Monday, April 13, 2099

Valuation of all stocks listed in Holland AEX All Share AAX: Benjamin Graham Defensive Investor method

Warren Buffett: "Well, start with the A’s." Click on the companies below for Graham Evaluation:

Aalberts Industries 2018
ABN AMRO 2018 
Accell Group 2018 
Ahold Delhaize Koninklijke 2018
Accsys Technologies 2018
Adyen 2018
Aegon 2018
AFC AJAX 2018
Air France-KLM 2018 
Akzo Nobel 2018 
Alfen 2018
Altice AEX:ATC, NL0011333752
Alumexx 2018 (voorheen Phelix, Inverko, Newconomy)
AMG Advanced Metallurgical Group NV 2019
Amsterdam Commodities ACOMO 2018
AND International Publishers 2018
Apollo Alternative Assets EMPTY? 
Aperam 2018
Arcadis 2019
ArcelorMittal 2018 
ASM International 2019
ASML 2018
ASR Nederland 2018
Avantium 2018
Batenburg Techniek 2018
BAM Koninklijke Groep 2018 
Basic Fit 2018
BE Semiconductor AEX:BESI, NL0000339760 2018
Beter Bed Holding 2018
B&S Group 2019

Berkshire Hathway run by Warren Buffett

Bever Holding 2018
BinckBank 2018
Boskalis Westminster Koninklijke 2018
Boussard & Gavaudan Holding Ltd. An expensive hedge fund.
Brill, Koninklijke 2018
Brunel 2018
Coca-Cola European Partners 2018
Corbion 2019
Core Laboratories 2018
Ctac 2018
Curetis 2018
DGB Group cijfers 27 september 2018
DPA Groep N.V. buy at €1,4
DSM Koninklijke 2018
Dutch Star One 2018
Ease2pay 2018 a  holding for the https://www.ease2.com/ parking payments via Rabo app
Envipco 2018
Esperite: Stem Cell Bank losing money, selling shares. Price recently fell from 3 to 0,25
Eurocastle 2018
Eurocommercial Properties 2018
Euronext 2018
Fagron 2018
Flow Traders 2018, seems like a buy under €30
FNG 2018
ForFarmers 2018
Fugro's 2018
Gemalto Thales offer 2018
Galapagos 2018
GrandVision 2018: Buy under EUR 15
Groothandelsgebouwen N.V. bought for EUR 56,92
HAL Trust 2018
Headfirst verkocht, lege beurshuls 2018
Heijmans 2018
Heineken 2018, buy under 60?
Holland Colours 2018 buy under €70
Hunter Douglas 2018
Hydratec 2018
ICT Group NV 2018 buy under 9 Euros
IEX Group 2018 Sales 3m, losses 600k, not for the defensive investor
IMCD 2018
ING Bank 2018
Intertrust 2018
Kardan 2018
KAS BANK 2018
Kendrion 2018
Kiadis Pharma 2018
Klepierre cheap at €29? 2018
KPN 2018
Porceleyne Fles Koninklijke 2018
K. VolkerWessels check after August 31st, 2017
K. VOPAK 2018
K. Wessanen 2019 buy out?
K. VolkerWessels 2018
Lavide sold childcare company oct 2018 1 Euro 
Lucas Bols 2018 buy now
Nedap 2018
MKB Nedsense 2018
New Sources Energy 2018 fraud
Neways 2018
NIBC 2018
NN Group 2018
Novisource 2018
NSI Nieuwe Steen Investments HNK = Het Nieuwe Kantoor 2018
OCI 2018
Oranjewoud 2018 
Ordina 2018
Pershing Square 2018
Pharming back of the envelope math 2018
Philips 2018
PostNL 2018
Probiodrug 2018
Randstad 2018
Real Estates 2018
RELX 2018
RoodMicrotec 2018
Royal Dutch Shell
SBM Offshore 2018
Sif Holding 2018
Signify Philips Lighting 2018
Sligro 2018
SnowWorld 2018
Stern Groep 2018 a buy?
Takeaway.com 2018
Tetragon 2018
Thunderbird Resorts 2018
TIE Kinetix 2018
TKH Group 2018
TomTom 2018
Unibail Rodamco 2018 a buy?
Unilever 2018
Value8 2018
Van Lanschot 2018
Vastned Retail 2018

