Sunday, July 17, 2016

I was looking over at the Vanguard Funds and the Vanguard REIT Index (VGSIX) jumped out at me with a 23.75% return this year. Some of that is a bid for dividends and total return, but maybe there is more to this US Real Estate story. Let's take a look at Toll Brothers (Symbol TOL).

Dow Jones Industrial Average -18516.55 (UP) Week Ending 07/15/2016

There seems to be something afoot in the Real Estate part of the stock market. I had already discussed Tri-Pointe, (Symbol TPH) ,earlier this year which is doing very well and now I am taking a look at Toll Brothers which is the number 1 builder of new luxury houses in the USA. 

Toll Brothers (Symbol TOL, $27.40) is a company with steadily increasing sales and earnings. It has a PEG Ratio of 0.68 and an ROE (Return on Equity) of 9%.

TOL has a current PE of 13.3 and a forward PE of 9.73 so looking very good as opposed to an overpriced market. The company did sales of $4.5 Billion last year. The one year EPS is up 37.2% and the 3-5 year EPS growth has been 34.3% as the real estate market slowly recovers.

2015 earning per share were $1.97 and 2016 is projecting at $2.58 cents per share.  2017 looking out is projecting at $2.97 per share. 

I think we might want to talk about book value now. The company has a Price to Book ratio of 1.11 which is very low and a current Book value of $24.62 a share. Also the Price to sales is also 1.01 so this stock has not been awarded its due value.

The target price on the stock is $36.62 which would be a 33.64% gain from these prices. Government policy seems to be pointing to keeping interest down and the jumbo loans have come down recently,  all are pointing towards a favorable real estate market.

I have already taken a small position in TOL and plan on adding to it at these prices or below as the market corrects a little. Of course, everyone just needs to have the open floor concept, and the double sinks with the Jacuzzi in the On-Suite- Master bathroom. (Not found in my house!). But alas , there are many people that have lots of money and they will buy Toll Brothers houses and make the stock price go up. The lest I can do is to financially benefit from their good fortune. 

Happy house and stock hunting,


Tuesday, July 12, 2016

Pokemon Go! Can I buy the stock. Nope, not at 22,480 Yen! (Nintendo Co. Ltd., PE 166). So I may as well tell you about a hard luck deep value stock. Community Health Systems Inc. (Symbol CYH) $12.87

Dow Jones Industrial Average 18,146.74 (UP) Week ending 07-08-2016

Pokemon Go! People are walking out into the street and into buildings playing this game. Stop it! You are going to end up in a bad place. Instead buy this value stock and make your real reality better than your virtual reality.

Community Health Systems Inc. (Symbol CYH, $12.87) is a stock that is having a down 2016 earnings year compared to its 2015 earnings year. So the stock has been pummeled to the point that the stock is down to $12.87 cents a share today. So we look to 2017 and a projected earnings of $2.67 per share and a forward PE of 4.82. Now you have my interest peaked. 

The current ROE and PEG Ratio are ugly. PEG 2.30 and ROE 2.20%.

But you are looking at a current Price to Book value of 0.35. This is a Book value $36.31 per share. A Price to Sales of 0.07 and a Price to Free Cash Flow of 4.17. Wacky numbers.

The company with this earnings down-draft has a 18.81% Short Float. If these earnings come in as predicted these shorts will need to be covered. This is really simply a recovery of earnings story.

I put up the map for their hospitals and they seem to be in markets where they can produce good margins. What I really like is that this company employees 137,000 people all in the United States.

Sales have averaged up 9% for the past 5 years. Yet, this year up only 1.80%, hence the low stock price. The current target price on the stock is $16.47. That would be almost a 28% gain from here. I like that in this market.

So what do the Community Health Systems insiders think? In the Last 6 Months there have been 40 Buys and 21 Sells. Very Favorable sentiment.

So I think you can go out and buy this stock here with the market up close to it's highs. I have been buying value stocks like this and peeling off layers of shares of my big winners , (MBLY, DG,and DEPO), to build up some cash to shop with later.

So lets keep that bull market running thorough the summer with these low US Treasurer Bond interest rates.  It is giving the market some spring in its step , but alas , it will not last forever.

" But when I heard your ragged voice, something switched in my perception, and I knew I was the victim, of a beautiful deception. All my once exact beliefs, like tangled threads unraveled, I walked out stunned and liberated and so began my travels. Keep the river on your right and the highway at your shoulder, and the front line in your sights, Pioneer. Keep your eye on the road, remember what you told her, this is all in code, my dear"    

Song the Long Strange Golden RoadThe Waterboys

Have a great and peaceful Summer,  Freewilly