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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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  • 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
  • CAP - CAI International Is Ripe For The Picking

    CAI International, lessor of ship containers and railcars for global trade, finds itself currently in a good spot for the enterprising investor. After an earnings miss in late July the stock trades at a measly ~7.5x PE and <7x forward PE.

    CAP Chart

    CAP data by YCharts

    As you can see from the chart it is at quite the temporary trough for the 12 month period. Management indicates the steps they've been taking to move containers to higher lease demand areas, to the detriment of earnings lately, will begin to show a positive bent going forward. The company has retained earnings in excess of 10% of their present market capitalization each of the last 3 years, indicating the strong profitability of the company. In my experience very few companies show that degree of efficiency in this very important line of the balance sheet.

    Analysts average projection for EPS next year sits at $3.03, which equates to about 64 million dollars, for a company who's market capitalization sits at ~410 million.

    Market players seem to be pricing in an already tough, and seemingly tougher going forward, rate environment for container lessors. Management at CAI International acknowledges the environment, and has indicated it intends to purchase more railcar investments to achieve better returns. They also indicate the steps they've been taking should result in positive earnings momentum.

    For a strongly profitable company in a non-tenuous industry, I'd attach at very least a 10x PE, indicating pretty significantly undervalued equity if they can indeed earn $3.00/share next fiscal year. Downside risk is minimal on the specific stock level, though a significant fall in the market would certainly bring it lower, which would make a great buying opportunity.

    Price Target = Seeing as market participants seem to value it conservatively I will say $26 is a reasonable price that CAP should eventually hit, though my own inclination is a fair price around $30, at 10x earnings.

    Disclosure: The author is long CAP.

    Tags: CAP
    Sep 03 9:29 AM | Link | 1 Comment
  • SPWH - Real, Current Potential

    After what is reasonably thought of as a failed IPO, with first the initial underpricing and now the already occurred devaluation of the equity, Sportsman's Warehouse nevertheless looks pretty solid. You could make the case SPWH made out great on the IPO and now that the devaluation has occurred a good point of entry now exists.

    Now let me be straight, I don't approve in any manner with their balance sheet, as they're a typical private equity sell out and now public kind of company. They exist off their fundamentals, I'm sure their credit is good but other than that they have no cover by way of a robust balance sheet. I suppose the possibility exists that they expand too hard, a significant consumer spending depression happens, and they go out of business. Very low probability though. They are set to open 8 stores in 2015. That will be a ~16% increase in current store counts, and assumed a potential increase of 10-20% in revenues. At just 3% NI margin of roughly ~700 million sales they'd be trading at 12x earnings at the current close of $5.95.

    Assuming a 10% CAGR in store count per year they should have over 75 stores in 5 years, which should produce a billion in sales easy. If this share price doesn't move you're looking at a retailer trading at .25x sales.

    I think if they manage it right, steadily, they could maintain 30 million in profit a year within 3 years and keep going from there. So with a 5-year window, they should be able to garner a very normal 15x sporting goods retailer valuation at some point in time, which would lead to a 450 million valuation.

    That leads to a price target of $11.25.

    I'll reiterate from the title, imo it's very real and current potential.

    Disclosure: The author is long SPWH.

    Tags: SPWH
    Aug 14 12:48 AM | Link | Comment!
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