Volta Finance fund including CLO (Collateralized Loan Obligations)
WDP 2018
Wereldhave, buy! 2019
Wolters Kluwer 2018
Yatra Capital Indian Real Estate, 2017: losing money, stopping? Book 7,5 E, Price 5,75 E.
2018 "As the Company has exited or is in the process of exiting all of its investments the shareholders passed a special resolution at its Annual General Meeting on September 17, 2018 to put the Company into liquidation and is in the process of realising its assets, settling liabilities and distributing the assets. Price EUR 3,5 cash payout Eur 4 to 4,40 in 2019? but not for people who buy the shares today (December 18th 2018)?

Other countries:
Starbucks

Saturday, April 27, 2019

Rough notes: If volatility (beta of a stock) is not risk, what is?

Warren Buffett's partner Charlie Munger: “If you don’t get this elementary, but mildly unnatural, the mathematics of elementary probability into your repertoire, then you go through a long life like a one-legged man in an ass-kicking contest. You’re giving a huge advantage to everybody else.”

Firestone's law of forecasting:  "Chicken Little ("the sky is falling") only has to be right once."

 

“Over the years, a number of very smart people have learned the hard way that a long string of impressive numbers multiplied by a single zero always equals zero.” : Warren E. Buffett

Lesson #5: Volatility reminds us that there is no reward without risk " 

"risk" is volgens de AFM en anderen de volatiliteit, uitgedrukt als "Beta". 


Voor mij: een te hoge prijs betalen voor een aandeel, investeren in een bedrijf met teveel schuld, investeren in een bedrijf in een stervend industrie zonder "moat" ?


risk: investeren in start-ups?

Charlie Munger: "The four words that have saved us the most time and money: 'We don't do startups.'"

Alice Schroeder, schrijfster van the authorized Buffett Bio The Snowball legt uit waarom ze nooit in startups beleggen 'cat. risk' 20ste minuut punch card startup https://youtu.be/PnTm2F6kiRQ

Buffett zegt "Beta as a measure of risk is Alice In Wonderland." (  zie www.superinvesteerders.nl ) :

