Date: 10 March 2009
Price: $18.74
P/E: 3.7
FP/E: 8.1
P/B: 0.8
Yield: 4.2%
Debt/Eq: 0
Company Description
Trendy, expensive clothing retailer.
Past 10 years
Actually looks pretty good. Sales and earnings have consistently grown. Free cash flow has been forthcoming, and book value has increased. They've never had any debt.
Pros
It's all about the history. This company has been very successful over the past 10 years - typically trading between 12 and 22 times earnings. So it's very cheap right now on any measure.
Cons
The downside is that the next couple of years are expected to be pretty grim. The mean earnings forecast for 2009 is 3.29 (giving P/E of around 5.9) and for 2010 it's 1.78 giving a P/E of 10.x. The company itself described Q42008 as a disaster for retailers (sales were generally down around 25% on last year), and gave the following comments on the upcoming year:
"The Company anticipates a difficult selling environment to persist throughout 2009 and believes there may be significant volatility in sales levels."
Of course this is all market worry rather than company specific concerns - and there doesn't seem to be much doubt that Abercrombie would remain profitable, just at a reduced level.
Conclusion
Yes - moderate buy.
Showing posts with label stocks. Show all posts
Showing posts with label stocks. Show all posts
Tuesday, 10 March 2009
SNY: Sanofi Aventis
Date: 10 March 2009
Price: $25.82
P/E: 9.25
FP/E: 6.2
P/B: 1.7
Yield: 6%
Debt/Eq: 0.08
Company Description
A French pharmaceutical company with an array of products. Top selling drug makes up 9% of sales, so they're not totally dependent on a single drug for their success.
Past 10 years
The financial history looks pretty encouraging. Sales have increased steadily, with a large bump in 2004 when they purchased another company. Book value has increased rapidly over the same period.
Earnings have been slightly less consistent, but still encouraging. Basically they rose from $0.43/share to $1.86/share between 1999 and 2003. Then the acquisition happened in 2004, and there was a $2.66/share loss. Then again we have consistent (and faster) growth from 2005 onwards, with EPS rising from $0.99 to $3.02, with an estimate of approximately $4/share for 2009.
Pros
Unlike most companies I've been looking at, SNY are actually expected to increase earnings quite significantly next year, giving a FP/E of around 6. It's also good to have some diversity in the portfolio, and certainly a European pharmaceutical company would give that. Basically that's it: they're cheap, growing, and different. That'll work.
Cons
It could be cheaper - some of the other companies we're looking at have P/Es as low as 4.x. They've made a bid to acquire Zentiva (an eastern European generic pharmaceutical company for $2.6B. Acquisitions are generally bad as there's plenty of scope for stuff to go wrong, but I'm not too worried about this as the acquisition is fairly small (net earnings for 2008 were $8B, so the acquisition can be made out of free cash flow).
Conclusion
Yes - I'd like to buy some stock in this company. Fairly strong buy.
Price: $25.82
P/E: 9.25
FP/E: 6.2
P/B: 1.7
Yield: 6%
Debt/Eq: 0.08
Company Description
A French pharmaceutical company with an array of products. Top selling drug makes up 9% of sales, so they're not totally dependent on a single drug for their success.
Past 10 years
The financial history looks pretty encouraging. Sales have increased steadily, with a large bump in 2004 when they purchased another company. Book value has increased rapidly over the same period.
Earnings have been slightly less consistent, but still encouraging. Basically they rose from $0.43/share to $1.86/share between 1999 and 2003. Then the acquisition happened in 2004, and there was a $2.66/share loss. Then again we have consistent (and faster) growth from 2005 onwards, with EPS rising from $0.99 to $3.02, with an estimate of approximately $4/share for 2009.
Pros
Unlike most companies I've been looking at, SNY are actually expected to increase earnings quite significantly next year, giving a FP/E of around 6. It's also good to have some diversity in the portfolio, and certainly a European pharmaceutical company would give that. Basically that's it: they're cheap, growing, and different. That'll work.
Cons
It could be cheaper - some of the other companies we're looking at have P/Es as low as 4.x. They've made a bid to acquire Zentiva (an eastern European generic pharmaceutical company for $2.6B. Acquisitions are generally bad as there's plenty of scope for stuff to go wrong, but I'm not too worried about this as the acquisition is fairly small (net earnings for 2008 were $8B, so the acquisition can be made out of free cash flow).
Conclusion
Yes - I'd like to buy some stock in this company. Fairly strong buy.
RDS.A: Royal Dutch Shell
Date: 10 March 2009
Price: $41.19
P/E: 3.42
FP/E: 6.7
P/B: 1.0
Yield: 7.8%
Debt/Eq: 0.2
Company Description
Huge oil company with a generous dividend policy. They do everything from exploration and drilling through to operating gas stations.
Note that these are the A shares, where the B shares are traded in the London Stock Exchange. This isn't anything to worry about - fundamentally by buying these shares we would be buying Shell.
Past 10 years
It all looks good. Sales, earnings, book value have all increased significantly - although it should be noted that over the past 5 years gas prices have also increased significantly... however Shell was doing well even during 2000-2005 when gas prices were fairly static.
It's interesting that P/E ratios have been consistently low these past 5 years - perhaps because gas prices have been high, and the market has been anticipating a fall.
Pros
This is all about the yield. But it's a yield in a huge multinational corporation with a solid balance sheet that prides itself on paying out a nice dividend - and indeed increased the dividend last year.
