Author Topic: Individual value stocks  (Read 4128 times)

vand

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Re: Individual value stocks
« Reply #50 on: September 24, 2019, 04:28:18 PM »
...REITs...cash, forex, as well as specialist investments (just as an example, I have been pondering investing in bonded whiskey casks).  As ever though, you should only ever invest in what you have a good understanding of (although that said I would argue few people have a very good grasp of even stocks & bonds).
REIT/Cash/Bonds/some FX etc are all good candidates for the "fixed" or "semi fixed" portion of your portfolio.
If you have a hobby and deep knowledge on some niche area (e.g. whiskey casks) that you can monetize, that can be great as well.

I'm indeed working on building up to a 20% cash cushion right now (only at 5% right now), so that I can buy up in the next recession.
I need to think of some bonds/FX at some point of time - definitely before retiring.
REIT - well - I'll have to think about it. Not sure exactly what purpose they serve. But I can't think of anything intrinsically negative about them either!!

Consider gaining exposure to real-estate/..., commodities, precious metals, ....
1. Commodities and precious metals have zero intrinsic value.
2. RE has intrinsic value (NPV of rent) - but the prices are wildly off-kilter from the intrinsic value almost anywhere you want to buy. + appreciation of intrinsic value is abysmal in RE, no "real return" in intrinsic value whatsoever as rent just keeps up with inflation.

#1 has price discovery solely by second order effects like demand supply mismatch with complex underlying drivers. Second order functions, by their very intrinsic mathematical nature, are much more volatile and difficult to predict. If there were ever any true Markov Chain random walk - commodity/gold prices are it!!

I fail to see how that benefits the "risk adjusted return" of my portfolio in any form or fashion. I stay off them for the same reason I don't go and play the slot machine as an "investment" - I have zero ability to predict their movement or trend, and have not found anyone with a consistent ability to do so!!

#2 just increases with inflation. No real return there. You make money on leverage. Given the counter-productively socialist housing policies in the US in the form of government subsidized leverage (couldn't we ever figure out the right areas in the economy to be socialist about!!! housing "Loans"!! Student "Loans"!! WTF!!) - it is usually profitable if you can put in the work.
Too much work, though! I have my hands full with work on the one house I live in!!

you're totally wrong on just about all of the above. It could be argued that real assets are the only assets that DO have intrinsic value. A house or a lump of copper is a real tangible asset. It will always have some value. A company can go bust. It's shares or its debt can end up worthless.  Instead of thinking that the world ends at JL Collins' view on investment, why don't you expand your learning on other assets classes.

Diversification: If its good enough for the Rothschilds its probably more than good enough for Joe McFire:
https://www.telegraph.co.uk/finance/investor/investing-news/11971879/How-to-invest-like-the-Rothschild-dynasty.html
« Last Edit: September 24, 2019, 04:38:44 PM by vand »

ctuser1

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Re: Individual value stocks
« Reply #51 on: September 24, 2019, 06:13:56 PM »
you're totally wrong on just about all of the above.
Very possible. I am often wrong.

It could be argued that real assets are the only assets that DO have intrinsic value. A house or a lump of copper is a real tangible asset.
You can argue anything you want, of course!

I wasn't arguing - but stating an economic tautology when I said "Commodities and precious metals have zero intrinsic value"
Reference: https://en.wikipedia.org/wiki/Intrinsic_value_(finance)
Important points:
Quote
....intrinsic value refers to the value...determined...without reference to its market value. ... It is ordinarily calculated by summing the discounted future income generated by the asset to obtain the present value...

Gold and commodities have no cash flow, neither can you do any reasonable fundamental analysis on it independent of the market value -> no intrinsic value.
Technical Aside: An option on a Gold Contract with a defined end date, on the other hand, has intrinsic value as calculated by Black Scholes or other variants. There is much philosophical dispute in Economics on this - but that is besides the scope of this discussion.

