Sunday, July 30, 2017

" Have been selling some positions into this rally in the Dow Jones Industrial Average. I am keeping in mind Warren Buffett's first rule of investing, "Don't lose money". Peeled back some QCOM, UAA, and AET. Be cautious here"

Dow Jones Industrial Average  21,830.31 (UP) Week ending 07-28-2017
S & P 500 - 2472.10  (UP) 


What me worry? The President thinks he is in the fantasy football league and has to make two lineup moves every week. That following an ill-timed, illogical, and probably illegal executive order to discriminate against a class of people in the military based on gender.  Congress cannot agree on approving some sort of healthcare bill, while the present ACA health plan is losing coverage in various states and is increasing in premiums cost and deductibles. Will they ever be able to pass any new fiscal policy with tax repeals for people and business and possibly a repatriation bill to bring back money into the US to stimulate business?  Storm clouds on the horizon I say.


One place you can park some money while you wait for the storm to pass is Cisco Systems (Symbol CSCO, $31.52). Wall Street hates hardware companies because they are capital intensive and have inventories and also obsolescence of products.

Cisco though had revenues last year of $48.5 Billion dollars and had net income of 10 billion dollars. They have more cash on hand than allot of small countries with a bulging $68.5 Billion dollars. The company pays a nice 3.68% dividend payout which will help you to compound your money.


People forget that everything is moving to the cloud. Well much of that stored information is put onto Cisco Systems servers. They are the best. Not only that, at some point Cisco will also be the lead company for cyber and network security. The Cloud needs to be safe.

The company trades at PEG ratio of 1.55 and a Return on Equity of 15.60. It trades at a forward PE of 12.49 some is a pretty good value in a high priced market. Earnings for 2018 are projected at $2.45 per share.

The Current and Quick Ratio are both 3.5 to 1. Sales end up flat here year over year so that is why the stock has not taken off here and is only up 4.3 % this year. The stock has a target price of $36 so fairly low expectations. 

My thinking is if you are going to crank out $10 to 11 Billion dollars in net income every year and have a pot load of money to buy up other small companies, then you really cannot go wrong here.


I love my Apple TV box,  because I can watch cool stuff on Youtube and Netflix.  Here is a link to a great HBO Documentary special on that may be of interest to value investors or even anybody as a human interest story.  Warren is going to give all $100 Billion away to charities. He was inspired by his wife to do it.

HBO Documentary - Warren Buffett - well done HBO!

 Warren Buffett - Berkshire Hathaway, Inc. 
Be cautious and take some profits here and raise some cash for future bargains. 

Evaluate your non-performers and pair some of them down. Make better use of your precious funds.

Best Wishes - Freewilly. 







Tuesday, July 4, 2017

"As we make our way across the halfway mark of stock trading year 2017, it is time to take a look at a 3 companies who seem to be "printing money".

Dow Jones Industrial Average 21,322 (Down) Week ending 06/30/2017
S & P 500 Index 2421.50


In my continuing research of Value Investing,  I find that there are many different variations of strategy, practices, screening methods and channels of thought on the subject. Just yesterday I watched a Youtube video of Howard Marks from Oaktree Capital at a Google talk with yet another value plan. His strategy is to buy value stocks, (cheap, at a discount), that have consistent company yearly performance and to put an emphasis on eliminating risk and big losers,  to get an excellent, consistent overall return. His view is that the best returns come when you don't make any big mistakes. Sounds pretty easy right? 


The three stocks that I am presenting today are not traditional Value stocks and if anything most people would consider them Growth Stocks. In my mind because of their extraordinary strong balance sheets they are provided with a natural built in  "margin of safety".  So I find when they are discounted because of a sector rotation or because of some one off event that they are reasonable investment vehichles. The first one is Skyworks Solutions Inc. (Symbol SWKS, $95.34). SWKS has a Current Ratio of 8.6 to 1. The forward PE is 13.34 and next year they are expecting to have $7.19 in earnings per share. The company has no debt, (tough to go broke if you have no debt!), and a Return of Equity of 25.20% and a PEG Ratio of 1.31. If current earnings trends continue I can see this stock moving up to $125.00 price. It was one of my picks at the beginning of the 2017 blog year. It is rated in IDB as an 87 and "A".



