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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: staring who wrote (58128)	10/5/2016 6:57:38 PM
From: E_K_S	Read Replies (2) \| Respond to of 78750

Re: Modified Graham Number candidate stocks TRN is a GN play I started buying at $17.5/share in 5/2016. This was more of a hybrid GN in that they did have one year of negative EPS over the last 10 years. I also have been buying CenturyLink, Inc. (CTL), Domtar Corporation (UFS) and Ampco-Pittsburgh Corp. (AP), all are 'modified' GN candidate value Buys. CenturyLink, Inc. (CTL); GN value $38.19/share started Buying 7/2016 @ $30.00/share 4 Buys in 8/2016 @ $29.30/share Domtar Corporation (UFS); GN value $ 53.49/share started Buying 9/2016 @ $36.50/share Ampco-Pittsburgh Corp. (AP); GN value $37.31/share started buying 9/2015 @ $11.30/share (sold 80% of those shares 4/2016 @ $17.50/share) added shares 12/2015 $ 9/2016 @ $9.95/share Trinity Industries Inc. (TRN); GN value $ $ 35.07/share started Buying 5/2016 @ $17.50/share FreightCar America Inc. (RAIL); GN value $16.79/share started Buying in 8/2016 @ $13.58/share ---------------------------------------------- Other GN Buys buys in 2014/2015 (Note: This was a modified GN candidate as they reported 2 quarters of losses over last 10 years) Sterling Construction Co. Inc. (STRL); GN fair value $3.99/share started Buying late 2014 through 2/2015 @ $2.75/share closed out 95% of the position at avg $6.50/share; still hold 200 shares; stock hit multi year high today @ $8.03/share. --------------------------------------------- I use this Graham Number Calculator but will also include candidate Buys that may have booked 1 year of losses over the last 10 years. I may also drill down the financials to see evaluate BV assets to include and/or exclude intangible and/or significantly undervalued assets (like real estate valued at cost rather than market). Same w/ other types of assets. I will also look at management and new management to see if they have insider ownership and/or if there are activist investor ownership (M. Gabelli is a 10% owner of AP). Many of these companies are in cyclical industries but remember you are buying based on the asset value(s). When the sector becomes profitable and FCF increases substantially, then you must sell if/when GN fair value is reached. There is never the best opportunity Buy candidate, all will have warts but you must have conviction that you are buying quality assets undervalued. You must also have a good experienced management team that can maximize the FCF if/when revenues turn up and/or lock in profitable long term contracts (like STRL has done in the last 18 months). Finally, these value plays take time to turn around and Graham usually will give them no more than 18 months. Some take longer if they are deep cyclical plays but that amount of time s/d be sufficient. I look at the new 52wk lows, then run them through my Graham Number value calculator (every day, every week, every month, year). That's how I glean the different sectors. There is/are some news events for the sector and or individual company that start the erosion of value until everybody throw in the towel. You begin to see value investors (and activist investors) accumulate shares. Be patient and spread out your Buys over a 90 day period. Grahmn generally always just bought his entire position once his criteria was met but w/ my modified GN value, I typically see good values become better ones and then the dreaded 'value trap'. You must learn to avoid the value trap and just exit that position and move on. They happen and I have some scars for those I rode out (like SVU). You will buy some loser but I have had good success picking up good candidate stocks w/ good risk/reward profiles. I have grown my portfolio to the point where I will have 5-6 GN value plays at different stages in their fair value cycle. These investments still only represent at most 30% of my portfolio as I never bet the house on any one investment thesis but only build to a 2% portfolio position. If/when they reach fair value, my 2% portfolio position may become a 4% portfolio position. My exist strategy is to peel off my high price shares at/near the GN fair value target price and then completely exit the position at 10% or high from the GN fair value price. FWIW, I do post most/all of my modified GN value Buys/Sells and reasons why I like the company included assets owned and management changes. I have been wrong in the past and will be wrong in the future but have had good success w/ this style of value investing. Good Investing EKS