When someone tells you commodities have intrinsic value - they are not engaging in the discipline of economics, as started by Adam Smith. https://en.wikipedia.org/wiki/Intrinsic_theory_of_value is a fundamental piller of "The Wealth of Nations".

If you are making a "not economics" argument (e.g. https://en.wikipedia.org/wiki/Intrinsic_value_(numismatics)), and state "according to vand definition of intrinsic value which is defined *thus*, It could be argued that real assets are the only assets that DO have intrinsic value" - then we have no dispute!!
 
A house or a lump of copper is a real tangible asset. It will always have some value. A company can go bust. It's shares or its debt can end up worthless. 

Concepts like "real tangible asset", "always have some value", "go bust", "end up worthless" are irrelevant to the economic concept of intrinsic value.

AAPL put option @strike $100 has more intrinsic value 1KG of gold - despite the fact that the first will likely end up worthless, and the lump of gold would not. Refer to the "without reference to its market value" part in the wikipedia definition I linked.


If its good enough for the Rothschilds its probably more than good enough for Joe McFire:
https://www.telegraph.co.uk/finance/investor/investing-news/11971879/How-to-invest-like-the-Rothschild-dynasty.html
Interesting link. I need to read through it. Seems like they did a combination of speculative and fundamental investing.

I wonder, however, how much their fortune have been if they had invested in the equivalent of the "total market" (which was totally doable with their wealth level) since 1800's. The comparison is often unflattering!!



chasesfish

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Re: Individual value stocks
« Reply #52 on: September 25, 2019, 04:02:13 AM »
I'm going to toss out my two favorite value stocks...especially if they'll get 5% cheaper.  CCL & WRK.  Own some, will buy more if they go lower

vand

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Re: Individual value stocks
« Reply #53 on: September 25, 2019, 09:01:48 AM »
Interesting link. I need to read through it. Seems like they did a combination of speculative and fundamental investing.

I wonder, however, how much their fortune have been if they had invested in the equivalent of the "total market" (which was totally doable with their wealth level) since 1800's. The comparison is often unflattering!!

I did a bit of digging on them myself.. RIT Capital is the investment fund the Rothschilds are associated with.

Not a bad track record


It looks like they have been more defensively positioned in the more recent years. They "only" lost about 38% in the GFC and then rather impressively bounced back to new highs within 2 years.

Since then it has been very steady, not matching the total return of the TSM but also much less volatile (I wonder if they changed the mandate of the fund?).. 25 year performance looks somewhere around 12.5-13% if my maths is correct. All in all I would say not a bad place to have your money.
« Last Edit: September 25, 2019, 09:06:59 AM by vand »

Buffaloski Boris

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Re: Individual value stocks
« Reply #54 on: September 25, 2019, 09:58:58 AM »
I'm going to toss out my two favorite value stocks...especially if they'll get 5% cheaper.  CCL & WRK.  Own some, will buy more if they go lower

WRK looks interesting (Iím into industrials). Whatís your thought process on that one? Or to paraphrase the Oracle of Omaha: whatís the moat?

Buffaloski Boris

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Re: Individual value stocks
« Reply #55 on: September 25, 2019, 10:30:18 AM »
Iíll toss one out there*

CLF

This is a mining stock. About as low of a PE ratio as youíll find. Iron ore producer. Itís moat is high quality ore, and soon to be the only producer of Hot Briquet Iron in the Great Lakes area when their new plant comes on line next year. This is a stock that will probably horrify the hipster set, but they should probably like it as HBI is orders of magnitude cleaner to use in making steel.

As a bonus, the company has one of the most colorful CEOs out there. Earnings calls are downright entertaining. The stock puts the ďVĒ in volatility.  The market canít seem to decide whether it hates this stock or it really hates it.

(* not investment advice. Youíd have to be a certifiable lunatic to follow my lead!)

chasesfish

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Re: Individual value stocks
« Reply #56 on: September 25, 2019, 03:35:31 PM »
I'm going to toss out my two favorite value stocks...especially if they'll get 5% cheaper.  CCL & WRK.  Own some, will buy more if they go lower

WRK looks interesting (Iím into industrials). Whatís your thought process on that one? Or to paraphrase the Oracle of Omaha: whatís the moat?

