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 new IPO, 1/2 year report August 28th 2018
Altice AEX:ATC, NL0011333752
Alumexx trappen 1/2 year report date?
AMG Advanced Metallurgical Group NV 2018
Amsterdam Commodities ACOMO 2018
AND International Publishers 2018
Apollo Alternative Assets AEX:AAA1, GB00B15Y0C52 Check after August 2, 2018
Aperam AEX:APAM LU0569974404
Arcadis 2018
ArcelorMittal AEX:MT, LU0323134006
ASM International AEX:ASM NL0000334118 2018
ASML 2018
ASR Nederland a buy under 30 Euros?
Batenburg Techniek
BAM Koninklijke Groep 2018 
Basic Fit ?! don't buy above 7,50
BE Semiconductor AEX:BESI, NL0000339760 2018
Beter Bed Holding AEX:BBED, NL0000339703

Berkshire Hathway run by Warren Buffett

Bever Holding: Small real estate fund, neg. cash flow, selling at 3,8 under 5,5 Euro book value. Plans to make money in near future. Buy?
BinckBank buy under 3 Euros
Boskalis Westminster Koninklijke AEX:BOKA, NL0000852580
Boussard & Gavaudan Holding Ltd. An expensive hedge fund.
Brill, Koninklijke kopen onder 22 Euro
Brunel International AEX: BRNL, NL0010776944
Coca-Cola European Partners
Corbion AEX:CRBN, NL0010583399
Core Laboratories AEX:CLB, NL0000200384
Ctac buy under €3,20
Curetis loss making biotech company = too difficult pile. Price fell from 7,14 to 5 June 2016-June 2017
Docdata: Now a  holding for the https://www.ease2.com/ Internet of Cars app, under construction.
Delta Lloyd now part of NN Group.
DPA Groep N.V. buy at €1,4
DSM Koninklijke 2018
Dutch Star One 2018
Esperite: Stem Cell Bank losing money hand over fist. Price fell from 3 to 0,70 June 2016-17
Eurocastle NPL Non Performing Loans in Italy 10% dividend FFO Funds From Operations pretty good, selling at 8,55 which is 7% under Net Asset Value
Eurocommercial Properties: Buy under 40?
Euronext buy at €30
Fagron compounding 
ForFarmers a Graham Defensive Pick up to €6,50
Flow Traders outside my circle of competence, seems like a buy under €30
Fugro's Graham Value has decreased, buy at €10?
Gemalto buy under €35
Galapagos is a clinical-stage biotechnology company, not profitable (yet?).
GrandVision : Don't buy over €20
Groothandelsgebouwen N.V. buy under €50
HAL Trust
Headfirst Source part of Value8 holding. Figures? Earnings 2017 before Amortization 0,30?
Heijmans losing money check August 17 2017
Heineken, buy under 60?
Holland Colours buy under €70
Hunter Douglas, good balance sheet, buy if under €70
Hydratec buy at 55 sell at 65
ICT Group NV buy under 9 Euros
IEX Group Sales 2m, losses 600k, not for the defensive investor
IMCD buy under 35 Euros
ING Bank buy under 15 Euros
Intertrust too little history: Earnings per share 2016 Euro 1,3 x 15 = 19,5 Euros: Price = 19,86 Euros
Inverko used to be Newconomy, is for sale, garbage (disposal) Price = 0,60 Euros
Kardan made a loss 5 out of the last 5 years including 2016 and first Q 2017. Almost bankrupt?
KAS BANK cheap now under 10 Euros ?
Kendrion buy at 25 Euros
Kiadis Pharma bleeder, not for Defensive Investor, no sales
Klepierre French Retail Real Estate 5% dividend
KPN not for the Graham Defensive Investor
Porceleyne Fles Koninklijke Check under 5 Euros.
K. VolkerWessels check after August 31st, 2017
K. VOPAK buy under 35
K. Wessanen 2018 
K. VolkerWessels
Lavide taking over childcare company sept 2017 
Lucas Bols 2018 buy now
Nedsense lege beurshuls prijs 5,6x intrinsieke waarde
New Sources Energy fraud
Neways 2018
NN Group 2018
Novisource turnaround
NSI Nieuwe Steen Investments HNK = Het Nieuwe Kantoor
Nedap NV Nederlandsche Apparatenfabriek
OCI NV buy under 16 Euros
Oranjewoud not a Defensive stock...
Pharming back of the envelope math
Philips Electronics buy around 20?
Philips Lighting
PostNL
Probiodrug loss making biotech, not a stock for the Defensive Investor
Randstad
Refresco Group  buy around 12 Euros?
RELX Group (formerly Reed Elsevier)
RoodMicrotec shareholder financed
Royal Dutch Shell
SBM Offshore 
Sif Holding
Sligro 
SnowWorld
Stern Groep buy under 25 Euros?
Takeaway.com making a loss, not for the Defensive Investor. Prijs 10x verkoop.
Tetragon investment fund including CLO (Collateralized Loan Obligations) NAV $20, price $12,44
Thunderbird Resorts: Negative book value and losing money.
TIE Kinetix Shares Outstanding: 2013:933 2014:1127 2015:1227 2016:1830
TKH Group
TomTom
Unibail Rodamco a buy?
Unilever after Kraft Heinz bid
Value8 Rat in mi Kitchen
Van Lanschot
Vastned Retail 2018
VNC = too difficult pile: Geert Schaaij + Selwyn Duijvestijn 
Volta Finance fund including CLO (Collateralized Loan Obligations)
Wereldhave, buy! 2018
Wolters Kluwer
Yatra Capital Indian Real Estate, losing money, stopping? Book 7,5 E, Price 5,75 E.

