Friday Randoms

The other day I saw a post on Seeking Alpha by a site called Street Authority that listed 20 foreign stocks that currently have single digit PE ratios. I'm not a huge fan of the "319 Stocks Going Ex-Dividend This Month" types of articles but for whatever reason I clicked on it and the names were interesting.

Their list (and their PE ratios);

Anglo American (AAUKY) 2.7
Roche Holding (RHHBY) 3.6
Lukoil (LUKOY) 3.8
Vale (VALE) 5.0 we own this one
Volkswagen (VLKAY) 5.1
Arcelor Mittal (MT) 5.1
Rio Tinto (RIO) 5.3
Posco (PKX) 5.3
BP (BP) 5.5
Petrobras (PBR) 6.1
Total (TOT) 6.3
Teva (TEVA) 6.4 we own this one
Itau Unibanco (ITUB) 6.7
Eni (E) 6.8
Royal Dutch (RDS) 7.3
Statoil (STO) 7.3 we own this one
Sanofi (SNY) 7.4
AstraZeneca (AZN) 7.6
Honda Motor (HMC) 7.9
Nissan Motor (NSANY) 7.9

A few things here. First you need to double check for yourself that the numbers are correct. Occasionally stocks get very cheap in this way and while there is no guarantee that a low PE stock will go up soon it can make for a very good entry point for a name that you would otherwise want to own. Obviously you need to have some basis for being favorably disposed to the name, expect that the earnings will grow from here or more correctly are not about to drop in half. That the earnings might be forecast to cut in half isn't necessarily a reason to not buy but it becomes a different type of trade--not bad, just different.

But if you do like a name, the PE is single digits and you do believe the story is in tact then it is a good entry point even if the stock gets cheaper (you can't bottom tick every stock you own). While this is maybe Investing 101 stuff the idea is important and the list is interesting.

I got a kick the other night out of the GOP debate on Bloomberg TV. It was the first debate I watched. Of particular interest was the fuss around Herman Cain's 999 plan which in case you missed it is 9% personal income tax, 9% corporate tax and 9% national sales tax. Cain is right that this would be a serious change to how the country does a lot of things so I like the idea of raising the concept. The situation that the country is in is going to require some serious changes in how we do things and it is unlikely that this will occur in such a way that every will be happy about it.

If I understand the specifics of it everyone would pay 9% income tax. Everyone paying their equal share has an appeal of course but it would crush all the people who don't pay tax now. Maybe those people should pay tax or maybe not but the fact is many do not and going from zero to 9% would crush them and thus be a big drag on the economy IMO. A flat and simple tax could work but the only way to get it passed is exempting some portion of income, the first $50,000 maybe or some other number that was practical.

I am a fan of a national sales tax but if I understand Cain's plan this would include groceries, medicine and energy products. This would crush people below a certain income level. National sales tax; yes! On groceries, medicine and energy products; no. There might be some other things that should be exempted but people who meet some description of wealthy will consume all the same. While I don't consider myself to be wealthy, I will not let a $25 national sales tax prevent me from replacing our espresso machine when the current one breaks. Again, I like the concept here not the specifics.

From what little I have read and heard it appears as though the math on the 999 plan doesn't work but ideas like this where people don't get crushed does advance the conversation.