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David Trainer  

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  • 5 Companies With Strong Dividend Yields Suitable For Defensive Investors [View article]
    Like DE and INTC a lot, but I'm bearish on OLN. EPS is misleading due to $25 million in non-recurring income in 3Q13. In addition, their business is facing some major headwinds in the form of declining demand for ammunition and falling prices in the chlor-alkali segment.
    Aug 25, 2014. 12:22 PM | Likes Like |Link to Comment
  • Is There Hope Of A Turnaround At Angie's List? [View article]
    One really interesting statistic to note is marketing cost per paid membership acquired. For the most recent quarter ANGI spent $90 on marketing per new member, up 13% from a year ago.

    ANGI is having to work harder and harder to keep adding new members.
    Aug 21, 2014. 02:32 PM | 6 Likes Like |Link to Comment
  • Best And Worst Mid Cap Value Style ETFs, Mutual Funds, And Key Holdings [View article]
    dimickdavid: Where do you see IVOV having more than $200M in assets? I see $86M.
    Aug 21, 2014. 12:20 PM | Likes Like |Link to Comment
  • How To Avoid The Worst Style ETFs [View article]
    Cal Boomer:
    Thanks for your comment.
    I appreciate your desire to see more info. It is natural to want to get all the answers in one place.
    Figures 1 and 2 provide lots of excellent information that would take you months to develop on your own.

    I am glad you would like to see more. Reality is that Seeking Alpha would not exist if not for high-quality firms providing research. High-quality firms cannot exist without getting paid.

    In the end, you are getting more than what you pay for from this article and many others. I think you are getting a very, very good deal.
    Aug 21, 2014. 09:23 AM | 1 Like Like |Link to Comment
  • How To Find The Best Style ETFs [View article]
    David at Imperial Beach:

    P/E ratios are a very unreliable measure of value, and just measuring the top holdings can lead investors to miss important qualities of the aggregate smaller holdings. That's why I calculate the average price to economic book value of all the holdings in the ETF, which quantifies the total cash flow growth implied by the valuations of all the holdings.
    Aug 15, 2014. 10:12 AM | 1 Like Like |Link to Comment
  • Danger Zone: Newell Rubbermaid [View article]

    Congrats on a great pick. NWL has definitely done well for shareholders over the past few years, but that doesn't mean it will deliver good returns going forward. Now might be a good time to take profits.
    Aug 14, 2014. 02:50 PM | 1 Like Like |Link to Comment
  • Danger Zone: Newell Rubbermaid [View article]
    Deep Value 1634:

    NWL has $1.8 billion in accumulated asset write-downs that I add back to invested capital. Companies should be held accountable for all the money they've invested in the business, even if they've written those assets down as worthless.

    A smaller adjustment I make is to add $370 million due to the present value of operating leases. These leases are kept off the balance sheet, but they represent assets that are currently being used in the business, and they should be included in invested capital.

    You can see how I adjust reported financials to get NOPAT and Invested Capital, the numerator and denominator of ROIC, here:
    Aug 14, 2014. 10:47 AM | Likes Like |Link to Comment
  • Do Microsoft Bulls Have A Convincing Case? [View article]
    Praveen Chawla:

    You need both. As Warren Buffet said "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." I'd rather invest in a company with a high and rising ROIC and a reasonable valuation than one with a low and declining ROIC and a cheap valuation.
    Aug 7, 2014. 04:00 PM | 1 Like Like |Link to Comment
  • Do Microsoft Bulls Have A Convincing Case? [View article]
    Praveen Chawla:

    ROIC is not what the previous generation of investors paid, it's the cash that the company is currently generating on the capital invested in its business. That's a very different number from enterprise value, which is the expected value of future cash flows.

    MSFT has a $280 billion EV, but it only actually has $45 billion in invested capital. FCF/EV gives you some insight into the valuation of the company, but ROIC is a better indicator of its operating profitability and efficiency.
    Aug 7, 2014. 02:45 PM | Likes Like |Link to Comment
  • Do Microsoft Bulls Have A Convincing Case? [View article]
    stratti: EBV refers to the perpetuity value of current cash flows, and if ROIC declines then cash flows will likely decline. Some of that can be balanced out by growth, but MSFT as a mature company is unlikely to experience very rapid growth.

    If MSF's ROIC keeps declining slowly over the next 10-20 years while revenues grow moderately, the stock does have limited upside, but if ROIC were to decline as low as cost of capital that would not be the case.
    Aug 7, 2014. 02:26 PM | Likes Like |Link to Comment
  • Do Microsoft Bulls Have A Convincing Case? [View article]
    Praveen Chawla:

    Since Morningstar doesn't show their calculation for ROIC, I can't comment on the difference between my numbers or theirs. Perhaps they use a higher number for required cash or don't exclude certain expenses from NOPAT as I do. Either way, you can see how I adjust the reported data to get NOPAT and Invested Capital for MSFT here:

    I disagree with the idea that total capital is a historical artifact. The purchase of that capital may have occurred in the past, but the capital itself is still being used in the present to earn a return, and that's what ROIC measures.

    FCF as a % of EV is a useful metric, but it's more of a valuation measure than one of operating profitability. MSFT's enterprise value is significantly higher than its invested capital, largely due to the fact that it earns such a high return on capital.
    Aug 7, 2014. 02:16 PM | Likes Like |Link to Comment
  • The Long Overdue Crash In Whole Foods [View article]

    I take the present value of all future operating lease commitments as my value for invested capital (which is ~$5 billion) and add back the implied interest expense % of the lease, which was a pre-tax value of ~$230 million. After adding a tax adjustment as well, I get a NOPAT of $690 million and average IC of $8.4 billion.

    You can see how I adjust net income and total assets to get NOPAT and IC at this link:
    Aug 7, 2014. 11:57 AM | Likes Like |Link to Comment
  • Do Microsoft Bulls Have A Convincing Case? [View article]
    Intrepid Investor:

    Other tech megacaps, such as Oracle and Qualcom, have sustained ROIC's significantly above IBM's 15% for many years, but it's true that 56% is nowhere near the mean. I should have said reversion towards the mean. Microsoft's existing advantages in terms of scale, customer relationships, and brand awareness should give it the ability to still earn an ROIC significantly above the average.
    Aug 7, 2014. 09:26 AM | 1 Like Like |Link to Comment
  • Do Microsoft Bulls Have A Convincing Case? [View article]

    You're welcome. Thanks for reading and commenting.
    Aug 6, 2014. 11:00 AM | Likes Like |Link to Comment
  • Do Microsoft Bulls Have A Convincing Case? [View article]

    What Microsoft's history shows is that it's extremely difficult for any company to continually earn a return on capital as high as Microsoft and Apple. My conviction on Apple is not just based on Microsoft's experience either. Apple's ROIC has already declined in each of the past two years.
    Aug 6, 2014. 10:59 AM | 2 Likes Like |Link to Comment