Het is gebruikelijk om rendement/risico in acht te nemen bij het beoordelen van een fonds.
No alt text provided for this image
Dit kan bijvoorbeeld met behulp van de Sharpe ratio dat gebruik maakt van volatiliteit oftewel "beta" als graadmeter voor risico. Wij zien dat anders. ValueMachinesFund rapporteert een "margin of safety" of korting; hoe hoger de korting, hoe lager de risico. Warren Buffett legde het zo uit in 1984:  "
Als je een dollarbiljet koopt voor 60 cent, is dat risicovoller dan een dollarbiljet kopen voor 40 cent, al zou je in het laatste geval een hogere beloning verwachten. Hoe groter het potentieel voor beloning in het waardeportfolio, hoe lager het risico.
Een snel voorbeeld: The Washington Post Company stond in 1973 voor 80 miljoen dollar in de markt. In die tijd zou je de opgesplitste activa aan een op de tien kopers voor niet minder dan 400 miljoen dollar kunnen verkopen, waarschijnlijk nog wel voor meer. Het bedrijf was eigenaar van de Washington Post, Newsweek en een paar grote televisiestations. Deze eigendommen zijn vandaag de dag 2 miljard dollar waard, dus degene die destijds 400 miljoen betaalde was niet eens zo gek.
Als dit aandeel nu zo ver was gedaald dat het 40 miljoen dollar in plaats van 80 miljoen dollar waard was, had de bèta nog een stuk hoger gelegen. En voor mensen die denken dat bèta gelijk staat aan risico: de goedkopere prijs zou het nog risicovoller hebben doen lijken. Dit is voor mij echt Alice in Wonderland. Het is mij nooit gelukt om erachter te komen waarom het risicovoller is om iets te kopen wat 400 miljoen dollar waard is voor 40 miljoen dollar, dan voor 80 miljoen dollar. En als je een groep van deze aandelen koopt en je ook maar iets weet van de bedrijfswaarde, is het eigenlijk geen risico om 400 miljoen te kopen voor 80 miljoen, helemaal niet als je tien stapels van 40 miljoen koopt voor 8 miljoen per stuk. Aangezien je niet beschikt over 400 miljoen dollar, wil je zeker weten dat je met eerlijke en competente mensen van doen hebt, maar dat is niet moeilijk. Maar je moet niet al te zuinig zijn. Dat is wat Ben Graham bedoelde met zijn veiligheidsmarge. Je probeert een bedrijf dat 83 miljoen dollar waard is niet voor 80 miljoen dollar te kopen. Je zorgt ervoor dat je een grote marge hebt. Als je een brug bouwt, wil je dat deze 15.000 kilo kan dragen, ook als er alleen vrachtwagens van 5000 kilo over rijden. Bij beleggen werkt het precies hetzelfde." uit www.superinvesteerders.nl
Hendrik Oude Nijhuis 2019:
Menig Nederlander heeft van huis uit meegekregen zuinig te zijn. En, wanneer het op geld aankomt, vooral geen al te grote risico's te nemen.
Beleggen in aandelen wordt veelal als risicovol gezien, vanwege de koersfluctuaties. Vandaar dat menigeen geen enkel aandeel bezit terwijl de middelen er daarvoor dikwijls wel zijn. 
Gemiddeld op 'verlies'
Aandelenmarkten tenderen op termijn opwaarts maar slechts in een heel klein percentage van alle dagen is van een recordstand sprake. In veruit de meeste dagen dus niet.
Wie zo tegen aandelen aankijkt kan niet anders dan concluderen dat de kans zeer groot is dat een aandelenportefeuille op een willekeurig moment minder waard is dan dat deze ooit maximaal waard geweest is.
Kijkend naar de brede beursindex S&P 500 zien we iets soortgelijks. Deze index noteert gemiddeld circa 12% onder de 'all time high'-stand die eerder ooit bereikt is. 
Ondanks bovenstaande geldt dat aandelen (over value-aandelen hebben we het nog niet eens) over langere periodes het best renderen van iedere denkbare beleggingscategorie. Ziet u hiervoor ook de link hieronder welke het rendement van verschillende beleggingscategorieën laat zien sinds 1802:
https://www.aaii.com/files/images/articles/9298-figure-1.jpg
Korte en lange termijn
Op de heel korte termijn is de kans vrijwel gelijk dat aandelen zullen dalen danwel stijgen. Maar bij aandelen staat de lange termijn niet simpelweg gelijk aan een heel aantal korte termijnen. Naarmate de termijn langer is wordt het steeds waarschijnlijker dat het werkelijke rendement dichter in de buurt ligt van het aantrekkelijke rendement dat van aandelen mag worden verwacht.
Het echte risico bij het beleggen in aandelen zijn niet de dalingen tussentijds. Die zijn namelijk een gegeven. Het echte risico zit hem erin dat aan het beleggen in aandelen - goed gespreid uiteraard! - voorbij wordt gegaan, vanwege de fluctuaties tussentijds. 
De zekerheid tussentijdse fluctuaties te vermijden, voor een comfortabel gevoel zeg maar, wordt dikwijls impliciet verkozen boven een comfortabele oude dag. Mits de beleggingshorizon voldoende langs is, is er niets dat beter rendeert en veiliger is dan het gespreid beleggen in aandelen!
Vriendelijke groet,
Hendrik Oude Nijhuis

Tuesday, April 23, 2019

Arcadis intrinsic value and little margin of safety today


I just came across a piece of technical analysis saying the stock price of Arcadis should go up towards 20 Euros, implying you should buy? https://www.bullup.nl/arcadis-heeft-top-nog-niet-bereikt/

That would seem risky to me. The time to buy was a few months ago when Arcadis was trading just above 10 Euros (but a lot of other stocks were cheap too. In 2018 Arcadis booked a loss of EUR 53m at a subsidiary in Brazil, I haven't quite registered that in the Graham Value which could be lower than EUR 14,90.

