'Dirty 30' Evaluation Tool - Part 2

by: Cory Cook

Okay, so if you haven't read part 1 of the series, then go ahead and click here to go there. Then, of course, come on back and continue in on this journey!

If you are reading this, then you have either read part 1 or really just don't care to go back and read my past posts. Either way, I'm glad you are here because today, we are going to go through the top section of the Dirty 30 evaluation for Hormel Foods Corp. (NYSE:HRL).

As you can see, there has been a few changes to the layout from the part 1 evaluation. There were a lot of questions by those who read the first post about what the value rating meant. Also, there was a small glitch in the background data that had this rated at 50% instead of 67%. This has now been remedied, as you can see below.

In today's post, I want to lead you through the top section that I lovingly call the "I hate analysis" section. This also could be called the lazy man's section or even the I just want to know value section.

This section is made up of 5 parts:

Ticker Symbol

This section really doesn't need any explanation. This is simply the symbol of what stock we are looking at. As you can see, we are taking a look at HRL (Hormel Foods Corp.). Nothing groundbreaking there.

D30 Safety Rating

This is the overall rating that I give the stock, based on the six categories that have been analyzed. This rating (changed from the value rating) indicates just how safe I believe it is to add this company to a long-term portfolio. Under 50% and I think it may be more of a risk (at this time or price) to add to your portfolio than the potential future gains. Over 50% and I believe that it has more reward than risk. If it has an even 50% rating, then there better be something I like about the future of the company, whether it be management, moat, or industry. In simple terms, I wouldn't buy under 50%, I would over 50%, and at an even 50% I look for another opportunity if the valuation isn't warranting a risk.

But... Does this mean that a company with a high or low rating is automatically a buy or sell? Absolutely not. This is simply a snapshot of how safe I think it is to invest in a company AT THIS TIME! Notice that I take a lot of the analysis from Q1 of the current year and Q1 of the previous year. As a long-term investor, I like to make my judgement over a long timeline and by using a combination of annual reports, 5-year and 10-year data. The company could have a very different look if significant events have occurred in the recent months. That being said, I rarely have seen a massive change in my opinion on a company, in terms of the safety rating, on a quarter-to-quarter basis.

D30 Buy Under Price

Now, when I tell you this, you probably will pull your hair out because of the simplicity, so go ahead and put on a hat. My buy under hat is simply a 10% discount from my Value Projection. This is because my current yearly return goal is 10%. Yes, it is that simple!

Current PPS

This is what the stock currently is priced per share. Obviously, this does not update due to it being a PDF, but it is the current price when the analysis was performed.

D30 Value Projection

Last but definitely not least is the D30 Value Projection. This is basically a fancy way to say price target. This is what I believe that the stock is actually worth. This is based off a series of 5-year and 10-year numbers, along with all of the information that you have found in the actual analysis.

What is the exact equation?

That my friend is for me to keep as my secret. Anyways, this may not even be correct (although I believe it is). Please, and I beg you, do not use that price as the sole reason take a position in a company. This is just like a price target you see from any analyst, it could be right or wrong. Remember that there is no telling what the market will do.

Conclusion

I hope this gave you a bit more understanding about the first section of the D30 analysis. Please do not take that as the gospel, but instead, use it as just another small piece of your research when selecting a stock.

As always, thanks for reading, and let me know if you have any questions or comments!