Request A Stock Analysis

I will be giving out an analysis of the financial statements for your request. I will be pointing out numbers that you should probably wary of, and I will try to point out any accounting that I see which looks aggressive or fraudulent. I will refrain from making predictions about a company's future here.

I will not be able to properly evaluate banks, commodities, biotechs, or pharmaceutical. Those are out of my circle of competence and I probably cannot address them correctly.

16 comments:

  1. yay thanks meteoraln! xD


    VRML
    JAZZ
    LVS
    BYD
    UAUA
    EMBA

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  2. VRML - This one's no good, negative earnings and negative cash flows for the past 4 years.

    JAZZ - This is not something that I can analyze, because it's pharmaceutical. In terms of pure numbers though, note the large research costs which eats into its operating profit. Also notice that the accounts receivables have been increasing significantly. The stock keeps getting diluted because JAZZ needs to pay off debt and pay workers. They sell a lot of stock in order to raise money to do this.

    LVS - This company has been in significant financial trouble and its statements shows its hardships. Billions of debt have been taken out in the recent years to help keep LVS going. It's now at 10bn in debt and 23bn in total liabilities, and it's showing only 1.8bn in cash flow from operations 2010. LVS still faces significant costs in capital expenditures, which it looks like it is unable to cut. These are probably the capital expenditures that are required to keep the business running, like building maintenance, new furniture for the hotel and casino. Receivables are increasing, my guess from giving out credit to guests. Lending money to people for gambling is probably the most dangerous kind of credit. Even with all the measures taken, the 2010 numbers still don't paint a picture of a viable company. I expect LVS to be in trouble for years to come.

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  3. BYD - Similar to LVS, BYD is in significant financial trouble. Shareholder equity is not increasing and capital expenditures are eating up all of its operating cash flow. Large amount of debt, 3.4bn compared to the 285m operating cash flow last year.

    UAUA - this doesn't seem to be listed... I can't find this company

    EMBA - This one is over the counter... I can't find it's financials listed.

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  4. I wonder if you would like to say a word or two about some Slovenian stocks. Ljubljana stocks exchange (a small stock exchange that is part of Vienna stock exchange) is very illiquid market, the sentiment is very low and I think that stock may be very undervaluated since Slovenian institutial investors don't have money to buy them. Ok, there are some foreign investors but they don't like Slovenian stocks since the government has done some stupid moves. They rather buy stocks on other Eastern Europe markets.

    I would be glad if you coult throw your eye on next stocks (I hope that you have access to Bloomberg proffesional data, if you don't, I can help you to get results 2011/H1 in english language which could be interesting at my oppinion:

    Zavarovalnica triglav (ZVTR)
    Krka (KRKG)
    Gorenje (GRVG)
    Nova KBM (KBMR)
    Petrol (PETG)
    Telekom Slovenije (TLSG)
    Mercator (MELR)

    tnx in advance :)

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  5. This comment has been removed by the author.

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  6. I've got a few.
    NLY - What is your take on the recent news with operation twist. I saw that you added more and I'm curious why? Without regulation it seems like a great bet, also AGNC
    WM - I own this and like it
    AAPL - This is the largest position in my portfolio and want to hear your thoughts
    INTL - Don't own this but curious about it

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  7. straightaway - (updated)I'm glad that you've been following my trades. The NLY added was actually the result of the option exercise. I originally wanted approximately $10k worth of exposure to NLY, so I bought 288 shares at around 17.34 and shorted 3 puts at 17 strike. The options got exercised against me. This was a stupid mistake on my part. I had been hasty and didn't check to see that NLY was paying a dividend during this time period, so I effectively paid 17.60 for the 300 shares because I didn't receive the dividend.

    This is one of the few stocks I own which were recommended by a friend so I did not do as much research as I should. To mitigate risk, I've left it as a relatively small portion of my portfolio. I know that operation twist will increase short term interest rates and lower long term rates. I might expect to see NLY's profit decline a bit in the future, but I don't think it will break them.

    Usually, short term rates are lower than long term rates because the risk is higher when repayment is further out. Banks generally borrow at the short term interest rate and then lend out at long term rates. Banks pocket the spread between the two rates as a profit. When operation twist raises the short term rate and lowers the long term rates, banks will earn a smaller spread. NLY operates in a similar manner. NLY borrows short term rates and buys mortgage backed securities. When you buy a mortage backed security, you are effectively lending out money. NLY's profit should decrease and may even take a loss if the short term rate increases above an existing mortgage backed security's rate.

    I don't think the impact will be big enough to cause significant damage to NLY's income.

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  8. WM - http://www.renaissanceinvestor.com/2011/10/research-wm-waste-management-and-its.html

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  9. Thanks for the analysis so far. I'm excited to hear your thoughts on the last two.

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  10. LGY - couldn't seem to find this one
    VGR - I'd have to say be careful with this one. VGR pays an attractive and consistent dividend. Consistency should not be maintained at the cost of internal rotting. Just as GM had begun taking out loans in order to keep their dividend payouts consistent with history, you need to look a little further to see the deterioration of a business. VGR has doubled their revenue from 506M in 2006 to 1B in 2010. However, gross profit has remained consistent at around ~200M. This means that their profit margin has been decreasing.

    For simple business such as VGR which purchases inventory and sells the product, we'd like to see the gross profit rise at least proportionally to revenue. Successful software companies can build one product and sell it infinite times, causing a proportionally larger jump in margin as revenue increases.

    The problem with a decreasing profit margin is it becomes harder to maintain the same level of dividends as you make less money. As a result, you see VGR issuing more debt and then paying the proceeds as dividends. You see a rise in interest expense year after year as their debt continues to grow. To top it off, the PE ratio is currently at 17, and I don't believe there is enough growth potential to justify it.

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  11. Any thoughts on Asian Citrus Holdings Ltd (ACHL:London)

    Seems very cheaply priced to me for a solid company. My main concern is overstatement of their assets.

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  12. ACHL - I don't feel too good about it. To start off, it's a Chinese company being listed on LON. Chinese companies are filled with fraud. Next, it's a holding company. Many of the numbers on the financial statements don't work as expected with holding companies and you really need to do a lot of research into the annual report for more information.

    While most of the numbers look okay in the financials (okay as in bare minimum, nothing stellar), the one big problem I see is how their revenues and their cost of sales move. From 2010 to 2012, revenues doubled, but cost of sales tripled. This means ACHL is not achieving economies of scale, and it cannot expand. They cannot grow their revenues because the cost of sales are growing faster, meaning at some point, they will lose money every time they try to sell more product.

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  13. Hey Ren, Its MDavis from BB.com (we have been pming a few times. Id be interested for your insight on ARR. I am still getting my head around the fundamental analysis but I do like the monthly div, and it doesn't seem like a shaky stock. Id be interested in your thoughts.

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  14. ZNGA
    AMZN
    FB
    MSFT
    thanks a lot, great work so far!

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