Value Expectations

Freeport McMoRan: Our Investment Summary

Here is a link to the rest of the report. Seeking Alpha must have missed it from the feed.

Link to FCX report below:
www.valueexpectations....


VE

Market Implying Negative Sales Growth for Next 5 Years

Sales are just one value driver we are using. The implied sales growth is actually holding EBITDA Margins and Asset turns constant over the next five years. We are actually calculating Economic Profit (Economic Margin)

Here is a link for a more detailed look at the calculation
www.valueexpectations....
As far as GM, we also wrote a piece on GM which you could find on Seeking Alpha. Again, we are measuring Economic Profits for GM which you can examine in this article:

seekingalpha.com/artic...

In the article you will notice the issue with GM is not actually sales, but EBITDA “GM would have to deliver and maintain EBITDA Margins not seen since 1994.”
Thank you for your feedback we will be posting more detailed overviews on our Economic Margin framework.
VE



On Mar 05 10:24 AM Paul&Shark Yachting wrote:

> it makes sense, but sales have no connection to stock price, I can
> show you priced stocks with negative assets, and stocks were revenues
> grow and sales are booming, but stocks are 95% down.

Earnings on Deck - Three Companies That Look the Best

Thank you for your feedback.

The Applied Finance Group is a global independent equity research firm with over 200 institutional firms as clients, which manage over $350 billion in equity assets. AFG is not an RIA so has no investments in any recommendation. We help clients with a long term investment discipline and not necessarily focused on day trading.

Here is a link in case anyone is interested in our long term performance portfolio around the world:
www.valueexpectations....

Lastly here is an article on Apple when we thought it was much more attractively priced at $91 not $147:
www.valueexpectations....

If you would like to learn how we could better help your investment process, visit: EconomicMargin.com


On Jul 30 02:19 PM Timeline Strategy Consulting wrote:

> Just like I said. AAPL closed at $147.52 on the day when this article
> was published. It's at about $164 today. That's a 10% gain in 3 weeks.
>
>
> PFE and BSX are up much less than AAPL in this same period. AMD is
> down.
>
> Back to the drawing board with your stock picking tools.

ADR Overview - Which Stocks Look Good, Which Don't

Regular followers have been exposed to the metrics and techniques used to identify our potential buy recommendations. We apologize for not adding a summary of some of our metrics that include economic performance, valuation, management quality, earnings quality for newer followers.

Here is a link to an updated version of this article that contains those summaries:

www.valueexpectations....

Market Implying Negative Sales Growth for Next 5 Years

Sales are just one value driver we are using. The implied sales growth is actually holding EBITDA Margins and Asset urns constant over the next five years. We are actually calculating Economic Profit (Economic Margin)

Here is a link for a more detailed look at the calculation
www.valueexpectations....
As far as GM, we also wrote a piece on GM which you could find on Seeking Alpha. Again, we are measuring Economic Profits for GM which you can examine in this article:

seekingalpha.com/artic...

In the article you will notice the issue with GM is not actually sales, but EBITDA “GM would have to deliver and maintain EBITDA Margins not seen since 1994.”
Thank you for your feedback we will be posting more detailed overviews on our Economic Margin framework.
VE



On Mar 05 10:08 AM Trish1 wrote:

> I thought the market trades on earnings... GM has huge sales... But
> may be I need to get with the program...It's all about sales now...

Earnings Quality: An Important Indicator

For those unfamiliar with “earnings quality” or other forms of forensic accounting which look at accruals, below are two interesting articles.

WSJ: Accrual Investing' Advocate Seeks to Clear Away Bluster:

online.wsj.com/article...

Smart Money: Forensic Investing:
www.smartmoney.com/inv.../

Apple: Buy, Sell or Hold?

Hi Stephen Rosenman,

I would like to clarify that our thesis does not rely on one variable.
We are actually using our Economic Margin Framework which encompasses a valuation system that explicitly addresses the four main value drivers of enterprise value: profitability, competition, growth, and cost of capital.

Below is a brief overview:
valueexpectations.com/...

For an in-depth overview, here is a white paper on our Economic Margin Frame:
www.valueexpectations....

We do appreciate your feedback and will do a better job of elaborating on our process.

VE



On Jun 20 02:17 PM Stephen Rosenman wrote:

> Apple's share price does not depend on sales growth. Rather, its
> price hinges on earnings. Nokia, for instance, increased its revenue
> from $34 billion to $58 billion over the last 3 years. Unfortunately,
> for Nokia, profit margins fell to 0.04%. Apple, in contrast, has
> not only grown revenue but driven net profit margins to 14.7% (and
> its iPhones which command greater margins have not yet been factored
> in). The author's thesis looks at only one variable (and not the
> key metric) to derive fair price.

Finding the Most Undervalued Stocks

Hi toobad41,

This article was meant to identify what sectors and styles are most undervalued. We will have a follow up article and highlight several companies that look undervalued and fit our default BUY criteria:

Value Scores > 50( valueexpectations.com/... )

Economic Margin Change> 50 ( www.valueexpectations.... )

Thanks,
VE

Are Fortune's Most Admired Companies Also the Most Investment Worthy?

Great observations on Apple! Yesterday we posted an article specifically on Apple, the reason it’s coming up as a sell on a default basis is because we are comparing it to other technology company. Even though it looks much more attractively priced and has much lower expectations than it used to have, there are other tech companies (in the tech sector) that look more attractive from a valuation level. Further analysis could be done braking it down by market cap. Here is a link to yesterdays Apple post:

www.valueexpectations....

