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Can someone suggest a company that is in the “too easy pile”?

 

I’m thinking something where grandma can read the financials and get a good idea of what’s going on and a what price she might want to pay for it.

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1 minute ago, crs223 said:

Can someone suggest a company that is in the “too easy pile”?

 

I’m thinking something where grandma can read the financials and get a good idea of what’s going on and a what price she might want to pay for it.

Real estate tends to be the easiest.  I own NEN & AIV.  EQR/ELS are two good examples.  

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MEGEF - you have oil (and oil related products). You sell oil at existing prices. No hedges. You pay down debt and buy back shares when you hit debt milestones. Maybe a dividend. 30% FCF/EV ratio. 

VET - you have gas and some oil all over the world. A lot of it in Europe. You sell gas and oil at really good hedged prices. Good prices, not great prices. You pay down debt and buy back shares when you hit debt milestones. Maybe an increased dividend. 35% FCF/EV ratio. 

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RTX - It's like Coke but with missiles. 

 

 

Annual FCF

2021 5,008.00
2020 2,539.00
2019 3,953.00
2018 1,203.00
2017 3,617.00
2016 4,713.00
2015 5,103.00
2014 5,385.00
2013 5,745.00
2012 5,216.00
2011 5,531.00
2010 4,882.00
2009 4,527.00
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13 hours ago, Dinar said:

Real estate tends to be the easiest.  I own NEN & AIV.  EQR/ELS are two good examples.  

NEN isn't easy to figure out. A  lot of value and debt is hiding in JV's so it takes quite a bit of work to calculate the proportionate share of income and debt. I doubt the average grandma could do it. Same with most other Reits.

Any large cap has also various business segments, so same problem in terms of complexity

I think the best bet is a microcap. Examples with fairly simple balance sheets and income statements are NUVR or LICT. They have very straightforward income statements and even more importantly only one business segments.

 

Some smaller banks may work as well. A good example of a straightforward and well managed bank is FMCB. In this case, I think you can figure it out as long as you have a basic understanding on how a bank works and makes money.

https://www.fmbonline.com/_/kcms-doc/171/69882/MSR8816_2021EarningsRelease_1312022.pdf

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Posted (edited)
1 hour ago, Castanza said:

RTX - It's like Coke but with missiles. 

 

 

Annual FCF

2021 5,008.00
2020 2,539.00
2019 3,953.00
2018 1,203.00
2017 3,617.00
2016 4,713.00
2015 5,103.00
2014 5,385.00
2013 5,745.00
2012 5,216.00
2011 5,531.00
2010 4,882.00
2009 4,527.00

 

indeed, but the "missile" part really came in after 2020 (with Raytheon corp purchase).

 

I thought that was an eye opener statement from Q1 call.

 

"Greg Hayes -- Chairman and Chief Executive Officer

Yes. Let me start with that. As far as looking at the sales forecast for RMD, that does actually not contemplate any upside that we see from replenishment of stocks. And again, we're working through all that, trying to understand the timing.

Clearly, we won't see any of that benefit this year. But as we think about the next couple of years, as we see the budgets continue to increase and we see the replenishment orders come in, we would expect we will see a benefit to the RMD top line, which will take that number up somewhat. Again, we're not quite ready to give you a new number, but I would just tell you, it's going to be higher than what we've got there. As far as the Stingers, we should keep in mind, we have -- we are currently producing Stingers for an international customer, but we have a very limited stock of material for Stinger production.

 

We've been working with the DoD for the last couple of weeks. We're actively trying to resource some of the material. But unfortunately, DoD hasn't bought a Stinger in about 18 years. And some of the components are no longer commercially available, and so we're going to have to go out and redesign some of the electronics in the missile, of the seeker head.

That's going to take us a little bit of time. So again, we'll ramp up production, what we can this year, but I would expect, again, this is going to be a '23, '24 where we actually see orders come in for the larger replenishments, both on Stinger as well as on Javelin, which has also been very successful in theater."

"

 

 

Edited by Xerxes
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39 minutes ago, Xerxes said:

 

indeed, but the "missile" part really came in after 2020 (with Raytheon corp purchase).

 

I thought that was an eye opener statement from Q1 call.

 

"Greg Hayes -- Chairman and Chief Executive Officer

Yes. Let me start with that. As far as looking at the sales forecast for RMD, that does actually not contemplate any upside that we see from replenishment of stocks. And again, we're working through all that, trying to understand the timing.

Clearly, we won't see any of that benefit this year. But as we think about the next couple of years, as we see the budgets continue to increase and we see the replenishment orders come in, we would expect we will see a benefit to the RMD top line, which will take that number up somewhat. Again, we're not quite ready to give you a new number, but I would just tell you, it's going to be higher than what we've got there. As far as the Stingers, we should keep in mind, we have -- we are currently producing Stingers for an international customer, but we have a very limited stock of material for Stinger production.

 

We've been working with the DoD for the last couple of weeks. We're actively trying to resource some of the material. But unfortunately, DoD hasn't bought a Stinger in about 18 years. And some of the components are no longer commercially available, and so we're going to have to go out and redesign some of the electronics in the missile, of the seeker head.

