Sunday, November 22, 2015

" We are heading into Black Friday so a few ideas for playing the arrival of Star Wars. Plus some work on refining my GARP/Value investing combo picks"

Dow Jones Industrial Average 17,824.00 (UP)   Week Ending 11/20/2015

The death star is coming!  The coming release of Disney's (DIS) first release of the Star Wars movies is quickly approaching. You could buy Disney of course, but I think there are some better ways to play this gigantic blockbuster.

First, you could buy the stock of
Electronic Arts, ( Symbol EA, $72.42) which has the rights to produce the Star Wars video game series.

Monica Gerson from Benzinga reported: 

"Electronic Arts has released a new game – the Star Wars Battlefront. The game is a 12-40 player online shooter set in the Star Wars universe and is available both online and at retail. Although the game has received relatively weak early reviews, it is still expected to be a mass-market hit and sell at least 13 million units in the quarter, analyst Ben Schachter mentioned, while adding that this could prove to be a conservative estimate.

The stock of EA has 15 Buy ratings on it and should perform well here. The company has done $4.52 Billion dollars of sales in 2015 and has Net Income of 875 Million dollars.

Another way to go, is to jump on the Star Wars toy bonanza and buy the stock of Hasbro Inc. (Symbol HAS, $75.49). I had read an article in the Wall Street Journal that said that Star Wars toys were already crowding out Snoopy and Peanuts on the toy shelves at stores even though there is a Peanuts movie out too. Hasbro has a 1.4 PEG Ratio and earnings should be on a steady climb for the next few years. Both EA and Hasbro stock prices have already done well in 2015 up 54% and 37% Year to date. Happy holidays for both of these winners.

So now on to some stocks that have good PEG Ratio's and Return on Equity, but yet also are trading at less than 3 times Price to Cash Flow and that are trading at less than 2 times Book Value.

Gannett Company Inc., (Symbol GCI, $17.00) is a spin-off from TEGNA, the old Gannett Company with broadcasting businesses.  GCI, with $2.96 Billion in revenues, is the spun-off publishing company, which adopts the name Gannett and  owns newspapers in 92 markets, including USA TODAY, and plans to acquire more papers and other media assets. Oddly they are looking to buy A.H Belo, that I discussed in last weeks blog, who owns the Dallas Texas newspaper. Carl Icann happens to own 7.4 million shares of this company. 

GCI has a Price to Book of 1.81 and a forward PE of 9.9. The company list a Return on Equity of 34% and pays a 4.71% dividend.
TEGNA had spun this company off because of the decline in newspaper advertising revenues. The company trades at 7.85 times Price to Cash Flow. Year to date the stock is up 20.82%.  I could see this stock trading to the $20 to $22 area, so a nice gain on your investment with a dividend kicker.

PDL BioPharma Inc. (Symbol PDLI, $4.00) according to their website,  "Manages a portfolio of patents and royalty assets, consisting primarily of its Queen et al. antibody humanization patents and license agreements with various biotechnology and pharmaceutical companies.  PDL pioneered the humanization of monoclonal antibodies and, by doing so, enabled the discovery of a new generation of targeted treatments for cancer and immunologic diseases for which it receives significant royalty revenue.  PDL is currently focused on intellectual property asset management, acquiring new income generating assets, and maximizing value for its shareholders."

That all sounds wonderful but here is the real important stuff.. The company has a Return on Equity 56.5% and a low PEG Ratio of  0.17.

PDL BioPharma has Revenues of $529.5 million  and a forward PE of 5.73. The Price to Book Ratio on the stock is 1.10 to 1 and the stock is trading at a Price to Free Cash Flow of 3.23.

There is more, the company pays a current dividend of 15.02% , (I doubt they will maintain this), and PDLI is in great financial shape with a Current ratio of 3.2 to 1. 

This company works on Royalty revenues from the companies that it invest in and have been quite successful. 2016 earnings are projected to be much softer,but still OK. I see a target here of $6 -$7 dollars per share on the stock price.

I asked for this book for Christmas for further learning in "Value" investing. I will let you know if Santa brings it. My hope is to bring you the best investing advice and that you continue to read my blog articles. Have a Happy and healthy Thanksgiving and holiday season.



1 comment:

  1. Be careful on PDLI. One of there Queen patent revenue streams is ending in Q2 , 2016. Just found this out. Freewilly