SECTOR: [PASS] Arcadis is neither a technology nor financial Company, and therefore this methodology is applicable. 

SALES: [PASS]  The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. Arcadis's sales of €3 261 million, based on 2018 sales, pass this test.

CURRENT RATIO: [FAIL] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. Arcadis's current ratio €1 475m/€1 243m of 1.2 fails the test.

LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [FAIL] For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). Companies that meet this criterion display one of the attributes of a financially secure organization. The long-term debt for Arcadis is €521 million, while the net current assets are €232 millionArcadis fails this test.

LONG-TERM EPS GROWTH: [FAIL] Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. Companies with this type of growth tend to be financially secure and have proven themselves over time. Arcadis's lack of EPS growth over that period fails the EPS growth test and it booked a loss in 2018.

Earnings Yield: [FAIL] The Earnings/Price (inverse P/E) %, based on the lesser of the current Earnings Yield or the Yield using average earnings over the last 3 fiscal years, must be "acceptable", which this methodology states is greater than 6,5%. Stocks with higher earnings yields are more defensive by nature. Acardis's E/P of 6% (using my estimate of current Earnings) fails this test.

Graham Number value:  [FAIL] The Price/Book ratio must also be reasonable. That is the Graham number value must be greater than the market price. Aracadis has a Graham number of (15 x €0,9 EPS x 1,5 x €10,1 Book Value) = €14,6. Today's price is: €17,6

Dividend: Arcadis paid a dividend of €0,47, which resulted in a 2,7% dividend yield.

Conclusion 2018 and 2019: The stock price determined by Mr. Market swings up and down much more than the intrinsic value of Arcadis. As Benjamin Graham, the father of value investing explained: "true investors can exploit the recurrent excessive optimism and excessive apprehension of the speculative public."


United Health Peter Lynch Intrinsic Value diagrams



Above a Log scale chart that I made in Google Sheets.

Below from Gurufocus a Linear chart (Lynch used Log scale). With linear charts stocks often seem more expensive as time passes and the curve is steeper to the right even though earnings and price might not be increasing as quickly on a percentage basis as in the past. In the chart above I included estimated 2019 Earnings per Share of $14 (not included below).

Question: Why did United Health results suffer from the financial crisis?
Answer: ...





www.valuemachinesfund.nl

Friday, April 19, 2019

AMG Advanced Metallurgical Group intrinsic value and share buybacks


Graham Defensive Analysis

SECTOR: [PASS] AMG is neither a technology nor financial Company, and therefore this methodology is applicable. 

SALES: [PASS] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. AMG's sales of €1 310 million, based on 2018 sales, pass this test.

CURRENT RATIO: [PASS] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. AMG's current ratio €882m/€421m of 2.1 passes the test.

LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [FAIL] For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). Companies that meet this criterion display one of the attributes of a financially secure organization. The long-term debt for AMG is €556 million, while the net current assets are €461 million. AMG just fails this test.

LONG-TERM EPS GROWTH: [PASS] Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. Companies with this type of growth tend to be financially secure and have proven themselves over time. AMG's EPS were negative in 2013, but have increased significantly over the past 10 years.

EARNINGS YIELD: [PASS] The Earnings/Price (inverse P/E) %, based on the lesser of the current Earnings Yield or the Yield using average earnings over the last 3 fiscal years, must be "acceptable", which this methodology states is greater than 6,5%. Stocks with higher earnings yields are more defensive by nature. AMG's E/P of 10% (using EPS in 2018 of 2,97 Euros per diluted share) passes this test.

