First, a correction. Last week, in the article inspired by a delicious bison steak, I wrote,
“The truth is that there have never been buffalo in North America. The major species of true buffalo are the domestic Asian water buffalo (also found in South American and Australia), the endangered wild Asian water buffalo, and the African buffalo (or Cape Buffalo).”
But I was wrong, and I was corrected by the Kent Underwood, the Director of Dairy Operations at Woodstock Water Buffalo Company in Woodstock, Vermont, who wrote,
“There are approximately 8-10,000 water buffalo in the US which are a mix of Riverine and Swamp type. Our herd is the largest in the US and the only farmstead creamery.”
The last word on the buffalo story, however, comes from a subscriber to Cabot Market Letter residing in Pierre, South Dakota, who wrote the following:
“Because buffalo hides sold for $3-4 at a time that $3-4 equaled $300-400 the whites and the Indians slaughtered them by the thousands. After years of this, the buffalo numbers got down to 21. A man from Ft Pierre South Dakota by the name of Scotty Phillips recognized the problem and purchased the final few. Scotty was a very wealthy cattleman who was married to an Indian woman. He moved the small herd to Dupree, South Dakota where he had them protected. The herd grew slowly and the animals were very expensive as they began to sell animals to other livestock men.
It was not uncommon for one animal to sell for $5000. As the number of animals increased, within the last 10 years, the price dropped from $5000 to under $500. The largest buffalo herd was kept by a man named Roy Houck. Roy died within the last 10 years. His buffalo ranch, northwest of Ft Pierre, is still run by his daughter. The Houck Ranch was the locale for the movie “Dances with Wolves.”
A substantial herd is kept in Custer State Park. These are animals of which you must exercise great care. One of these animals chased my daughter-in-law and granddaughter within the past 30 days. Today the herds do number about 350,000. This is the history of buffalo in the US according to South Dakotans.”
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And now a story about Edward R. Murrow, who was born in 1908 near Polecat Creek, North Carolina. Originally named Egbert, he was the youngest of fifteen children in a Quaker family, and until he was six, his home was a log cabin with no plumbing or electricity.
Then the family moved to Washington State, where the family found both those modern conveniences and schools that Murrow used to great advantage. He was student body president in his senior year of high school and then earned a degree in speech at Washington State College in Pullman, Washington.
Murrow joined CBS news in 1935, and he never left, becoming famous early on for his radio broadcasts from London during World War II. But he was a heavy smoker all his life, and he died of lung cancer in 1965, just two days after his 57th birthday.
I never had the chance to hear Murrow, but not long ago I read a review of a book titled, “What I Believe,” and I bought it, interested to read the brief personal philosophies of men and women from all walks of life. Included, for example, are the personal philosophies of Bill Gates, Newt Gingrich and Gloria Steinem.
The book wasn’t a new idea, however; it was, in fact, a new version of a book originally published in 1952. So at the same time I bought the new book on Amazon, I also bought a used copy of the original. Notable in that one are the philosophies of Bobby Doerr, Margaret Mead and Herbert Hoover.
There’s also a web site (thisibelieve.com), but I’ve found that because there are far more philosophies there - many from far less remarkable people - the average quality is lower.
And where does Murrow enter into it? Well, “This I Believe” began as a radio show in 1951, after Murrow and three other CBS “suits” saw a need (or a market) - in that materialistic, post-war, cold-war environment - to emphasize the spiritual qualities of life and devised the show as a way to stimulate hundreds of successful people, both famous and everyday, to explain their personal philosophies.
The host of the show, which ran until 1955, was Edward R. Murrow himself. More recently, the show was revived in 2005 by National Public Radio … and it’s still going strong.
Of particular interest to me is this passage, written by Murrow, from the foreword of the original book.
“The speed of modern communications has largely turned conversation into assertion, and letter-writing into telegrams. The reporter and the listener, or the reader, are overrun and smothered, trampled down by the newest event before they gain perspective on the one that just passed by. It has become a cliché to say that modern man has been debased and materialized by the circumstances of his daily life.”
Fifty-five years later, we communicate at an exponentially faster rate, and in some ways this is absolutely wonderful. But there’s still great value, just as there was when Murrow was writing, in slowing down to take a breath and consider what really matters … what you really believe.
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One thing I believe in is the power of lifelong education. It keeps your brain young, it keeps life interesting, and … the reason you’re reading this … it can make you a better investor.
Which brings me to the state of the stock market today. My strongest thought today is that while the headlines are absolutely glum, forecasting recession, lamenting the prospect of $100 per barrel oil, and worrying that the Chinese, the Mexicans and the Arabs (to name just three) threaten our American way of life …the market is very strong!
Professional investors tend to recognize this; after all, it’s their buying that’s behind the majority of this strength. But many individual investors, who are not required to consider the markets every day, remain on the sidelines, worried by the headlines.
My suggestion … unless you’re in the residential housing/finance business … is to be an optimist. The market, looking six to nine months ahead, tells us the future is bright.
But if you’re not so sanguine … and reasonable minds can differ … at least consider investing in a low-risk value stock. Today, my suggestion comes from Cabot Benjamin Graham Value Letter, which has beaten the market over the long term by employing the time-tested techniques developed by Mr. Graham and popularized by Warren Buffett.
The stock is Franklin Resources (BEN), and here’s what editor Roy Ward wrote last month.
“Franklin Resources is a leading financial services company managing mutual funds and individual portfolios. Assets under management jumped 27% during the past 12 months to $624 billion. BEN has outperformed its mutual fund competition and stock market indices during the past five years. The company concentrates on a value-oriented approach for its mutual fund investments. BEN also offers a strong line-up of mutual funds that invest in international stocks and domestic bonds. The company has a very strong balance sheet with an abundance of cash. New acquisitions are likely in the near future. BEN shares sell at a modest 16.4 times EPS with a small dividend yield of 0.5%.”
I look at Franklin Resources and I see a company that’s grown revenues in nine of the past ten years and grown earnings in eight of those. I see a company that grew revenues 24% and earnings 35% in the latest quarter, suggesting that the PE of 16x estimated earnings is too low. And I see a stock that’s pulled back from 146 to 129 over the past ten weeks, marking a fine buying opportunity.
If you’d like regular updates on Franklin Resources, and on other undervalued stocks, consider a no-risk trial subscription to Cabot Benjamin Graham Value Letter. Recent sells include Ceradyne, up 25% in five months; Nike, up 38% in 18 months; Total, up 56% in 17 months; and ExxonMobil, up 22% in eight months,
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Yours in pursuit of wisdom and wealth,
Cabot Wealth Advisory