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.