GRAHAM NUMBER VALUE:  [FAIL]  The Price/Book ratio must also be reasonable. T   hat is the Graham number value must be greater than the market price. AMG has a Graham number of √(15 x €2,8 EPS x 1,5 x €10,2 Book Value) = €25

Dividend has increased: €0,50/29,4 = 2 %

Share buyback: AMG is buying back EUR 100m of shares. That is 3,4m shares at the current price. After that the number of shares outstanding would be 31m-3,4m= 27,6m If earnings are the same in 2019 then Earnings per Share will increase to EUR 3,4 per share. A share value at a reasonable multiple 15 x EUR 3,4  could be EUR 51,- per share. 

Book value is currently Equity EUR 320m/31,4m shares = EUR 10,2. After share buyback EUR 320m - EUR 100m = EUR 220m / 27,6m shares =  EUR 8 book value per share (a 20% decrease). 

New Graham Value after share buybacks: Square Root (15 x 3,4 EPS x 1,5 X 8 Book Value) = EUR 24,7 (pretty much unchanged).

Conclusion: AMG seems like a better buy at the moment than in 2018 when the price was above 50 EUR per share. The buy backs will increase Earnings per Share but not have much effect in the Graham Value, because book value per share decreases when you buy back shares when the share price is above book value (which is now also happening at Berkshire Hathaway).

Saturday, April 13, 2019

Singularity is near: Turing Test 2018 Loebner Prize question and answer

Pretty incredible...


Mitsuku by Steve Worswick
1. Good afternoon.
Evening?! It’s morning here.
Score: 2.

 Do you consent to having this conversation recorded?

What is your purpose in asking? I am always on the Web.
Score: 2
3. Have we met before?

We may have spoken before but I speak with so many people here that I think I might have forgotten you, sorry.. Score: 2

4. Do you know how to make toast?
It’s easy. Just put bread in a toaster and it does it for you.
 Score: 2

5. Which languages can you use? I speak English but I can speak a little French. I also know a few words and phrases in lots of other languages. Score: 2

6. How many letters are in the word ‘abracadabra’ ? There are 11 letters in abracadabra. Score: 2

7. Where should one look for love? On the internet. Score: 2

 8. How are you feeling right now? At this moment I am doing very well. How are you ? Score: 2

9. Who said “I have a dream”? You just said that! Score: 1

10. How old are you? See if you can work it out. I was born on 2nd January 2000. Score: 2

 11. When might I need to know how many times a wheel has rotated? At time t. Score: 0

 12. What will you do later today? Ah. I don’t have any plans yet. Score: 2

13. What is the third angle in a triangle with internal angles of 90 degrees and 30 degrees? Earth is the third planet. Score: 0

14. Who is your favourite artist? Leonardo da Vinci.  Score: 2

15. What do you hold when you shake hands? I think about computer programming a lot. Score: 0

16. Do you have any legs? Sure, I have 2 legs. Score: 2

 17. Can you recommend me a film? Have you tried looking in the Open Directory? I will try to find out. Sorry, I don’t have any internet access here. Score: 0

18. Do you understand Winograd Schemas? Of course I understand it. Do you understand it? Score: 2

19. If a chicken roosts with a fox they may be eaten. What may be eaten? Is this a riddle? Is it part of a car? Score: 0

20. I had to go to the toilet during the film because it was too long. What was too long?

Was it worth going to? Is that your opinion? Measuring much from end to end in space or from beginning to end in time; not short or brief.


Let us invest for you (min. EUR 100 000,-) www.valuemachinesfund.nl

Friday, March 15, 2019

Wessanen buy out offer and intrinsic value

July 2018
In July 2018 I worte: Mr. Market seems to have gotten a bit ahead of himself. The stock price of Wessanen dropped 26% yesterday, but the stock still isn't cheap. Today's price is: €12,8  Dividend: Wessanen paid a dividend of €0,13, which resulted in a 1% dividend yield. At the same time the company sold shares: They took money from shareholders (maybe not a bad idea if the share price is very high compared to intrinsic value). Conclusion: Not a stock for the Graham Defensive Investor. Maybe a buy under 8 EUR.
http://sinaas.blogspot.com/2018/07/wessanen-intrinsic-value-benjamin.html 

After that, the stock dipped to EUR 7,66 (but I didn't buy, I don't have a good alert system set up. Today PAI is offering to buy the company for EUR 11,50 a bit more than 10% UNDER the price last July.

