Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Paul Senior who wrote (75736)	6/5/2024 7:33:44 PM
From: Harshu Vyas	Read Replies (1) \| Respond to of 79199

I prefer to buy obviously out-of-favour cyclicals. Companies that haven't made (recent) major errors are hard for me to see the value in because I can't see an obvious path forward. DBI is one of them. Business is ok I suppose (long-term decline, medium-term stable), but what about management...? At a (generous) free cash flow margin of 3.5% on revenues of slightly above $3b and $426m net debt, I don't think those buybacks of $250m (!) (plus divis of over $25m) in the last couple of years were a "smart" use of capital. Nor was the acquisition of Keds (for example) for over $100m from Wolverine. Quite quickly, I don't fully trust management's strategy so I pass on it. (FWIW, I think the stock is roughly priced right.) That said, I'm beginning to like Urban Outfitters (whose share price has bounced around for the best part of two decades!) and, specifically, their subscription-based business model, Nuuly, as an opportunity for significant growth. They seem to be the closest to making such a model work. Not yet profitable, quite expensive and a tad gimmicky, but I've a feeling sustainability will become more important to consumers, businesses etc as time goes on. Overall URBN valuation is reasonable at under 7x EBITDA (5y average). Will think it over. Still got plenty of time. On the travel/hospitality side, I'm liking MGM and TNL (timeshares). Mainly because of their strong cash generation and aggressive share buybacks. Of course, it won't continue forever so you have to be careful before plunging head first into that pond. Thought about CAR for a while, too, before coming to the conclusion the balance sheet's just not healthy enough (for me). Best UK stock I've found is Centrica PLC but I'm in the process of dissecting it for a much longer write-up, so won't say too much here. It's the strange stock I'd recommend to both my parents and have in my own portfolio.