Facebook on a Value stock list? (No I didn't have too many rum and cokes for the 4th of July.) Facebook (Symbol FB, $148.43) has a Current ratio of 12.60 to 1 and no company debt. ZERO. The stock because of some sector rotation is selling at a discounted forward PE of 25.16. Earnings quarter over quarter are up 74%. EPS this year are up 170%. Earnings for 2018 are projected at around $6.00 per share. The Return on Equity for the stock is 20.80% and the PEG Ratio is 1.49. Facebook is rated in IBD at 99 and "A" the highest rating. 

The definition of the word Juggernaut is:
  1. a massive inexorable force, campaign, movement, or object that crushes whatever is in its path. 
Yeah that about sums it up!  This Value investor picked up 25 shares of FB  for his IRA account. Suggest that you do the same.


Now let's go to the other extreme to a small cap stock. The Meet Group (Symbol MEET, $5.13) is an interesting stock to me. It has a Current and Quick Ratio of 7.80 to 1. This company in 2016 had revenues of $82.9 Million dollars which netted $44.4 million dollars of income.

The forward PE of the company is 7.85. Earnings per share for 2018 are looking like $.0.64 cents per share. Return of Equity is 24.30 and PEG ratio is 0.32.  Sales quarter over quarter are up 51.10 % and sales for the past 5 years are up 48%. The company has a current price to book of 1.28.  

This company seems to have a model that requires very little capital to be infused, so that many of the revenue dollars fall down to the bottom line. A very interesting young company that has 4 applications that you can access on your smart phone.


Enjoy your 4th of July in the USA and the Tour De France for the whole world. Sad day in Stage 4, with the crash of  the top sprinters Peter Sagan and Mark Cavendish together. Sagan is disqualified from the Tour and Cav is probably out with a shoulder injury. So much energy all careening towards the finishing line. Such great competitors!

 I salute all the riders in the 2017 Tour race. Congratulations to Arnaud Demare the French star rider winning the Stage 4.




All the best,  Freewilly.


Saturday, June 10, 2017

"This stock market in the USA reminds me of a stage in the Tour De France race. These 15 so called "FANG" hyper-growth stocks are the lead out group and I am waiting for the Peloton of Value stocks to pull them back in by the end of the race"

Dow Jones Industrial Average 21,271.97 (UP) Week ending 06-09-2017
S & P 500 Averages  2431.77 (UP)

One of the great joys of my summer season for the past few years has been watching the Tour De France - Cycling Race, now it it's 104th year. There are so many varied individual and team strategies going on all at the same time during the race, and it kind of reminds me of the stock market. Options, ETF's, Short-sellers, Sectors and Individual stocks all pulling in different directions on different news and with different motivations. 

The current US markets this year remind me a lot of a Tour stage race, with a small breakout group of sunshiny and much beloved growth stocks with even higher PE ratios running out to a big lead. These guys can do no wrong and everybody is piling on the bets.

It is my thinking though that just like in a stage race, this "peloton like" group of stocks following them, will in time,  pull them back in on total return %. There are many good value stocks that have not run up at all this year and some are even down a bit. In fact 60% of the S&P gain this year are created buy this "Nifty Fifty" like small group of front-leading stocks. 


So here is a few of the "Peloton" stocks that I like right now:

Devon Energy Corp. (Symbol DVN, $32.66), A shale oil driller.



Hudson Technologies Inc. (Symbol HDSN, $8.56),  in the refrigerants business.





TREX Co. Inc. (Symbol TREX,$65.47),  a manufacturer of wood alternative decking materials.

Synchrony Financial (Symbol SYF, $28.72), Consumer Financial services, credit card and payment solutions.


So let's watch this one play out. I would avoid those high flying stocks out front, and stick with the companies with the low PE's and a margin of safety.

Oh, and make sure to get ready for July 1st, 2017 for the real Tour De France which starts in Dusseldorf this year.


Have a good month of June.  
Freewilly 


Sunday, May 21, 2017

It is hard as a Value investor to watch these wild moves in some of these Growth stocks. But one must stay the course and continue to look for compelling bargains. This week ALK fit the bill as wonderful Mid-Cap stock.

Dow Industrial Average 20,804.84  (Down) Week ending 05-19-2017
S & P 500 Index 2381.73  (Down)

Warren Buffett and Charlie Munger of Berkshire Hathaway bought up the stocks of many of the US airline carriers in late 2016, but they did not buy all of them. They like the 85% capacity utilization in the industry. It is a little difficult for competition to come in, because they are limited by the number of gates available at the various airports.