That's going to take us a little bit of time. So again, we'll ramp up production, what we can this year, but I would expect, again, this is going to be a '23, '24 where we actually see orders come in for the larger replenishments, both on Stinger as well as on Javelin, which has also been very successful in theater."

"

 

 

 

Sure, and the company has become a bit more complex post merger. But long-term I don't see this going way. Humans love to blow each other up and modernity makes no difference (hence Russia/Ukraine). War on the Rocks had a solid podcast recently about how a lot of countries will be pursuing their own defense initiatives internally with a more urgent status. India is a good example as they get a lot of stuff from Russia. So this leads to sharing of some details, diversifying who you're buying from and potentially another arms race. 

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I own RTX, and hope to continue to own for many decades.

But it was always based on it being system-agonostic supplier of picks and shovels in aerospace & buildings (prior to Otis and Carrier spin-off).

Defense portion is just icing on the cake. Not comlexity in my opinion.

 

It was just interesting to note, how fast NATO inventories are being drawn down.

 

 

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@Xerxes $RTX is a fine business and will be around for a long time. However, it's a large cap with a lot of different business segments. The 10-K is 134 pages, which actually isn't too bad considering the size, but it's far from simple.

 

Maybe we should reframe the question and ask for the stock with the shortest 10-K. Even a simple business like $FIZZ's annual report has 52 pages.

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Posted (edited)

Thanks for the great ideas so far everyone.  This is for a teaching lesson, not necessarily investment ideas.  I love ALCO: "sells oranges and then maybe later sells the land" -- reading the 10-K now.

Edited by crs223
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... some say "it's easy... no need to clone Buffer and Munger... you can get better results doing your own research".  So far I don't believe it... but maybe I'm starting with "too hard".  I just want to see what "too easy" looks like first.

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14 minutes ago, crs223 said:

... some say "it's easy... no need to clone Buffer and Munger... you can get better results doing your own research".  So far I don't believe it... but maybe I'm starting with "too hard".  I just want to see what "too easy" looks like first.

Logan Clay is simple as are many OTC stock annual reports, often because they lack important disclosure ($QUCT etc.). LAACZ had good disclosure and I found it in fact easy to value once I looked at their very brief annual report.

 

I don't think it's easy to outperform with such a limited universe of investment opportunities, which brings us back to index investing.

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19 minutes ago, Spekulatius said:

I don't think it's easy to outperform with such a limited universe of investment opportunities, which brings us back to index investing.

 

1) Indexing

2) Clone Buffett/Munger

3) DIY

 

Wouldn't surprise me if (1) is best of the three.

 

Some on this site say that I will do better with (3) than I would with (2).  I don't know how anyone could say that -- without at least inquiring whether or not I am mentally handicapped.

 

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1 hour ago, D33pV4lue said:

Full Annual Report.pdf 1.24 MB · 16 downloads

 

Not an endorsement but this one is short. I have shorter ones but they are in a 4-10 page booklet so its not easy to scan. Is this for a teaching lesson or investment ideas? 

 

Very interesting. Where did you find that annual report? It's very hard to find information on these guys. Talk about trying hard to remain under the radar.

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Why not a bit of everything? It’s all highly personal. But what elevated my investing to another level is when I came to the conclusion that you should ALWAYS have something that is working. It is more about correlation than diversification. 

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5 minutes ago, Cevian said:

 

Very interesting. Where did you find that annual report? It's very hard to find information on these guys. Talk about trying hard to remain under the radar.

I got on the mailing list as an interested party some time ago. 

 

CRS - As spek pointed out OTC's are going to have short annuals because of the lack of disclosures I don't think short necessarily means easier. If you want practice with valuations/financials you should pick a few different companies go back and read old 10-ks come up with a valuation then see how your analysis played out. From there you can look for opportunities in the market.

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UAN is pretty easy to understand--it converts natural gas and petroleum coke into fertilizer. Follow corn, wheat, natural gas, and fertilizer prices, and you'll know where the business is going. It's pretty easy to build a simple model for how the company will perform based on the inputs, particularly since the vast majority of sales are executed six months or more before they appear on an income statement. And then you collect distributable cash.

 

The company-specific risks are also easy to understand: explosions, weather-related shutdowns, transportation problems, and unexpected downtime. The broader risks are a bit more complicated--basically anything that affects the price of corn, wheat, natural gas, or fertilizers.

 

Plus, the unit price doesn't tend to be forward looking, at least on the way up.  e.g. shares are at $155, but my model suggests that Q2 will result in distributable cash in the $18 range, and $50 for the next 12 months. But the market only seems to recognized what's happened a month or so after the results come out.

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Posted (edited)

I naively thought liberty media (in particular the Sirus XM "branch") would be mindlessly simple: it's a company that just owns stock in another company.  I thought I was going to see:

 

  1. Assets: Shares of SIRI
  2. Liabilities: Debt used to by SIRI
  3. Revenue: dividends from SIRI and proceeds from SIRI sales
  4. Expenses: cost to purchase SIRI shares

 

Then I would create a spreadsheet showing NAV.

 

Amusingly... I'm an hour into the 10K and I still don't know how many shares of SIRI are owned by Liberty Media.  Not even sure if the Liberty financials are "including" SIRI's financials.

Edited by crs223
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