kirkomi Posted October 22, 2015 Share Posted October 22, 2015 AXP also So, I have looked at and rejected AXP before (maybe because I was stupid) but I ran the calculations again to day and it seems incredibly cheap. I will be happy if you guys can point out if I am being stupid again. This data is from morningstar. Metric 2005 2014 FCF $7.4B $9.7B Revenue $23B $34B Shares 1.25B 1B The company has grown at around 4% compounded (both FCF as well as Revenues are up 50% in 10 years). They have additionally returned some value via share-buybacks. Buying 20% of the company in 10 years. And they are paying a dividend (after tax) of around 1%. So, a back of the envelope kind of calculation means the company is expected to return the following to the shareholders 4% (growth) + 1% (dividend) + 2% (buybacks) = 7% Let us now look at what we are paying for it. Market Cap : + $72B 2014 Annual report figures: Cash: - $22B Customer Loans : - $69B Customer Deposits: + $44B Account receivable: - $44B Debt : + $58B = $39B That can't be right ... Is there a mistake somewhere ? Edit : So, I see my mistake a bit. The company is kind of taking money from the market as debt and giving it as loan to the loan-card holders. Given that this is the business model I can't really add and subtract like this. But then I need to think on how to value this. The company is paying 2.34% on its debt (2014 figure) and receiving ~ 8.3% in interest on the loans it has given to the customers. So, it is earning around 5% for the service (approximately $3.5B a year with $69B loan). If this stream does not grow *at all* and at 15% discount rate this part of the business is worth approximately 3.5 * 1/(1.15-1) = $23B. Looking at the income statement, the non-interest revenue - all expenses = $5B. Again, at 15% discount rate, this stub is worth = $33B And now, with $22B cash on balance sheet, I should be willing to pay ($23 + $33 + $22) B = $78B. Phew ... this seems closer to the market value. Link to comment Share on other sites More sharing options...
kab60 Posted October 22, 2015 Share Posted October 22, 2015 I think I would just look at it on a rough FCF yield and then add expected growth/decline (4%?). And make sure you don't double count FCF by adding in FCF/share growth due to buybacks. We should probably move the discussion to the investment board but you might also want to have an opinion on the credit cycle. Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted October 27, 2015 Share Posted October 27, 2015 Sold VALE 11/20/15 PUTS @ 4 for $0.25 Doubled my SPY short today. Also sold FCAU 11/20/15 PUTS @12 for $0.60. Sold BBRY 11/20/15 PUTS @ $7 for $0.67. sold WFM 11/20/15 CALLS @ 35 for $0.45 Sold ACI 11/20/15 PUTS @ 2 for $0.30 Last set of puts worked out pretty well. Sold 10/16 puts @ 4 for $1.00 when it was at $6+. Incredible that the stock can fall 50% and you still make 25% in a month by selling puts. Bankruptcy is a real risk here but selling puts is more attractive to outright equity exposure which is what my passive P/B strategy would have me doing. I think the puts are a better option for exposure at this point until the bankruptcy/debt swap issues are worked out and then I'll probably roll the exposure into equity. Sold more FCAU options. 12/18/2015 PUTS @ 15 for $0.85. Also sold CHK 12/18/2015 PUTS @ 5 for $0.21 Link to comment Share on other sites More sharing options...
Lance Posted October 28, 2015 Share Posted October 28, 2015 IBM Thanks, Lance Link to comment Share on other sites More sharing options...
feynmanresearch Posted October 28, 2015 Share Posted October 28, 2015 GILD, BIIB,SAFM Link to comment Share on other sites More sharing options...
John Hjorth Posted November 4, 2015 Share Posted November 4, 2015 Added more BRK.B & SAN. Started small positions in LUND B.ST [L E Lundberg Företagen AB ser. B, Sweden] PROTCT.OS [Protector Forsikring ASA, Norway][There is a topic about this company in the Investment Ideas forum] SCHO.CPH [schouw & Co. A/S, Denmark]. Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted November 5, 2015 Share Posted November 5, 2015 Sold VALE 11/20/15 PUTS @ 4 for $0.25 Doubled my SPY short today. Also sold FCAU 11/20/15 PUTS @12 for $0.60. Sold BBRY 11/20/15 PUTS @ $7 for $0.67. sold WFM 11/20/15 CALLS @ 35 for $0.45 Sold ACI 11/20/15 PUTS @ 2 for $0.30 Last set of puts worked out pretty well. Sold 10/16 puts @ 4 for $1.00 when it was at $6+. Incredible that the stock can fall 50% and you still make 25% in a month by selling puts. Bankruptcy is a real risk here but selling puts is more attractive to outright equity exposure which is what my passive P/B strategy would have me doing. I think the puts are a better option for exposure at this point until the bankruptcy/debt swap issues are worked out and then I'll probably roll the exposure into equity. Sold more FCAU options. 12/18/2015 PUTS @ 15 for $0.85. Also sold CHK 12/18/2015 PUTS @ 5 for $0.21 Sold about 40% of my Posco position today after selling about 10% a week ago. I generally think I've been wrong here. China may have slowed production, but the drop in domestic demand more than compensated for that drop leaving the market still flooded with steel. Also, my sizing of the position was too large not to be reducing into some strength given how wrong I've been even if the price remains cheap :/ The proceeds pay down some margin and about half of it went into increasing my allocation to WFM by 25%. Considered options given the technical pressure I'm expecting from repurchasing 10-12% of your shares in a 6 month period but I don't have the conviction to play the short term options market and LEAPs don't give me any margin credit. WFM is now a 5% cost-basis position. Link to comment Share on other sites More sharing options...
