Creating a ToDo/watchlist for 2017

In this post I want to present a list of interesting stocks which I want to look at in the near future. I want to note the name and the reason why I think the stock is worth a look.

In my last post I mentioned Eddy Elfenbein and his new “Buy List Stocks”. I would put all of them on my To-Do list. I also will watch through the indices and look at the “losers” – maybe some of them are worth a look (a bad performance alone is no reason to buy a stock). The selection I did here is intuitively (no Solar, no Roll-Ups, reputation).

 

This are MMI’s 27 Investments for 2017. A lot of them are “reasonably priced” – he plans to increase his Admiral Group plc holding.

The biggest Index losers – screenshots

Some Screenshots from ariva.de – this are the stocks of the SP500, Dow, HDAX and FTSE that have performed worst in 2016.

 

 

The List:

(Far away from perfect, to long and still in process)

 

Danaher / Eddy Elfenbein / frequently named quality stock

Bolloré / Ebdem, Muddy Waters*

Nike / Dow Loser

TripAdvisor / SP500 Loser (maybe just spin-off)

Regus plc / Ebdem, ProfitlichSchmidlin

CBS / 6 top ten shows

Coty / SP500 Loser / Reimann family

easyJet plc / FTSE Loser (BRK bought Airlines)

HugoBoss / DAX Loser / contra: fashion

Dt pbb / DAX loser / Valueandopportunity

Cinemark Holdings / Eddy Elfenbein

Pitney Bowes / SP500 loser / owned company previously

Moody’s / Eddy Elfenbein / owned company previously

Philip Morris Int. / poor 2016 performance

 

Muddy Waters:

*We value BOL shares at €8.50, which is 94.6% higher than its current price.

Extended List:

Axalta Coating Systems / Eddy Elfenbein / BRK?

Continental Building Products / Eddy Elfenbein

Ingredion / Eddy Elfenbein

Intercontinental Exchange / Eddy Elfenbein

RPM International / Eddy Elfenbein

Sherwin-Williams / Eddy Elfenbein / theconservativeincomeinvestor

JM Smucker / Eddy Elfenbein

Last post for 2016 – Some links

Brooklyn Investor

Is the Market overbought after this Trump-Ralley? …

Brooklyn Investor about the Market situation today (link)

 

Eddy Elfenbein

Eddy’s 25 Stocks for 2017 (link)

The ten new stocks are Axalta Coating Systems (AXTA), Cinemark Holdings (CNK), Continental Building Products (CBPX), Danaher (DHR), Ingredion (INGR), Intercontinental Exchange (ICE), Moody’s (MCO), RPM International (RPM), Sherwin-Williams (SHW) and JM Smucker (SJM).

CBPX, INGR, RPM are new to me, the others are High-Quality Companies. Wasn’t Axalta a BRK buy this year?

 

Valueandopportunity

MMI’s 27 Stocks for 2017 (link)

 

And finally a graph:

Maybe CBS is worth a look? Infographic: America's Favorite TV Programs | Statista
You will find more statistics at Statista

 

I wish you a good, successful and healthy 2017.

Some links

Meb Faber about “timing” the market / switching asset classes / considering CAPE ratios

It seems detractors are asking CAPE to clearly tell us “in or out” applied to just one asset class or market. But is that fair? Or even rational? No.

So what sort of missed market gains would that have translated into for this individual? As referenced at the top of this paper, 780%.

The tourist won the hand, but does that mean he made a good bet? Of course not.  He transformed his odds of winning the hand from roughly 70% to an almost certainty of losing by taking another card.

In this scenario, let’s compare our switching systems to a new strategy in which we invest in the cheapest 25% of global stock markets as identified by the CAPE ratio.

CAPE = Cyclically adjusted price-to-earnings ratio, Shiller P/E, or P/E 10 ratio (wikipedia)

Thinking about my Nestle post, the-conservative-income-investor likes Anheuser Busch for the same reasons (link)

Anheuser-Busch pays out $4.40 per share in dividends, and has raised it every year under 3G management. At a price of $101 per share, that is a 4.35% starting yield.

Someone buying Anheuser-Busch is setting themselves up for a 4% dividend yield and 8-9% annual returns on a pre-tax basis.

The earnings of $2.10 do not reflect Anheuser-Busch’s earnings power because the figure is clouded by enormous integrative expenses with SABMiller, and the dollar strength matters because Anheuser-Busch Inbev reports its earnings in Euros

Next year, Anheuser-Busch is going to report profits of around $5.75 per share. That is a P/E ratio of 17.5x earnings.

*good, steady dividend, reasonable growth assumptions

Donald Trumps biggest stock investments (article from august 2016)

Fannie & Freddie after the US election

IBorrowDesk – Nice to have informations like Fees about short selling (link)

 

 

 

Nestlé SA

I love many consumer-staple stocks, but these are areas that tend to flourish when folks get nervous about the economy. After all, when the economy gets weak, people cut back on vacations, not on soap. On Thursday, the Consumer Staples ETF closed at $50.25 per share. That’s a 10% drop in a few months during a largely bullish overall market.
Eddy Elfenbein (link)

 

I am searching for alternative-investments to bonds as parts of my “income portfolio”. It’s the part of my portfolio which I expect to do fine in good times an bad times (when people cut back on vacations, not on soap). A lot of Consumer Staples stocks like Unilever, Nestle, Anheuser-Busch InBev and Coca-Cola (link: illusion-of-choice) are all near their 52W-Low.

 

Lets look at Nestle

Nestle is a global company, founded in swiss in 1867. They started with milk powder for babies and are now offering everything from water, soups, icecream, dogfood, nespressso to milk powder for babies.

