Which stock pick should we analyze next?2018-04-05T22:48:58+00:00

Forums Stock Picks Which stock pick should we analyze next?

Forums Stock Picks Which stock pick should we analyze next?

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Viewing 15 posts - 1 through 15 (of 56 total)
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  • StigStig Administrator
    Post count: 162

    Guys,

    I hope you have enjoyed our resource with intrinsic value calculations: https://www.theinvestorspodcast.com/intrinsic-value-index/

    Which picks should we analyze next and why?

    Please feel free to provide your own estimates too!

    Thanks!

    -Stig

    Price is what you pay. Value is what you get. - Warren Buffett

    Girish S Newbie
    Post count: 3

    Hey Stig,

    Lots of consumer staples are starting to come down to a reasonable value. I just picked up a few shares of CPB in the wifes portfolio. We buy their soup and also Kettle brand chips they just acquired in a merger of one snack company. Seem to have heavily overpaid but I guess they are looking for some growth sources. Decent dividend and multi year lows made it an attractive entry for me, Would greatly appreciate your opinion on this or another name in the sector for a long term hold. By no means a deep value pick but decent price considering recent market highs.

    Thanks,
    Girish

    StigStig Administrator
    Post count: 162

    Girish,

    You know that pick makes me think of Buffett’s investment in KRAFT (which is a huge compliment). I’ve been looking at retail (not always with success) lately, and it’s crazy how often you can still find value when you don’t look for the new exciting thing.

    As value investors, we’re just boring (and doing better in the markets) I guess…haha…

    Thanks!

    -Stig

    Price is what you pay. Value is what you get. - Warren Buffett

    Girish S Newbie
    Post count: 3

    Newell Brands would be a similar sector, maybe slightly more value pick that has come up for me a few times recently. Probably higher beta than CPB.

    Ed D Newbie
    Post count: 4

    LCI Industries and Tractor Supply Company are 2 “under the radar” companies that look like typical Buffett companies. Market Leaders, strong competitive advantage with room to gorow, around for many decades, very high ROE (>30%), high plough-back ratios and right now look undervalued (>50% discount to IV) in my opinion.

    StigStig Administrator
    Post count: 162

    I like LCII Ed! Here is more info for other users: http://financials.morningstar.com/ratios/r.html?t=0P000001S0&culture=en-US&platform=sal

    It seems to be on the expensive side – but very attractive numbers. It’s trading at high multiples. How did you come up with your valuation?

    -Stig

    Price is what you pay. Value is what you get. - Warren Buffett

    Ryan u Newbie
    Post count: 1

    SMCI, seems like a strong company providing the hardware for a ever advancing sector. Good numbers and good market price. Downside is there is no dividend but seems to invest in to RnD, as well as the recent firing of their CFO and failure to file their financial statements on time.
    If they don’t gain approval from a board review, they could be removed from the Nasdaq.

    Currently the market price is trading around their tangible book value.

    Thanks

    Gus R Newbie
    Post count: 2

    UVE and SAFM

    Patrick M Newbie
    Post count: 2

    Hi Stig,

    SoftBank Group Corp. (SFTBY)
    Masayoshi Son

    https://www.youtube.com/watch?v=Sa2_VBu0d7k

    What do you think?

    Thank you.

    Patrick.

    Ed D Newbie
    Post count: 4

    Stig – re LCI Industries and your question re how I did get my Intrinsic Value? – here are my key assumptions. Let me know what you think. I used estimates for 2018 from ValueLine (which I use).

    Free CF (Owner earnings) = $6.95
    growth rate of 5% for next 10 years then 0% growth for perpetual value
    discount rate of 7%
    $1 / share of net debt
    Intrinsic value = $149. Current price is around $100. this is a 50% discount or an implied return of 10%. This is a conservative assessment because the historical growth rate of EPS over the last 5 years has been 27% and I have assumed only a 5% growth rate. ValueLine is forecasting 15% growth in EPS over the next 5 years. If they can growth 7.5% for the next 5 years then the IV jumps to around $180.

    StigStig Administrator
    Post count: 162

    Ed,

    I like how you put this up. I’ve never been using ValueLine too much (though I hear that it’s good). How about the sector? How much is that growing?

    I guess what I’m concerned about is always the growth assumptions. Every time I’m looking at higher than GDP growth numbers I get a little concern even for 10 years.

    Thanks for contributing to the forum! We could use more people like you for sure 🙂

    -Stig

    Price is what you pay. Value is what you get. - Warren Buffett

    Cbhutchison@smcm.edu Newbie
    Post count: 1

    Consol Energy Ordinary Shares (CEIX)

    Jonathan C Newbie
    Post count: 1

    Hey Stig,

    I would be interested in hearing about Exor (EXXRF). Exor is a holding company and one of the largest shareholders of Fiat Chrystler and Ferrari. Seems to be looking to diversify away from the auto industry. They also own a reinsurance business among other things.

    I’m also interested in Graham Holdings (GHC).

    Thanks!

    DavidDavid Moderator
    Post count: 152

    Thanks for the ideas guys,

    I’ll have a look through the companies you mentioned and try and pick one out to analyse.

    @ Ed, Regarding your DCF calculation for LCI Industries, remember that the DCF model is very sensitive to the numbers you put in. From my perspective, a discount rate of 7% is too low. Why?

    Firstly, it is below the rate one could achieve by simply investing in an index which is much less risky. Taking the S&P 500 as an example, the long-term (Jan 1st,1871-Dec 31st,2015) CAGR (Including dividends) is 9.05%.

    What about long-term inflation?, the long-term (1913-2015) inflation rate is 3.18%. If a company does not possess pricing power (which most don’t apart from those which Buffett describes as an economic franchise. See his 1991 shareholder letter here; http://www.berkshirehathaway.com/letters/1991.html ) it can’t pass the cost of inflation on to the consumer and has to absorb the cost.

    It’s for these reasons that I personally use a discount rate of around 12% instead,

     

    Regards,

     

    David

     

    Ed D Newbie
    Post count: 4

    Hi Stig – thanks for your reply. I agree with your view of using a discount rate of 12% FOR THE AVERAGE COMPANY that has a ROE of <15% which is where most companies are re ROE. Also, these average companies have, generally, a very poor degree of certainty re their future earnings predictability. However, for truly great businesses (like the ones that Buffett only invests in) that have high ROE and have a very high probability of certainty re their future earnings (for example Coke) then a lower Discount is justified. A 7% discount rate is about double the current risk free rate which Buffett often says he uses. For average companies (ROE <20%) I don’t bother doing an intrinsic value calculation of any sort for all the reasons we have read about in Buffett’s letters re focusing on great companies….See the letter (see the 2007 letter re great, good and gruesome companies). For True Buffett investors the key is identifying great businesses to do an intrinsic value calculation where a lower discount rate is defendable. Why bother looking at average companies when we should be spending our time on great companies. The question is LCI Industries a great company? Ed

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