Lance Posted November 5, 2015 Share Posted November 5, 2015 THW Thanks, Lance Link to comment Share on other sites More sharing options...
Ross812 Posted November 5, 2015 Share Posted November 5, 2015 I've been busy the last few weeks: Sold 25% of Bidvest - Still my 2/3 largest holding but I don't think a US rate hike is going to help the ZAR:US rate. Sold $16 and $17 Nov covered calls on Fiat before the RACE spin off. I bought back the $16's for a nickle. Sold $17.5 Dec covered calls for ~1.3 on all but 100 shares of CHEF after the 20% jump yesterday. CHKDG is now my largest holding - I am thinking about paring this back a little and buying the 2020 bonds yielding 10.5% and more KMI Bought a little BAM Top 5 holdings are CHKDG, LKQ, BDVSY, AXP, BRK/B put spreads. Link to comment Share on other sites More sharing options...
PatientCheetah Posted November 5, 2015 Share Posted November 5, 2015 KMI Link to comment Share on other sites More sharing options...
bargainhunter Posted November 6, 2015 Share Posted November 6, 2015 Added more WIN. Link to comment Share on other sites More sharing options...
simplefocus Posted November 6, 2015 Share Posted November 6, 2015 BXE Link to comment Share on other sites More sharing options...
blainehodder Posted November 6, 2015 Share Posted November 6, 2015 Brk.b Link to comment Share on other sites More sharing options...
Guest Schwab711 Posted November 6, 2015 Share Posted November 6, 2015 Brk.b Certainly does look cheap. Sold MON a few weeks ago and added to FICO today. Link to comment Share on other sites More sharing options...
gjangal Posted November 7, 2015 Share Posted November 7, 2015 Brk.b Certainly does look cheap. Sold MON a few weeks ago and added to FICO today. Schwab, since you know fico well, why aren't they exhibiting any operating leverage yet(sga seems to be a problem ) . if you look at EFX which uses Fico algorithms for its services , they seem to exhibit operating leverage. Just wanted to know your thoughts on this. Link to comment Share on other sites More sharing options...
Guest Schwab711 Posted November 8, 2015 Share Posted November 8, 2015 Brk.b Certainly does look cheap. Sold MON a few weeks ago and added to FICO today. Schwab, since you know fico well, why aren't they exhibiting any operating leverage yet(sga seems to be a problem ) . if you look at EFX which uses Fico algorithms for its services , they seem to exhibit operating leverage. Just wanted to know your thoughts on this. Operating leverage is never going to be as large as you'd think (if you picture FICO as just credit scores). Apps/Tools use basically the same developers/architecture (from what I understand). So application revenue is flat because customers are switching to cloud solutions (Tools). It's best to look at Apps/Tools and Scores separately. Also, 2015 was a major investment year. They spent $18m on severance to remove 100 jobs and hire 60 sales folks to replace them. We are looking at Affinity contracts being signed sometime in 2016 (with rev beginning in 2017) and pronounced shift to royalty-like revenue for scores and software. R&D was +20%. If you wanted to adj R&D down and remove the restructuring then you can see the signs of future operating leverage. In 2016 (and more surely, 2017), SG&A will be more proportional to sales, R&D should be down, "sticky" revenue should make a greater %, and revenue growth should start to approach high single-digits or low double-digits. FICO still has the potential to sign the other two credit bureaus to the same plan as Experian. As more companies transition to AWS/cloud, FICO's cloud (Tools) solutions should become game-changers as there really isn't a comp out there. Read about FICO's role in creating the NFL schedule to understand the benefits they provide. I hope this helps. It's worth reading the recent conference call. They will be able to describe their business better than I ever could. I can't find a source now, but a few years ago FICO claimed the highest percentage of PhD mathematicians/employee ratio of all public companies. At times, it's noticeable (such as long periods of R&D and conservative guidance). I believe FICO has repurchased 70% of their shares outstanding since IPO and they are the perfect company to continue eating themselves. http://seekingalpha.com/article/3654756-fair-isaac-fico-william-j-lansing-on-q4-2015-results-earnings-call-transcript Link to comment Share on other sites More sharing options...
Lance Posted November 9, 2015 Share Posted November 9, 2015 IBM Thanks, Lance Link to comment Share on other sites More sharing options...
frommi Posted November 10, 2015 Share Posted November 10, 2015 Made LVNTA+EXPE short my biggest position today. Link to comment Share on other sites More sharing options...
rpadebet Posted November 10, 2015 Share Posted November 10, 2015 BRK.B and AMNF Link to comment Share on other sites More sharing options...
Guest Grey512 Posted November 11, 2015 Share Posted November 11, 2015 Macy's (M) Link to comment Share on other sites More sharing options...
rkbabang Posted November 11, 2015 Share Posted November 11, 2015 WFM @ $29.17 this morning. Link to comment Share on other sites More sharing options...
Lance Posted November 12, 2015 Share Posted November 12, 2015 KMI Thanks, Lance Link to comment Share on other sites More sharing options...
Otsog Posted November 12, 2015 Share Posted November 12, 2015 KMI and KMI.WS Link to comment Share on other sites More sharing options...
intothebreach Posted November 12, 2015 Share Posted November 12, 2015 Thanks guys! KMI was not on my radar as I had not looked at the pipeline operators in a long while. Nice to see Capital Group companies as fellow owners too (at least back in June quarter). Link to comment Share on other sites More sharing options...
feynmanresearch Posted November 12, 2015 Share Posted November 12, 2015 KMI Thanks, Lance What are your thoughts on KMI? Link to comment Share on other sites More sharing options...
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