inflation under control, we would have a good decade in the stock market. All I was really saying was that P/Es could go from 7 to 17 just as they had between ’50 and ’60.  


  • Ronald Muhlenkamp: Looking for a Rich Harvest? Plant in the Growing Season

    Investors cite many reasons for favoring a particular class of investment, but the most common is simply, "It has done so well." The unspoken assumption is that it will continue to do well. Investors aren't alone in this line of reasoning. The media, too, tends to focus on recent price trends to extrapolate future performance.

    In the past few years, small-cap and foreign stocks (especially emerging markets) have performed very well, drawing the media's attention and the public's money. Money flows into mutual funds show that people are investing heavily in small caps and emerging securities; recent flows into foreign and international funds have outpaced flows into domestic funds.  


  • Ronald Muhlenkamp: Our companies are doing well and we expect their stocks to reflect that

    Ron Muhlenkamp: "Economic trends of the past year continue. The economy is growing nicely and inflation is roughly 2.0%. The Fed should be nearing the end of its campaign to raise short-term interest rates. When they finish, it should allow price-to-earnings ratios (P/E's)* for many stocks to expand a bit. This would broaden the number of stocks which do well beyond the current focus on extending the momentum in international and small cap stocks. We believe our companies are doing well and we expect their stocks to reflect that in the next few calendar quarters."

    Source  


  • Stocks should be like tractors: sturdy and reliable

    To Muhlenkamp, stocks should be like tractors: sturdy and reliable. So he wants companies with a retirn on equity above 14%, revenue growth of at least 10% a year. He'll have no truck with exotic asset allocation theories, saying, "Academic theories are good as academic theories, but my job is to make money."

    The maverick Muhlenkamp is guided by a peculiar mix of bottom-up stock picking and macroeconomic forecasts. He foresees a fairly steady economy in 2006, with 2% inflation and 4.5% short-term interest rates. Thus he concludes that the bottom won't fall our on his eclectic collection of holdings.  


  • A Seasoned Philosophy

    WHY ARE FARMING AND MONEY MANAGEMENT SIMILAR? To Ron Muhlenkamp, the 62-year-old founder of the Muhlenkamp Fund, the answer is simple: Both require tractor loads of that rarest commodity: common sense. In Ron Muhlenkamp's view, "Selling stocks is like deciding when to harvest apples." "I'd say I've learned more about investing from farmers than I have from Wall Streeters and MBA types," says Muhlenkamp, whose father, Isidor, owned an Ohio dairy farm. "They know that different seasons require different approaches. Selling stocks is like deciding when to harvest apples. Farmers can't tell you exactly when they plan to harvest, but they know when the fruit is ripe."

    Born and reared in Coldwater, Ohio, near the Indiana border, Muhlenkamp has an admirable long-term investment record. One key to his success has been his ability to skip over tectonic shifts in the economy. What explains the sure footwork? Muhlenkamp says it's the ability of every farmer to recognize and react to change. "My dad farmed on a four-quarter cycle," says Muhlenkamp. "I invest on about a four-year cycle."  


  • Muhlenkamp Fund has been long-term winner

    Q. Ron Muhlenkamp is quoted and interviewed a lot and appears to know his business. What do you think of his Muhlenkamp Fund?

    A. Muhlenkamp is definitely more than just a talking head. The fund bearing his name, which he has run since it opened in 1988, has a fine long-term record.  


  • Ronald Muhlenkamp: we're finding more value in the big than the small

    "We ran a screen two months ago, and again a week ago, we said we want companies that have return on equity over 14%. You're familiar with us, that's where we start, we want a PE well below the ROE, that just gives us a good value and we want revenue growth of 10% or more over the last year. We screened 6,000 stocks. Usually when you screen 6,000 stocks, you find a lot of little stuff that has been overlooked. Two-thirds of the names that came through those screens are in the S&P 500. We're finding more value today in the big stuff than we are in the little stuff. Now the momentum continues on the little stuff. Incidentally, in 1998, the only values we were finding were small stuff. And for a long time we were viewed as a small cap manager, and we don't care cap. We care about value."

    "We haven't yet bought a Wal-Mart, but they’re starting to look interesting. In the last year and a half we have bought a Johnson & Johnson and a Pfizer, we own a Citigroup, Eliot Spitzer gave us a chance to buy AIG at a reasonable price."  


  • Can home builders handle a chill?

    When high-end home builder Toll Brothers caught investors off guard last week by announcing a sales slowdown, the Wall Street spin machine wasted little time explaining that the troubles are limited to Toll.

    Theyre not. Witness:  


  • Ronald Muhlenkamp: We think stock prices are at reasonable levels

    "Were at an interesting point in the economic/investing landscape.

    The economy, as measured by GDP growth and unemployment, has recovered from the 2001 recession. Short-term, long-term, and mortgage interest rates are at reasonable levels, given a core inflation rate of 2%. On average, we think stock prices are at reasonable levels given the above."  


  • Sending Out a Message by Buying Back Shares

    BUYBACKS are back, and portfolio managers are taking notice.

    Companies have been repurchasing their own shares at record levels, and the trend shows no sign of letting up. In the first half of this year, share buybacks reached $163 billion, according to Standard & Poor's, up 91 percent from the first six months of 2004. Howard Silverblatt, an equity market analyst at S.& P., estimates that they will surpass $300 billion for the year. That would be well above the $197 billion for all of 2004.  


  • Muhlenkamp Sees Lots Of Bullish Signs

    Ronald Muhlenkamp thinks investors need to get with it and appreciate the prosperous conditions of today's markets.  


  • Investors paying a price for inertia

    Autopilot is a poor strategy for managing your savings.

    If the stock market were truly efficient, Ron Muhlenkamp would be managing a lot more money, and many of his peers would be managing a lot less.  


  • Ronald Muhlenkamp: How to Make Money in the Current Investment Climate

    In an investment seminar given by Ron Muhlenkamp, he talked about his view on investment in real estate, federal budget deficit, tax, currency, social security, foreign stocks, and his philosophy in buying and selling, and hedge funds: if Warren Buffet is managing your hedge fund then youll do fine. Most hedge funds are not being managed by Warren Buffeta lot of people are going to lose an awful lot of money. I can teach you the science of buying stocks. Selling them is an art. We buy fundamentally and we sell technically.

    [www.muhlenkamp.com]  


  • Ronald Muhlenkamp: Stocks are priced to return 8%-9%

    Given the current economic numbers on unemployment rate, inflation, interest rates, Ron Mulhenkamp believes stocks are priced to return 8%-9%, which is fair. He asks why so many reasonably intelligent people refuse to accept and enjoy them!

    [www.muhlenkamp.com]  


  • Ronald Muhlenkamp: Investing is equal parts mind and Stomach

    Ron Muhlenkamp searches for stocks starting with return on shareholder equity, then he looks for companies that have a price-to-earnings ratio thats less than the ROE. If everyone agrees with me, its usually time to sell and take my gains, Ive found. But as long as they consider me crazy, Im probably on the right trackThats an example of pure stomach. He likes homebuilders, which have a return on equity of 18 to 24 percent and are selling at eight times earnings

    [www.muhlenkamp.com]  


  • Ronald Muhlenkamp: Fair is Fair

    Everything is fair for Ron Muhlenkamp right now: The economy continues to expand. Inflation remains under control at about 2%. The Fed continues to raise short-term interest rates toward the 3%+ range, the long-term treasury rates (the 30-year) are just below the 5% range. Stocks are priced to return 8%-9%

    [www.muhlenkamp.com]  


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