Cons
To what extent is stock price performance pegged to the price of oil? But if it is, then prices are currently far below the $130/barrel range we saw a year ago - more like $40-$50/barrel... but that's still high compared to $15-25 that we had 7 years ago.
Also, do we view big oil as 'bad' in some way - for environmental reasons for example? In which case should we not be investing?
Conclusion
Maybe. I think yes as part of a portfolio, but this would be a smaller buy compared to some of the others I think.
Price: $41.19
P/E: 3.42
FP/E: 6.7
P/B: 1.0
Yield: 7.8%
Debt/Eq: 0.2
Company Description
Huge oil company with a generous dividend policy. They do everything from exploration and drilling through to operating gas stations.
Note that these are the A shares, where the B shares are traded in the London Stock Exchange. This isn't anything to worry about - fundamentally by buying these shares we would be buying Shell.
Past 10 years
It all looks good. Sales, earnings, book value have all increased significantly - although it should be noted that over the past 5 years gas prices have also increased significantly... however Shell was doing well even during 2000-2005 when gas prices were fairly static.
It's interesting that P/E ratios have been consistently low these past 5 years - perhaps because gas prices have been high, and the market has been anticipating a fall.
Pros
This is all about the yield. But it's a yield in a huge multinational corporation with a solid balance sheet that prides itself on paying out a nice dividend - and indeed increased the dividend last year.
Cons
To what extent is stock price performance pegged to the price of oil? But if it is, then prices are currently far below the $130/barrel range we saw a year ago - more like $40-$50/barrel... but that's still high compared to $15-25 that we had 7 years ago.
Also, do we view big oil as 'bad' in some way - for environmental reasons for example? In which case should we not be investing?
Conclusion
Maybe. I think yes as part of a portfolio, but this would be a smaller buy compared to some of the others I think.
Monday, 9 March 2009
WES: Western Gas Partners
Date: 9 March 2009
Price: $12.63
P/E: n/a (recently IPOd)
FP/E: 9.3
P/B: 0.5ish
Yield: 8.2%
Debt/Eq: 0
Company Description
Another unit trust, set up to process and transport natural gas (not oil), and to pay out dividends. Dividend currently seems to be $0.30 a quarter, which is $1.20/year.
Past 10 years
Not much to go on - as the IPO was just last year. Apparently the parent company is well run and solid.
Pros
I'd like an 8% yield. :-)
Cons
We have very little information to go on. However the end of year results will be published tomorrow.
Conclusion
Maybe. I'll wait until I've seen the final results after tomorrow's close.
Update
Results for the year were roughly in line with expectations I think. Buy maybe I'm not understanding something, because my reading says that EPS is $0.77 on a price of $13/share, which is a P/E of approximately 15. And next year they're saying EBITDA (and presumably therefore EPS) could drop by upto 20%. So while I like the company, and like that they do transportation rather than directly selling gas, they seem overvalued right now. Maybe if the price drops to $7/share...
Price: $12.63
P/E: n/a (recently IPOd)
FP/E: 9.3
P/B: 0.5ish
Yield: 8.2%
Debt/Eq: 0
Company Description
Another unit trust, set up to process and transport natural gas (not oil), and to pay out dividends. Dividend currently seems to be $0.30 a quarter, which is $1.20/year.
Past 10 years
Not much to go on - as the IPO was just last year. Apparently the parent company is well run and solid.
Pros
I'd like an 8% yield. :-)
Cons
We have very little information to go on. However the end of year results will be published tomorrow.
Conclusion
Maybe. I'll wait until I've seen the final results after tomorrow's close.
Update
Results for the year were roughly in line with expectations I think. Buy maybe I'm not understanding something, because my reading says that EPS is $0.77 on a price of $13/share, which is a P/E of approximately 15. And next year they're saying EBITDA (and presumably therefore EPS) could drop by upto 20%. So while I like the company, and like that they do transportation rather than directly selling gas, they seem overvalued right now. Maybe if the price drops to $7/share...
EBF: Ennis, Inc
Date: 9 March 2009
Price: $6.98
P/E: 4.37
FP/E: 4.4 (only one estimate)
P/B: 0.5
Yield: 6.7%
Debt/Eq: 0.19
Introduction
This is a smaller company than the others I'm looking at, with a market cap of $180m. It seems to be basically two businesses under one umbrella - a "business forms" division, and an apparel division. So it has a rather confused identity, but is incredibly cheap on P/E.
Company Description
As above - business forms, and apparel. It looks like it acquired another business (perhaps the apparel division?) in about 2006, as it grew substantially that year.
Past 10 years
All looks good. Sales and earnings have consistently grown, with a bump in 2006, which coincided with more shares being issued - but even EPS has grown throughout that time.
Book value has also grown. Dividends have been paid at around the same level every year. The stock has never been highly valued - P/E ratio is typically in the range of 10-14, but obviously we have quite a way to go to reach such heights from here!
Pros
It looks like a simple business, which has been well run over the past 10 years - including a successful acquisition. P/E ratio is crazy, and the dividend yield is nice.
Cons
Forward looking statements in the 9-month results in December were very cautious: "we continue to believe the remainder of this fiscal year and the next will be extremely difficult for all companies. We are encouraged however, by how we have navigated these waters to date".
Conclusion
I like Ennis. Not so much as PAC perhaps, but I'd say that this a Buy.
Price: $6.98
P/E: 4.37
FP/E: 4.4 (only one estimate)
P/B: 0.5
Yield: 6.7%
Debt/Eq: 0.19
Introduction
This is a smaller company than the others I'm looking at, with a market cap of $180m. It seems to be basically two businesses under one umbrella - a "business forms" division, and an apparel division. So it has a rather confused identity, but is incredibly cheap on P/E.
