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IIEX 1Q-2015 Newsletter

|Includes: Level 3 Communications, Inc. (LVLT)


Market View update (as of 03/16)

Our latest article on market trends was "A Unique Way To Use The Shiller PE As A Market Indicator" on November 13. The market has become slightly more expensive since oyr last newsletter. The following graphs are produced from Excel using the SMF add-in:

Below we will compare the current graph (2nd graph) to the status as of last quarter (1st graph)

The market has moved into overvalued territory but as you can see not close to the internet bubble of 2000. No one can know how high the market will go before the next correction but as the market veers higher into overvaluation territory so does risk. Finding bargains also become increasing difficult for the same risk/reward profile compared to the last five years. For a historical perspective including 1929 click here or create your own graphs using the web interactive model here.

My view hasn't changed since December, i.e., at this point I'm neutral on the market and accumulating cash when individual holdings become overvalued to take advantage of any bargains that may appear on the radar; although it would probably take a small correction to generate the types of bargains that fit my criteria. My present screening list can be found here. As of today I am long the following stocks on the list as it exists today (today=03/16/2015); CHK,FTR,GE,LVLT,MSFT,PFE,RRD, short puts in CAT,CHK,EMN,HAL,LVLT, and long calls in LVLT.

Focus Stock (NASDAQ:LVLT)

Level 3 Communications was made the IIEX focus (replacing Telular) in July 2013 after LVLT announced a change in leadership and direction. LVLT is trading at a discount to the IIEX fair value as of this writing. One new article was added since the last newsletter:

Level 3 Communications: A Long Idea Still Priced At An Attractive Discount To Fair Value

The article linked above is an update to our last article, "Level 3 Communications: A Long Idea At An Attractive Value" which is an in depth look at the company. We discussed the following topics in the last article and this article will update topics that have changed as indicated below:

Management Change - UNCHANGED
TWTC Acquisition - UNCHANGED
Financials (Pro-Forma) - UPDATED
Growth outlook (Pro-Forma) - UPDATED
Valuation (Pro-Forma) - UPDATED
Debt (Pro-Forma) - UPDATED
Competition - UNCHANGED
Open tax issues - UNCHANGED
Final thoughts - UPDATED

For additional information visit our website or click the links below:


Financial Model Download; results, projections and charts-click here

Interactive Web Model

Group Insider Transactions

Link to IIEX SA Articles

Short Interest Table & Graph


Our current fair value as of this writing is $70. The market price as of this writing is $54.50 The stock has more than doubled since July 2013 (price approx. $21). Our fair value is based on recent results and updates on the integration of TWTC. The LVLT Excel spreadsheet is available to supporters of the website.

Price summary by month (source Yahoo)

NOTE: The "Max Entry Target" is based on my personal risk tolerance, i.e., I demand a substantial discount from my Fair Value calculations. The targets can be adjusted based on individual preferences.

Template updates during the quarter (for website supporters only)

The latest updated Excel (Web Query) templates are detailed here. The flagship template (IIEX_FairValue Analysis which I still consider a beta file since it is still under development but available for use to site supporters) includes updates not shown in the original video or the second video which highlights updates added to the original found here. NOTE: there have been major updates not yet on video such as the ability to generate pro-forma financials, manually entering historical financial data when not available via downloads or to fill in missing information etc., and downloads various analyst estimate data for information, plus more links and graphs.

The latest updated templates for the SMF add-in are detailed here and other files detailed here.

These templates collect data from free websites, i.e., they work for as long as 3rd party websites continue to provide data that can be grabbed by Excel's web query.

Any feedback on the site, articles or if you have access to the templates is always welcome at the email below ( ).


Additional disclosure: Disclosures listed in the newsletter