My Financial Analysis of Stocks

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These are my Financial Analysis on stocks using Value and Growth Investing methods, particularly Buffettology. These methods typically require the Intelligent Investor to buy and hold the stock for 10 years or more. For those that are Day Trading or are buying and selling stocks within a year's time frame, this method will NOT work for you. Any information is solely for educational purposes, not for trading purposes or advice.

We use Google Spreadsheet to do our analysis because it is capable of delivering the stock price in real-time. The calculations in our analysis changes in real-time as the stock price changes every 20 minutes.

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Looks Like Capitulation in Viacom (VIAB)

posted Nov 17, 2017, 10:37 AM by Intelligent Investor   [ updated Nov 17, 2017, 10:38 AM ]

Capitulation is when large institutional investors give up on a stock and sell all of their holdings in that stock. Capitulation is a sign of a bottom for a stock. It means that everyone that needed to sell that stock for any reason has already sold. There are no more large institutional sellers left.

A few signs of Capitulation are:
1) The company delivers bad news and yet the stock price does not go down much.
2) The company delivers bad news but the price has become so cheap so the stock price actually goes up.
3) Large volume meaning large institutional holders are giving up or buying.

Signs of Capitulation in Viacom (VIAB):
1) The company delivered bad news when they announced earnings yesterday 11/16/2017, but the stock price didn't go down much. It actually bounced back from its lows.

2) And if you look at the chart below, the stock price bounced back from its lows yesterday and soared almost 10% today 11/17/2017 without any significant good news about the company. The price is so cheap with a P/E Ratio of 5.56, the price actually goes up.

3) Yesterday 11/16/2017 there was large volume while to stock price was going down meaning large institutional investors are giving up. And today, there is large volume again as the stock price is going up 10%, this means that large institutional holders are buying because of Viacom's overly cheap valuation, P/E Ratio is at 5.56!

Source: Google Finance

Disclosure: We own shares in Viacom (VIAB)

IBM's Fortunes Finally Turns Around Today

posted Oct 17, 2017, 4:03 PM by Intelligent Investor   [ updated Oct 20, 2017, 1:58 PM ]

Warren Buffett purchased IBM shares in the year 2012 worth billions of dollars. Yet the stock has pummeled and has been pounded downwards for the past 5 years. The company's revenue has been dropping due to their exit of the computer business. IBM sold their computer business and invested into the Artificial Intelligence business. Wall Street didn't seem to like the drop in revenue so their stock has dropped and stayed flat for 5 years.

Today, their fortunes seems to be turning around. Their investment into the Artificial Intelligence business seems to be paying off. The drop in revenue has bottomed out. Wall Street seems to like it. The stock is up 4% today after-hours when they announced earnings.

See article here:

Update 10/18/2017
IBM's stock price surged 13% today. The company is making headlines regarding their turn around. I think this is it. Our long wait is over.

Disclosure: We own shares in IBM.

Exchanged AT&T (T) for Time Warner (TWX) and Dumped Hilton Worldwide (HLT)

posted Sep 1, 2017, 4:34 PM by Intelligent Investor   [ updated Sep 1, 2017, 4:36 PM ]

I exchanged AT&T (T) for Time Warner (TWX). Their merger currently gives TWX a 6% premium. AT&T is offering $107/share for TWX. Time Warner is currently priced at $101/share.

Time Warner's (TWX) Current Price = $101/share
AT&T (T) Offer = $107/share

$107/$101 = 1.06
(1.06 - 1) x 100% = 6%

I like AT&T. I think AT&T will be around forever. But we could sure use a 6% gain. We sold all of our AT&T holdings and bought Time Warner (TWX).

Hilton Worldwide's (HLT) Forward P/E Ratio is currently at 35 which is expensive. We see other things we like better.

HLT Forward P/E Ratio = 35

Disclosure: We own shares in Time Warner (TWX) and no longer own shares in Hilton Worldwide (HLT)

My Stock Holdings 2017

posted Aug 28, 2017, 6:46 PM by Intelligent Investor

Hilton Worldwide Holdings (HLT) split into 3 companies. So we now own the following 3 Hilton companies:

1) Hilton Worldwide Holdings (HLT)
2) Hilton Grand Vacations (HGV)
3) Park Hotels and Resorts (PK)

The crown jewel of this split is Hilton Grand Vacations (HGV).

Berkshire Hathaway added Synchrony Financial (SYF) and Barron's Magazine had a favorable article right after Berkshire added it to their portfolio. Thus, we didn't do research on this stock purchase. We just trusted the professional opinion of others.

Repurchased Apple After Warren Buffett Confirms He Purchased it

posted Jun 5, 2017, 12:35 PM by Intelligent Investor

As a rule-of-thumb, if an investment has a Return on Equity (ROE) of greater than 30%, it means the company has a Durable Competitive Advantage.

Apple's Return on Equity (ROE) is at a staggering 34%. In the book Buffettology*, the ROE is the anticipated compounding growth rate of a company's earnings for the next 10 years. The last time Warren Buffett invested in a company with an ROE of greater than 30% was in 1994 when he purchase Coca-Cola (KO). Coca-Cola turned out to be one of Buffett's most lucrative investment.

I should have seen this coming.

I've always thought that Apple was a technology company and Warren Buffett has always advised against investing in technology companies because of the amount of money that they spend on Research and Development. Technology companies spend so much money on Research and Development that they are unable to significantly grow their Shareholder's Equity. Shareholder's Equity is also called Total Equity.