Company Description
As above - business forms, and apparel. It looks like it acquired another business (perhaps the apparel division?) in about 2006, as it grew substantially that year.
Past 10 years
All looks good. Sales and earnings have consistently grown, with a bump in 2006, which coincided with more shares being issued - but even EPS has grown throughout that time.
Book value has also grown. Dividends have been paid at around the same level every year. The stock has never been highly valued - P/E ratio is typically in the range of 10-14, but obviously we have quite a way to go to reach such heights from here!
Pros
It looks like a simple business, which has been well run over the past 10 years - including a successful acquisition. P/E ratio is crazy, and the dividend yield is nice.
Cons
Forward looking statements in the 9-month results in December were very cautious: "we continue to believe the remainder of this fiscal year and the next will be extremely difficult for all companies. We are encouraged however, by how we have navigated these waters to date".
Conclusion
I like Ennis. Not so much as PAC perhaps, but I'd say that this a Buy.
ELY: Callaway Golf Company
Date: 9 March 2009
Price: $5.81
P/E: 5.59
FP/E: 6.6
P/B: 0.6
Yield: 4.8%
Debt/Eq: 0
Introduction
The ratios look pretty good. It's cheap based on earnings and book value. Yield is fairly good, and there's no debt.
Company Description
Callaway makes and sells various golfing equipment - clubs, balls, clothing etc - and have a number of well known brands.
Past 10 years
The results look patchy. There's steady sales growth over the whole period. The past 4 years have seen good earnings growth, but it seems that this is mostly because they hit a bad patch around 2004/05 which they have gradually recovered from... and have now returned to the levels they saw in the early years of the millennium. Cash flow is overall positive, but varies from year to year. The book value has been fairly static over the last 10 years - again moving up and down a bit. They seem to have been consistent with their dividend payouts, which is good.
The company has historically been valued on a high multiple of its earnings - with a P/E above 20 for much of the time - so that's encouraging given the current P/E.
Pros
The business is simple. Current trend is for increased earnings. Valuation is cheap. No debt. Has been highly valued in the past - currently at lowest price of last 10 years.
Cons
The financial history isn't giving me a warm fuzzy feeling. The balance sheet is sound, but I don't get the feeling that the company is growing in value over time. Having said that, if it stagnates, but continues to pay out 4.8% in dividends then that's a lot better than money in the bank right now.
Conclusion
Tentative yes? I'd buy these as part of my portfolio, but they'd probably get a relatively small chunk of money.
Price: $5.81
P/E: 5.59
FP/E: 6.6
P/B: 0.6
Yield: 4.8%
Debt/Eq: 0
Introduction
The ratios look pretty good. It's cheap based on earnings and book value. Yield is fairly good, and there's no debt.
Company Description
Callaway makes and sells various golfing equipment - clubs, balls, clothing etc - and have a number of well known brands.
Past 10 years
The results look patchy. There's steady sales growth over the whole period. The past 4 years have seen good earnings growth, but it seems that this is mostly because they hit a bad patch around 2004/05 which they have gradually recovered from... and have now returned to the levels they saw in the early years of the millennium. Cash flow is overall positive, but varies from year to year. The book value has been fairly static over the last 10 years - again moving up and down a bit. They seem to have been consistent with their dividend payouts, which is good.
The company has historically been valued on a high multiple of its earnings - with a P/E above 20 for much of the time - so that's encouraging given the current P/E.
Pros
The business is simple. Current trend is for increased earnings. Valuation is cheap. No debt. Has been highly valued in the past - currently at lowest price of last 10 years.
Cons
The financial history isn't giving me a warm fuzzy feeling. The balance sheet is sound, but I don't get the feeling that the company is growing in value over time. Having said that, if it stagnates, but continues to pay out 4.8% in dividends then that's a lot better than money in the bank right now.
Conclusion
Tentative yes? I'd buy these as part of my portfolio, but they'd probably get a relatively small chunk of money.
Sunday, 8 March 2009
PAC: Pacific Airport ADR
Date: 8 March 2009
Price: $15.16
P/E: 5.28
FP/E: 9.19
P/B: 0.5
Yield: 12.2%
Debt/Eq: 0
Introduction
Nice P/E, great yield, great P/B. No debt. The figures look really nice.
Company Description
This is a Mexican company, with a government contract to manage six of Mexico's ten busiest tourist airports for the next 40 years.
Past 10 years
Everything looks good. Revenues and earnings have consistently risen over the past 5 years (as long as data is available). The company consistently generates free cash flow. Shareholder's equity is consistently increasing too. All good. Also, the stock's valuation is low compared to its historic valuation - against P/E, P/B, P/S, P/CF. :-)
Pros
Everything looks good. All the financials are great. As a long term investment it should do really well, and it's insanely cheap.
Risks
On the down side, I'm sure tourist travel to/from Mexico will be hurt by the current economic crisis, but Q4 2008 was "only" 15% worse (all passengers) than Q4 2007, which really isn't that bad. I can live with the profit dropping for a bit - the price has that built in.
Also, it's a Mexican company - I don't know if there are any reasons to be concerned about that. Maybe different corporate governance laws in different places?
Conclusion
Yes. The next question is how much... and that's harder.