That industry (paper and paperboard) requires billions of dollars in equipment and plenty of environmental hurdles.  There are not new competitors and we're likely going to be using cardboard and packaging made of paper in the future.   International Paper, Westrock, and Georgia Pacific.   

Westrock has the steepest discount because it was the combination that came out of MeadWestVaco and RockTenn, then they went on a spree of buying up smaller competitors.  Higher debt and execution risk then wham, trade war

Nobody has leverage on these companies because its a three company oligopoly with another large public company and a massive private company (Georgia Pacific) owned by Koch Industries. 

My opinion is oversold due to the trade war, but it can't seem to break out of a range of $32 to $38.  I'll happily collect my dividend and let the company pay down debt.  They've beaten earnings estimates for the last five quarters yet every analyst hates them because of execution risk. 

There's three companies in this business with massive moats - There's only two I can buy and like WRK better than IP

Radagast

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Re: Individual value stocks
« Reply #57 on: September 25, 2019, 08:37:24 PM »
When someone tells you commodities have intrinsic value - they are not engaging in the discipline of economics, as started by Adam Smith. https://en.wikipedia.org/wiki/Intrinsic_theory_of_value is a fundamental piller of "The Wealth of Nations".

If you are making a "not economics" argument (e.g. https://en.wikipedia.org/wiki/Intrinsic_value_(numismatics)), and state "according to vand definition of intrinsic value which is defined *thus*, It could be argued that real assets are the only assets that DO have intrinsic value" - then we have no dispute!!
Sorry to continue to stray off topic...
My 20 dollar bill does not generate cash flow, does that mean it has no intrinsic value? (you can say a $20 has no intrinsic value because it generates no cash flow, as long as you are consistent in applying your standard).
The link you posted says that intrinsic value can be approximated by the cost to produce an item. Going by that, gold absolutely has an intrinsic value, and I don't know what it is, but I guess it is 1/2 to 1/6 of it's current price if there were no speculators, or 1X-3X the consumer price index. Of course since it is mostly speculative I have no guess at all what it will actually be...

Back on topic:
About a year ago I bought a few shares of Olympic Steel to use up my Robinhood freebie. For one thing its ticker is ZEUS. For another all the numbers P/E, P/B etc. were amazing for it, but then it dropped by about 50% over the next year (I got bored and broke even after about a month and bought BRK.B to try and get an insurance discount).
https://www.google.com/search?rlz=1C1GIGM_enUS527US527&ei=gB6MXc-QFMqMsQX-y7OYBA&q=olympic+steel+ticker&oq=olympic+steel+t&gs_l=psy-ab.1.0.0l3j0i22i30l7.16429.17490..19917...1.2..0.116.346.0j3......0....1..gws-wiz.......0i71j0i10.2BOoajPtM0A

Four years ago in a similar thread I  said
Barrick Gold has a price-to-book ratio of 0.78 and a lot of great assets. The price amazingly was $5.94 a few weeks ago, which was like a 30 year low (of course now well over $7, for a 23% gain).
Tripled in the next nine months.
https://www.google.com/search?rlz=1C1GIGM_enUS527US527&ei=lR6MXcyYDYKctgXW95SoDw&q=abx&oq=abx&gs_l=psy-ab.3..0i67l6j0j0i131j0l2.589807.590531..590922...0.4..0.135.369.0j3....2..0....1..gws-wiz.......0i71j0i273.rsQd6IpqDws&ved=0ahUKEwiMt6HttO3kAhUCjq0KHdY7BfUQ4dUDCAs&uact=5

For one of those I knew what I was talking about, and for the other I had no clue and was just looking at easily searchable price/X ratios ;).

No ideas at present...

vand

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Re: Individual value stocks
« Reply #58 on: September 26, 2019, 02:01:49 AM »
The Philip Morris/Altria merger is off, which hit tobacco stocks hard today...