However, Apple seems to be an exception to this rule. They have the lowest Research and Development to Gross Profit Ratio when compared to other Technology companies. And their Shareholders' Equity (also called Total Equity) is at $119 Billion for the year 2015. This means Apple is able to grow their Shareholders' Equity because of their low Research and Development to Gross Profit Ratio. In other words, when compared to their Gross Profit, the money they spend on Research and Development is small, and thus, the company can save more money. The more money they save, the bigger their bank account grows. The bigger their bank account grows, the bigger their Shareholders' Equity will grow. As Apple's Shareholders' Equity grows, the value of the company will also grow.

 Company  Research and Development for the Year 2015 (Millions)  Gross Profit for the Year 2015 (Millions)  Research and Development to Gross Profit Ratio
 Apple  $8,067  $93,626  8.62%
 IBM  $5,247  $40,684  12.90%
 Microsoft  $12,046  $60,542  24.16%
 Google  $12,282  $46,825  26.23%
 Facebook  $4,816  $15,061  31.98%
Table 1: Apple has the lowest Research and Development to Gross Profit Ratio when compared to other technology companies.

We sold Apple some time last year and now we are buying it back.

Mary Buffet, Clark, Buffettology, Chapter 16

Disclosure: We own shares in Apple.

Purchased Hilton Hotels in Anticipation of a 3 for 1 Stock Spin-Off

posted Feb 28, 2017, 2:06 PM by Intelligent Investor   [ updated Mar 1, 2017, 6:12 PM ]

Last December I purchased Hilton Hotels in anticipation of a 3 for 1 stock spin-off. In other words, Hilton Hotels will be splitting into 3 independent companies. The most undervalued part of their business is their timeshare operation, Hilton Grand Vacations.

You have to own the stock by December 15, 2016 to take part in the stock spin-off.

Hilton Hotels split into the following 3 independent companies:
1) Hilton Worldwide Holdings (HLT)
2) Hilton Grand Vacations (HGV)
3) Park Hotels and Resorts (PK)

Hilton Grand Vacation (HGV), which is the crown jewel of Hilton Hotels, is only trading at a P/E Ratio of 12 right after the spin-off. Compare that to Marriott Vacations' (VAC) P/E Ratio of 20, HGV looks like a clear bargain with plenty of upside. HGV's Return on Assets is at around 9% whereas VAC is at around 6%. HGV is getting a much better return on their assets when compared to VAC.

Park Hotels and Resorts (PK) becomes a Real Estate Investment Trust (REIT). It is the parent company of the Waldorf Astoria, an ultra luxury resort and hotel chain. After the split they announced a quarterly dividend of $0.43 cents which come out to $1.72 per year. Using the after split price of $30 per share, that would give us a return of 5.5%. Bonds are currently averaging at around 3.5%. Thus, PK is a good place to park our money while we wait for a great investment to purchase. Once we find a great investment to purchase, we will sell PK in exchange for that great investment.

As for Hilton Worldwide Holdings (HLT), I think it is a decent investment. It isn't great, only decent. I'll just keep it until I find something better.

Warren Buffett's 5 Best Investing Tips

posted Sep 26, 2016, 3:13 PM by Intelligent Investor   [ updated Aug 19, 2017, 4:26 PM ]

1) Don't buy or sell based on the headlines.
2) Don't try to profit from bubbles.
3) Put your emotions aside.
4) Always invest in productive assets.
5) Always invest in America.

Sold Wabco (WBC) to Raise Cash in Case there is a Recession

posted Sep 6, 2016, 3:46 PM by Intelligent Investor   [ updated Sep 7, 2016, 10:22 AM ]

The signs of a recession are getting stronger so I've decided that I needed to raise cash. Out of all the stocks I own, Wabco (WBC) seems to be the weakest link. The stock's volatility is high, the P/E ratio is at 30 which is expensive, and it doesn't pay dividends. On a separate note, Berkshire Hathaway's recent 13F filing shows they've reduced its exposure to Wabco. So I basically just sold Wabco at the around the same price I bought it. I just broke even on this trade. The only lost I had is $40 bucks on trading fees. Oh well, better safe than sorry. The main concern is that if a recession does come, then I'll have some cash to put to work.

Note: Over the long term, I believe Wabco (WBC) will do very well.

Sold Chicago Bridge and Iron

posted Aug 23, 2016, 3:54 PM by Intelligent Investor   [ updated Aug 25, 2016, 9:50 AM ]

Chicago Bridge and Iron (CBI) comprise 2.5% of my overall portfolio. I first bought this stock at around $46/share. I sold it at $34. So, I basically took a 30% loss on this investment. My portfolio took a hit of a 0.75% loss from this investment.

Chicago Bridge and Iron (CBI):
Portfolio Allocation: 2.5% = 0.025
Loss: 30% = 0.30
Total Loss = 0.025 x 0.30 = 0.0075
0.0075 x 100% = 0.75%

I sold it because I saw better values and less risk with other stocks such as AT&T (T), Goldman and Sachs (GS), Phillips 66 (PSX), and Qualcomm (QCOM). And I just got tired of waiting for the price to rebound to $46/share. In addition, Warren Buffett exited his position in CBI. The problem with CBI is that the price of oil is directly correlated with the company's ability to make money. Oil prices are still falling at this time which means there is a lot of risk here.

As a note to others:

When investing in a risky stock DO NOT invest no more than 5% of your portfolio in that stock. The riskier the investments, the less weight or allocation you should have of that investment in your portfolio.

For example:

Wabco (WBC) is a risky investment, so it only comprises 5% of my portfolio.

Chicago Bridge and Iron (CBI) is a riskier investment than WBC, so it only comprises 2.5% of my portfolio.

Viacom (VIAB), another very risky investment, only comprises 2% of my portfolio.

5 Things to Keep in Mind for Entrepreneurs

posted Mar 17, 2016, 12:04 PM by Intelligent Investor   [ updated Mar 18, 2016, 9:54 AM ]

Interesting article from Mark Cuban.

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