Price: $15.16
P/E: 5.28
FP/E: 9.19
P/B: 0.5
Yield: 12.2%
Debt/Eq: 0
Introduction
Nice P/E, great yield, great P/B. No debt. The figures look really nice.
Company Description
This is a Mexican company, with a government contract to manage six of Mexico's ten busiest tourist airports for the next 40 years.
Past 10 years
Everything looks good. Revenues and earnings have consistently risen over the past 5 years (as long as data is available). The company consistently generates free cash flow. Shareholder's equity is consistently increasing too. All good. Also, the stock's valuation is low compared to its historic valuation - against P/E, P/B, P/S, P/CF. :-)
Pros
Everything looks good. All the financials are great. As a long term investment it should do really well, and it's insanely cheap.
Risks
On the down side, I'm sure tourist travel to/from Mexico will be hurt by the current economic crisis, but Q4 2008 was "only" 15% worse (all passengers) than Q4 2007, which really isn't that bad. I can live with the profit dropping for a bit - the price has that built in.
Also, it's a Mexican company - I don't know if there are any reasons to be concerned about that. Maybe different corporate governance laws in different places?
Conclusion
Yes. The next question is how much... and that's harder.
Saturday, 7 March 2009
7 March 2009, Dow 6627, FTSE 3530 - screening
As I start looking to invest again, I'm a little overwhelmed by the number of really cheap stocks available at this time - but also excited.
In this post I'm going to jot down a few notes on the stocks I've found - simply as a to-do list of stocks to investigate. This is based on a list I got from the MSN Deluxe stock screener (see previous post).
Screen
Roughly: FP/E < 10, Yld > 4%, Debt/Equity < 20%, P/B < 1.
I'm ignoring financial stocks for now, as these are something of a special case.
Stocks
SAY - Satyam Computer Services - Indian based consultancy.
FPE = 1, P/B = 0.28
Price has crashed in the last couple of months. A brief skim of the news suggests they're raising more money, and that there's some sort of fraud/legal investigation ongoing. May still be a bargain, but clearly there are reasons for the ridiculous price.
PDS - Precision Drilling Trust - Oil and Gas equipment
FPE = 2.3, Yield > 17%
Latest news suggests that my debt stats are incorrect, as they're trying and failing to issue debt to raise more money - perhaps to finance a recent acquisition. Again - doesn't look like a conservative pick.
ERF - Enerplus Resources - another oil and gas exploration
FPE = 3.5 (per MSN - more like 8 in reality), yield 12%
Nothing untoward here, other than typical economic woes due to falling oil and gas prices. Worth further investigation.
PAC - Pacific Airport ADR - own airports and other properties in Mexico
FPE = 6.9, P/B = 0.49. No debt.
No disasters here. Worth further investigation.
ELY - Callaway Golf Co - Makes and sells golf clubs and other accessories
FPE = 8.6. Generally cheap, but nothing spectacular.
Worth further investigation - simple business.
WES - Western Gas Partners - gas pipelines, processes and transports gas in USA.
FPE = 9. P/B = 0.5 Yield = 9.3%
Worth further investigation - has long term contracts, so may not be hit by falling gas prices particularly.
ANF - Abercrombie and Fitch - clothing retailer
Just qualified under my filter. Not particularly cheap. I don't like them because they're trendy and I'm not! :-) Maybe investigate.
RDS.A - Royal Dutch & Shell: A shares - gas again
Huge company, that I've owned (profitably) before (which is irrelevant). P/B is slightly over 1, but P/E is 6, and yield is 7.5%. Worth looking at - obviously need to figure out what the A shares are.
SNY - French pharmaceutical company
Generally cheap - FP/E of 7.
No crisis. Worth investigating.
EBF - Ennis, Inc - sells business forms, and T-shirts... ?!
Smaller than other companies. FP/E 5.4, Yield 8.3%.
Worth investigating.
For further investigation:
ERF, PAC, ELY, WES, RDS.A, EBF, SNY, ANF
In this post I'm going to jot down a few notes on the stocks I've found - simply as a to-do list of stocks to investigate. This is based on a list I got from the MSN Deluxe stock screener (see previous post).
Screen
Roughly: FP/E < 10, Yld > 4%, Debt/Equity < 20%, P/B < 1.
I'm ignoring financial stocks for now, as these are something of a special case.
Stocks
SAY - Satyam Computer Services - Indian based consultancy.
FPE = 1, P/B = 0.28
Price has crashed in the last couple of months. A brief skim of the news suggests they're raising more money, and that there's some sort of fraud/legal investigation ongoing. May still be a bargain, but clearly there are reasons for the ridiculous price.
PDS - Precision Drilling Trust - Oil and Gas equipment
FPE = 2.3, Yield > 17%
Latest news suggests that my debt stats are incorrect, as they're trying and failing to issue debt to raise more money - perhaps to finance a recent acquisition. Again - doesn't look like a conservative pick.
ERF - Enerplus Resources - another oil and gas exploration
FPE = 3.5 (per MSN - more like 8 in reality), yield 12%
Nothing untoward here, other than typical economic woes due to falling oil and gas prices. Worth further investigation.
PAC - Pacific Airport ADR - own airports and other properties in Mexico
FPE = 6.9, P/B = 0.49. No debt.
No disasters here. Worth further investigation.
ELY - Callaway Golf Co - Makes and sells golf clubs and other accessories
FPE = 8.6. Generally cheap, but nothing spectacular.
Worth further investigation - simple business.
WES - Western Gas Partners - gas pipelines, processes and transports gas in USA.
