Having spent the last three and a half years in the US Army, SpartanNash (SPTN) trucks delivering goods to various military commissaries was no uncommon sight for me. Having just left the Army, I realize that I miss many things, not least of which is the affordable, convenient and rather diverse assortment of goods easily found in a military commissary. If you’ve never been to a military commissary then I’ll explain, a military commissary is a type of fantastic grocery store, a truly wonderful establishment for any hungry soldier with a little bit of cash in his pocket, and this is all thanks to long term contracts with SpartanNash (SPTN). •Distributeur of food, retail and tobacco products to various military posts and grocery/retail establishments in all 50 states •Down 50% over the last 12 months and currently less than a dollar above 52 week low •price/book .60 — price/cash flow 3.3 •6.60 dividend yield •15% dividend growth last five years SpartanNash (SPTN) has had a rough year with poor earnings and some internal revamping, however, its deterioration in price is not proportional to its struggles. SpartanNash (SPTN) is poised for an exceptional few years ahead. They have a solid niche, long term safe contracts with the federal government, an incredible distribution network and a sought after product line. Additionally, the currently inflated, solid and growing dividend will supplement your income for the possibly long wait until the stock price aculizes to its true value. It is my assessment that SpartanNash (SPTN) is a 25 dollar company. I currently do not own SpartanNash (SPTN), however I will update when I eventually purchase this company
By. Tyler R. Martin
Sibanye Limited (SBGL) has been surging following the conclusion of the AMCU unions strike. The agreement includes a three year wage agreement including 4000 Rand in cash to each of the 14000 South African workers who will now be reassuming gold productions. This will allow Sibanye Limited (SBGL) to sell gold at gold’s current price (1275 dollars per ounce) and will will bolster the struggling balance sheet to acceptable levels within the next year…buying SBGL now at its current price of 4.07 dollars per share would certainly be considered a steal and the increased production over the next several months will drive the price even higher.
Blackstone LP is an asset management Limited partnership which I personally have done very will with over the past three years. Currently trading at 39.46 dollars per share, the price has of late remained quite stagnant, with the majority of my unrealized capital gains occurring over the past week, however, I have slowly accumulated several shared between the prices of 30 and 40 dollars and have collected an average distribution of ~8%. Interestingly enough, the reason for the growth of late is the result of the management’s decision to change the Limited Partnership status of the company to a C Corp, meaning it will operate more like that of a normal company. This will allow Blackstone to be bought up by more institutional investors and will cause an influx of investable cash in the next several years (the BX management team has an excellent track record for return on investment). It is my assessment that this will lead to significant appreciation of the share price and a more stable and steadily growing dividend.
Full disclosure, I own shares of both of these companies and have no plans of selling any time soon
By Tyler R. Martin
This is a weird one for me…Sibanye Gold Limited (SBGL), a South African mining company with a market cap of 2.3 billion, boasting consistently negative earnings, no dividend, is currently dealing with a massive workers strike at some of its key gold mines and has recently flooded the market with shares. But on the plus side, its a solid company with solid, potentially explosively high yield assets, operating in an undervalued, economically depressed industry and can be bought insanely cheap at the current price. Sibanye Gold Limited (SBGL) is currently trading at a ridiculously inexpensive 3.83 dollars per share. In mid 2016 it traded at its all time high: just a few cents short of 20 dollars when gold was holding firmly North of 1300 dollars per ounce. Additionally, in 2016, Sibanye Gold Limited (SBGL) had no annoying workers strike and several spectacularly producing mines. This stands in stark contrast to today. Today, the price of gold stands at a reasonable 1278.70 dollars per ounce, however, due to a strengthening dollar, the commodities markets have been inconsistent to say the least. Recently, Sibanye Gold Limited (SBGL) has acquired Stillwater mine, a major U.S. producer of palladium, a crucial metal used ubiquitously in the auto industry. This metal is almost certainly responsible for Sibanye’s very positive Price to Cash Flow ratio of 7.84x earnings. The acquisition has long term positive implications due to the high demand of the metal, but the debt utilized for the acquisition has caused short term negative sentiment for the company. To compound these complications, a severe worker’s strike has set back the company even more significantly in recent months. Due to this strike Sibanye Gold Limited has, in order to form a stable war chest to weather the length of the strike, issued new shares to the market at ~4 dollars per share. This has further depressed the share price.
