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David Klein
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I've been investing full time for over 15 years. I use a proprietary model based on a modified Graham, DCF & PE analysis. Results can be viewed at our website (address below). As a result of past investment decisions I was able to turn my attention to full time investing & research which... More
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Investor Information Exchange
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  • Its Been An Interesting Week In The Markets But Still Not Cheap

    After the current market downdraft this week the 31 stocks presently on the my fair value web page (from the fair value template for excel) only 4 have hit the entry target (turned green). They are AAPL, GM, LVLT and CBT. All pay dividends with the exception of LVLT.

    I was disappointed only four hit my entry target but not surprised. The market is still not cheap but opportunities are starting to appear. The market valuation web page still shows the Shiller in the (yellow) caution zone (reflects data from the Shiller template).

    MarketGauge

    That said who knows what will happen short term but the data shows more downside is a real possibility when viewed through the Shiller template.

    Shiller curve

    Aug 21 8:49 PM | Link | 1 Comment
  • IIEX 2Q-2015 Newsletter

    Jun-2015 Newsletter

    Market View update (as of 06/27)

    Our latest article on market trends was "Using Shiller To Project Market Returns" on May 27. I've added some additional features to this excel model to add more color to the status of the market; S&P earnings with trend and a market gauge to get an instant view of market valuation. The following graphs are produced from Excel using the SMF add-in:

    (click to enlarge)

    Above data translated into a simple market gauge:

    S&P earnings and trend:

    (click to enlarge)

    Here are the 5 and 10 year S&P CAGR projections based on the limits in the first graph and earnings growth:

    5 Year: CAGR range 1.1% - 5.4%; midpoint 3.3%

    10 Year: CAGR range 4.0% - 6.2%; midpoint 5.2%

    The market has moved into slightly overvalued territory but as you can see not close to the internet bubble of 2000. No one can know how high the market will go before the next correction but as the market veers higher into overvaluation territory so does risk. Finding bargains also become increasing difficult for the same risk/reward profile compared to the last five years. For a historical perspective including 1929 click here or create your own graphs using the web interactive model here.

    My view hasn't changed since December, i.e., at this point I'm neutral on the market and accumulating cash when individual holdings become overvalued to take advantage of any bargains that may appear on the radar; although it would probably take a small correction to generate the types of bargains that fit my criteria. My present screening list can be found here. As of today I am long the following stocks on the list as it exists today (today:06/27/2015); CHK,FTR,GE,LVLT,MSFT,PFE,RRD, short puts in GM,F,LVLT, and long calls in LVLT.

    Focus Stock (NYSE:LVLT)

    Level 3 Communications was made the IIEX focus (replacing Telular) in July 2013 after LVLT announced a change in leadership and direction. LVLT is trading at a discount to the IIEX fair value as of this writing. One new article was added since the last newsletter:

    Has Revenue Growth Stalled At Level 3 Communications? For additional information visit our website (Chrome browser does not load all data correctly)

    Seeking Alpha recognized LVLT as an outstanding performance based on our first article after we made it the IIEX focus stock. Here is a quote from the outstanding performance article:

    Dave Klein began to turn bullish on the stock (from Aug/2013 article). At this time the company had been free cash negative for its entire public history, excepting a brief moment in 2009… Klein is beginning to argue that while the results were not yet showing it, there was a hidden story - that their emphasis on enterprise revenue appeared to have legs and, most importantly, that "free cash flow will grow substantially over the next five years and beyond." … His argument was based on improving industry dynamics - the bottlenecks preventing magnitudes of bandwidth demand were receding, last mile internet speeds were being increased. The growth of video was becoming an increasing factor in demand. Finally, after nearly 15 years, capacity demanded was catching up to capacity supplied. With operating results to improve, David Klein argued the firm was about to hit cash profitability. The improved position would likely reduce both debt and interest expense further increasing the firm's profitability. This story is ongoing, but the results so far have been right on cue… These factors have led to a rerating of the stock to a tune of 145%

    That's all good but what about going forward. Our current fair value as of this writing is $73. The market price as of this writing is $53.79. The stock has substantially increased since July 2013. Our fair value is based on recent results and updates on the integration of TWTC. There has been a cloud of uncertainty forming over LVLT in the form of acquisition rumors. Macquarie Capital is speculating about a LVLT - AKAM combination. There are also rumors about a LVLT- COLT takeover. Since LVLT would be the purchaser fears of possible dilution will have a negative effect on the share price until the rumors are proven false or a deal is struck where the terms are known. These are short term worries for the market which will have no effect on long term performance measured by the current trends highlighted in previous articles.

    The LVLT Excel spreadsheet is available to supporters of the website.