Alaska Air Group Inc. (Symbol ALK, $84.57) is one that they did not buy up. Analysts have a current target price on ALK of $110.00 per share. The stock has corrected a little bit here but has good numbers. PEG Ratio is 1.54. ROE is 25.50. (I saw ROE reported on IBD at 34.11%). The Price to Book Ratio is 3.46.

Alaska Airlines Group Inc., when it combined with Virgin Airlines, became the 5th largest US airline carrier and the premier USA west coast carrier known for its good customer service and low fairs.

ALK stock has been up 29.69% over one year (even with the recent correction). Earnings are year ago were $7.25 per share and this year is projected at $7.93 per share. 2018 Earnings are projected at $8.56 per share with a forward PE of 9.61. EPS for the last 5 years have been up an average of 31.5%.

ALK has a market capitalization of $10.45 Billion and had sales last year of $6.33 Billion. Sales quarter over quarter where up 29.80%. The IBD rating on the stock is 69 and B.  The company pays a dividend of 1.42% currently.



Alaska Airlines starting in 2018 is going to start 9 flights a day to a 2nd Airport in Seattle. 

  • "Alaska Airlines has been ranked #1 among the nine largest carriers in the United States by The Wall Street Journal for overall operational performance for three years in a row, while Virgin America has placed #2 in the same study for the past two years.
  • Virgin America had been voted “Best Domestic Airline” in both Travel + Leisure’s Annual World’s Best Awards and Conde Nast Traveler’s Readers’ Choice Awards for the past eight consecutive years.  
  • Alaska Airlines has been ranked “Highest in Customer Satisfaction Among Traditional Carriers” by J.D. Power for eight years running, and has been ranked #1 for on-time performance six years in a row by FlightStats."

     


I have just recently purchased this stock as a new addition to my IRA account and feel fully confident in the consistent growth and earnings of the company. 

Have a great, healthy, and peaceful weekend, wherever you are in the world.

Freewilly





Saturday, April 22, 2017

Is it time to buy this stock, that's only crime is that their product works to well? The answer is YES! It is time for the patient investor to buy shares of Gilead Sciences (GILD).

Dow Jones Industrial Average 20,547.76 (Down) Week ending 04-21-2017
S & P 500 Average - 2348.69 (down)

Guilty as charged. Gilead Sciences (Symbol GILD, $65.95) cured the Hepatitis C virus with there regiment of medications,  Sovaldi and Harvoni. Because of this,  there is not a continuing use of the drug and therefore no repeat business with that patient. That's GREAT, but not so good for the earnings report. 

However, this lowering of earnings has gone on for two years and into next year. This downside earnings number next year is looking like $7.62 per share in earnings with a forward PE of 8.76 in stock market that trades at 17-18 times earnings. Normally a stock with those earnings would trade for $110.00 to $130.00 per share. GILD reports earnings on May 2nd, 2017.

In the last three months insiders by 30-18 have been on the buy side of this stock. The company operates on a Return on Equity of 83.5%. It pays a 3.15% dividend why you wait. Unless you are retiring in the next 2 years, it is time to buy this stock right here. I have already purchased it myself personally for my IRA account. What I am looking at is the eventual slowing of the earnings decline. The company also trades at a Price to Free Cash Flow of 6.4.



and, this is not a company standing still.
They have a very robust pipeline, http://www.gilead.com/research/pipeline , and plenty of cash if they want to go out and purchase another company. What if they got together with like a Bristol Myers Squibb, (Symbol BMY).  

It is time to look at the glass half filled, not half empty! This company has many options to be successful.



So let spring time arrive here in April , and pick up a nice bargain for your long term retirement portfolio. Buy GILD here at the market.

Sincerely,

Freewilly


Sunday, April 2, 2017

I was reading "The Little Book of Value Investing" by Christopher H. Browne,(Tweedy Browne & Co LLC.), and he likes Value stocks with a Price to Free Cash Flow below 10. I came up with Manulife Financial Corporation, (MFC), with a P/FCF of 3.01.

Dow Jones Industrial Average 20,663.22  (Down) Week Ending 03-30-2017
S &P 500 average 2362.72 (Down)


The past few weeks in the stock markets here in the US have been like a poker game where everybody keeps getting bad cards and throwing them in, (with nobody winning). Well at least as far as Value investors. The market keeps running up a select group of growth stocks to unsustainable highs. This is a time that test Value investors meddle. It is a time to be patient and keep 20% in cash until the time is right to buy and there is an adequate Margin of Safety.