According to their 3Q16 Presentation (page 3) their Organic Sales Growth in CHF was 3.3%, their Real Internal Growth was 2.5%. On page 14 you can find growth split by real internal growth and pricing, shown for every operating unit separately (very interesting).

 Sales by reginon:

AMS (America) 29 bn CHF
EMENA (Europe) 20 bn CHF
AOA (Asia, Africa) 16.5 bn CHF

(Each geography includes Zones, Nestlé Waters, Nestlé Nutrition, Nestlé Professional, Nespresso, Nestlé Health Science, and Nestlé Skin Health)

Nestle & L’Oréal

Nestle owns 23,07% of the worlds largest cosmetic company L’Oréal (according to LOreal)

L’Oreal is worth about 90,3 bn. € (05.12.2016 ariva.de) so their stake is worth around 20-21 bn €.

Nestle Dividend History

Dividend History (link)

They have a nice dividend history and have risen their dividend in the last 10 Years from 0.90 CHF (2005) to 2.25 CHF (2015)

 

To sum it up, Nestle is a good diversified, resilient company in an non-cyclical business. It is also a big company which is followed much (I guess getting an information advantage here is impossible for me).

 

Nestle Valuation

There are selling for:

PE-Ratio 23
FCF-RatioDividend-Yield ~3.3%
EV/EBIT 12,7

Numbers according to yahoo finance de

This is the last year chart in EUR. As we see they are down to a 52W-Low. I am not a chart-man but I guess this doesn’t look like a feel-good-chart.

NestleChart_EURO.PNG

 

This are some historical dividend data for them

nestle-dividend

As we can see, one of the highest yields the nestle stock offered in the last 14 years was 3.6% (data from finanzen.net). This don’t make them automatically cheap, but its a good starting point.
Nestlé’s last dividend was 2,25 CHF. I except the next dividend to be 2,3 CHF for 2017. This would translate into a ~3.3% dividend yield at the moment. When looking at the upper table, it is in the “better” range.

 

Pay out Ratio

payoutratio

They say their Free Cash Flow in 2015 was 9.9 bn CHF, which is pretty similar to “Profit for the year attributable to shareholders of the parent (Net profit)” which was 9.1 bn CHF. Annual Report 2015, page 39

Debt

Data from Morningstar (link)

The yields at which these bonds are traded for range from -0,38% (Nestlé Holdings 07/18 CHF) to 2,95% (Nestlé Holdings 14/20 AUD). The highest yield I can find in USD is 2,10%, the highes yield I can find in EUR is 0,42%. (source of information)

Looks like the market expects most risk in a Nestlé (bond) investing comes from currency risk.

 

Bottom Line

I am not expecting skyrocketing results from Nestlé. I see It as a good bond-substitute with a reasonable yield (that goes up as the years  are passing by) and don’t go to much down when the market does so. Therefor I am considering changing a/some more holdings of mine into this sector (Consumer Staples). Nestle for me is a good starting point for that.

 

Disclaimer: The content contained on this site represents only the opinions of its author(s). I may hold a position in securities mentioned on this site. In no way should anything on this website be considered investment advice and should never be relied on in making an investment decision. As always please do your own research!

 

Foot Locker, everything is running well

I wrote in my first article about foot locker:

Earnings per share in 2020 would be 7,19$ – I guess a stock of that quality could be sold for 15 times earnings. So that would be 107.85$ in year 2020. The price today is around 62$. That is a pretty nice upside of around 70% – not bad.

 

In my “buy” article about them I wrote:

Some more fun with numbers:

I looked at their debt situation to define a discount rate: Morningstar Debt/Bonds overview FL

They have a year 2022 – 8.5% bond outstanding which is currently trading at 4.93% yield to maturity. I assumed a 6.5% discount rate for the equity.

I calculated with the assumed sell price for the year 2020 which I see at 107,85$ (of course things could turn out quite different). I discounted this price with a rate of 6,5% and came up with a “net present value” of about 82$. (note: this calculation does not include or consider dividends).

Discount Rate
6,5%
2020 107,85
2019 100,83
2018 94,28
2017 88,15
2016 82,42
NPV 82,42
Current price 63,2
Upside 30%

Bottom line:

Considering the stock is now somewhere around 60 US$, this produces a 30% upside. So I bought a small amount.

 

Lets summarise this:

Foot Locker was at 63.0 USD when I bought it

Foot locker is now at 73.68 USD

I estimated the y2020 value of FL 107.85 USD (NPV of that was 82,42 for me)

I thought a PE of 15 would be fair

 

What happend at FL in the mean time:

The 3Q2016 reads like this:

Net income for the Company’s third quarter ended October 29, 2016 was $ 157
million, or $1.17 per share, compared with net income of $80 million, or $0.57 per share in the same period of 2015.
Nice!
Third quarter comparable – store sales increased 4.7percent.
Wow! That sounds healty!

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Bending the odds in your Favor?

A little excursion in the world of betting:

A german Betting-Agency is offering you 100€ if you create a new account. (I don’t say which because I don’t want to promote them). Maybe there is a way to bend the odds in my favor with that. Let’s calculate the probabilities on that.

 

The terms of that offer are:

  • if you pay in 100€ you will get additionally 100€ betting money for free
  • you have to be a new customer
  • you have to bet twice on a bet with a quote of min. Quote of 3,00 (!)
  • you have 90 days time for that
  • real money and your bonus money will be accounted separately (?)
  • money you made with the bonus money can’t be transferred to the real money account (???)
  • no long-term bets

 

(???) Really, whats the point then guys? The fake money you gave me should stay in a fake account you gave me untill I have lost it on some low probability bets? Then the sunk cost fallacy kicks in and I want to win my lost money back and you have created a new customer? Really? Is that your plan? Conclusion for me: always read the fine print!

But I still want to make the math on that:

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