So, the previous 300 words of this article have listed several reasons, from the perspective of the intelligent value investor, not to buy a single share of this company, and it is for these reasons that I will not employ my usual writing strategy of producing several numeral statistics indicating why a company is worth your attention…Sibanye Gold Limited’s stats will do nothing to help my case….they are not very good. However, I have done very well in the past buying depressed miners and hanging on to them, waiting patiently for the market to turn around and, as long as the underlying company has intrinsic value, it always does. Based on past performance, its underlying assets and factoring in the obvious reasons the stock price has collapsed, it is my belief that Sibanye Gold Limited (SBGL) will turn around in a spectacular fashion once the industry rebounds and the strike is resolved. I believe that this company should be bought with both hands while the getting is good…I know I will be.
Full disclosure, I personally own shares of SBGL and have no intention of selling until the price has appreciated significantly.
By. Tyler R. Martin
Founded in 1898, Goodyear Tire (NYSE: GT) is a truly old world company with solid roots in the American economy. Their services will not go obsolete due to technological advances (even self driving cars will need tires and repairs), and a has a trusted name rooted into generations of American motorists. Much like Coca Cola (NYSE: KO), the mantra of “my dad drank Coke so I drink Coke” can easily be applied to Goodyear Tire and so, in consequence, putting Goodyear tires on your car will continue to be a tradition as American as fathers and sons watching football on Sundays. One reason for this, is a superior product. Goodyear Tire develops and manufactures tires and related tire products for just about any conceivable wheeled vehicle (from aircraft to farm tools) and sells them on a global scale. With a large presence in South and Central America, various countries in Europe and a growing presence in Africa and the Middle East. Additionally, Goodyear Tire offers basic quality automotive repair at their numerous shops. On a personal note, I’ve brought my own car into Goodyear for new tires, an oil change and other minor repairs, on several occasions and have never had a single issue with their services.
Now to get into some of the numbers based details, they’re not as interesting, I know, but equally important to the analysis. To began with, Goodyear Tire is extremely cheap. Goodyear Tire is a mid-sized company (a bit large for my usual picks) with a market capitalization of 4.4 Billion. The price per share is currently valued by the market at 18.90 dollars a share and is not far off its 52 week low, which stands at 17.30 per share. But even more importantly, it is a full ~10 dollars off its 52 week high of 28.34. This considered, when you factor in the additional stats I’m about to present, make Goodyear Tire a substantial bargain. To start, Goodyear Tire’s p/e currently stands at 6.34x, as compared with an industry average of 18.30x. Its Price to Book ratio, which gives an excellent indication if the asset value relative to market value (meaning any number below 1 indicates a higher asset value than market price) is calculated at 0.89x compared to an industry average of 3.51x. The five year growth rate for earnings per share is a steady, however not substantial 5.25%. The dividend is 3.44% with a five year growth rate of 64% and a payout ratio of 24% of its earnings. These factors indicate Goodyear Tire’s commitment to paying its loyal investors, its insistence on increasing that payment and the genuine safety of its dividend. Goodyear Tire’s return on equity, a great gauge of management effectiveness at allocating resources, is currently a very solid 14.81%.
Goodyear Tire is a buy at 30, and can now be purchased at far, far cheaper. It should be considered a great value which any intelligent investor should pounce on. Effective as both a company to buy cheaply and sell after a rebound, a buy and hold for years as a dividend growth stock, or a combination of both. Goodyear Tire is a exemplary example of true value. With its commitment to dividends, and the massive room for growth of said dividend, this could very well be a company to leave to your children, whether you’re currently 21 or 71. Get in while you still can and buy in bulk.
