tryhard's  Instablog

Individual Stock Analysis

At the FNIC Partnership February meeting (02/07/2013) we evaluated several stocks, Oracle (ORCL), Qualcomm (QCOM), and Hain Celestial (HAIN).

Oracle (ORCL):

1. I currently hold an equity position in this stock.

2. EPS growth over the next 5 years is estimated to be about 11.5% annually.

3. To estimate a future price for this stock I forecast a reasonable range for PE ratios over the next 5 years to be between 13.5 and 21.

4. My "Upside" stock price estimate (long-term high price 5 years in the future) is expected to be as high as about $71/share and my "Downside" stock price (near-term worst-case scenario) could be as low as $21.5.

5. I have owned this stock since Jun. 2007, and have been happy with its performance over the time since I bought it.

6. I bought this company, in part because of its leadership and dominant position in the software industry and because it seemed to be skillfully executing a strategy of product development and service that would continue over the intermediate- to long-term. This seems to still be true today.

7. I expect the performance of this stock to continue on track in a reasonably predictable manner, despite its lack of price strength in the past couple years.

8. Based on the current price of about $34.43/share I put this stock in the Hold Range. At prices below $34 I consider this stock to be in the Buy Range, depending on other stock specific, portfolio and general market dynamics or concerns.

9. This stock has a dividend yield of 0.7% and its dividends have grown predictably over the last few years.

Qualcomm (QCOM):

1. I currently hold an equity position in this stock.

2. EPS growth over the next 5 years is estimated to be about 14% annually.

3. PE ratios over the next 5 years are expected to be as high as about 23.3 and as low as about 14.5.

4. My "Upside" stock price estimate (long-term high price 5 years in the future) is expected to be as high as about $149/share and my "Downside" stock price (near-term worst-case scenario) could be as low as $42.50.

5. I have owned my current position in this stock since Apr. 2010, and have been happy with its performance over the time I have owned it. I also owned a position in this stock from mid-1998 through about 2007, but periodically sold portions of my holdings from late 1999 until finally selling all remaining holdings in 2007 because of concerns for the U.S. economy.

6. I bought this company, in part because of its leadership and dominant position in the global communications technology and manufacturing industry and because it seemed to be skillfully executing a strategy of product licensing, development and service that would continue over the intermediate- to long-term. This seems to still be true today.

7. I expect the performance of this stock to continue on track in a reasonably predictable manner.

8. Based on the current price of about $66.73/share and at any price below $69, I put this stock in the Buy Range, depending on other stock specific, portfolio and general market dynamics or concerns.

9. This stock has a dividend yield of 1.5% and its dividends have grown predictably over the last few years.

An analysis of Hain Celestial (HAIN), a non-portfolio stock, was also presented by one of the partners:

1. I do NOT own this stock.

2. EPS growth over the next 5 years is estimated to be about 20% annually.

3. PE ratios over the next 5 years are expected to be as high as about 22.2 and as low as about 11.

4. I have never owned a position in this stock at the time this entry was written.

5. The "Upside" stock price estimate (long-term high price 5 years in the future) is expected to be as high as about $103/share and the "Downside" stock price (near-term worst-case scenario) could be as low as $37.

6. This company is evaluated and considered, in part because of its leadership and dominant position in the food manufacturing and marketing industry, because of the strength of its revenue and earnings growth in the last two years, and because it seemed to be skillfully executing a strategy that would continue over the intermediate- to long-term.

7. I expect the performance of this stock to continue on track in a reasonably predictable manner.

8. Based on the current price of about $57.50/share, this stock is in the Hold Range. At prices below $53.50 the stock is in the Buy Range, depending on other stock specific, portfolio and general market dynamics or concerns.

9. This stock does not pay a dividend.

Table 1. Summary information for three recently evaluated stocks.

FNIC Partnership Portfolio Management

--Feb. 2013 portfolio changes:

There were no SELL decisions. BUY decisions were to use Cash to increase holdings in Qualcomm (QCOM) by 25%.

--Jan. 2013: There were no SELL decisions. BUY decisions were to use Cash to make an "initial buy" in National Oilwell Varco Inc. (NOV) and an "initial buy" in Echo Global Logistics Inc. (ECHO).

--Dec. 2012: NO CHANGE to portfolio holdings.

Table 2. Valuation, capitalization and performance information on current portfolio stocks.

Table 3. Allocation and estimated growth and price information on current portfolio stocks.

¹The Upside-to-Downside Ratio (U/D) is a tool that allows quick analysis of where the recent price falls in the range of estimated high price (upside) to low price (downside) estimates. A reasonable rule-of-thumb is that a long-term fundamental investor should look for an U/D greater than 3.0 (three times more upside-gain-potential than downside-loss-potential). Buying only stocks with U/D of 3.0 or greater gives an investor a hedge against the risks of unforeseen circumstances or the possibility that their analysis over estimates the true value of the stock. [U/D = (High Price Est. - Recent Price)/(Recent Price - Low Price Est.)]

Disclosure: I am long COST, CTSH, DTV, ECHO, IPGP, LKQ, NOV, ORCL, PG, QCOM.

I am a general partner in an investment partnership that was first organized in 1987. Our primary focus is owning a portfolio of individual publicly traded stocks that we have researched for ourselves using fundamental analysis tools.

Included here is our portfolio allocation to the ten stocks we currently hold as well as our current cash allocation. I have also included brief notes on the changes we have made to the portfolio in the past few months. In the future I will continue to update followers on buy and sell decisions we make and add more details and logic behind those changes.

Current Portfolio:

1. Cognizant Technology (CTSH), 11.9% of total portfolio value

2. Costco Wholesale (COST), 11.4%

3. DIRECTV (DTV), 8.1%

4. Echo Global Logistics (ECHO), 3.7%

5. IPG Photonics (IPGP), 5.2%

6. LKQ Corp. (LKQ), 13.2%

7. National Oilwell Varco (NOV), 5.3%

8. Oracle Corp. (ORCL), 10.6%

9. Procter & Gamble (PG), 10.0%

10. QUALCOMM (QCOM), 9.7%

11. Cash, 10.7%

--January 2013: There were no SELL decisions. BUY decisions were to make an "initial buy" in National Oilwell Varco Inc. (NOV) and an "initial buy" in Echo Global Logistics Inc. (ECHO).

--December 2012: NO CHANGE to portfolio holdings.

--November 2012: SELL decisions were to decrease holdings in Emerson Electric (EMR) by 100%; and Stryker (SYK) by 100%. BUY decisions were to make an "initial buy" in IPG Photonics (IPGP).

--October 2012: SELL decisions were to decrease holdings in LKQ Corp. (LKQ) by 36% to realize capital gains from recent price appreciation. There were no BUY decisions.

--September 2012: SELL decisions were to decrease holdings in Johnson & Johnson (JNJ) by 100%; NVE Corp. (NVEC) by 100%; and Synaptics (SYNA) by 100%. BUY decisions were to increase holdings in Cognizant Technology (CTSH) by 100%.

Disclosure: I am long COST, CTSH, DTV, ECHO, IPGP, LKQ, NOV, ORCL, PG, QCOM.