Other countries:
Starbucks 2018

Comments, questions or E-mails welcome: ajbrenninkmeijer@gmail.com

Saturday, July 21, 2018

Wessanen intrinsic value Benjamin Graham analysis


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.

Benjamin Graham Defensive Analysis from Chapter 14 of The Intelligent Investor:

SECTOR: [PASS] Wessanen 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. Wessanen's sales of €625 million, based on 2017 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. Wessanen's current ratio €211m/€163m of 1.3 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 Wessanen is EUR 84 million, while the net current assets are €48 millionWessanen 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. Wessanen recently lost money and fails this test.

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. Wessanen's E/P of 4% (using the 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. Wessanen has a Graham number of (15 x €0,44 EPS x 1,5 x €3,07 Book Value) = €5,5. 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.

Comments, questions or E-mails welcome: ajb@valuemachinesfund.nl

Thursday, July 19, 2018

Arcadis intrinsic value versus price a week ahead of Q2 2018 results

Arcadis like Accell Group has bought companies which have not increased value per share. The balance sheet is getting worse and worse.

Here's the math/analysis:

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 €3 219 million, based on 2017 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 449m/€1 107m of 1.3 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 €620 million, while the net current assets are €342 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.

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 the 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 €10,7 Book Value) = €14,4. Today's price is: €14,3

Dividend: Arcadis paid a dividend of €0,47, which resulted in a 3% dividend yield. I don't know if they are paying dividends in 2018.

Conclusion: 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."

See www.beterinbeleggen.nl for in-depth analysis of quality companies.

Comments, questions or E-mails welcome: ajb@valuemachinesfund.nl

Wednesday, July 18, 2018

Longterm investing in compounders explained by Terry Smith & Charlie Munger

Terry Smith wrote the investing classic "Accounting for Growth" in 1992. His relatively new fund, Fundsmith, has increased (mark to market) by 19,7% per year compared to 12,7% for his equity benchmark. The following excerpt is similar to the way we think at ValueMachines Fund and the reason we chose to invest in "compounders":

"There is also the fact that the alternative of investing in cyclicals, financials and so-called ‘value’ stocks involves investing in companies, which over time do not create shareholder value by generating returns on capital above their cost of capital and growing by deploying more capital at such favourable returns. We seek to invest in companies which accomplish this. Quoting Warren Buffett, the ‘Sage of Omaha’ and arguably the best investor over the past fifty or so years has in my view become somewhat passé. It is frequently done by acolytes or imitators many of whom seem to have done only the most cursory study of what he actually does, if anything at all. So instead I am going to quote his business partner and Berkshire Hathaway’s Vice Chairman, Charlie Munger:

‘Over the long term, it's hard for a stock to earn a much better return than the business which underlies it earns. If the business earns 6% on capital over 40 years and you hold it for that 40 years, you're not going to make much different than a 6% return— even if you originally buy it at a huge discount. Conversely, if a business earns 18% on capital over 20 or 30 years, even if you pay an expensive looking price, you'll end up with a fine result’ (emphasis added).