At the time of this writing, I do not personally own shares of Goodyear Tire (NYSE: GT)
By. Tyler R. Martin
Sadly, I have not as of yet added Universal Insurance Holdings Inc. (NYSE: UVE) to my portfolio. However, I fully intend on doing so as soon as I am financially able. I have various reasons for this desire if you’d care to read.
Now, I have never been one to bow down to investment idols and declare that if Mr. Warren Buffet, or some such appointed demigod, believes it, then all contradicting evidence be damned. For example, I would very rarely recommend ETFs for those who want take an active role in their investments, but I must confess, Buffet’s proclivity for insurance companies deserves some observance. Insurance companies (in the case of UVE, property and casualty insurances), are generally solid investments. This stems from the necessity to maintain quality personal insurance in today’s litigious society and, in consequence of this, people have a great incentive to consistently pay premiums. Additionally, barring some kind of cataclysm (i.e. flooding, hurricane, etc.) where many customers are afflicted simultaneously, insurance companies payout on claims quite infrequently and in far smaller numbers, relative to the premiums they collect. This is beneficial due to what insurance companies are able to do with collected funds in the interim. With all of that free cash flow, insurance holding companies, such as Universal Insurance Holdings Inc. (NYSE: UVE), invest in publicly and privately traded securities and are able to benefit from the long term compound interest. In short, due to the nature of the business structure, insurance companies are excellent by-and-hold investments. As long as the companies you select maintain increasing earnings every year, a solid, growing dividend, you purchase shares while they are undervalued and hold these companies for long periods of time, you will compound at a substantial rate.
Now finally to zero in on Universal Insurance Holdings Inc. (NYSE: UVE). UVE is currently priced at 30.66 dollars per share, only .36 cents above its 52 week low and a full 20 dollars below its 52 week high. The price to earnings is a very attractive 9.37x earnings with an industry average standing at 18.71x earning. UVE’s dividend stands at a reasonable 2.10% with a three year growth rate of 9.26%. The EPS (earnings per share) has been consistently growing and deftly out pacing its peers. For example, last year’s earnings growth rate was 3.87%, with an insurance industry average standing at a dismal -8.85%. It revenue growth over the last year is similarly high paced for the industry, with UVE’s growth standing at 9.56% and the industry average a solid but markedly lower 5.48%. Now, to be fair, the UVE had had a rough 4th quarter for 2018, reporting a EPS of -19 cents; however, so did the sector as whole (many of which reporting far more bleak earnings). It should be apparent to the intelligent value investor that a 20 dollar drop in the price of a company, which has and will continue to outperform its sector, based almost entirely on one poor quarter, amounts to nothing more than a foolish overreaction of the market. And there, as always, is where the value lies.
Universal Insurance Holdings Inc. (NYSE: UVE) was a very solid buy even when it stood at its 52 week high. But better yet, it is currently trading at 30.66 dollars, in very near approximation to its 52 week low. Based on its outperformance within its industry, it is apparent to me that this opportunity must be capitalized on before the market corrects itself. At this moment, UVE is a MUST HAVE for every value investor’s portfolio. Get in while you still can….
By Tyler R. Martin
Crown Crafts, Inc. (CRWS) is an American apparel manufacturing company based in Louisiana. Through several subsidiaries, CRWS manufactures and distributes infant and toddler care products (ie. bottles, onesies, etc…) and maintains long term contracts with several big name vendors. Currently, Disney, Walmart and Target are the biggest and most attention grabbing examples. On the surface this looks like a rather simple buy. Factoring in the simple, wholesome all-american nature of the business, the consistent 6.10% dividend (.08 cents per share quarterly), the noteworthy distribution connections, and the rock bottom debt levels, Crown Crafts, Inc. (CRWS) would, on the surface, appear to be a good ol’ orphan and widows stock. However, the ever-growing presence of foreign manufactured goods in the US has depressed not only the fundamentals of this company, but more interestingly, the markets perception of this company’s future. So, as always, therein lies the opportunity to find a gem in the junk pile.