FPE = 9. P/B = 0.5 Yield = 9.3%
Worth further investigation - has long term contracts, so may not be hit by falling gas prices particularly.
ANF - Abercrombie and Fitch - clothing retailer
Just qualified under my filter. Not particularly cheap. I don't like them because they're trendy and I'm not! :-) Maybe investigate.
RDS.A - Royal Dutch & Shell: A shares - gas again
Huge company, that I've owned (profitably) before (which is irrelevant). P/B is slightly over 1, but P/E is 6, and yield is 7.5%. Worth looking at - obviously need to figure out what the A shares are.
SNY - French pharmaceutical company
Generally cheap - FP/E of 7.
No crisis. Worth investigating.
EBF - Ennis, Inc - sells business forms, and T-shirts... ?!
Smaller than other companies. FP/E 5.4, Yield 8.3%.
Worth investigating.
For further investigation:
ERF, PAC, ELY, WES, RDS.A, EBF, SNY, ANF
Method - how do I find and investigate stocks?
Having come back to this blog two years after I started it, I realize that I made something of an error in not recording the tools and websites I used to find and then investigate these stock pics. This post aims to rectify that (now that I've started from scratch).
Stock Screener: Finding stocks
I use MSN Money's Deluxe Stock Screener - which is free, yet powerful.
"Find MSN’s screener from its homepage (moneycentral.msn.com) by selecting Investing and then Stock Screener. Once there, click on the Deluxe Stock Screener link to download the free screener program. Coincidentally, MSN’s screener only works with Microsoft’s Internet Explorer, it won’t work with Firefox or other non-Microsoft browsers." (Thanks to http://www.winninginvesting.com/stock_screeners.htm.)
Once installed, you can access the screener directly at: http://moneycentral.msn.com/investor/finder/customstocks.asp.
Filters
As described in my first post, I use filters on the P/E, forecast P/E, dividend yield, price/book value, and leverage (lack of) to find cheap shares, which I then investigate in more detail.
Further investigation
So this gives me a list of interesting looking stocks. What do I do next?
1. Pick one that looks interesting.
2. Click on the ticker symbol (a link from the results page on the screener) to pull up the company information. This brings up a page that looks like this: http://moneycentral.msn.com/companyreport?Symbol=PAC
3. Read about what the company does. The more straightforward the business (i.e. the easier for me to understand) the better.
4. I then click on the Financial Results link on the left hand menu, to get some more detail on the company's finances over the past couple of years. e.g. http://moneycentral.msn.com/investor/invsub/results/hilite.asp?Symbol=PAC
5. I then look at the quarterly revenue and earnings per share figures, to get an idea of the pattern, and to look out for anything unusual. Ideally I'm looking for a company that makes profit every quarter, and whose profit is growing year-by-year. If I see any startlingly unusual figures (e.g. there's a sudden spike (or drop) in profit this year) then I'll note that, and investigate further.
6. I'll then examine the financial statements for the past ten years. I prefer MorningStar to MSN for this: e.g. http://quicktake.morningstar.com/StockNet/Income10.aspx?Country=USA&Symbol=PAC.
My investment style is very conservative, so I'm looking for a company that has been consistently profitable (and ideally growing) over the past ten years, and where the total equity (i.e. value owned by share holders) has increased over time.
7. If everything still looks good, then I'll read the most recent quarterly earnings statement, or any earlier statements that are necessary to throw light on any oddities I've seen in the results. To find these I go to http://quote.morningstar.com/Quote/Quote.aspx?Ticker=PAC and then near the bottom of the screen there's a section entitled "Company Press Release" under "News, Alerts, and Opinions".
And that's it. Hopefully by now I've figured out whether or not I want to invest.
Disclaimer: I know nothing. This is not investment advice.
Stock Screener: Finding stocks
I use MSN Money's Deluxe Stock Screener - which is free, yet powerful.
"Find MSN’s screener from its homepage (moneycentral.msn.com) by selecting Investing and then Stock Screener. Once there, click on the Deluxe Stock Screener link to download the free screener program. Coincidentally, MSN’s screener only works with Microsoft’s Internet Explorer, it won’t work with Firefox or other non-Microsoft browsers." (Thanks to http://www.winninginvesting.com/stock_screeners.htm.)
Once installed, you can access the screener directly at: http://moneycentral.msn.com/investor/finder/customstocks.asp.
Filters
As described in my first post, I use filters on the P/E, forecast P/E, dividend yield, price/book value, and leverage (lack of) to find cheap shares, which I then investigate in more detail.
Further investigation
So this gives me a list of interesting looking stocks. What do I do next?
1. Pick one that looks interesting.
2. Click on the ticker symbol (a link from the results page on the screener) to pull up the company information. This brings up a page that looks like this: http://moneycentral.msn.com/companyreport?Symbol=PAC
3. Read about what the company does. The more straightforward the business (i.e. the easier for me to understand) the better.
4. I then click on the Financial Results link on the left hand menu, to get some more detail on the company's finances over the past couple of years. e.g. http://moneycentral.msn.com/investor/invsub/results/hilite.asp?Symbol=PAC
5. I then look at the quarterly revenue and earnings per share figures, to get an idea of the pattern, and to look out for anything unusual. Ideally I'm looking for a company that makes profit every quarter, and whose profit is growing year-by-year. If I see any startlingly unusual figures (e.g. there's a sudden spike (or drop) in profit this year) then I'll note that, and investigate further.
6. I'll then examine the financial statements for the past ten years. I prefer MorningStar to MSN for this: e.g. http://quicktake.morningstar.com/StockNet/Income10.aspx?Country=USA&Symbol=PAC.
