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Straightforward Investing Since 1969

The investment advisory firm of O’Brien Greene & Co. provides independent investment management to a diverse clientele. Individuals, families, and corporate retirement plans make up the majority of clients, although longtime clients also include trusts, insurance companies, and charitable endowments. We seek the preservation and growth of capital through good and bad markets, and our investment strategy emphasizes several themes: simple, transparent, separate accounts; direct ownership of high-quality stocks and investment-grade bonds; diversification across the market; customized portfolios with a high degree of personal attention. The firm has more than $270 million under management and its offices are located in suburban Philadelphia in the borough of Media, Pennsylvania.

Review & Outlook

Our take on the investing, financial, & economic themes of the day

An Investment Theme for 2016: Spinoffs

8 January, 2016 by Ben O'Brien in Commentary
2015 was a huge year for Mergers and Acquisitions with over $4 trillion in announced deals. Pfizer announced it was buying Allergan for $183 billion, Annheuser Bush In Bev bought SAB Miller for $120 billion, and Dow Chemical announced it would buy Dupont for $65 billion, just to name a few of the biggest deals. While mergers tend to get all the headlines, whether these giant transactions, which are so lucrative for management and investment bankers, actually create any value for investors is widely disputed. More promising for investors are mergers’ less glamorous cousins: spinoffs. In a spinoff, a company separates itself or divests from a subsidiary or unit of the company. These transactions come in various shapes and sizes. The parent company can issue shares of the new entity to existing shareholders, they can have an initial public offering of the new company or they can give parent shareholders the option to exchange their shares for shares of the new company ... read more...

Using Free Cash Flow Yield to Evaluate Stocks

21 December, 2015 by Ben O'Brien in Commentary
I wrote recently about the problems of relying too much on the P/E ratio for investment decisions. So what should you look to instead? There are lots of important fundamental factors to consider, but one particularly useful measure is the Free Cash Flow Yield. It is a measure of how much extra cash the company produces as a percent of the company’s total value. Free cash flow is the lifeblood of companies. It is the left over cash that allows companies to pay out dividends, reduce debt, acquire other companies or invest in the future. It gives a company flexibility. The simplest way to calculate free cash flow is to take the cash flow from operations on the cash flow statement and subtract capital expenditures. This is the cash generated from its core business minus long term investments in things like new factories or trucks. It leaves out things like depreciation and amortization, restructuring or other accounting charges that can distort earnings even though they don’t ... read more...

Thinking About a New Metric in a Low Growth Economy

18 December, 2015 by Mark O'Brien in Commentary
Investors don’t like the interest rate hike. That’s becoming clear. As I write the Dow Jones industrial average is down 250 points. Yesterday it was down as well. Though the interest rate hike was a mere quarter of a percent (25 “basis points” as we say in the trade), and though the hike was off a zero base, that was enough to spook the market. Stocks are now in negative territory for the year. Just a couple of weeks ago, they were positive on the year. It’s been like this all year: Up, then down, then up, and now down again. Bummer, as the kids say. What to think? For starters, remember that three-fourths of the time the stock market goes up. I am indebted to my OBG colleague Paul Devine for reminding me of this market statistic. According to Paul, the Standard & Poor’s 500 stock index, which is the leading measure of the stock market among professional investors, has been up 63 of the 87 years since 1927. That’s 72% of the times. (So three-fourths is only a slight ... read more...

Why No More Christmas Presents from Stockbrokers?

11 December, 2015 by Paul Devine in Commentary
In an earlier era in the money-management business, the second half of December was accompanied by the arrival at the O’Brien Greene & Company offices of wheels of cheese, cartons of delicacies, bottles of liquor, cases of wine, barrels of popcorn, umbrellas, rain hats, and such, sent by brokerage firms to show their appreciation for stock and bond transactions during the year just ending, and their hope for more in the year about to begin. But with the lowering of brokerage commissions over the past 25 years, those firms have gradually found such lavishness uneconomical, to the point where today our seasonal take consists of a single box of chocolate-coated pretzels. O tempes, o mores! What does this say about the money-management business? The cost of making changes in client portfolios have dropped dramatically over the years to the point where the costs of buying and selling shares of stock are practically immaterial. Is this a good thing? It is for clients, because they ... read more...

The Problem with PE Ratios

3 December, 2015 by Ben O'Brien in Commentary
One of the first things new investors tend to learn is the PE ratio. It is a very quick measure of a company’s relative valuation. To get the PE ratio you simply divide the current share price by one year’s earnings per share. The ratio tells you how much you will pay for each dollar of a company’s earnings. This number, often called the earnings “multiple”, is then compared to the PE ratio of other stocks or of an index. For many individual investors the PE has traditionally been an essential factor in identifying good stocks to buy. When you look closely at PE ratios, however, you begin to find that the PE is a very blunt tool, and maybe not as useful as it first appears. Relying too much on this ratio can lead to all sorts of investment mistakes and misconceptions. Why is it that despite its more than $50 billion in earnings, Apple has a relatively low PE while the barely profitable Amazon has an astronomical one? While I’m not sure I have ... read more...