I continue to read the books of classic Value investors, such as the managing directors of Tweedy Browne, to refine my discipline in this area. One area Christopher Browne brought up in his book, (among many other good Value investing ideas), is to look at Price to Free Cash Flow and stocks that are listed with a P/FCF of less than 10. This led me to the following stock.

ManuLife Financial Corporation, (Symbol MFC $17.74, US Dollars, NYSE)   Manulife Financial is a leading Canada-based financial services group with principal operations in Asia, Canada and the United States. Manulife Financial more recognized operations in the USA are John Hancock Life Insurance and John Hancock Wealth Management. While these are important, 



The real key to ManuLife Financial going forward though is the offering of Insurance and Wealth Management to the very burgeoning markets of Asia. This according to their brand new President, Roy Gori. 


 So the first important number I am going to look at and the theme of this post is the Price to Free Cash Flow which is currently 3.01. Very good being under 10. The company also trades at a current price to book value of 1.21. The PEG Ratio is 1.47 and and ROE of 7.3%.

ManuLife Financial also pays a handsome dividend of 3.53%.
The company did $39.96 Billion dollars in sales ad quarter over quarter sales were up 413.4%. 2016 sales were up 59.2%.

Earnings per share for 2017 are projected are anywhere from $1.76 to $2.18 to $2.39 per share according to different sources with a forward PE below 10.

The IBD ranking on the stock is "94 "and "A". It is ranked #2 in its sector in IBD.  The analyst have 10 buy ratings and 3 outperform and 5 hold ratings on the stock.




So a new tool to add for our evaluation of Value stocks, Price to Free Cash Flow to go along with PE, PEG Ratio, Return on Equity, and Price to Book. (A little bit of Revenue growth doesn't hurt the cause either!).  I would rate ManuLife Financial, (MFC),  a buy here and a fine addition to your portfolio.




April has arrived and the flowers and the green leaves cannot be far behind. Hopefully this market will also come into bloom.

Spring greetings to you and all the best with your investments,

Freewilly

Sunday, March 12, 2017

A couple of Value investing names to keep you busy. They are PHM and BMY. I almost wrote about HSY Hershey Foods, but their joint venture with Lotte, the South Korean company was shut down in China temporarily. Hopefully not a sign of the times?

Dow Jones Industrial Average 20,902.98 (Up) Week Ending 03-10-2017
S & P 500 Average - 2372.60

I have been busy working on taxes, researching family genealogy, paying bills, and wearing many different hats. It has keep me from writing articles every week. Value stocks are not as easy to pick out as Growth stocks in this rollicking market. Sometimes you can get to close to the "third rail" with some of the Value stocks, such as I did with buying Adeptus Health, (Symbol ADPT, $2.13), a free standing Emergency Room hospital company. They ended up delaying their year-end 2016 -10K statement and the stock took a nosedive. My mistake was that the company only had $400 Million in annual revenues which allowed an uncalculated write-off, (even though they have a 3:1 Current Ratio), to devastate the stock price. A lesson learned here, be very vigilant with Small-Cap Value stocks because they could plunge into a dive that they may not recover from. We will find out what happens this week, when Adeptus Health is required to submit their report by March 16th. Stay away from this one for now.


So here are two that you can have confidence in:


Bristol Myers Squibb (Symbol BMY, $58.32) is recovering from some short term disappointments with two drugs not getting approved. They are an excellent company and will recover. They had a 22.3% quarter over quarter sales gain and have a good PEG Ratio and ROE. They also pay a 2.67% dividend.  






Pulte Group, Inc. (Symbol PHM, $23.53) is a residential home building company that is 60 years old. 28.4% quarter over quarter sales bodes well for this company. PEG Ratio of 0.73 and an ROE of 12.60. This company had $7.6 Billion dollars in sales last year so can weather a few interest rate raises by the Fed. Earnings for next year will be $2.68 per share and the company and analyst project a forward PE of 8.79. The company also pays a 1.53% dividend. 

I hope that you all have a great week,

Freewilly

Saturday, February 11, 2017

"With an all new Jeep design coming for 2018 and a new Dodge Challenger SRT Demon muscle car coming, things are looking quite glowing at Fiat Chrysler Automobiles N.V. . I must credit this idea to Mr. Bill Miller of Legg Mason fame."