My investment style is very conservative, so I'm looking for a company that has been consistently profitable (and ideally growing) over the past ten years, and where the total equity (i.e. value owned by share holders) has increased over time.
7. If everything still looks good, then I'll read the most recent quarterly earnings statement, or any earlier statements that are necessary to throw light on any oddities I've seen in the results. To find these I go to http://quote.morningstar.com/Quote/Quote.aspx?Ticker=PAC and then near the bottom of the screen there's a section entitled "Company Press Release" under "News, Alerts, and Opinions".
And that's it. Hopefully by now I've figured out whether or not I want to invest.
Disclaimer: I know nothing. This is not investment advice.
Saturday, 27 January 2007
OMM: OMI
Date: 27 Jan 2007
Price: $21.45
P/E: 4.28
P/B: 1.6
Yield: 2.20%
Debt/Eq: 0.75
Data from Morningstar
Introduction
No prizes for guessing what drew my attention to OMM - look at that P/E ratio! I haven't started to investigate yet, but I have a suspicion that next year's P/E ratio won't look quite as good - but we'll get to that.
Company Description
OMI provides seaborne transportation services with large shipping vessels, primarily of crude oil and petroleum products.
Past 10 years
The company seems to have been formed in 1998, and has grown pretty rapidly in that time. The first 5 years saw the company making a profit, but also a lot of capital expenditure (hence strongly negative free cash flow). The last two or three years have seen a significant increase in the profit (from ~$1.20/share to $5/share) and positive free cash flow. Which all suggests that the company made big efforts to expand over the first few years, and is now starting to see the benefits of that. The book value has increased from $245m to $872m since 1998 - mostly in the past couple of years.
One interesting factor to note is the number of shares in issue, which increased from 49m to 85m leading up to 2004, but has since declined to 63m - suggesting that a share buyback program has been instigated these past two years (this is confirmed by the latest results statement). Which again fits with the theory that the first 5 years were about raising capital and building the company, and now we're starting to see the profits of that. Having said that I'm sure the high oil price has also contributed to the high profits (there are graphs in their presentations showing the correlation in oil price and the earnings they can make).
Pros
Well obviously that P/E ratio marks the company out as being ridiculously cheap - however a glance at the stock history shows that it has always been fairly cheap (5 year average P/E is 8.7, and P/Es of 3-6 are not unusual). The company is profitable, has net leverage of 35%, and is buying back shares like nobody's business. All of these are good things.
Risks
There seems to be some uncertainty about the way to calculate EPS, as I've seen 9 month financial statements saying that the company has made $3.56 in the first 9 months of the year, and yet I've also seen analyst consensus estimates of $3.12 for the year, which seems rather unlikely given that we're expecting at least $0.50 in earnings in the last quarter - giving over $4 EPS for the year, and a P/E of 5.3 rather than a P/E of 7. I suspect this year's EPS numbers are skewed by the sale of four ships (two of which will be leased back). This also suggests an expectation that the business will decline in coming years
Ignoring that, estimates for next year seem to think that 50c a quarter will be fairly typical, and so if ongoing earnings will be only $2 then the current price doesn't look so attractive.
Conclusion
I'm not sure (which equals a no). It certainly doesn't look a bad company, and I'd like to monitor it over the coming months to see what happens when the final results for the year come out, and then once we start to see some results that aren't skewed by the boat sales. If the price falls to 4 times next year's earnings (ie. to $8-$10) then I would really be interested!
Price: $21.45
P/E: 4.28
P/B: 1.6
Yield: 2.20%
Debt/Eq: 0.75
Data from Morningstar
Introduction
No prizes for guessing what drew my attention to OMM - look at that P/E ratio! I haven't started to investigate yet, but I have a suspicion that next year's P/E ratio won't look quite as good - but we'll get to that.
Company Description
OMI provides seaborne transportation services with large shipping vessels, primarily of crude oil and petroleum products.
Past 10 years
The company seems to have been formed in 1998, and has grown pretty rapidly in that time. The first 5 years saw the company making a profit, but also a lot of capital expenditure (hence strongly negative free cash flow). The last two or three years have seen a significant increase in the profit (from ~$1.20/share to $5/share) and positive free cash flow. Which all suggests that the company made big efforts to expand over the first few years, and is now starting to see the benefits of that. The book value has increased from $245m to $872m since 1998 - mostly in the past couple of years.
One interesting factor to note is the number of shares in issue, which increased from 49m to 85m leading up to 2004, but has since declined to 63m - suggesting that a share buyback program has been instigated these past two years (this is confirmed by the latest results statement). Which again fits with the theory that the first 5 years were about raising capital and building the company, and now we're starting to see the profits of that. Having said that I'm sure the high oil price has also contributed to the high profits (there are graphs in their presentations showing the correlation in oil price and the earnings they can make).
Pros
Well obviously that P/E ratio marks the company out as being ridiculously cheap - however a glance at the stock history shows that it has always been fairly cheap (5 year average P/E is 8.7, and P/Es of 3-6 are not unusual). The company is profitable, has net leverage of 35%, and is buying back shares like nobody's business. All of these are good things.