Also as a point of reference, keep in mind that the average company in the S&P has -9% implied sales growth over the next five years which indicates that there could be some better opportunities in the tech sector.

www.valueexpectations....

Thanks,
VE



On Mar 06 07:06 AM Zoltan L. Kovacs wrote:

> Apple is mainly building its business on human creativity. Now it
> can choose among the best brains on earth. Now just put it in your
> expactations framework. Then look into your rearview mirror and see
> what an economic performer Apple has been for the last ten years.
> Finally take a look at the present P/E, cash flow potential and cash
> reserves of AAPL and crunch the numbers.

Our Portfolio Performance Update

TradingHelpDesk, Good questions.

No, we do not meet with any management teams. We use our Management quality score to measure if the company is generating positive or negative Economic Margins. We don’t like to see them grow the business if they have negative economic margins, we would like to first see them shrink and fix the business first. If they have positive economic margins, we do like to see them grow.

The only time we ever meet with management teams is for corporate consulting. We help corporations structure management compensations plans or to value acquisitions and divestitures.

I do want to clarify something on our valuation system. Based on this comment on other questions you have asked about solving for sales growth. We are using our economic margin to measure historical economic profits, simply to see how well management runs its business, but our valuation system also uses Economic Margins. Basically we are forecasting Economic Margins in the future, our DCF Model with NO perpetuity; we assume that economic margins will decay over time to zero (we do this on a company specific basis). Once Economic Margins are zero then that means that the company is earrings its cost of capital, so growth is irrelevant. What we are doing next is discounting the future economic margins to come up with an intrinsic value.

We will be writing more articles about how we calculate and use Economic Margin on our site that may not show up on Seeking Alpha. I encourage anyone that wants to read to register on our site (Value Expectations.com) to ensure they access the articles or receive via email:

www.valueexpectations....

Lastly, we are using publicly available information to build our models. But again, we are taking that data and making adjustments which leads to our development of Economic Margins.
Thanks for all your feedback and Questions, hope this clarifies things.

AFG

Our Portfolio Performance Update

TradingHelpDesk, Good questions.

No, we do not meet with any management teams. We use our Management quality score to measure if the company is generating positive or negative Economic Margins. We don’t like to see them grow the business if they have negative economic margins, we would like to first see them shrink and fix the business first. If they have positive economic margins, we do like to see them grow.

The only time we ever meet with management teams is for corporate consulting. We help corporations structure management compensations plans or to value acquisitions and divestitures.

I do want to clarify something on our valuation system. Based on this comment on other questions you have asked about solving for sales growth. We are using our economic margin to measure historical economic profits, simply to see how well management runs its business, but our valuation system also uses Economic Margins. Basically we are forecasting Economic Margins in the future, our DCF Model with NO perpetuity; we assume that economic margins will decay over time to zero (we do this on a company specific basis). Once Economic Margins are zero then that means that the company is earrings its cost of capital, so growth is irrelevant. What we are doing next is discounting the future economic margins to come up with an intrinsic value.

We will be writing more articles about how we calculate and use Economic Margin on our site that may not show up on Seeking Alpha. I encourage anyone that wants to read to register on our site (Value Expectations.com) to ensure they access the articles or receive via email:

www.valueexpectations....

Lastly, we are using publicly available information to build our models. But again, we are taking that data and making adjustments which leads to our development of Economic Margins.
Thanks for all your feedback and Questions, hope this clarifies things.

AFG



On Aug 14 04:29 AM TradingHelpDesk wrote:

> Interesting that you combine 2 quantitative measures, economic margin
> and the metric valuation system with a qualitative measure - the
> effectiveness of management.
>
> It makes sense to me and I can see how you might outperform. One
> thought / question; Do you guys meet management and ask questions
> face to face or do you assess them using publicly available information?

15 Stocks You May Want to Keep Out of Your Portfolio

We appreciate all comments and look forward to providing the results of our performance every quarter and all though we may not get every stock pick correct we do provide a solid buy/sell spread with a 70% batting average on buy recommendations. Here is a link to our last performance update on our buys

www.valueexpectations....

and here is our buy sell spread

www.valueexpectations.....

Our Monthly Market Review for July

Here is a link to our complete market review:

www.valueexpectations....

Seeking Alpha posted this before we emailed them a copy of the complete version.

Thank you for your feedback!

Our Monthly Market Review for July

Here is a link to our complete market review:

www.valueexpectations....

Seeking Alpha posted this before we emailed them a copy of the complete version.

Thank you for your feedback!



On Aug 09 04:17 AM TradingHelpDesk wrote:

> You are right to mention the jobs data as being fundamental to sentiment
> and risk appetite. Friday's better then expected 247,000 new claims
> versus the 325,000 forecast is good news.
>
> Another couple of weeks of improving data and we may well see a continuation
> of the equity run. Investors are looking for reasons to invest and
> even the pessimists are slowly coming round - though I admit the
> US still faces significant structural challenges not least government
> debt.

Earnings on Deck - Three Companies That Look the Best

Precisely


On Jul 17 03:47 AM TradingHelpDesk wrote:

> Freerange, I empathise with some of your views but I do believe that
> it is useful to look at issues like instrinsic and economic value.
> It may not tell us where the stock will be next week or even in 3
> months - market wide risk appetite is more key over short term horizons
> - but if you as an investor are keen to pay fair value at most for
> a stock then this excellent articel and others like it will help
> you.
>
> If you just want to chase the market trend then of course there are
> other methods that would suit you better.