September 27, 2011 – 9:14 am
Most of my research and publishing tends to focus on companies manipulating accounting rules to make their reported earnings look better than the real economic cash flows of their business.
It is unfortunately rare that I find a company whose economic earnings are outpacing the reported accounting results and whose stock is cheap.
One such company is Lam Research (LRCX – very attractive rating). One of September’s most attractive stocks, LRCX offers investors hidden value.
By David Trainer
|
Posted in Stock Picks and Pans
|
Also tagged economic earnings, ETF predictive rating, excess cash, First Trust NASDAQ-100-Technology Sector Index Fund, Lam Research, LRCX, NOPAT, ProShares Ultra Semiconductors, QTEX, USD, Very Attractive Rating
|
September 13, 2011 – 11:36 am
It is only a matter of time before oil and gas stocks stop moving with the price of oil and start reflecting their underlying economics.
When this happens, Baker Hughes (BHI – “very dangerous” rating) will be among the stocks that fall the hardest.
By David Trainer
|
Posted in Stock Picks and Pans
|
Also tagged Baker Hughes, BHI, economic earnings, Energy Select Sector SPDR, First Trust Energy AlphaDEX Fund, FXN, high-low fallacy, IEZ, iShares Dow Jones U.S. Oil Equipment & Services Index Fund, P/E ratio, PowerShares Dynamic Oil Services, price/earnings multiple, PXJ, Rydex S&P Equal Weight Energy ETF, RYE, SPDR S&P Oil & Gas Equip & Service, Very Dangerous Rating, XES, XLE
|
The valuation of NUE’s stock implies the company will grow its after-tax cash flow (NOPAT) by nearly 20% compounded annually for 20 years.
If you are looking for a good, safe stock in this volatile market, Wal-Mart is one of the best.
By David Trainer
|
Posted in Stock Picks and Pans
|
Also tagged attractive Rating, Consumer Staples Select Sector SPDR, economic book value, FCD, Focus Morningstar Consumer Defensive Index ETF, National Bankshares, NKSH, PKW, PowerShares Buyback Achievers, Vanguard Consumer Staples ETF - DNQ, VDC, Wal-Mart, WMT, XLP
|
Yes, RIMM is losing market share and fast. Yes, RIMM’s Blackberry Playbook tablet is a dud. Yes, the stock has been a stinker recently. And yes, none of what I wrote at the beginning of this article would matter if the stock were not super cheap.
By David Trainer
|
Posted in Stock Picks and Pans
|
Also tagged AAPL, android, Apple, First Trust NASDAQ-100-Tech Index, GOOG, Google, ipad, iphone, LO, Lorillard, mobile computing, mobile phones, mobile technology, NOPAT, PowerShares QQQ, ProShares Ultra QQ, ProShares UltraPro QQQ, QLD, QQQ, QTEC, Research In Motion, RIMM, TQQ
|
Recent weakness in Intel (INTC)‘s stock presents an excellent buying opportunity for investors. As one of March’s most attractive, INTC offers the rare combination of strong cash flow growth with a remarkably cheap valuation.
February 15, 2011 – 1:26 pm
HIDDEN GEMS:
1. Our discounted cash flow analysis shows that DFS’s current valuation (stock price of $21.80) implies that the company’s profits will decline by 40% and never grow again.
2. Economic earnings are growing faster that reported accounting earnings.
3. Free cash flow of $2.8bn or 24% of its enterprise value during the last fiscal year.
February 11, 2011 – 10:08 am
HIDDEN GEM: ABT’s current stock price (~$45 per share) implies the company’s profits will permanently decline by 20%. In other words, the market is not only giving no credit for future profit growth, it is predicting a significant (20%) decline in profits.
January 20, 2011 – 9:53 am
Most investors are not aware of how many corporate managers destroy shareholder value because accounting rules allow them to erase their mistakes from financial statement. A little-known accounting trick called an “asset-write down” allows managers to simply remove assets and shareholders’ equity from the balance sheet as if they never existed.
Investors must beware companies that report artificially high profits due to asset-write-down loophole.
By David Trainer
|
Posted in Red Flags & Hidden Gems Reports
|
Also tagged AKAM, AKamai Technologies, asset write-down, creating shareholder value, destroying shareholder value, detroying value, EXPE, Expedia, JDSU, JDSU Uniphase, management failure, Symantec Corp, SYMC, VRSN Verisign, write-down, write-off
|
January 11, 2011 – 8:40 am
Red flags:
1. Misleading earnings: BJRI reported a $3mm increase in GAAP earnings while our model shows economic earnings declined by $2mm (a difference of $5mm or nearly 40% of reported net income) during the last fiscal year.
2. Very dangerous valuation: stock price of $34 implies BJRI must grow its NOPAT at over 20% compounded annually for 15 years. A 15-year growth appreciation period with a 20%+ compounding growth rate sets expectations for future cash flow performance quite high. Historical growth rates are much lower.
3. Free cash flow was -$83mm or –11% of the company’s enterprise value last year.
4. Off-balance sheet debt of $265mm: 79% of net assets and 25% of market value.
5. Outstanding stock option liability of $44mm or 5% of current market value.