So I pulled the trigger on scooping a few BATS shares.

There's definitely value in this sector:
https://seekingalpha.com/article/4290922-british-american-vs-imperial-brands-one-far-superior-ultra-high-yield-stock

I don't expect the stellar sort of returns that the industry saw between 2002-2017 but they are incredibly resilient businesses and the dividends are covered well enough.
« Last Edit: September 26, 2019, 03:05:31 AM by vand »

vand

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« Last Edit: September 26, 2019, 03:14:43 AM by vand »

Buffaloski Boris

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Re: Individual value stocks
« Reply #60 on: September 26, 2019, 05:49:48 AM »
The Philip Morris/Altria merger is off, which hit tobacco stocks hard today...

So I pulled the trigger on scooping a few BATS shares.

There's definitely value in this sector:
https://seekingalpha.com/article/4290922-british-american-vs-imperial-brands-one-far-superior-ultra-high-yield-stock

I don't expect the stellar sort of returns that the industry saw between 2002-2017 but they are incredibly resilient businesses and the dividends are covered well enough.

Like minds. I was just looking at British American last night!

Buffaloski Boris

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Re: Individual value stocks
« Reply #61 on: September 26, 2019, 07:14:26 AM »
The case for UK defensives:

https://www.trustnet.com/news/7458718/fidelity-internationals-alex-wright-why-im-finding-value-in-uk-defensive-stocks

The UK is one of the few markets I have exposure to right now. Relatively speaking, equities are at low prices and whats not to like about the exchange rate? For an American that is 😁.

Unfortunately UK defensive (value) mutual funds are not greatly accessible here.

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Re: Individual value stocks
« Reply #62 on: September 26, 2019, 11:16:29 AM »
There is always a large number of stock picking threads here when the market goes sideways. I do not think that is a good plus for stock picking. It comes across as acting fearful.

Precious metals might not be as precious in the future with the advances in science, chemistry and space travel/mining. They may end up with less  value. Houses are also very susceptible to government oversight and changing laws, taxes,climate and interest.

Buffaloski Boris

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Re: Individual value stocks
« Reply #63 on: September 26, 2019, 06:25:15 PM »
There is always a large number of stock picking threads here when the market goes sideways. I do not think that is a good plus for stock picking. It comes across as acting fearful.

Precious metals might not be as precious in the future with the advances in science, chemistry and space travel/mining. They may end up with less  value. Houses are also very susceptible to government oversight and changing laws, taxes,climate and interest.

So weíre going to have more stock picking threads? Thatís great news! Maybe weíll get some cool stocks to check out. The power of crowdsourcing at work.

As for folks motivation for stock picking that really isnít my business. I hope that theyíre smart enough to not make oversized buys in one or two or three stocks, and diversify across asset categories. To quote Ray Dallio: "diversifying well is the most important thing you need to do in order to invest well."

So do you have any stock picks youíd like to share?  What do you think about Altria? Theyíve been in the news a lot. Great earnings profile, but seems to be a declining industry. As youíll note upthread, Iíve been thinking about British American Tobacco. PE ratio is lower that MO or PM, which makes it very interesting to me.

ctuser1

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Re: Individual value stocks
« Reply #64 on: September 26, 2019, 06:41:37 PM »
My 20 dollar bill does not generate cash flow, does that mean it has no intrinsic value? (you can say a $20 has no intrinsic value because it generates no cash flow, as long as you are consistent in applying your standard).

Cash is a somewhat special case. It is the unit of measure for intrinsic value. So $20 has an intrinsic value of $20.
Cash *does* produce cashflow - the "risk free return". That's not relevant for IV calculations, however, because they will NPV down to the current cash value by definition (because you will discount by risk free rate as well).
You may choose to put your cash under a mattress and not earn any return (not even the risk free rate). But the fact that you have the option to earn the risk free return is all that matters!!