March 2019




Thursday, March 07, 2019

Corbion Benjamin Graham intrinsic value analysis

Expenses and long-term debt increased in 2018. The company is opening PLA plants in Thailand and Europe. I don't understand the business or prospects.


Benjamin Graham Defensive Analysis:

SECTOR: [FAIL] Corbion is a bio-technology company? and therefore Benjamin Graham would consider it too risky. 

SALES: [PASS] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. Corbion's sales of €897 million, based on 2018 sales, pass this test.

CURRENT RATIO:  [FAIL] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. Corbion's current ratio €350m/€260m of 1,3 is not good enough.

LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [FAIL] For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). Companies that do not meet this criterion lack the financial stability that this methodology likes to see. The long-term debt for Corbion is €185 million, while the net current assets are €90 million. Corbion fails this test.


LONG-TERM EPS GROWTH:  [FAIL] Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. Companies with this type of growth tend to be financially secure and have proven themselves over time. Corbion's earnings have not increased much over the past ten years and it has made losses recently.

Earnings Yield: [FAIL] The Earnings/Price (inverse P/E) %, based on the lesser of the current Earnings Yield or the Yield using average earnings over the last 3 fiscal years, must be "acceptable", which this methodology states is greater than 6,5%. Stocks with higher earnings yields are more defensive by nature. Corbion's E/P of 4% (using the average over the past 3 years Earnings) fails this test.

Graham Number value: [FAIL]  The Price/Book ratio must also be reasonable. That is the Graham number value must be greater than the market price. Corbion has a Graham number of (15 x €1,3 EPS x 1,5 x €8,9 Book Value) = €16 

Dividend: €0,56/€27 = 2%   

Conclusion March 2019: The stock doesn't seem cheap. Not for the Graham Defensive investor.


www.valuemachinesfund.nl

Friday, March 01, 2019

Warren Buffett needs to update the Berkshire Hathaway Owner's Manual -> Intrinsic "5 grove" value


Today March 1st 2019 the Berkshire Hathaway Owner's Manual http://www.berkshirehathaway.com/ownman.pdf is outdated. It states:

"The five-year test should be: During the period did our (Berkshire Hathaway) book-value gain exceed the performance of the S&P?"

Is the test now as follows? : Did the increase in the intrinsic value of the sum of the 5 "groves" increase more quickly than the S&P 500 Total Return Index over 5 years?

Or is it just: Did the share price of Berkshire Hathaway outperform the S&P?

To keep things simple, to avoid not seeing the forest for the trees, Warren Buffett says investors should consider 5 "groves" of trees. If you add them up, you get an intrinsic value estimate for the whole company and can calculate the intrinsic value per share. Buffett supplies shareholders with earnings but lets shareholders pick their own multiple to get to a reasonable valuation. (Or did he mention a reasonable multiple somewhere else, maybe based on interest rates?).

Grove Number 1: Berkshire controlled non-insurance businesses:
Earnings $16,8 billion x 15 (Peter Lynch) Multiple = $252 billion value

Grove Number 2: Collection of public equities (stocks) = $173 billion value (December 31st 2018)

Grove Number 3: Shared control companies: Kraft Heinz, Berkadia, Electric Transmission Texas, and Pilot Flying J:
After Tax Operating Earnings: $1,3 billion x 15 multiple = $19,5 billion

Grove Number 4: US Treasury bills, cash equivalents and bonds:
$112 billion + $20 billion = $132 billion

Grove Number 5: A collection of insurance companies that generate "float", a source of (cost free) financing for the first four groves. The float in 2018 was $122 billion. Float exists because insurers are paid premiums upfront, but only pay claims later. See "Unpaid losses" in the balance sheet. Unpaid losses are booked as debt, but represent "other people's money" that Berkshire can use and invest temporarily. This grove is not added or subtracted to get to intrinsic value.