I have no idea why Mr. Munger chose those particular rates of return but what I do know is that he is not voicing an opinion. What he is describing is a mathematical certainty. If you invest for the long term in companies which can deliver high returns on capital, and which invest at least a significant portion of the cash flows they generate to earn similarly high returns, over time that has far more impact on the performance of the shares than the price you pay for them. Yet I have been asked far more frequently whether a share, a strategy or a fund is cheap or expensive than I am asked about what returns the companies involved deliver and whether they are good companies which create value or not. Even though Mr. Munger is right it requires a long-term investment perspective to capture that compounding by high return companies, and finding those companies is not easy especially as you need to assess their ability to grow and ward off competition. But the most difficult part of applying the investment strategy suggested by Mr. Munger’s quote, and which we seek to apply, is us. Our inability to take a really long-term view, particularly through the periods when our chosen strategy and companies are not performing as well as less good companies, which are enjoying their period in the sun, is our greatest enemy. I will leave this subject with a sporting analogy. We are often told that life is a marathon not a sprint. So is investing. Most of us will be investors for the majority of our lives. If we start investing in our 30’s with current average life expectancy most of us will be investing for over half a century. It makes Mr. Munger’s 40 year example seem a bit short. So why we should think about what happens over shorter time periods, like quarters or even years is a bit of a puzzle." 

Source: https://www.fundsmith.co.uk/docs/default-source/analysis---annual-letters/annual-letter-to-shareholders-2017.pdf

Comments, questions or E-mails welcome: ajbrenninkmeijer@gmail.com

AND (Automotive Navigation Data) 2018 intrinsic value and price update

One year ago
A little over a year ago I wrote: " Conclusion: AND is very small and has been growing. 2015's profit was partly non cash, but business was good in 2016 and the company now expects to sell in North America. Not a stock for the Defensive Investor, because of the company's small size and reliance on a limited number of clients." http://sinaas.blogspot.com/2017/05/and-international-publishers-intrinsic.html


2018
Since then existing sales have collapsed and North American sales failed to appear. AND had sales of only EUR 1,4 million (with an "m") in 2017 and 100 employees. That is sales of EUR 14 000 per employee. It has now had to close its operations in India. If it had a lot of debt, it might be bankrupt.

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

SALES: [FAIL] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. AND's sales of only €1,4 million, based on 2017 sales, fails 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. AND's current ratio €4,6m/€0,9m of 5 passes the 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 AND is €0,23 million, while the net current assets are €4 million. AND passes 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. AND lost money in 2017 and fails this test. 

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. AND's E/P of 0% (using last 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. AND has a Graham number of (15 x €0,13 EPS x 1,5 x €4,5 Book Value) = €3,2 

Dividend: €0

Conclusion: It is difficult to say how the company will do in the future. Still not an investment for the Graham Defensive investors even if the share price falls further.

Comments, questions or E-mails welcome: ajbrenninkmeijer@gmail.com

Tuesday, July 17, 2018

Quick & Dirty math voor Akzo Nobel intrinsic value

A bit more than a year ago Akzo Nobel declined to be taken over by PPG for EUR 96,75 per share. Currently the shares are trading for EUR 74,50.
Based on 2017 book value per share EUR 23 and Earnings per Share EUR 3,3 the company has a Graham Value of EUR 41,- (15 x EPS = EUR 50. what first glance the stock doesn't seem cheap.

The company is now being split up in 2 parts: Specialty Chemicals which is being sold to private equity investors for EUR 10,1 billion and Paintings & Coatings which should keep making money for shareholders. Workers are currently threatening to go on strike and ex-CEOs say more of the cash from the sale of part of the company should go to the retirement fund.

Ignoring that, the earnings of Paintings & Coatings have fallen. Q1 2018  EUR 0,4 per share x 4 = EUR 1,6 per year x multiple of 15 = EUR 24 per share going concern.

Cash from sale per share = EUR 10,1 billion / 0,253 billion shares = EUR 40 / share Specialty Chemicals sale proceeds. 