    Template updates during the quarter (for website supporters only)

    The latest updated Excel (Web Query) templates are detailed here. The flagship template (IIEX_FairValue Analysis which I still consider a beta file since it is still under development but available for use for site supporters) includes updates not shown in the original video or the second video which highlights updates added to the original found here. NOTE: there have been major updates not yet on video such as the ability to generate pro-forma financials, manually entering historical financial data when not available via downloads or to fill in missing information etc., and downloads various analyst estimate data for information, plus more links and graphs. There has been a major update required when Guru made a major change to their site. Guru changed their site and moved some of the data to a subscription. Only 5Y financial data is now free vs the 10Y shown in the Fairvalue Analysis template video. The revised template works exactly the same as previously with 5Y historical financial data. Any questions feel free to email me. Any Guru members can sign into Guru and the template will download 10Y data.

    The latest updated templates for the SMF add-in are detailed here and other files detailed here.

    These templates collect data from free websites, i.e., they work for as long as 3rd party websites continue to provide data that can be grabbed by Excel's web query.

    Any feedback on the site, articles or if you have access to the templates is always welcome at the email below ( iiex@live.com ).

    Dave

    (click to enlarge)

    Jun 27 12:04 PM | Link | 1 Comment
  • IIEX 1Q-2015 Newsletter

    Mar-2015

    Market View update (as of 03/16)

    Our latest article on market trends was "A Unique Way To Use The Shiller PE As A Market Indicator" on November 13. The market has become slightly more expensive since oyr last newsletter. The following graphs are produced from Excel using the SMF add-in:

    Below we will compare the current graph (2nd graph) to the status as of last quarter (1st graph)

    (click to enlarge)

    The market has moved into overvalued territory but as you can see not close to the internet bubble of 2000. No one can know how high the market will go before the next correction but as the market veers higher into overvaluation territory so does risk. Finding bargains also become increasing difficult for the same risk/reward profile compared to the last five years. For a historical perspective including 1929 click here or create your own graphs using the web interactive model here.

    My view hasn't changed since December, i.e., at this point I'm neutral on the market and accumulating cash when individual holdings become overvalued to take advantage of any bargains that may appear on the radar; although it would probably take a small correction to generate the types of bargains that fit my criteria. My present screening list can be found here. As of today I am long the following stocks on the list as it exists today (today=03/16/2015); CHK,FTR,GE,LVLT,MSFT,PFE,RRD, short puts in CAT,CHK,EMN,HAL,LVLT, and long calls in LVLT.

    Focus Stock (NYSE:LVLT)

    Level 3 Communications was made the IIEX focus (replacing Telular) in July 2013 after LVLT announced a change in leadership and direction. LVLT is trading at a discount to the IIEX fair value as of this writing. One new article was added since the last newsletter:

    Level 3 Communications: A Long Idea Still Priced At An Attractive Discount To Fair Value

    The article linked above is an update to our last article, "Level 3 Communications: A Long Idea At An Attractive Value" which is an in depth look at the company. We discussed the following topics in the last article and this article will update topics that have changed as indicated below:

    Management Change - UNCHANGED
    TWTC Acquisition - UNCHANGED
    Financials (Pro-Forma) - UPDATED
    Growth outlook (Pro-Forma) - UPDATED
    Valuation (Pro-Forma) - UPDATED
    Debt (Pro-Forma) - UPDATED
    NOLs - UPDATED
    Competition - UNCHANGED
    Open tax issues - UNCHANGED
    Final thoughts - UPDATED

    For additional information visit our website or click the links below:

     

    Financial Model Download; results, projections and charts-click here

    Interactive Web Model

    Group Insider Transactions

    Link to IIEX SA Articles

    Short Interest Table & Graph

      

    Our current fair value as of this writing is $70. The market price as of this writing is $54.50 The stock has more than doubled since July 2013 (price approx. $21). Our fair value is based on recent results and updates on the integration of TWTC. The LVLT Excel spreadsheet is available to supporters of the website.

    Price summary by month (source Yahoo)

    (click to enlarge)

    NOTE: The "Max Entry Target" is based on my personal risk tolerance, i.e., I demand a substantial discount from my Fair Value calculations. The targets can be adjusted based on individual preferences.

    Template updates during the quarter (for website supporters only)

    The latest updated Excel (Web Query) templates are detailed here. The flagship template (IIEX_FairValue Analysis which I still consider a beta file since it is still under development but available for use to site supporters) includes updates not shown in the original video or the second video which highlights updates added to the original found here. NOTE: there have been major updates not yet on video such as the ability to generate pro-forma financials, manually entering historical financial data when not available via downloads or to fill in missing information etc., and downloads various analyst estimate data for information, plus more links and graphs.

    The latest updated templates for the SMF add-in are detailed here and other files detailed here.

    These templates collect data from free websites, i.e., they work for as long as 3rd party websites continue to provide data that can be grabbed by Excel's web query.

    Any feedback on the site, articles or if you have access to the templates is always welcome at the email below ( iiex@live.com ).

    Dave

    (click to enlarge)

    Mar 16 5:10 PM | Link | 3 Comments
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