Driving value in a down environment

A couple of interesting things I came across today. The first one comes from UBS which paints a picture that equities are still not cheap. The endless stream of negative news from the media just continues to pile on. There just doesn't seem to be anything positive or any glimmer of light to look forward to, from the European debt crisis, to the sluggish job outlook here in the US. The article is a pretty good read which looks at overall PE for the world. Yes, the "world" which they pin the forward looking "fair" PE at 13x earnings, while the current PE is running 9.9x 2012 earnings. Logic looks simple... The "world" is trading below fair value, so one way to move some cash is into a low cost fund that encompasses the world, like Vanguard's Total Stock fund. However, the article's main point is that due to current global risks with no signs of stability, there is more risk to the downside. I tend to agree with this, but at the same time as I've said before, this presents opportunity... one just needs to approach this "sale" of equities with a sharp sniper like focus and pick out those quality companies that will survive this downturn. And yes, I'm convinced we are entering another down turn. One of the companies I recently picked up was the Walt Disney Company (DIS) for this very reason. I'm currently evaluating the set of 3 coffee companies to try and weed out any quality companies that maybe worthy of investment (Tim Horton's THI, Starbucks SBUX, and Dunkin' Brands DNKN).

One company that is providing value is Amazon. Not value to investors, but value to customers. When I first started this investment blog, I made a strong call to stay away from Amazon (AMZN). Well, that was 3.5 years ago when the company was trading at $81/share. Today, Amazon announced a deal with Fox to provide more instant streaming video content to Amazon Prime customers. So not only do you get two day shipping from your existing $79/year Amazon prime membership, but now you get the benefit of all this content to be streamed on-demand. The company continues to add more value to customers and although the valuation is beyond me, it's now trading at $229/share... almost 3x ROI if you had bought 3.5 years ago. Ugh. This just brings back fresh memories of Lesson number 9. Don't bet against a company you actually like from a customer stand point.