Risks
There seems to be some uncertainty about the way to calculate EPS, as I've seen 9 month financial statements saying that the company has made $3.56 in the first 9 months of the year, and yet I've also seen analyst consensus estimates of $3.12 for the year, which seems rather unlikely given that we're expecting at least $0.50 in earnings in the last quarter - giving over $4 EPS for the year, and a P/E of 5.3 rather than a P/E of 7. I suspect this year's EPS numbers are skewed by the sale of four ships (two of which will be leased back). This also suggests an expectation that the business will decline in coming years
Ignoring that, estimates for next year seem to think that 50c a quarter will be fairly typical, and so if ongoing earnings will be only $2 then the current price doesn't look so attractive.
Conclusion
I'm not sure (which equals a no). It certainly doesn't look a bad company, and I'd like to monitor it over the coming months to see what happens when the final results for the year come out, and then once we start to see some results that aren't skewed by the boat sales. If the price falls to 4 times next year's earnings (ie. to $8-$10) then I would really be interested!
Thursday, 25 January 2007
FUNC: First United
Date: 25 Jan 2007
Price: $21.99
P/E: 10.23
P/B: 1.4
Yield: 3.48%
Debt/Equity: 2.71
Data from Morningstar.com
Introduction
First United Bank first drew my attention as the result of some apparently erroneous information reporting that the dividend yield was a whopping 6.7%. That 'fact' coupled with a fairly low P/E ratio was enough for me to investigate further.
Company Description
It's a bank. I don't like to dwell too much on trivial details like what the company actually does, so that's all you're getting.
Past 10 years
The companies financial history makes very pleasant reading. Earnings have increased every year in the past ten years with one exception (2004 due to a high "non-compensation expense"), and in 2005 earnings were stronger than ever - so that proved to be a temporary blip. EPS doubled during the period from $1 to $2.15. The book value increased from $56.8m to $94m over the period, which is also good to see. Lots of warm fuzzy feelings here.
Pros
Everything about this company looks solid. In my opinion if you're looking for a relatively safe place to put your money then this is it. The return on shareholder's equity is around 12%, which is solid if not spectacular, and the balance sheet, income growth etc all looks very healthy.
Cons
I should first say a brief word about the debt/equity ratio above - particularly having complained so much in my previous post. For banks this number is basically irrelevant. All the customer deposits at the bank are counted as debt, which is of course true, but the banks business is to take on that debt and then use it to make money - so I don't penalize banks for that, and generally try to ignore the gearing or leverage ratios for a bank.
The main negative on this stock is that I'd like to see it even cheaper before buying. If it had a P/E of 8 rather than 10 I'd be jumping at it - as it is, I think it's worth an investment, but won't be getting excited about FUNC.
Conclusion
This stock seems to be pretty unexciting - and that has historically been true of the share price too. Personally I don't mind that, and I'm quite comfortable with investing some of my money in FUNC for the long term, and I'd probably get a low double-digit return (including dividends), which will do me nicely. It's nothing exciting, but I also view it as pretty low risk, and as a first dabble into the US stock market that will do nicely.
Price: $21.99
P/E: 10.23
P/B: 1.4
Yield: 3.48%
Debt/Equity: 2.71
Data from Morningstar.com
Introduction
First United Bank first drew my attention as the result of some apparently erroneous information reporting that the dividend yield was a whopping 6.7%. That 'fact' coupled with a fairly low P/E ratio was enough for me to investigate further.
Company Description
It's a bank. I don't like to dwell too much on trivial details like what the company actually does, so that's all you're getting.
Past 10 years
The companies financial history makes very pleasant reading. Earnings have increased every year in the past ten years with one exception (2004 due to a high "non-compensation expense"), and in 2005 earnings were stronger than ever - so that proved to be a temporary blip. EPS doubled during the period from $1 to $2.15. The book value increased from $56.8m to $94m over the period, which is also good to see. Lots of warm fuzzy feelings here.
Pros
Everything about this company looks solid. In my opinion if you're looking for a relatively safe place to put your money then this is it. The return on shareholder's equity is around 12%, which is solid if not spectacular, and the balance sheet, income growth etc all looks very healthy.
Cons
I should first say a brief word about the debt/equity ratio above - particularly having complained so much in my previous post. For banks this number is basically irrelevant. All the customer deposits at the bank are counted as debt, which is of course true, but the banks business is to take on that debt and then use it to make money - so I don't penalize banks for that, and generally try to ignore the gearing or leverage ratios for a bank.
The main negative on this stock is that I'd like to see it even cheaper before buying. If it had a P/E of 8 rather than 10 I'd be jumping at it - as it is, I think it's worth an investment, but won't be getting excited about FUNC.
Conclusion
This stock seems to be pretty unexciting - and that has historically been true of the share price too. Personally I don't mind that, and I'm quite comfortable with investing some of my money in FUNC for the long term, and I'd probably get a low double-digit return (including dividends), which will do me nicely. It's nothing exciting, but I also view it as pretty low risk, and as a first dabble into the US stock market that will do nicely.
Monday, 22 January 2007
RYI: Ryerson
Current Stats
Date: 22 Jan 2007
Price: $29.76
P/E: 10.3
P/B: 1.2
Yield: 0.7%
Debt/Equity: 1.68
Data from MorningStar.com
Introduction
I pick Ryerson somewhat at random from those stocks on my watchlist, and already I'm having doubts based on the level of debt you see above - but I'll follow through this process so that I get a feel for how I want to analyze stocks.
Company Description
Ryerson is a metal distributor. They act as the middle-man between producers of metals such as aluminium (I'm British, okay...) and buyers who aren't big enough to negotiate directly with the producers.