Dow Jones Industrial Average 20,269.37 (Up) Week ending 02/10/2017
S & P 500 - 2316.10

I was watching an interview with Bill Miller of Legg Mason Value Trust fame and Chairman and CEO of LMM LLC Investment management services and they asked him about the stocks he was investing in now and he said he couldn't say because of confidentiality. But then the interviewer, (CNBC and Barrons), said which stocks can you talk about now and he said he liked and owned Fiat Chrysler Automobiles N.V. (Symbol FCAU), and he said he liked the execution of the company's "5 Year plan" which runs from 2013 to 2018.

I have to honestly say I had never thought much about this company or even the auto group other than the parts sellers, but I do know some people that are waiting for the new 2018 Jeep redesign.  Always in search of a good Value stock, I decided to investigate. 

FCAU earned $2.04 per share in 2016 and is projecting 2017 per share earnings of $2.41 per share. Bill Miller contends that the 2018 per share earnings may look as high as $4.50 per share!  The 2017 forward PE is 4.13. If Bill Miller is correct,  the 2018 forward PE could be 2.39.  The stock is trading right now at $10.75 per share. Now you have my attention! (Flashback of Subaru stock in olden days trading at $8 per share like forever and then shooting up to $90).

Then there is the Dodge Challenger SRT Demon. It boast the highest horsepower engine of all the current muscle car group, 707 HP. Being a former 67 GTO owner I am suitably impressed and car shows and auctions are all the rage right now. 

So what about the muscular stats for FCAU stock. The company is actually trading currently at 0.76 of book value. The stock YTD is up 17.87% and up 79.47 for one year. EPS for the next 5 years is supposed to go up 18% per year.


The target price of the stock is $15.28 but should move higher. The Current Ratio is 1.27. The Investors Business daily has them ranked as a 72 D and the 2nd highest ranked stock in this group. 

The analysts on the stock are 8 Buy, 1 Out perform and 10 hold. (Also 5 sells, they hate the autos!). FCAU in January introduced the concept of the Electric Mini-Van.


Oh , and did I mention that this U.K. manufacturer also owns 
Alfa-Romeo, Maserati and Ferrari.
Ferrari just doubled their Net Income in the fourth quarter.  With Trump in as President of the USA, everyone is going to be rich and buying these cars.

So we buy FCAU here at $10.75, and watch the 5 Year Plan roll out, and save up the money for your new Maserati.

Sounds like a good plan to me. Let the races begin!

Freewilly



Sunday, January 8, 2017

"Freewilly's Stockpicker Blog - Value pick lineup for 2017. I decided to make it like an NFL team Offense with 11 Picks.Only the very best make the team."

Dow Jones Industrial Average 19,963.80 (Up) Week ending 01-06-2017


Well it is that time of year again when we put forth predictions on which Value stocks will work the best for your portfolio. I decided to keep it to the eleven best picks instead of 17 for the year number. I feel your portfolio should be more focused and concentrated to get you the best results. Pick only the best. Hard to do with the market at all-time highs.




I laid them out like a NFL Offense football team by position. Here they are:

Wide Receiver - Under Armour Inc.  (Symbol UAA)

              Tackle - Lennar Corp.   (Symbol LEN) 

              Guard - Activision- Blizzard Inc. (Symbol ATVI)

              Center - CVS Health Corp. (Symbol CVS)

              Guard  - Blackstone Group LP (Symbol BX)

               Tackle - Skyworks Solutions Inc. (Symbol SWKS)

         Tight End - Goodyear Tire and Rubber Company (Symbol GT)

           Fullback -  INSYS Therapeutics Inc. (Symbol INSY)

    Quarterback - Amgen Inc.  (Symbol AMGN)

  Wide Receiver - Lending Tree Inc. (Symbol TREE)

  Running Back - Align Technologies - (Symbol ALGN)


Honorable Mention: Whirlpool Inc.(Symbol WHR) , International Business Machines (Symbol IBM), Suntrust (Symbol STI) and Rio Tinto (Symbol RIO).

I currently own 7 of the 11 team picks for 2017 and have faith in the other four. I will discuss these picks as the year moves forward. Amgen Inc. is actually the quarterback of my real team and is in fact my largest holding of any individual stock. I think this is a good mix of stocks. I would carefully pick your entry points to maximize your returns.  




I think that you will be able to buy some stocks after the Trump Inauguration. I think that we will have an 7 to 8 % correction as the honeymoon is over and the President has to get down to the business of running the country. The second half of the year will be better to see the results of any pro-business changes in US fiscal policy made this year. 



 Best of luck and health in the new year. Keep concentrated in your very best picks this year.

Sincere regards,

Freewilly