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Friday Value Overview

The markets dipped again going into the weekend and completed a tough week. August has not been pretty, but there are a lot of buying opportunities out there. This weekend edition mentions J.C. Penney (JCP), Apple (AAPL), Cooper Industries (CBE), Grifols (GRFS), Hewlett-Packard (HPQ), Citigroup (C) and Microsoft (MSFT).

Bill Ackman intends to increase his position in J.C. Penney. You may remember that he was instrumental in bringing over Ron Johnson from Apply to be the new CEO. Shares flew soon after that announcement, but are now lower than before the announcement, and at the lowest price since September of last year. Ackman obviously is still bullish about the company. He currently owns 16.5% of it, and he wants to increase that up to 26.1%. The stock already makes up more than 20% of his portfolio. Some portfolio managers call themselves focuses, but very, very few take it to the level Ackman intends to. He currently owns nine stocks.

Let’s take a look at another guru. Steven Cohen had more activity in the second quarter than Ackman probably has ever had. To read all of the details, check out this Guru Focus article. Cohen bought two new stocks: Cooper Industries and Grifols. He increased his stake in 57 stocks, and decreased or sold out of 45. The stocks are listed in the article, but suffice to say he was a busy man as usual.

Unfortunately things keep getting worse for John Paulson. The Wall Street Journal estimates that Paulson lost $500 million on his HP stake. He has had terrible luck this year across a range of industries. The only thing that could make this worse is if the price of gold implodes. Happily for him, I don’t think that is likely at all. Outside of gold and gold-related stocks, Paulson’s largest holding is Citigroup. No matter which way you slice it, Citigroup is cheap. We just have to wait for this macro trade to end, especially with financials.

I love following Daniel Pink on Twitter and today he served up a link about Apple. Apparently Apples market cap is worth as much as all 32 euro zone banks. “The euro zone banks have lost 3/4 of their value since May of 2001, while Apple has been ascendant, reaching a market cap of $340 billion on the back of strong sales and outlook.” That’s a bit disturbing on a macro and economic level, but kudos to Apple. We need strong banks in order to have a strong economy. We have neither, here in the U.S. and definitely in Europe. Hopefully the regulatory atmosphere for the banks will swing closer to the regulatory atmosphere for tech companies (Microsoft’s anti-trust suit excepted.). It’s much worse in Europe than here. Regulators are almost forcing euro zone banks to commit suicide with purchases of unsafe bonds. Many banks there almost died a few years ago. It looks like they are near death again.

Have a great weekend!

Disclosures: Long MSFT

About the author:

Steven Kiel
Steven Kiel is the president and chief investment officer for Arquitos Capital Management, a Virginia-based investment management firm. He is a graduate of George Mason School of Law and a captain in the Army Reserves. He manages two spoke funds, The Freedom Fund, a value-oriented portfolio, and The Hayek Fund, a portfolio dedicated to free market principles. He can be contacted at steven.kiel@arquitos.com or through the firm's website at www.arquitos.com.

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