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Brendan O'Boyle

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  • Why Aflac Is So Cheap [View article]
    This is a good point. I am unsatisfied with AFL's buyback.

    There are many cheap insurance companies and most are more shareholder friendly: AWH, CB, RE, TRV.
    Aug 27 12:29 AM | Likes Like |Link to Comment
  • Why "S&P 2000″ Is A Fed Manufactured Mirage: The "Buy The Dips" Chart That Says It All [View article]
    I'm crying a river for all the stocks I own that have been manipulated higher with no revenue growth.

    TRV - 10 Yr Total Return = 251% - Revenue Growth = 31%

    IBM - 10 Yr Total Return = 165% - Revenue Growth = 4%

    CB - 10 Yr Total Return = 236% - Revenue Growth = 9%

    GSK - 10 Yr Total Return = 89% - Revenue Growth = 7%

    MO - 25 Yr Total Return = 5220% - Revenue Growth = -60% (they did spin off PM so it's probably more like -30%).

    Yeah clearly it's impossible to get good returns in the stock market without revenue growth...
    Aug 26 12:30 AM | 4 Likes Like |Link to Comment
  • Deere & Co.: Plowing Its Way To Lower Prices [View article]
    Why don't people understand that the market is a discounter?

    If earnings are expected to decline 18% YoY that means terrific upside for shareholders if they were to only decline be 5%.

    If you want to gauge the price of DE over the next year or two you need to make a compelling case as to why the company will beat or miss forecasts over that time period.

    If you are talking about the longer term it's no contest, the trend toward industrialized farming in the developing world and Deere's willingness to retire shares make it difficult for me to believe there isn't a bright future ahead. And because analysts expect zero growth it's all upside moving forward.

    In the past 5 years DE has retired nearly 15% of its float. What do you think the chances are that 5 years from now EPS will be the same?
    Aug 19 11:24 AM | 1 Like Like |Link to Comment
  • Signs Of An Approaching Bear Market [View article]
    "Investors should buy stocks without hesitation, it's very rare that you can be as unqualifiedly bullish as you can be now."

    Alan Greenspan - Jan. 7th 1973

    Funny I didn't realize that he received a crystal ball for his 88th birthday...
    Aug 14 09:15 PM | 1 Like Like |Link to Comment
  • 5-Year Projection: S&P 500 Price, Earnings And Dividends Using Mean Reversion Growth [View article]
    "The exponential projection suggests there is little if any price growth in the 5-year future of the S&P 500. The long-term growth rate applied to the internet era suggests a price level 5 years out in the vicinity of 2900, or about 31% to 32% cumulative price change over the next 5 years."

    I don't see how a 5.7% CAGR for the S&P 500 price over the next 5-years is "little if any price growth."

    Basically this would be in line with the historical average. The conclusion I take from your data is that in 2014 after a strong bull market advance the market is more or less at the same valuation as at the bottom of the 2000 bear market.
    Jul 30 11:01 AM | 1 Like Like |Link to Comment
  • The Truth About IBM No One Comes Out To Say [View article]
    I didn't say that there isn't an opportunity cost to sitting in cash, I just said that price matters. I was giving a comment to answer: "in 20 years will it really matter if one entered a position at 62 or 66 per share?"

    In 20 years (or 100 years) yes it does matter if you buy for 62 or 66. At 62 you buy more shares, it's that simple. Buying is a balance between paying the current price vs. the cost of waiting for a better price.

    I also didn't say anything about buying IBM or AFL and considering whether overall market is under or over-valued. However, it is unlikely that in a period when stocks fall that IBM and AFL will rise. The overall market is discounting how investors feel about the current state of the economy. When investors are very dour about the state of the economy and the market is cheap there is likely more upside for the purchase of any stock compared to when investors are euphoric and expect that nothing can go wrong.

