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Brian Schieble's  Instablog

Brian Schieble
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Retail investor of five years, fundamentally oriented, short and long investor as cases warrant. Probably characterize my own investing style as aggressive conservative investing with large emphasis on valuation and entry point.
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  • AKS - Good Value With Multiple Forward Catalysts

    I'm sort of mad at myself for not writing this sooner since the call would have looked better in the $5's. This morning AKS ratified a new labor agreement making the Ashland operations more competitive, and the stock is up 10%.

    Still at this point in time AKS presents a good value entry point into the American steel market, in a time when the USA is one of the few bright spots in the world economy. Automotive industry demand for steel is robust, and residential and non-residential building is also projected to increase at a healthy clip.

    The main knock on this company is a high amount of leverage, but the Severstal acquisition actually improved their credit profile and they're looking at 2015-17 as capex light, high cash generation years. So when their next bond maturation comes up, they'll be able to both pay down some of it in a prudent fashion, and roll the debt at a lower rate, making for more earnings power going forward.

    There is also concern over falling steel prices by some of the major investment firms, which if you look at their selling price averages per quarter it seems like a legitimate concern, but the 5 and 10 year outlook for the industry suggests also that both value and tonnage will go up, so a reversion in prices would probably be short lived, and anyway the demand outlook for steel would seem to suggest that may not happen at all.

    All in all, I'd say AKS is set to return to where it was only a few short months ago, at $12. Institutional investors were sold 35 million shares at $9.08 average for the Severstal acquisition, so buying today would be a huge discount to buyers who should generally be considered more sophisticated than the average investor. That alone should convince you half way. Then looking at their investor presentation and the macro backdrop, AKS seems like a good bet.

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: AKS
    Dec 18 8:40 AM | Link | Comment!
  • PBR - Close Your Eyes And Buy

    Petrobas is looking very ripe for a long term play at the moment, at around $6.10. Current yield for the common shares is ~7%, which may very well be suspended to preserve cash in 2015, but I should imagine will return on a longer term horizon and pay handsomely for buyers today.

    The company is facing many problems right now, corruption at Lava Jato, oil price collapse, stalled capex spending, and potential negative cash flow in FY 2015. All which are figured in to the price of shares.

    The thesis is that this company owns some very valuable assets, has large piles of cash and the backing of the Brazilian government, the corruption issues will make a more transparent less shady company going forward, and eventually oil production levels will drift towards equilibrium and a higher world price, all which should help PBR's share price immensely.

    One should not rule out a share price dipping into the $4-$5 range. Momentum seems to suggest it.

    Disclosure: The author is long PBR.

    Tags: PBR
    Dec 16 10:00 AM | Link | 3 Comments
  • Genworth Financial - Laughably Cheap

    GNW Chart

    GNW data by YCharts

    Genworth Financial presents one of the best values in the market today, I believe. Insurance is a predictable business, at least it should be, at least that's how they try to structure it. Because of this fact, insurers rarely get a high growth P/E ratio. Usually it's 10x or under. Usually PE's aren't even necessarily the best measures to value them. Because an insurance business literally could be liquidated for predictable valuations that don't approach a fire sale, book value is a pretty good measure.

    GNW is trading at .4x book value right now. All because of a long term care reserve charge that is forth coming that many minds think will be no more than a billion dollars, or ~$2.00/share.

    The reserve charge will be a blip, and although substantial, will not bring down the walls of the company. There will be life after the reserve charge. And rising interest rates will be accelerating earnings for the insurance sector going forward, and GNW will be right along with it. At most this company loses 1.5x years worth of earnings, and then moves forward.

    A reputable, highly visible, profitable, highly predictable insurance company cannot remain at such a discounted valuation to book for long.

    Genworth Financial is a big time buy. The reserve charge announcement may take it down 10%, but i'm doubtful of it. If it were to drop sharply I'd expect it to be short lived and would be an amazing opportunity for a safe 50%+ gain over time.

    Disclosure: The author is long GNW.

    Tags: GNW
    Sep 26 9:14 AM | Link | 4 Comments
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