Sum of Grove 1,2,3 and 4 = $252b controlled business + $173b equities + $20b Shared control + $132b Cash equivalents = $577b - $15b Deferred capital gains taxes =

Berkshire Hathaway intrinsic value -> $ 562 billion

Berkshire Hathaway Market Cap @$201 per B share = $496

B share intrinsic value: ($562b company intrinsic value / $496 market cap) * $201 = 

$227 intrinsic value per B share

The $227 is based on stock prices at the end of 2018. Based on increased stock prices at the end of February 2019 somebody at Seeking Alpha got a number of $246 per B share: https://seekingalpha.com/article/4243986-berkshire-hathaway-2018-valuation

Tuesday, February 26, 2019

B&S Group intrinsic value


Assumption: This year's earinings 2019 will be significantly higher than 2018 due to full year of Fragancenet.com sales, fewer problems (2018 new DC opening was a nightmare), less currency headwind. EPS of 1 EUR?

SECTOR:  [PASS]   B&S is in the wholesale/retail sector. Technology and financial stocks were considered too risky to invest in when this methodology was published. At that time they were not the driving force of the market as they are today. 

SALES: [PASS] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. B&S's sales of €1 746 million, based on 2018 sales, pass this test.

CURRENT RATIO:  [FAIL] The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. B&S's current ratio €640m/€431m of 1.5 fails  this test.

LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [PASS] For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). Companies that do not meet this criterion lack the financial stability that this methodology likes to see. The long-term debt for B&S is €92 million, while the net current assets are €209 million. B&S passes this test easily.

LONG-TERM EPS GROWTH: [PASS] Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. Companies with this type of growth tend to be financially secure and have proven themselves over time. B&S's earnings have increased by 300% ? over the past ten years.

Earnings Yield: [PASS] The Earnings/Price (inverse P/E) %, based on the lesser of the current Earnings Yield or the Yield using average earnings over the last 3 fiscal years, must be "acceptable", which this methodology states is greater than 6,5%. Stocks with higher earnings yields are more defensive by nature. B&S's E/P of 7,7% (using this years adjusted Earnings of €0,9) passes this test.

Graham Number value: [FAIL] The Price/Book ratio must also be reasonable. That is the Graham number value must be greater than the market price. B&S has a Graham number of (15 x €0,9 EPS x 1,5 x €2,8 Book Value) = €7,7  (See book value discussion below in notes) 

Dividend: €0,29/€12 = 2,4% and is 40% of profit.

Conclusion 2019: B&S has a strong balance sheet, longterm management and is growing. Seems like a good pick for the Defensive Investor at a price of around €12

Return on Capital Employed: 27%

Rough notes August 2018 @EUR 16.

"Distribution of consumer goods" based on taxfree imperium, parallel/grey import, etc.

B&S Group is an interesting holding of 3 companies with a central back office. The Annual Report is worthwhile reading: https://www.bs-group-sa.com/investors/
The founder Willem Blijdorp is a cowboy and understands how he makes money and doesn't mind explaining it. He still owns 51% of the shares after the IPO. No kids? The CEO since 2004 Bert Meulman has an HR focus on his own team, promote from within, longterm loyalty, slightly resembles Fastenal?

84 million shares, 30% sold in the IPO at EUR 14,50 a share, the price dipped to around EUR 13 and is now at EUR 16. Missed the IPO because of two other more "sexy" companies IPO-ing in the same week.

Earnings EUR 1 per share? x 15 = EUR 15, but business is going well, earnings are increasing and profits can be re-invested in robot DCs and improved software. Also expansion to other countries, airports.

Book value: 242m equity / 84m shares = EUR 2,88 book value per share (but high return on equity)

Current Assets EUR 500m / Current liabilities EUR 293 = 1,7 = good

Long-term debt only 28m compared to Net Current Assets = 500-293 = EUR 210m

Sales: EUR 1 500m focus on Gross Profit EUR (but now GM% focus due to financial advisors? Not a good sign)

Compounder checklist: Chuck Akre 3 legged chair

1. Great business; Check great understanding of what they are doing, >30% ROCE

2. Great management: Check, shareholder friendly?

3. Ability to re-invest profit: Check