To: staring who wrote (58128)	10/6/2016 10:52:46 AM
From: Graham Osborn	Read Replies (2) \| Respond to of 78750

Disclaimer: I'm not necessarily saying these are stocks I would buy right now - I was trying to answer the question as posed. Graham stocks often have serious issues. That said.. TGA is interesting, but recent operating performance is scary. Do you know why? Are they turning it around? Yes, they're burning through cash at an alarming rate. Incredibly, I still haven't managed to find a single attractive stock play on the oil sector right now, even though I feel reasonably bullish on oil prices. BNKJF supposedly has a better balance sheet (maybe they just haven't made write offs yet?) but the liquidity sucks. GBX is highly cyclical. I wonder whether recent performance is sustainable. Same is true of TRN and RAIL. I often wonder what isn't cyclical nowadays.. it seems like businesses with very stable FCF have been levered up to a point where they are effectively cyclical - look at pharma and consumer defensives. You can still make money on these sometimes, as we've seen since the first of the year. RAIL has a very low FCF and highly volatile... Yep. I prefer GBX over RAIL. UTHR looks extremely interesting, but I don't understand the business and its sustainability (patents and so forth). Can you explain it me? This is a play that is as you say is not simple, and I don't own it yet. Management is very cagey about industry-critical information, namely how big the hit from generics by Sandoz and Teva will be. I personally think they will be substantial, but OTOH UTHR is a SME in PAH and have some strategies for LCM that may mitigate the ability of generalists like these 2 to easily win credibility with physicians - UTHR hits the disease state at multiple failures in the course of disease. They have a nice cash position but about 25% of that will be blown in frivolous cash payouts to management and other large shareholders, probably at the worst possible time. The stock is in a bit a death slide right now and I think better prices may be seen, but they are also a company I don't expect to be freestanding forever given their cash, still decent franchise, and present interest rate environment. TBNC seems to have interesting financials, but I think the upside of a bank trading at 1.1 PB is limited nowadays. That's why I like regional banks that are growing their book at a significant pace. IEHC has a very weak FCF and profitability... Do you understand the business model, profitability and growth prospects? They are plowing a lot of their cash into inventories from what I can tell. That may actually weaken its candidacy as a Graham pick. The Company is sought after by many of its customers to design and manufacture custom connectors. Our customers consist of OEM’s (Original Equipment Manufacturers), companies manufacturing medical equipment, and distributors who resell our products to OEMs. We sell our products directly and through 16 independent sales representatives located in all regions of the United States, Canada, Israel, India, various Pacific Rim countries, South Korea and the European Union (EU). The customers we service are in the Government, Military, Aerospace, Medical, Automotive, Industrial, Test Equipment and Commercial Electronics markets. We appear on the Military Qualified Product Listing “QPL” to MIL-DTL-55302 and supply customer requested modifications to this specification. Sales to the commercial electronic and military markets were 39% and 53%, respectively, of the Company’s net sales for the year ended March 25, 2016. Our offering of “QPL” items has recently been expanded to include additional products. They have significant customer concentration which is probably the biggest risk factor. If you buy, be prepared to ride through a recession (Lazarus obviously is). SYNT is a company in which I invested recently. It looks very interesting. I agree, but I need to do more digging at the current valuation/ cash position. PHO.V is interesting but it is not available in my broker. Still trying to open an IB account, lol :/

To: staring who wrote (58128)	10/7/2016 4:51:29 PM
From: Graham Osborn	Read Replies (1) \| Respond to of 78750

I'm not feeling all that warm and fuzzy about SYNT now. I just calculated the dividend payout at 1.3B, which is about all of their book value. They've been accumulating book at a rate of around 300M per year, so that will take at least 4 years to replenish if the good times continue. I guess I didn't realize the cash dividend practically enucleated the company. It's cheap on an operating basis of course, but at this point it's tough to call it a value stock :/