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Strategies & Market Trends : Value Investing

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To: Mario :-) who wrote (59900)	10/9/2017 3:36:20 PM
From: E_K_S	Read Replies (1) of 78748

Yes but I use a modified version. The company s/d also have 10 years of "positive" EPS but this may not be the case especially if there are 1 or 2 years of specific company events which generate a loss (negative EPS; ie restructure). Therefore, I do not hold it as a fast rule. I also look at the components of BV and back out intangible assets and/or Goodwill. If this reduces BV significantly then you can recalculate the GN but I just look at this from total valuation. I want to see EBITDA positive which is a good measure of FCF as long as debt is manageable. Total Debt/ Annual Net income s/d be <= 4 (A Buffet rule) but this generally never occurs with a GN stock so I will go as high as 10X especially if EBITDA is growing along w/ EPS. Remember that the Yahoo Finance numbers are lagging so GN value may/could fall over time if EPS have yet to bottom. So I want a good story why EPS s/d rise and then accumulate a position over a 3 month period if/when the story is clear. There are a lot of moving parts so you have to view the whole package and quantify the assets owned and how they can generate higher revenue streams and/or if management can create new revenue streams w/ a new strategy. Also, be careful of depleting assets like in Oil/NG and/or mining that get used up over time AND assets and/or Revenues that are pegged to the price of a commodity (like NG & Oil). I like to see a growing book of business (use when evaluating railcar orders and semiconductor/specialized technologies and/or construction/roads/bridges) but to get the deepest discount in GN value, these measures are typically bad (book to bill <1). That could be a good thing if you believe management has a plan to increase orders/projects. You can search this forum using "GN" and most of my posts will come up explaining the value opportunity I see. It does not always work but allows you to screen candidate companies better. I give each GN value Buy 18-24 months to get to the calculated GN valuation. Many will exceed the GN valuation and go much higher if management is doing a good job. My favorite play is CTL which GN shows 61% undervalued. M in the retail sector mainly for the real estate assets that M owns (62% undervalued). GN opportunities are harder to find and you must be careful of not getting into a "value trap". Please post your candidate value plays you find explaining your thesis on where the value lies and what management is doing (or not doing). You will find that most of the GN value plays appear in out-of-favor sectors and/or company specific events. Good Investing EKS

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