    But I also believe that the fundamentals of the economy and the vagaries of investor sentiment are so difficult to predict that investors are better off in the long-run dollar averaging into reasonably priced stocks with good fundamentals. Maybe today IBM is cheap so buy that, but that doesn't mean that price or overall investor sentiment do not matter. I expect that the return for any investment now will likely be lower than earlier in this bull market when investors were more dour. Don't put too much faith in your ability to beat the market with stock picking, it's not that easy.
    Jul 6 04:41 PM | 2 Likes Like |Link to Comment
  • The Truth About IBM No One Comes Out To Say [View article]
    The reason IBM is down and Lockheed-Martin is up is due to investor expectations.

    Everyone expected IBM to grow and they didn't so the stock gets sold. Everyone expected the sequester to hurt defense contractors more than it did so when it's not that bad the price goes up.

    That's how the market works in the short term (and short-term can mean 5+ years). In the long-term sure IBM is undervalued, but no one cares because you have to lag the market for who knows how long waiting for them to get things together.

    So in a way I agree with you and Tim and in a way I don't. No one buys a tech stock without revenue growth. IBM may be on its way to a sub-10x earnings multiple if they can't grow the business - and that means revenue growth not increasing EPS with buybacks.

    The good news is that IBM doesn't have to cross a very high bar to get to $300-$350/share in 2-3 years. They just need to have some growth and they get a 15-17x multiple with $20/share EPS coming soon.
    Jul 5 12:33 PM | Likes Like |Link to Comment
  • The Truth About IBM No One Comes Out To Say [View article]
    Sure it matters what price you enter.

    Say you have a stock at $100 and you buy 100 shares. 30 years from now with dividends reinvested maybe you have a 10x return or $100,000.

    Now say the price drops 10% and you buy then, now you have 111 shares at $90 and $111,111 in 30 years.

    The price difference is proportional to the entry price no matter how long the holding period. In other words, the statement "I am going to own this stock a long time" does not mean you shouldn't be concerned with the price you pay. The price you pay is just as important thirty years from now as one year from now.
    Jul 5 12:07 PM | 7 Likes Like |Link to Comment
  • Buy Parexel International On Increasing Pharmaceutical Contract-Research Spending [View article]
    Hi Tai,
    Thanks for the comments. I would be adding to PRXL below ~$45 and holding where it is now. Above $55 maybe sell some as the valuation gets less attractive, but in the long-term it should go a good deal higher.

    I agree smaller-cap stocks have been quite volatile this year, but I still believe the reward outweighs the risk. The larger Pharma companies are all putting more of their clinical trial spending into companies like PRXL. I don't expect the trend to stop any time soon. Quintiles could also be worth a look, but I was less convinced about the valuation.

    Because the stock has been volatile selling cash covered puts is attractive in my view. I think if the stock pulls back to $50 selling the Sept $50 put will give you a reasonable entry price or a good short term return if the stock moves higher.
    Jul 3 10:54 AM | Likes Like |Link to Comment
  • Coach Is Falling - Is It A 'Buy' Now, Or A 'Sell'? [View article]
    Yes, but the decrease in cash comes mostly in proportion to an increase in short-term assets.

    Total current assets are $1.8B vs. $2.0B one year ago.
    Jun 25 09:11 PM | 1 Like Like |Link to Comment
  • Coach Is Falling - Is It A 'Buy' Now, Or A 'Sell'? [View article]
    No the numbers are the same. I was talking about long-term debt (not the current liabilities), which is still $400M according to the 10-Q.

    $1.19B is all current liabilities vs. $1.7B in current assets. Last year current liabilities were $1.1B. About the same as a year ago. And we are still talking about an amount equal to the after tax income of the company in the last 12 months.

    Would you say I couldn't afford my mortgage if I grossed 100k, netted 75k and owed the bank 75k? Also, I think just about every company in the S&P probably has short-term liabilities equal to 10% of revenue. It's a necessary part of running a business (the average current ratio in consumer disc is 1.36 - 1.7/1.19 = 1.42, very much in line with the sector average). Therefore, the debt is a complete red herring, Coach has a very clean balance sheet.

