Seeking Alpha


Send Message
View as an RSS Feed
View wdchil's Comments BY TICKER:
Latest  |  Highest rated
  • IBM: Revenue Concerns Are Overblown [View article]
    ER, there is a reasonable (in my opinion fairly high) likelihood that IBM earnings will have roughly a $20 annual run rate within two years. A below DOW PE of 14 would provide a $280 share price. This seems compelling and one of the best risk-adjusted values I have seen. What am I missing?
    Apr 21 11:28 PM | Likes Like |Link to Comment
  • IBM: A Decent Q1 But Worse-Than-Expected Outlook [View article]
    Yes - the reduction from 230 to 180 assigns too much value to the hardware business. The strategically valuable portion of the hardware business is mainframes - small in revenue but important in related software and service products. That portion of the hardware business still appears healthy and there is no real competitor. Assuming that IBM is likely to hit close to $20/share in earnings for 2015 what would that tell you about the likely valuation then?
    Apr 20 02:08 PM | Likes Like |Link to Comment
  • General Electric: The Beginning Of The Industrial Breakout [View article]
    GE's 9 year record (2004-2013):

    Share count decreased from 10.4 billion to 10.3 billion (no change)
    Net income decreased from $16.6 billion to $13.0 billion
    EPS decreased from 1.59 to 1.27

    Keep in mind that earnings and EPS actually peaked in 2007 at $22.2 billion and 2.17 respectively. The 2008/9 downturn showed how overexposed and aggressive GEC had become - and this was under the current management's watch. The solution is to downsize the financial unit but a better solution would have been to have more rigorous credit risk standards.
    Apr 18 10:48 AM | 2 Likes Like |Link to Comment
  • Is Doing Its Very Best To Increase Earnings [View article]

    If you want a proxy for online sales UPS is a good option. Arguably they dominate shipping as much as Amazon dominates online retailing and should have the roughly same growth rate. UPS sells for 16.6 X forward earnings (Morningstar) and 12.6 X cash flow. They generated over $5 billion in FCF in the latest FY. Decent valuation and very good growth prospects going forward. Probably not much risk there.
    Apr 17 07:29 PM | Likes Like |Link to Comment
  • Buying More Google On The Pullback [View article]
    VBBV - That is exactly what I don't like about Google. I also don't like the lack of management accountability due to the share voting rights. Compare all this to Apple - where company investments have been very shareholder-friendly.

    That said, their core business seems to have tremendous value - if the share discount is large enough then I will be a buyer - but the discount requirement is larger due to those issues you mention. Google has a $360 billion market cap so that at best it is in the "base hit" category as opposed to a home run (Apple at $90 was a home run).
    Apr 17 12:37 PM | 4 Likes Like |Link to Comment
  • Coca-Cola: Implications Of Its Correlation To Interest Rates [View article]
    CCM, some dividend payers are more tied to the economy and/or commodities and thus the correlation might be weaker. Examples might be XOM or COP which benefit from commodity inflation or IBM which benefits from a stronger economy to a greater extent than KO - although KO can push through price increases during periods of inflation and/or economic expansion. Bottom line - the top dividend growers can be a little bond-like but do have some big advantages!
    Apr 17 11:29 AM | Likes Like |Link to Comment
  • IBM Finally Breaks Out: The Earnings Update. [View article]
    A few comments:

    (1) The 2015 "forward PE" of IBM is just over 9 versus a value of 17 for VIG (which holds quality companies with a track record of growing dividends. Thus the average such company must outgrow IBM's EPS by a large factor to justify the difference.

    (2) IBM's debt is mostly covered by financial receivables. The aggressive share purchasing is tilting the balance but not enough to affect any ratings.

    (3) Other metrics such as return on equity (+79%) are compelling. IBM's acquisitions are of the smaller bolt-on variety that tend to be very focused and high return.

    The time value of money for this investment seems quite favorable.
    Apr 17 11:04 AM | 2 Likes Like |Link to Comment
  • Wal-Mart: Not Really Cheap [View article]
    "past performance does not guarantee future results"

    That is true of any business. But their current US-based growth initiatives seem promising.
    Apr 16 09:44 PM | Likes Like |Link to Comment
  • Wal-Mart: Not Really Cheap [View article]
    The forward PE is about 13 and most of the capital investment is investment to expand the business - which suggests that the owner earnings based PE is probably lower. Thus the "owner earnings yield" is perhaps 8% making the adjustment. WMT generates a 21% ROE suggesting that the earnings yield still understates the potential return. Capital spending almost equals earnings ($13 billion in annual CAPEX versus net income of nearly $17 billion). Given the 21% ROE that sounds pretty good looking forward.

