Saturday, March 5, 2016

When I do my stock screening sometimes it seems like I am channeling The Chairman, Mr. Mario Gabelli. We seem to like the same value stocks to invest in. Here are two of them, Viacom B and Tri Pointe Group Inc."

Dow Jones Industrial Average 17,006.77 (UP) Week Ending 03-04-2016

The Chairman, Mario Gabelli is one of the legendary Value stock investors of all time. He is the founder, chairman, and CEO of Gabelli Asset Management Company Investors, (GAMCO Investors) an investment firm headquartered in Rye, NY.   

Some of the Chairman's great investments have been Precision Cast Parts, Madison Square Garden, Cowles Communications, Keurig Green Mountain and Chris Craft. Gabelli is a leading proponent of the Graham-Dodd school of security analysis. (Ben Graham and David Dodd). Graham's most well known disciples of Value Investing include Warren Buffett, William J, Ruane, Irving Kahn and Walter J. Schloss.

One of the stocks that Mario initiated coverage on on June 29th, 2015 is Tri Pointe Group Inc. (Symbol TPH, $10.68). Mario's target price for the stock is $19.00. From the Tri Pointe website, " TRI Pointe Homes became a publicly held company, trading under the symbol “TPH” on the NYSE. It was the first IPO in home-building to emerge after the downturn. Within 5 years, the company merged with Weyerhaeuser Real Estate Company (WRECO), which operated as five distinct home-building companies in seven states, to become TRI Pointe Group. This merger has created one of the top 10 largest public home-building companies in the United States based on equity market capitalization." 

 Here are some of their franchise names around the country:
  • TRI Pointe Group                                         
  • Maracay Homes
  • Pardee Homes
  • Quadrant Homes
  • Trendmaker Homes
  • TRI Pointe Homes
  • Winchester Homes
Here are the numbers for Tri Pointe Group Inc.. The current PE is 10.68 and the Forward PE is 7.73. The PEG Ratio is 0.31 and the ROE is 10.70%. Price to current Book Value is 1.38. 

IBD has the earnings rank at 75 and gives it a "B" Rating. EPS for this year is +149.60 and EPS for the next 5 years is a rate of 34.39%. Sales Quarter over Quarter is 35.6% and the EPS Q/Q is 342.90%.  I like this stock here and have taken a position in it.

The second one of Mario's value picks he has owned for a number of years as a storehouse of value. Mario is often looking far ahead down the road for values. Sales have been down every year here at VIAB for the last 5 years, but I guess he thinks that the assets intrinsic value is not being realized or capital is just not being deployed properly.  The company is Viacom Inc. B (Symbol VIAB, $38.82). VIAB has a PE of 8.29 a Forward PE of 6.81. This one pays you to wait with a 4.12% current dividend payout. The company had 2015 sales of $13 Billion dollars and Income of $1.87 Billion.

One idea is that Viacom will start unlocking value by leveraging its high quality asset as owner of Paramount Pictures with some type of joint venture. 

A look at my normal measures show a PEG ratio of 0.91 and and ROE of 60.30. The price to free cash flow is 11.05, (I like this number to be 10 or under), and the Price to current book is 4.17 , (I like under 2.5). The current consensus target price on the stock is $48.55. 

Earnings for the trailing 12 months have been $4.68 per share. 2015 earnings were $5.22 per share and next years 2016 earnings are projected at $5.55 per share. So with the stock at $38.82,  this stock is inexpensive even with the company running the way it is currently, (i.e inefficiently for the great assets that they have). 

The IBD rating currently is rated at "63" for earnings and a "B" rating. 

I don't think something is going to happen quickly but I think we are finally at a "Starting Point" here. So I would buy in smaller positions and take a position over a one year time frame. (25 or 50 shares at a time).

 Mario Gabelli wearing a name tag? Who doesn't know him!

So a couple of ideas for a stock market that has been up for the last 3 weeks. Just be careful here in stocks that have already run up. There has been allot of speculating going on with the swings in the price of Oil.

I want to take a moment and wish the love of my life, my wife Deborah, a Happy Birthday today. She trust in me to do the right things financially for our family. My hope is to provide us financial security and to also help people who are not as well versed in the stock market to invest their money smartly and carefully. 

All are welcome to ask me questions in the comment section here on the blog or follow me on Twitter at @freewilly555 and ask questions there.

Thanks and hope you become a great investor,


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