The link you posted says that intrinsic value can be approximated by the cost to produce an item
Now we are getting into more complicated topics of economics. I typically don't venture into there because I am not a professional economist. But i'll take a stab anyway.

That "cost to produce" thing is a lot more nuanced and contextual than how you mention it.
Adam Smith (and later Marx) *did* use the labor cost as a stand in for the "intrinsic value" back in the 18th century when labor cost was the largest input and was considered "intrinsic". Today, labor cost is < 10% in most of manufacturing and industrial sector (it's much higher in service sector). So nobody argues *that* (i.e. your "cost to produce" in context) is any part of the intrinsic value any more.

Using "Cost to produce" to approximate intrinsic value would be problematic. Cost to produce Gold in China would (hypothetically) be lower than the cost to produce in US - due to labor and environment regulations. They are as "extrinsic" to the fundamental property of Gold as it can be. Using that to calculate "intrinsic value" would as far from "intrinsic theory of value" as it ever can be.

vand

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Re: Individual value stocks
« Reply #65 on: September 27, 2019, 03:18:47 AM »
There is always a large number of stock picking threads here when the market goes sideways. I do not think that is a good plus for stock picking. It comes across as acting fearful.

Precious metals might not be as precious in the future with the advances in science, chemistry and space travel/mining. They may end up with less  value. Houses are also very susceptible to government oversight and changing laws, taxes,climate and interest.

So weíre going to have more stock picking threads? Thatís great news! Maybe weíll get some cool stocks to check out. The power of crowdsourcing at work.

As for folks motivation for stock picking that really isnít my business. I hope that theyíre smart enough to not make oversized buys in one or two or three stocks, and diversify across asset categories. To quote Ray Dallio: "diversifying well is the most important thing you need to do in order to invest well."

So do you have any stock picks youíd like to share?  What do you think about Altria? Theyíve been in the news a lot. Great earnings profile, but seems to be a declining industry. As youíll note upthread, Iíve been thinking about British American Tobacco. PE ratio is lower that MO or PM, which makes it very interesting to me.

On top of the merger stuff, IMB.L released a downbeat forecast yesterday which has wiped a further 15% off their price since. They have really massively underperformed in an underperforming sector.. They have a track record of increasing dividends but this policy is now under review and at the current yield of 10.4% obviously the market thinks a cut is very likely.

I perfer BATS at the moment but will probably buy some IMB too at some point.

A decade-long bull market affords people the luxury of targeting tobacco and oil for public ire, but when the next crisis hits and half the zombie companies in the index are under existential threat, the boot will be on the other foot and people will clamber for what is safe, steady.. and profitable.

« Last Edit: September 27, 2019, 03:44:10 AM by vand »

Buffaloski Boris

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Re: Individual value stocks
« Reply #66 on: September 27, 2019, 09:48:44 AM »
On top of the merger stuff, IMB.L released a downbeat forecast yesterday which has wiped a further 15% off their price since. They have really massively underperformed in an underperforming sector.. They have a track record of increasing dividends but this policy is now under review and at the current yield of 10.4% obviously the market thinks a cut is very likely.

I perfer BATS at the moment but will probably buy some IMB too at some point.

A decade-long bull market affords people the luxury of targeting tobacco and oil for public ire, but when the next crisis hits and half the zombie companies in the index are under existential threat, the boot will be on the other foot and people will clamber for what is safe, steady.. and profitable.

Any good UK based websites that talk about defensive stocks or for research that youíd recommend?

 BATS is traded on NYSE so thatís easy to look at.  I donít think IMB is. So far to me it looks like the better choice is BATS anyway.  But of course it all depends on the relative price.

Iím going to stop worrying and learn to love the cap weighted index funds. If folks want to toss their money into them at the tail end of a bull market, then Iím happy for them. In this market and really the bigger society, virtue signaling is more important than profitability. I expect that to change as well.

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Re: Individual value stocks
« Reply #67 on: September 27, 2019, 11:56:08 AM »
There is always a large number of stock picking threads here when the market goes sideways. I do not think that is a good plus for stock picking. It comes across as acting fearful.