First, to shed a positive light on American manufacturing with some stats. According to the Bureau of Economic Analysis, in 2018 manufacturing comprised 11.6% of the US economic output, and manufactured goods made up more than half of US exports. Additionally, in 2018 the US added over 12.75 million manufacturing jobs. Based off these number, it would seem that American manufacturing, for at least the near future, is inclined towards an upward trajectory. Crown Crafts, Inc. (CRWS) at the time of this writing, stands at 5.23 dollars per share, 23 cents higher than the 52 week low and a dollar shy of the 52 week high. Approximately three years ago, despite similarly solid fundamentals, similarly low debt and the same dividend, CRWS stood at a very high 10.20 dollars per share. Given that the fundamentals have not improved over the past few years, and given that CRWS has struggled to maintain its earnings per share (EPS) and revenue (which is due largely to the loss of Toys R Us), one could certainly consider CRWS a very high risk high reward play. However, due to careful analysis of current market conditions, I personally believe that over the course of the next ~5 years, the manufacturing component of the American economy will prosper, especially if the tax system continues down the path of instituting beneficial tax laws. This is evidenced by the 2018 third quarter earnings growth announced at an eye popping 192%. It was due to this, and the massive sell off in the last three years, that I originally committed to purchasing CRWS. Additionally, a true value investor would agree that it is a sound investment strategy to select a company that survived a rough time in a cyclical industry, come out the other end relatively unscathed and to commit to actively accumulating shares while the market is still pessimistic about the industry.
Now some stats: Crown Crafts, Inc. (CRWS), is a very, very small company with a market cap of 53 million dollars. Its price/earnings is 10.53x, which is exemplary in comparison to the industry average of 26.23x earnings. Its price/sales (which is telling for a product-centric industry like textiles) is a very low .68x earnings compared to an industry average of 2.90x. CRWS maintains a very healthy dividend of 6.10%, but has remained unchanged in the last five years. However, the preservation of this dividend seems very likely, due to a comfortable 66% payout ratio and a very solid dry powder reserve with a current ratio of 3.51.
Analysis: Crown Crafts, Inc. (CRWS) is a strongly positioned, niche company in a battered industry. Due to how effectively it weathered a tumultuous time in the US economy, it can easily be assumed that CRWS will outperform its peers as the industry rebounds. The savvy investor should stock up on this must have company for every (enterprising) value investor’s portfolio.
Full disclosure I personally own shares of CRWS and plan to continue accumulating shares
Why Mercer International Inc. is an Undervalued Gem (NYSE: MERC) By Tyler R. Martin Today I’ll be writing about one of my favorite companies: Mercer International Inc. (MERC), and will be presenting a buy and hold case for this company regardless of your investment principles, personal values or financial goals. In future posts, I likely will not find another company (or find very, very few) who I’d recommend to the income seeking retiree, the young aspiring investor and every investor in between. To begin, Mercer International Inc. (MERC), is a very small company with a market cap of about 900 Million, however, its fundamentals are that of a company easily worth billions, indicating that’s minuscule market presence is due solely to the fact that too few investors are privy to its existence. Additionally, MERC has several entrenched, solidly producing irons in the fire. Primarily operating in the lumber industry, MERC produces softwood pulp for various grades of bleached paper and tissue products. To do this, MERC owns various sawmills in Europe and the Americas. Through the utilization of the natural black liquor and wood-waste byproducts of these sawmills, Mercer International Inc. (MERC) produces carbon neutral green energy at a net positive energy output. This means that the energy it produces has been more than sustaining its day to day operations and the excess is sold at a profit. This carbon neutral energy structure, along with its operation of numerous railway systems in Europe (considered a “green” mode of transport), demonstrate not only MERC’s commitment to planet friendly business (an important factor in today’s political