LauA: Okay. Here's a way to value CYM. My way-- not necessarily the best, only, or correct, way. First the big picture. Then some numbers. Then some other stuff and implications.
Big picture: This is the Ben Graham value thread. We are going to own a bunch of Graham type stocks. We will play a statistical game - not all of the investments will work out successfully, but the ones that do will cover the ones that do not. "Successfully" means maybe a profit of 50% over a 3 year holding, maybe a double, and with some margin of safety. If you agree with this, then let's discuss "bunch of stocks". Exactly how many is that? Some people say 8-12, some 20, some 50 or more. I'm in the >50 camp. DIVERSIFY. DIVERSIFY. Okay, now time. How much time exactly is going to be spent analyzing each investment? How much time is required to make a sell/buy decision on a close-decision stock (That is, with some stocks, right away you know they don't qualify, but a stock such as CYM, it might be iffy.) I'll say DD might be 2 hours. There ought to be some time limit. If I can't figure out whether to buy or sell the thing with 2 hours of research and some thought, then PASS on it. Come back later. THE POINT IS: With this CYM analysis you will NEVER do enough research to know all there is to know, to be able to predict copper prices, Peru expropriation policies, coal demand, or know the strength of the management team, the number of mines they have or what all they even mine. It is not necessary to know these things in this game.
Numbers: I will use a straight and simple valuation. But sometimes I change the measures or weight them differently, depending on my knowledge of the industry.
Per Yahoo and WSRN: the price to sales is .34. This psr figure is about half of what it's been in the past 6 years. The price to earnings is neglible. --They are having a bad year. The price to book value is .4, again its low for the past several years. More than 1/2 less than the p/bv of recent years. The stock is about 10. My notes show that there hasn't been a year in the past 8 when this stock has not sold above 20.
Other/implications: We know that the mining biz. and CYM are cyclical. We know that CYM is big in Copper, Moly, Gold, and Coal. We know they are trying to reduce costs (They got $1b for some of their coal properties.) We know there's a big dividend and that means trouble -- the div. is likely to be cut. That could drop the stock even further. We know when we tell anybody about buying CYM, the shame/pride ratio is top heavy. (Everybody will look at us funny, just as they did Jim when he presented it.) (Note: I actually am a believer in the shame/pride ratio-- higher very often seems to be better) At some point anyway, there just isn't anymore selling pressure. A little demand for the stock will cause an upsurge. And at some point the metals markets WILL recover. CYM, we are told, is lowering its operating costs, improving its productivity. Somewhere there's a news article about them buying back some stock too. Insiders (per Yahoo) don't seem to be selling. There's not much insider buying though. Putting it all together, what do you think, maybe earn $3/sh and sell for 8 times earnings. Maybe by 2001? Do we have the guts to hold that long? It almost earned $2 in '93 and in '94 and sold for $24-25. It's going to happen again. When? Can we hold until then?
I say this is one of the best value stocks I see out there now.
BUT.....
Only for someone who plays the entire game-- diversified and patient
(and for me, I'm diversified all right (LOL!), but not so sure of patient.) And as pointed out to me by someone here ---Only by someone who will sell at the full value point ----NOT ride the darn thing back down.
Please remember, if you invest based on what I say, I think you MIGHT do okay, but you would be too trusting (or crazy). My record is just not that good IMO. I think I talk a good game... not sure I can play it that well.
But if you invest on what Jim Clarke says, that's another story. He chooses carefully and he doesn't seem to miss. But that would be another post -- how Jim Clarke selects value stocks.
good investing! Paul Senior |