Precious metals might not be as precious in the future with the advances in science, chemistry and space travel/mining. They may end up with less  value. Houses are also very susceptible to government oversight and changing laws, taxes,climate and interest.

So weíre going to have more stock picking threads? Thatís great news! Maybe weíll get some cool stocks to check out. The power of crowdsourcing at work.

As for folks motivation for stock picking that really isnít my business. I hope that theyíre smart enough to not make oversized buys in one or two or three stocks, and diversify across asset categories. To quote Ray Dallio: "diversifying well is the most important thing you need to do in order to invest well."

So do you have any stock picks youíd like to share?  What do you think about Altria? Theyíve been in the news a lot. Great earnings profile, but seems to be a declining industry. As youíll note upthread, Iíve been thinking about British American Tobacco. PE ratio is lower that MO or PM, which makes it very interesting to me.

Altria would not be a bet id be welling to take. Cigarette sales have trended down for a long time and the only reason they are profiting at all is from vaping which is also coming under fire.  far to risky and who knows where that is going. Most of the sales they are reporting are off coupon or discount so.... it should be downhill from here with lower margins. Ethically too it is not something i would invest in directly but to each his own

vand

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Re: Individual value stocks
« Reply #68 on: September 27, 2019, 01:01:42 PM »
On top of the merger stuff, IMB.L released a downbeat forecast yesterday which has wiped a further 15% off their price since. They have really massively underperformed in an underperforming sector.. They have a track record of increasing dividends but this policy is now under review and at the current yield of 10.4% obviously the market thinks a cut is very likely.

I perfer BATS at the moment but will probably buy some IMB too at some point.

A decade-long bull market affords people the luxury of targeting tobacco and oil for public ire, but when the next crisis hits and half the zombie companies in the index are under existential threat, the boot will be on the other foot and people will clamber for what is safe, steady.. and profitable.

Any good UK based websites that talk about defensive stocks or for research that youíd recommend?

 BATS is traded on NYSE so thatís easy to look at.  I donít think IMB is. So far to me it looks like the better choice is BATS anyway.  But of course it all depends on the relative price.

Iím going to stop worrying and learn to love the cap weighted index funds. If folks want to toss their money into them at the tail end of a bull market, then Iím happy for them. In this market and really the bigger society, virtue signaling is more important than profitability. I expect that to change as well.

Moneyweek is a terrific UK publication, probably the one I would recommend above others. They have their finger on the pulse for most of the important investing themes. Look at that they say today on oil, for example:

https://moneyweek.com/515816/this-could-be-a-huge-contrarian-buy-signal-for-oil-stocks/


You hit the nail on the head about the financial virtue signalling.  As a contrarian this makes me more than happy to invest in oil and baccy right now.

Also Monevator.com is a great UK personal finance blog
« Last Edit: September 27, 2019, 01:05:17 PM by vand »

Buffaloski Boris

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Re: Individual value stocks
« Reply #69 on: September 27, 2019, 04:33:35 PM »

Moneyweek is a terrific UK publication, probably the one I would recommend above others. They have their finger on the pulse for most of the important investing themes. Look at that they say today on oil, for example:

https://moneyweek.com/515816/this-could-be-a-huge-contrarian-buy-signal-for-oil-stocks/


You hit the nail on the head about the financial virtue signalling.  As a contrarian this makes me more than happy to invest in oil and baccy right now.

Also Monevator.com is a great UK personal finance blog

Thanks for the links! Iíve been binge reading moneyweek and indeed, I like the way they think. I especially enjoyed the articles on negative interest rates which isnít really an issue in the US. Yet.

Iím of the view that UK equities are a relative bargain as compared to US. And being able to get them with expensive dollars is just more reason to look at them.

Monevator is going to be more of an acquired taste. Iíll have to read it some more.  It may be that Iím just souring on the FIRE movement in general. The FIRE groupthink, at least in the US, is getting tedious.