logo
  Join        Login             Stock Quote

Growth And Value: Esterline Technologies - A Leading Defense Contractor

 December 19, 2011 09:00 PM
 


Investing versus Speculating

With the amount of volatility seen in the equity markets today, many people seem to believe that the old proven practices of investing in solid businesses for the long run no longer apply.  But it's important to remember that there is a significant distinction between true investing and speculating.  And it's even more important to recognize that the level of risk taken by speculators is significantly greater than the amount of risk assumed by investors.

Although there are famous speculators, the average investor would not have the appetite for risk or the steely nerves that speculation requires.  On the other hand, most of the great icons of sound and prudent investing practices offer insights and strategies that are as much common sense and prudent behavior, as they are genius.  Therefore, the everyday investor is capable of applying their insights and lessons, and therefore achieving their own low risk investment success.

[Related -Northrop Grumman Corporation: How Defense Budget Will Fare In 2014?]

Famous investors like Warren Buffett, Philip Fisher, Peter Lynch, Bill Miller, John Neff, Sir John Templeton, Thomas Rowe Price and Bill Ruane are just a sampling of many great prudent investors who believe in investing in good businesses rather than speculating in the stock market.  Then of course there is Ben Graham, who taught many of the above-mentioned investing greats and offered us one of my favorite quotes to share: "in the short run the market is a voting machine, but in the long run it's a weighing machine."

[Related -United Technologies Corporation (NYSE:UTX): How Pension Shift Will Drive EPS?]

Speculators focus on stock price movement and attempt to guess the magnitude and direction where the price of the market or a company may go next. Speculators tend to be very active traders, and therefore, tend to ignore, or at least pay very little attention to the fundamentals of the business. Consequently, the trader/speculator, deals with the voting machine or short-run market that Mr. Graham spoke about. To me at least, this turns the stock market into a casino, and trading is closer to gambling than it is to prudent behavior.

In contrast, sound investors are interested in owning the business and therefore take a longer-term approach.  Since they do not intend to sell the business they invest in for a long period of time, short-term market volatility concerns them very little. Consequently, investors are interested in the "weight" of the business, and therefore carefully scrutinize the fundamentals underpinning the companies they are interested in. To prudent investors, the stock market merely represents the store where they can find good businesses to buy and hold for the long run.  Once they buy their business, the store they bought it in is no longer of any interest to them. 

Esterline Technologies - Solid Fundamentals on Sale

As I was recently shopping in the stock market store, I came across a very interesting business in the aerospace/defense industry that I believe is currently on sale.  This is a growth business with solid fundamentals and a compelling thesis for continued above-average growth.  However, since it operates in the defense industry, many investors, mistakenly in my opinion, seem to believe that cuts in defense spending would curtail or eliminate this company's growth potential.  Consequently, I believe this quality company is being mispriced by Mr. Market, and is currently significantly undervalued. The following slides from their Investor and Analyst Day Conference presentation on September 15, 2011 summarizes their businesses and geographic exposure. In addition to offering a balanced business mix by end market, Esterline Technologies (ESL) is not just dependent on the U.S.


Next Page >>123
iOnTheMarket Premium
Advertisement

Advertisement


Comments Closed


rss feed

Latest Stories

article imageIntegrated Device Technology Inc. (IDTI) Q1 Earnings Preview: Another Beat and Pop?

Integrated Device Technology Inc. (NASDAQ:IDTI) will issue first quarter 2015 financial results on July 28, read on...

article imageHerbalife Ltd. (NYSE:HLF) Q2 Earnings Preview: The Potential To Shock?

Herbalife Ltd. (NYSE:HLF) will release its second quarter 2014 financial results after the close of trading read on...

article imageHealth Net, Inc. (HNT): Potential to Be Huge Winners Says Bank of America

As of this keystroke, Health Net, Inc. (NYSE: HNT) shares are up around 4% on the day. The managed health read on...

article imageHomeAway, Inc. (AWAY) Q2 Earnings Preview: Top and Bottom Line Bullish Surprise?

HomeAway, Inc. (NASDAQ:AWAY) will report its financial results for the second quarter ended June 30, 2014 read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.