    As for P/B, I do not care how it compares to the other companies you listed because it is not relevant as a method of valuation. By P/B would you would say that PM and IBM are worthless? These are simply companies that do not build up large amounts of assets on the balance sheet, thus the P/B is high. As a result the book value doesn't mean much, it's the cash flow of the company that creates its value.

    So I would say that Coach is a good buy as a turnaround (if you believe they can do it). When I say turnaround I don't mean in a quarter or two. So whether you want to buy COH or not depends on two things:

    1. do you believe they can right the ship?
    2. are you willing to wait at least 1-2 years on the investment?

    Thus the only thing in the article that I thought was pertinent was the part about "brand dilution," which didn't really tell me anything new.
    Jun 25 08:47 PM | 4 Likes Like |Link to Comment
  • Coach Is Falling - Is It A 'Buy' Now, Or A 'Sell'? [View article]
    Not a well reasoned article:

    1. "The stock is going to continue falling, because of high debt" - COH does not have a high debt load. 400M in long-term debt vs. 950M in TTM earnings. The video you referenced even said the dividend was unsustainable. I guess "Fast Money" doesn't have time to read a balance sheet.

    2. "If the market for Coach products stops expanding within the Asia Pacific market, then Coach will have an increasingly difficult time producing greater revenue." So if the Asia Pacific market stops expanding then it will stop expanding? I guess at least I can agree with you here.

    3. "We can see from the chart above that Coach is not doing very well with respect to their P/B Ratio. A P/B of roughly 4.00 is rather high, and we can see that, when compared to its peer group, Coach is also currently trading at a price that is high." Price to book is not an effective metric to gauge a luxury goods company. By price/sales or price/cash flow Coach is at the bottom of its valuation since 2009 and heavily discounted relative to peers.

    4. "However the interesting problem here is that Coach is the only group which has suddenly risen from the range of Michael Kors to the range of 5% - 6%." Yes clearly sales have slowed, we already know that from the company's report, which is why the stock has fallen in the first place.

    Obviously the company has problems. That is why the stock has fallen from $55 to $34.
    Jun 25 05:54 PM | 2 Likes Like |Link to Comment
  • GDP contracted 2.9% [View news story]
    Um, look at the headline number?

    A recession is simply defined as two consecutive negative GDP prints...
    Jun 25 09:39 AM | 1 Like Like |Link to Comment
  • Tobacco bonds deteriorating [View news story]
    It wouldn't make much sense if MO 10-Yr debt traded at 3.6% if there was any significant chance of default.

    Very misleading headline.
    Jun 24 09:44 AM | 8 Likes Like |Link to Comment
  • Cutting My Dividends By 35% - Improving My Dividend Growth Portfolio [View article]
    "The very simple S&P 500 dividend aristocrats index has beat the market. This index simply includes the companies from the S&P 500 that have increased their dividends over 25 years or more."

    Is it not surprising that a group of companies that has raised dividends for 25 years has beaten the market? You can't grow dividends for 25 years without growing earnings and if you didn't grow earnings you are excluded from the list.

    This outperformance is probably mostly survivorship bias, coupled with expanding P/E ratios during a time that the majority of stocks saw P/E contraction. The average P/E of the dividend aristocrats is 22x, a 12% premium to the market. 15 years ago this list probably traded at a significant discount to the market.

    Likewise the average PEG ratio of this group is 2.5 vs. 1.6 for the S&P 500.

    There are stocks in this list that I would be happy to own, but as a group it doesn't look convincing (AFL, BCR which I already own, CB, T, TGT, CVX, XOM, maybe ABT, PPG and JNJ although I wouldn't be buying now).

    That's the problem with almost every "beat the market" back tested strategy. It's backward looking not forward looking and whatever the trend was over the past 15 years is unlikely to be repeated over the next 15 years.
    Jun 23 01:52 PM | 8 Likes Like |Link to Comment