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.