Seeking Alpha
View as an RSS Feed

Bargain Bin  

View Bargain Bin's Comments BY TICKER:
Latest comments  |  Highest rated
  • Cisco Has Entered The Bargain Bin [View article]
    Last year there was so much pessimism about Cisco when it was around $16. I don't know if it'll ever get that low again, but given the irrational prices that pop up from time to time I wouldn't be surprised.

    @kcajc, I would be buying if I wasn't fully invested. If I sell any of my positions soon Cisco is on the top of my list.
    Aug 16, 2013. 08:56 PM | 1 Like Like |Link to Comment
  • Get Paid 16% To Buy Cisco At A Great Price [View article]
    Cisco's free cash flow is about 2.5 times higher today than it was 10 years ago. If I had estimated its fair value 10 years ago using the same analysis I would have concluded that it was dramatically overvalued and I wouldn't have touched the stock with a ten foot pole. This is a case where the company was playing catch-up with the stock, and for Cisco it took about a decade.
    Jun 26, 2012. 09:53 PM | Likes Like |Link to Comment
  • Get Paid 16% To Buy Cisco At A Great Price [View article]
    The goal of this strategy is to ultimately buy shares of Cisco as a long term holding at a price that you're comfortable with. One bad earnings report doesn't change what I think the company is worth, so if it does tank after earnings I certainly wouldn't sell my shares. I'd probably buy more, as my original thesis that the stock is undervalued is still intact.
    Jun 26, 2012. 09:45 PM | Likes Like |Link to Comment
  • McDonald's Is A Dividend Investor's Dream [View article]
    I don't have enough money to invest in every stock that I write about. McDonald's is certainly on my list of stocks I'd like to own, but it's not possible for me to buy shares in the immediate future.
    Jun 15, 2012. 06:46 PM | Likes Like |Link to Comment
  • Chevron Is A Great Dividend Stock [View article]
    I chose 9% because it's in line with the growth for the last few years. It may even be a little conservative. Typically any discount valuation method like this has an initial growth period and a long term slow-growth period. This is because trying to predict the dividend increase 10 years from now is full of uncertainty, so after 10 years I set the growth rate to roughly the growth rate of the GDP. The calculation is basically a conservative estimate of fair value, and even under these conservative assumptions Chevron offers a good value, so faster dividend growth would make it an even better deal.
    May 3, 2012. 08:43 PM | Likes Like |Link to Comment
  • Why PepsiCo Is Better Than Coke For Dividend Investors [View article]
    5 years ago Coke was clearly the better value than Pepsi. Pepsi stock is flat because it was probably overvalued in the past. Of course, what matters is now, not 5 years ago. Now, Pepsi appears to be a better value than Coke. If I had done this same analysis 5 years ago I would have come to the opposite conclusion.
    Apr 12, 2012. 05:20 PM | 4 Likes Like |Link to Comment
  • McDonald's The Stock Is Ahead Of McDonald's The Company [View article]
    The big difference is probably the discount rate used. Discount rate is the rate of return you require on your investment, and i'm guessing Morningstar uses the weighted-average-cost-... as their discount rate, which I don't agree with.
    Apr 9, 2012. 03:22 AM | Likes Like |Link to Comment
  • Dell Is A Steal At These Prices [View article]
    I think you're right about changes in working capital. Some people insist that it should be included, and others insist that it shouldn't be, but what you've said makes sense. I'll have to modify my valuation technique; thanks for the input. In the case of Dell it appears that this doesn't affect the end conclusion that Dell is undervalued.

    I also agree that there may be a better way to incorporate the stock-based compensation. I'll have to think about the best way to do this.
    Apr 9, 2012. 03:18 AM | Likes Like |Link to Comment
  • Buy Oracle At A Discount [View article]
    Capital expenditures and stock-based compensation are subtracted, and then interest*(1 - tax rate) is added back in, since interest is tax deductible. Oracle's tax rate was around 25%, so only 3/4 of the interest is added back in.
    Apr 8, 2012. 01:57 PM | Likes Like |Link to Comment
  • Discounted Cash Flow: What Discount Rate To Use? [View article]
    The problem is that there are two schools of thought in regards to discount rates. One is to adjust for risk by changing the discount rate, and the other is to use a discount rate equal to the required rate of return on the investment and adjust for risk with margin of safety. I subscribe to the second view, because ultimately the value of an investment depends on what return I require, not what return a company requires when it deploys capital. The idea that there is a "correct" discount rate is absurd.

    The risk of the cash flow not occurring is based on the firm, but this is accounted for with the margin of safety. The riskier the cash flows the larger margin of safety.

    You haven't pointed out any logical flaws in my reasoning in the article.
    Apr 7, 2012. 06:38 PM | Likes Like |Link to Comment
  • McDonald's The Stock Is Ahead Of McDonald's The Company [View article]
    PBI isn't growing and has a huge amount of debt. Owner earnings have been decreasing, so if i assume no growth going forward I put the value around $10 per share using the same method as in the article, so it's a far worse investment than McDonalds'.
    Apr 6, 2012. 11:48 AM | 1 Like Like |Link to Comment
  • McDonald's The Stock Is Ahead Of McDonald's The Company [View article]
    I don't see capital expenditures as a "bad thing". The definition of owner earnings is the amount of cash that can be pulled out of a business after expenditures needed to maintain the business and long-term growth. It doesn't make sense to not deduct capital expenditures from operating cash flow because that money needs to be spent.

    I am not making the claim that management is not investing their cash flow efficiently. I made a point in the article saying that they are. All I'm saying is the the current market price is high relative to how much I think the company is worth based on how much cash they generate.


    Apr 5, 2012. 10:06 PM | 1 Like Like |Link to Comment
  • McDonald's The Stock Is Ahead Of McDonald's The Company [View article]
    They bought back $300 million dollars worth, not 300 million shares. I used the most recently reported value for outstanding shares. Future share buybacks come out of the future cash flow, so that doesn't change the analysis.
    Apr 5, 2012. 08:34 PM | Likes Like |Link to Comment
  • McDonald's The Stock Is Ahead Of McDonald's The Company [View article]
    I haven't, but I may in the future.
    Apr 5, 2012. 08:30 PM | Likes Like |Link to Comment
  • McDonald's The Stock Is Ahead Of McDonald's The Company [View article]
    Ultimately what matters is how much cash a company generates. Earnings is an accounting number and can be easily manipulated while cash flow is much more indicative of profitability.

    All I've done is calculate the future value of cash flows discounted back to today. The growth rates I used are clearly stated. I don't see what's confusing about it.
    Apr 5, 2012. 08:29 PM | 1 Like Like |Link to Comment
COMMENTS STATS
33 Comments
14 Likes