EUR 24 + EUR 40 = 64 EURO guesstimate of value per share. Compared to a price of EUR 74, Akzo Nobel still seems expensive. There is no "Margin of Safety" for the Graham Defensive Investor.

What strikes me is that in Q1 2018 the company raised the prices off paints and said to shareholders: Look at how we have increased margins by 3%! whilst at the same time saying: Volume has decreased 8% due to external circumstances. .... Personally, I like companies with more customer focus and/or pricing power than companies that seem to be run by the financial department, consultants and/or investment bankers.

Comments, questions or E-mails welcome: ajbrenninkmeijer@gmail.com

Saturday, July 14, 2018

ValuePortfolio dashboard van laatst berekende Waarde en LIVE Prijs en Korting

BLAUW = Geschatte Intrinsieke Waarde 

ROOD = Netto Vermogenswaarde (Beurswaarde cq. Prijs )





Korting (Margin of Safety, Veiligheidsmarge) = verschil tussen Waarde en Prijs


Comments, questions or E-mails welcome: ajbrenninkmeijer@gmail.com

Saturday, July 07, 2018

SBUX Starbucks Graham Defensive & Peter Lynch Logarithmic scale


Future growth in China sales should help increase Value (red line). Dividends which have been paid out are not taken into account. Price seems relatively cheap.

If at first, you don't get what you want to see, keep "torturing the data" until you get what you originally wanted. Peter Lynch chart = Price versus 15 x Earnings.




Disclaimer: I own Starbucks shares.

Comments, questions or E-mails welcome: ajbrenninkmeijer@gmail.com

Monday, June 25, 2018

Texas Instruments CFO to Home Depot Co-Founder: "Your margins are too low to be able to make any money."

This part of a series linked to how to make money in a theoretically impossible manner in retail: see also ( http://sinaas.blogspot.com/2018/05/brenninkmeijers-profiting-from-insight.html )

Home Depot has been a great investment since it went public: https://www.valuewalk.com/2016/07/companies-that-beat-warren-buffett/ but not everybody believed in it when Ken Langone was raising money to start the company. In his autobiography "I love Capitalism", Langone explains.
Cash flowing at Home Depot checkouts

"Bernie Marcus' revolutionary idea for a new chain of home-improvement stores sounded great ... In Bernie and Arthur's vision, the new stores' huge size, wide inventory, and low prices would produce $7 to $9 million in annual sales per store (Handy Dan stores averaged $3 million in sales per annum), at gross profit margins of 29 to 31 percent (the industry standard was 42 to 47 percent). Sheer sales volume would compensate for the lower profit margins.
And not just volume. The salespeople in the stores wouldn't only be there to operate cash registers. They would be highly trained in home repair and home improvement, ready to answer all questions and guide customers through any project, small or large." Langone  continues: "I calculated that the initial stage would take a couple million dollars in venture capital... I needed a contrarian with a couple million dollars lying around.
Who else but Ross Perot?" (Langone had helped with Perot's EDS IPO).
Ross Perot entrepreneur & candidate
Langone: "I took Bernie down to EDS's Dallas headquarters to meet Ross, and the initial meeting went well...Ross sat there behind his big desk, all ears...So far, so good. Except for Bryan Smith, who from the jump was the sceptic in the room. He was a very nuts-and-bolts guy who simply didn't believe that -- no matter how great the new stores' service and product selection and sales volume -- Bernie and Arthur could make a go of it on a 27 percent gross margin (markup), when the industry standard was 44 percent. No matter how hard I insisted that service and selection and store size were certain to create big sales volumes, Bryan Smith kept shaking his head. 
At the end of the meeting, Langone spoke to Perot: " "Look, Ross," I said. "We're all thinking about where we are. Bryan's clearly got reservations about the deal. Why don't we all think this over for a couple of weeks, and we'll come back and see where we are."
"Okay, " Ross said, "If you want to come back, come back."
We knew we wouldn't be coming back. As we waited for the elevator outside Perot's office, Arthur was despondent. "Oh, my God, what are going to do, what are we going to do?" he said. "We haven't got any money!"
"Arthur, here's what we are going to do," I said. "I'm going to go out and raise the two million bucks. You guys are going to get 45 percent instead of the 25; the investors are going to get 50, and I'll get 5."
Arthur looked amazed. "Hell, that's a much better deal than we would've had with Perot," he said.
"Yes, Arthur," I said. "In the retail business, when you can't sell something, you guys mark it down. In my business, when you can't sell something you mark it up."

