A few weeks ago, I wrote about Equitrader, the site that’s attempting to bring brains and talent all over the world into the world of daytrading just as Topcoder has done for programming. So far, it’s fared much better than I expected. I’m not sure how much overlap in membership there is between the two sites, but discussions among members in forums have turned technical, with participants discussing ways to create automated programs to do trading. Program trading is not something the average person can probably accomplish easily. And some of the returns are definitely impressive. (Incidentally, if you see me listed on the site, you can believe that my participation is almost entirely passive.)

So the question of the day is the following: assuming there was a trader who performed consistently well (through his own means or, more likely, via a program he wrote), would you consider investing in him (e.g. give him your money to trade) just as you’d consider investing in an actively managed mutual fund or asking a financial advisor to manage your money?

JLP’s recent post about groceries got me thinking about our own shopping patterns. My husband and I mostly cook and eat at home, and we did it in the beginning to save money and eat healthier, but later on, we found we actually preferred the foods we cooked to restaurant food. When it came to saving on groceries, Walmart wasn’t much of an option because there was nothing conveniently close to us, and Costco didn’t help either because we don’t eat much packaged or processed foods, and their sizes are just too big for two people. So, if you’re single or a couple and looking to save money on groceries, here’s what we do:

Buy (and cook) ethnic: Because of our backgrounds, we cook a lot of ethnic foods (Chinese, Japanese, Spanish, Italian, Dominican), which means going to “ethnic” grocery stores for items you can’t find in a typical supermarket. But many of these places carry your standard grocery items, especially when it comes to produce, meats, and seafood, at significant savings to Safeway or other well-known supermarkets. If you’re lucky enough to be close to a 99 Ranch Market, don’t get intimidated by the throngs of Asian shoppers there and check it out. We found that we easily spent 50% less on vegetables, fruits, and meats there than at Safeway.

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Most of my portfolio is comprised of ETFs, but back in November, in addition to Nucor (NUE), I also decided to purchase Premium Standard Farms (PORK), a vertically integrated hog and meat processor. This one hasn’t fared as well as NUE, but honesty is honesty, so I’ll write about it here in case it’s helpful to anyone else.

PORK actually popped up several months before November on Valuedog, one of the quant screens I occasionally follow. They’re also occasionally spoken of by Motley Fool and other sorts of investment sites touting how the company’s unglamorous profile is often a key factor in finding undervalued stocks. After calculating Graham’s financial ratios and reading 10Ks and 10Qs just as I did for Nucor, I thought this stock looked ok overall. Now, this one was closer to what Graham defines as an enterprising rather than defensive value investment: it was quite new (an IPO from June 2005), it was quite small (less than the 2B market cap recommended for defensive investments), and some of its financial ratios did show red flags. On the other hand, management seemed to be forthright, earnings were solid and growing. When investing in a company like this, where commodities prices like soybeans and corn (for feed) and, of course, hog prices, affect margins incredibly, it’s always wise to follow reports on these markets as well. I found that Farmdoc, a publication by the University of Illinois Urbana-Champaign, put out regular, easy-to-understand reports every week and quarter that suited this purpose well.

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Another value investment I came across was Audiovox (VOXX), maker of various electronics products which seem to largely fall in the value (e.g. lower margin) segment. I started following Audiovox after hearing Thomas Kahn, who’s supposed to be known as a value investor, speak about it, NY Bankcorp (NYB), and Haggar way back in 2004 during an interview on a finance discussion roundtable as good turnaround candidates to invest in. Interestingly enough, none of these stocks has fared particularly well so far, and in fact, Kahn Brothers bought out Haggar and took it private.

When I first started watching VOXX, it was hovering around $18. By November, it had dropped to $14. The reason VOXX was such an interesting proposition was that it was about to meet one of value investing’s most sought-after critera: not only was it trading below book value, but its price was trading at below net working capital (current assets – total liabilities) per share, meaning that if you bought this business, you’d be paying for only its operating costs. Sounds like a great deal, right? Such candidates are supposed to be rare, if not impossible to find these days.

The problem was that that was about the only value investing criteria that VOXX met. Their earnings were non-existent or negative, and most troubling of all was that during the company’s conference calls, management (including the CEO) seemed to think there wasn’t a big problem and outlined their strategy for getting out of it by introducing new products (whose ASP, or average selling price, had to be slashed by 50% due to unseen competitive pricing pressures) and acquiring potential targets. What company in trouble gets out by buying other companies? That just seemed like a foolhardy idea, and analysts pointed it out. The market was punishing the company’s stock price. Didn’t management get the hint and realize they might be on the wrong track?

These days, VOXX is trading around $12, whereas net working capital is valued at around $14.4 (based on their 2/28/06 financials). It dipped as low as $11.45 a couple of months ago. I haven’t had the guts yet to buy this stock, because although it’s trading at such a nice price, if management continues to destroy shareholder value by losing and mismanaging money, the company may well still be overvalued. On the other hand, if management gets a clue and starts making real profits again, the stock could take off. I’m not sure what I’ll do yet myself, but I’d be curious if anyone had any thoughts on it.

Remember the game 20 questions, where you think of an object and I ask you 20 yes/no questions and guess what you’re thinking of? Someone’s come up with a neural net version at 20q.net that seems pretty darn accurate. It’s probably Bayesian-based artificial intelligence and claims to guess what you’re thinking of 80% of the time and 98% if you let it ask 25 questions. It guessed “carrot” and “glue” when I tried it. If it doesn’t guess what you’ve got in mind, it learns it for the future. Ok, this is my non-finance post for the week, but I guess it tickles my scientist’s funny bone.