Past 10-years
The last ten years haven't been great. In 4 of those 10 years (2000-2003) the company made a loss. The company's book value has actually declined from $789m to $639m over that period. Free cash flow has swung between wildly positive and wildly negative over the period, and the sum over all those years is getting on for $100m negative.
Pros
The reasons I was attracted to this stock in the first place were pretty simple - a P/E ratio of around 10 is fairly (but not spectacularly) cheap, and a price to book ratio of 1.2 is unusually cheap these days. I think these numbers were even better a month or so back when the stock first crossed my radar. The argument goes that if a stock is trading close to book value then the book value should place a pretty good floor under the stock price (as in the worst case you could always liquidate the company). The company has also done pretty well over the past 3 years - since 2003 the book value has increased from $382m to $639m, which is pretty spectacular.
Cons
But all of this is pretty quickly shot down by the debt. The whole point of value investing is that you try to minimize the risk. You choose a stock that is so cheap that the market is expecting bad news, and that is financially stable so that it can't actually go bust. In this case, the stock has an unstable earnings history, and is heavily in debt - interest on debt was approximately $50m for the first nine months of this year, and earnings were around $76m (after paying the interest obviously). There's not a whole lot of margin of safety there - particularly when you consider the patchy earnings history.
Conclusion
Personally, I won't touch this with a barge pole - due to the debt and the significant risk of future losses. I like to be able to sleep at nights, and with Ryerson I wouldn't feel secure that I wouldn't one day lose all my money.
Date: 22 Jan 2007
Price: $29.76
P/E: 10.3
P/B: 1.2
Yield: 0.7%
Debt/Equity: 1.68
Data from MorningStar.com
Introduction
I pick Ryerson somewhat at random from those stocks on my watchlist, and already I'm having doubts based on the level of debt you see above - but I'll follow through this process so that I get a feel for how I want to analyze stocks.
Company Description
Ryerson is a metal distributor. They act as the middle-man between producers of metals such as aluminium (I'm British, okay...) and buyers who aren't big enough to negotiate directly with the producers.
Past 10-years
The last ten years haven't been great. In 4 of those 10 years (2000-2003) the company made a loss. The company's book value has actually declined from $789m to $639m over that period. Free cash flow has swung between wildly positive and wildly negative over the period, and the sum over all those years is getting on for $100m negative.
Pros
The reasons I was attracted to this stock in the first place were pretty simple - a P/E ratio of around 10 is fairly (but not spectacularly) cheap, and a price to book ratio of 1.2 is unusually cheap these days. I think these numbers were even better a month or so back when the stock first crossed my radar. The argument goes that if a stock is trading close to book value then the book value should place a pretty good floor under the stock price (as in the worst case you could always liquidate the company). The company has also done pretty well over the past 3 years - since 2003 the book value has increased from $382m to $639m, which is pretty spectacular.
Cons
But all of this is pretty quickly shot down by the debt. The whole point of value investing is that you try to minimize the risk. You choose a stock that is so cheap that the market is expecting bad news, and that is financially stable so that it can't actually go bust. In this case, the stock has an unstable earnings history, and is heavily in debt - interest on debt was approximately $50m for the first nine months of this year, and earnings were around $76m (after paying the interest obviously). There's not a whole lot of margin of safety there - particularly when you consider the patchy earnings history.
Conclusion
Personally, I won't touch this with a barge pole - due to the debt and the significant risk of future losses. I like to be able to sleep at nights, and with Ryerson I wouldn't feel secure that I wouldn't one day lose all my money.
Brave New World
Welcome to the inaugural post of my new Value Investing blog. My intention is to use this blog as a repository for my investigations into various US stocks that I might consider for investment.
My background is actually in the UK stockmarket, where I was moderately successful for the first two or three years of my investing career (I say career - I'm not a professional, I do this for fun and to increase my savings). I have been heavily influenced by the writings of TMFPyad (Stephen Bland) on The Motley Fool UK website). You might describe his strategy as deep value, where the letters PYAD stand for
I have not been particularly strict in following these criteria, but this at least gives you some idea of my background. I'd rather buy a dog of a company at a really cheap price than a good company at a mediocre price. And there have been many studies to back up this strategy as more likely to be successful (David Dreman's book: Contrarian Investment Strategies provides ample proof of this).
As I say, my previous experience has been in the UK (where I was moderately successful - generating approximately 19% p.a. compounded return), so the US stock market is a new adventure for me. I'm therefore also expecting this to be a learning experience to some extent - I'm not sure if anyone will read this blog, but if you'd like to journey with me then you'd be more than welcome.
My background is actually in the UK stockmarket, where I was moderately successful for the first two or three years of my investing career (I say career - I'm not a professional, I do this for fun and to increase my savings). I have been heavily influenced by the writings of TMFPyad (Stephen Bland) on The Motley Fool UK website). You might describe his strategy as deep value, where the letters PYAD stand for
- Price (low P/E)
- Yield (high dividend)
- Assets (Price to Tangible Book Value of < 1)
- Debt (or rather - no debt)
I have not been particularly strict in following these criteria, but this at least gives you some idea of my background. I'd rather buy a dog of a company at a really cheap price than a good company at a mediocre price. And there have been many studies to back up this strategy as more likely to be successful (David Dreman's book: Contrarian Investment Strategies provides ample proof of this).
As I say, my previous experience has been in the UK (where I was moderately successful - generating approximately 19% p.a. compounded return), so the US stock market is a new adventure for me. I'm therefore also expecting this to be a learning experience to some extent - I'm not sure if anyone will read this blog, but if you'd like to journey with me then you'd be more than welcome.
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