Comments, questions or E-mails welcome: ajb@valuemachinesfund.com

Saturday, June 23, 2018

Air France KLM Graham Defensive analysis

2017 Conclusion: Too difficult pile. 2018 still too difficult, but it remains a Frech ariline. AF KLM is probably not a good long-term investment. The company seems to need to sell more and more shares to keep its planes aloft.


SECTOR: [PASS] AF 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. AF's sales of €25 800 million, based on 2017 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. AF's current ratio of €9 051m/€11 045m of 0.8 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 do not meet this criterion lack the financial stability that this methodology likes to see. The long-term debt for AF is €10 348 million, while the net current assets are €-1 994 million. AF 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. EPS for AF were negative in many of the past years and therefore the company fails this criterion.

E/P RATIO: 
 [FAIL]  The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which this methodology states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. AF's Earnings Yield is 17% this year and has made a loss over the past 3 years.

GRAHAM NUMBER VALUE: 
[PASS]  [FAIL]  The Price/Book ratio must also be reasonable. That is the Graham number value must be greater than the market price and is at 8 Euros. 

NO DIVIDEND and selling lots of shares.

Comments, questions or E-mails welcome: ajb@valuemachinesfund.nl

Friday, June 22, 2018

AFC Ajax and Invesco, not a bad investment

Last year I wrote about Invesco owning Ajax shares. The Value of Ajax seemed to be higher than the Price and both have increased since then: http://sinaas.blogspot.com/2017/05/ajax-football-club-intrinsic-value.html

I don't know how Ajax will do financially this year or next. Here is the Benjamin Graham Defensive analysis.  The price seems very reasonable:

Last year Ajax paid out a dividend of 24 cents per share, which surprised me a little. I thought they would spend profits on trying to win more games instead of returning capital to shareholders.

Here a simple Graham analysis:

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

SALES:[FAIL] The investor must select companies of "adequate size". This includes companies with annual sales greater than €260 million. AJAX's sales of €118 million, based on 2017 sales, fails 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. AJAX's current ratio €148m/€72m of 2.1 passes the 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 AJAX is €15 million, while the net current assets are €76 million. AJAX passes 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. AJAX made a small loss in 2015  and thus fails the test.

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. AJAX's E/P of 11% (using the average of 3 years Earnings) passes this test.

Graham Number value: [PASS] The Price/Book ratio must also be reasonable. That is the Graham number value must be greater than the market price. AJAX has a Graham number of (15 x €1,5 EPS x 1,5 x €8,6 Book Value) = €17 

Dividend 2017/2017 24 cents/12 = 2%

Comments, questions or E-mails welcome: ajb@valuemachinesfund.nl

Thursday, June 21, 2018

Ahold Delhaize overcomes Amazon + Whole Foods jitters


Ahold merged with Delhaize and value per share has increased from 7 to more than 12 Euros per share leading to an increase in the Graham value per share. After the Ahold Delhaize merger Amazon bought Whole Foods supermarkets in the US and investors dumped Ahold Delhaize shares. Hendrik Oude Nijhuis (www.beterinbeleggen.nl and co-founder of ValueMachines Fund) wrote in VEB Magazine in March 2018 that investors (Mr. Market) were (was) overreacting. Since then the company's Value has increased and the Price of the stock has increased even more quickly closing the gap between the two. (But I missed the boat = opportunity cost).

SCTOR: [PASS] AHOLD 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. AHOLD's sales of €63 000 million, based on 2017 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. AHOLD's current ratio €9 970m/€10 305m of 1,0 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 do not meet this criterion lack the financial stability that this methodology likes to see. The long-term debt for AHOLD is  €8 400 (was 4,526 million before the merger), while the net current assets are minus €335 million. AHOLD 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. AHOLD's EPS growth of 160% over that period passes the EPS growth test.

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. AHOLD's E/P of 6,5% just 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. AHOLD has a Graham number of (15 x €1,4 EPS x 1,5 x €11,55 Book Value) = €18,9

Dividend: 0,63 / 20,45 = 3%

Comments, questions or E-mails welcome: ajb@valuemachinesfund.nl