environment) but also a commitment to keeping costs in check through internal self-sufficiency. So now some stats: Mercer International Inc. (MERC) is currently a bargain, valued at 13.35 dollars per share at the time of this writing, which puts it at ~9.21 dollars below the 52 week high. This company boasts a p/e ratio of ~7x earnings while the average p/e of the paper goods sector is ~10x earnings–(a low p/e ratio relative to peers is a very simple but effective measurement of the intrinsic value of a company). It has a current ratio of 2.60x which indicates MERC has a large stockpile of cash on hand to pay/raise dividends, pay down debt and jump on acquisitions that are potentially undervalued. MERC’s Return on Equity (ROE), which essentially measures how effectively a management team will utilize its assets to create profits, is ~23%, with the industry average hovering around 15%. MERC’s dividend is a robust and growing 3.70% with with a 23% payout ratio and a three year growth rate standing at a very healthy 30%. And last but not least, earnings per share (EPS) and revenue growth over the last 12 months has been has been solid and consistently growing with both standing at ~26%. Analysis Considering the fundamentals of Mercer International Inc. (MERC), the currently discounted price, the growing dividend and the unique and intrinsically solid business structure of this unique and intrinsically solid industry, MERC is a must have for any value investors portfolio.
Full disclosure I personally own shares of MERC and plan to continue accumulating shares
By Tyler R. Martin
I have maintained for quite a while that a rising interest rate environment is an appropriate time to commit to accumulating shares of high quality REITs (real estate investment trusts). Despite the counterintuitive nature of this (given that historically REITs underperform in high interest rate environments), it actually makes quite a bit of sense, when you consider it. REITs, on average far outperform the paltry yield of the bond or money markets with, dare I say, almost the same level security. Assuming you selected a trust that has a manageable level of debt, high assets, steady cash flow and an a solid business strategy, then regardless of the ups and downs of the fickle market, these trusts will continue to pay high dividends (if you can bare the tax disadvantages associated with REIT dividends), and maintain normal day-to-day operations despite the higher rates on mortgages and fleeing myopic investors. Interest rates are cyclic, regardless of the very widespread connotation that they aren’t, and, down the road, when rates once again retreat, you will have amassed shares of a solid company at severe discount.
Consider LTC Properties Inc. (NYSE: LTC). A monthly dividend payer with a market cap of 1.7 billion which has been beaten down to the point that it is currently trading 11 dollars shy of its 52 week high. This senior housing/healthcare REIT has an attractively low PE ratio of 11.6x earnings, while the REIT sector currently averages just north of 46x earnings. Additionally, LTC shows of its sizable assets with a comfortable Price to Book of 2.33x, while the sector average currently rests at 6.1x. LTC’s dividend, the real gem of this value investor’s sweetest dream, is a mouthwatering 2.28 dollars a year (19 cents a month/5.60%) which puts it just below a 60% payout ratio. However, fear not, it’s still far lower than the majority of REITs in the industry; for example, Realty Income Corporation (NYSE: O) boasts a payout ratio of over 200%, and although Realty Income Corporation does not specialize in senior care, it does give perspective as to the current norm of the REIT sector. Additionally, this payout is extremely sustainable with predictably increasing earnings, a Total Debt/Capital 10% lower than the industry average, and a small dry-powder reserve (meaning cash on hand to employ in a pinch).
Even if an investor will disregard the superior stats, an investor can also consider the fact that LTC is a best-of-breed company which lies in a growing niche industry (on account of the baby boomers) and can sleep well at night given the firm stability of the senior housing/senior healthcare industry. It is for these reasons that I believe LTC is must for every value investor’s portfolio.
The fluctuation of interest rates will be the ultimate catalyst in the ups and downs of this security. Both of which, if patience and good research are employed, can be very profitable for owners of LTC.
Full disclosure I personally own shares of LTC and plan to continue accumulating shares