    Thus I disagree with the author. I think looking at the last 9 years (which has had periods of negative same store sales) tells the story:

    Share count reduced from 4.27 billion to 3.28 billion
    Net Earnings from 10.2 billion to $16.0 billion
    EPS from $2.41 to $4.88 (up 100% in 9 years)
    Apr 16 06:02 PM | Likes Like |Link to Comment
  • Why Investors In Tesla, Netflix, And Amazon Have A Rough Five Years Ahead [View article]
    " is Doughtery's analyst Andrea James projecting eps of $15, when Tesla hits 500K units per year, which the most bullish analysts see in 2020..."

    Estimates like that are pure speculation. I have a rule of thumb - if a company can't reasonably show earnings equal to at least 10% of the share price within 3-5 years then I look elsewhere. And this has to be reasonable, not optimistic hyper growth (look at the JDS Uniphase estimates around the year 2000 if you want to see optimism) There are a lot of companies that meet that requirement, and Tesla is not one of them.

    While the author's survey numbers may be off his conclusion still seems reasonable.
    Apr 15 11:00 AM | 1 Like Like |Link to Comment
  • A Bit Of Rot Beneath Hewlett Packard's Shiny Surface [View article]
    Don and laugher - good points - this is not one of my significant holdings anyway - but I certainly wish the best for the company as a former employee. Lots of good people there but a few bad apples certainly can hurt morale and reputation and as such these revelations can be quite irritating. With such far flung and complex operations it can be difficult to exert controls everywhere I suppose and hopefully management will find a practical way to rein in these problems. The best way to do so is to consider the character of the persons you are hiring. A bunch of e-courses on ethics may help mitigate lawsuits but can't compensate for dishonest employees or contractors.
    Apr 12 03:18 PM | Likes Like |Link to Comment
  • A Bit Of Rot Beneath Hewlett Packard's Shiny Surface [View article]
    Don - it is important to keep the perspective - this is $100 million out of 100+ billion. So this is less than 0.1% of revenue for a company with a 7+ % operating margin. I would have to say - insignificant. This is probably a localized problem to a particular team and will probably be stamped out - HP's general counsel seems very conservative and likely won't put up with that kind of behavior.

    More important is the path forward for the businesses and this I am less sanguine about. The business seems stable but much of it is either in commodity hardware or experiencing secular headwinds. The burden for HP is to demonstrate some areas of significant growth - for a $112 billion revenue company.
    Apr 12 02:00 PM | Likes Like |Link to Comment
  • Projected T-Bill Rates Peak At 3.92% For 2021, Down 0.13% From Last Week [View article]
    "The 10-year U.S. Treasury yield is projected to rise from 2.65% at Thursday's close (down 0.15% from last week) to 3.037% (down 0.15% from last week) in one year."

    As always, thanks again for your article. The taper seems like it will bias rates upward while WW sluggish & slightly positive economic news and WW rates seem to pull the other way. So the implied forecast seems reasonable as a conservative measure for the next year.

    One question: The 10 year US treasury seems to consistently yield substantially more than comparable rates in countries like Germany and Switzerland. For example the German 10 year is only about 1.5%. That seems like a huge difference! Why is that?
    Apr 12 01:49 PM | Likes Like |Link to Comment
  • Retirement Strategy: Is Boring Becoming Bubbly? [View article]
    RS, Some of your companies (e.g., XOM, Apple) have aggressive buyback programs and most do some buybacks. A big market downdraft improves the effectiveness of the buyback program. The only downside of a downdraft is if you are planning to sell or take a haircut. Otherwise downdrafts are favorable longer term because we get to own a bigger percentage of the company.

    One more comment regarding buybacks - some companies like John Deere (DE) modulate their buybacks to bump them up during periods of pessimism. This even further enhances the long term effect. Others are more like dollar cost averaging - and so they sometimes buy when the price is high.

    Apr 12 01:11 PM | Likes Like |Link to Comment
  • Apple's Laptop Opportunity [View article]
    Agreed - but it may be a tough decision for Apple because they don't want to orphan their higher end Intel-based offerings. As my comment below indicates the threat of this may be enough to get Intel to come up with something more compelling. We will see. If Apple does go that route then they will need to greatly increase their A-series investment - and that probably does not make sense because the high end is too low in unit volume to justify the large added overhead.
    Apr 11 02:15 PM | 1 Like Like |Link to Comment