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  • Avoid These 4 Technology Stocks In 2012 [View article]
    Quote: "Yes, the company generates cash, but it's not making any profits."

    I encourage you to learn about discounted cash flow valuation.
    Feb 9 01:52 PM | Likes Like |Link to Comment
  • MEMC Electronic Materials: It May Be Time to Start Accumulating [View article]
    According to Bloomberg, MEMC has consistently surprised to the upside on revenues, but the last time the company hit or exceeded consensus EPS estimates was for the period ending March 31, 2010. This data point supports the market's embracing MEMC as a tangible book equity story, at least until the company begins to deliver.
    Jun 14 05:42 PM | Likes Like |Link to Comment
  • Nokia: The Sky Is Not Falling! [View article]

    The paragraph beginning with, "Let's assume that..." offers the assumptions behind the high-level DCF drivers of a holistic valuation including, but certainly not limited to, the cash on hand.
    Feb 14 05:23 PM | Likes Like |Link to Comment
  • Goodyear Tire: A Range-Bound Value Stock You May Find Compelling [View article]
    I agree with Rubberoptions about the need for deep, fundamentals analysis when valuing a company's equity. Such analysis typically produces forward-looking P&L and balance sheet estimates for ratio comparisons (i.e., comps) and / or discounted cash flows to arrive at a valuation point. I skipped to the average of forward-looking results of several sell-side institutions to keep my article at a manageable length.

    I disagree with Rubberoptions about only industry or company insiders / pundits being privy to details on cost structure, product mix and market share (to name just a few fundamental drivers). Sell-side analysts may not always be as diligent as they should be, but to effectively suggest "the market doesn't get it" not only assumes that something as basic as market share is not already baked into equity prices but also reeks of the express path to financial losses.
    Jan 25 11:16 PM | Likes Like |Link to Comment
  • Capitulation in SuperValu? [View article]
    Good questions. I avoided mentioning details underlying the CAPM buildup to avoid readers' eyes glazing over, but my input data included:

    a) 12-month UST yield as the risk-free rate

    b) 6.5% as the expected inflation-adjusted equity market return

    Both assumptions can be debated, especially the first. I used a one-year rate because of the significant flux in SuperValu's strategy and operations. Given the steep yield curve, results from one- and ten-year assumptions vary meaningfully. Like I said, the dividend discount approach is not without pitfalls, but hopefully we can agree on a share price of ($0.352 / 0.05) = $7.04 still representing a smaller downside than the potential upside once management's strategy begins bearing fruit.
    Dec 15 04:06 PM | Likes Like |Link to Comment
  • Capitulation in SuperValu? [View article]
    I too noticed the discrepancies in outstanding debt. The $7.5B value I used came from the latest 10-Q filing:

    In the 10-Q, you will notice the following:

    a) $480M of current maturities in long-term debt and capital leases

    b) $6,644M of long-term debt and capital leases

    c) $327M of book overdrafts - In Note 1 of the most recent 10-Q, you'll find that the company's banking arrangements allow for these overdrafts, which are effectively short-term loans. SuperValu, however, classifies the overdrafts under operating activities and consequently books the $327M under accounts payable.

    The total debt comes out to $7,451M. Others may be using a lower amount that takes into account proceeds from recent asset sales, which is reasonable given management's intent to de-leverage. I used reported numbers to avoid speculation on this matter. Credit Suisse suggested that the sale of the Total Logistic Control Division could fetch $125M - $150M, and the sale of Bristol Farms could garner another $50M - $80M. Terms of these transactions were not disclosed, however.

    All that said, the overarching point of mentioning the debt is to place another potential dividend cut in context with the company's high debt load.
    Dec 15 03:38 PM | Likes Like |Link to Comment
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