I was pointed to this board after complaining about one of the top picks on SA - TCS The Container Store. I was commenting on the performance of IPOs and was kindly directed here.
A little background - for years I’ve been a mutual fund investor until I was cajoled into coming back and paying for the advise. When I loaded my portfolio into the Scorecard app and found how really bad my fund picks were performing, I sold all of them and started investing in some of the Starter Stocks and BBN stuff. Most of them have been very good and profitable, though unlike Saul, I took the risk on two gold mining stocks that are doing very well. I embrace risk because I know the truth about risk and reward. I’ve used Barcharts for years trying to judge the direction of the market and have used Financial Engines to diversify our portfolios. Currently I’m looking to move up the date my wife can retire, so I’m looking for medium term growth. I’ve arbitrarily set a limit of 20 positions, including cash, so that leaves room for 19 equities/funds. I’m always on the lookout for profitable companies or successful funds. I realize I’m looking at past performance on the funds, but looking at past revenues and profitability is still hindsight.
I’ve got a small list that I’m currently researching and am wondering if there are any on this board who can expedite my efforts. The tickers are: KORS, VNET, AFSI, CJES, CRUS, CLR, EOG, THRM, IPGP, $ NOAH. Several of these companies have MF coverage, but many don’t. I’m currently most interested in THRM as it looks like a true growth stock and its PEG ratio is awesome.
One last request from a newbie - what is the definition of “Free Cash Flow”? I’m sure I could Google it, but I’d like to learn why it’s important and what it means.
You might want to check out TMF1000 (Tom Engle) for additional thoughts on some otherwise unfollowed stocks. He was following KORS long before it became a TMF rec. He is one of the many great resources like Saul available on these boards. I also know Tom E has his own way of calculating FCF but can’t fins his post about right now.
Here is a definition of FCF from a TMF post in 2000:
look at free cash flow (FCF). In its simplest form, FCF is simply cash from operations minus capital expenditures. This has the advantage of capturing at least three items EBITDA leaves out: Receivables, inventory, and capital expenditures (property, plant and equipment).
It’s not a cure-all since it omits the cost of debt. Also, many terrific companies are cash flow negative in their formative stages. Wal-Mart reported negative free cash flow for years while handily beating its cost of capital and building its retail empire. Focusing on FCF alone could lead investors to miss opportunities.
Here’s a more recent defintion from TMFGebinr:
cash flow yield is a calculated metric. You have to look at the cash flow statement and calculate how much cash flow from operations there was and deduct the amount spent in spending for plant, property, & equipment (also called capital expenditures). That gives you free cash flow. CFFO - capex = FCF And don’t be thrown by the fact that capex is always a negative number so subtracting a negative means add. Uh uh. FCF < CFFO
Free cash flow (FCF) is the part of the cash flow which theoretically is available for distribution, e.g. the cash remaining after paying for everything necessary to continue operations, incl. all investment and growth projects etc.
It is the main input variable in the DCF method, one of the widely used valuation methods.
You gave us a very interesting and eclectic group of stocks. And most of them seem pretty speculative on first look–very small, some ADYs/Chinese (high risk), energy, and others in the technology sector. Altogether prone to be pretty volatile. One or the other of them could be excellent growers and a great stock to own but then again perhaps not.
Before I would buy any of them I would take the time to listen to a few of their conference calls, read their Investor Relations pages, 10Ks and annual reports, (found on the Edgar site or on the Investor Relations pages) and anything you can find about them in TMF or the New York Times or other sound sources. Yours are not stocks to be purchased lightly IMHO, especially if you are nearing retirement age.
For example, Gentherm (THERM) looks like a very interesting company with many attributes, but I just skimmed the transcript of their latest conference call and noted that one of their best manufacturing bases is in the Ukraine. I’m not sure I would want to sink a significant portion of my retirement funds into that situation, but maybe it’s OK. In any case, it requires a lot more scrutiny.
Here’s a transcript of the THERM conference call:
If you are a newbie it may be an easier introduction to investing in stocks if you choose a few from a Motley Fool service like Stock Advisor or from Saul’s or Tom E’s lists. Then follow the board discussions and read anything you can find about them. Typically other MF members are happy to share observations and give support and guidance if you ask for it. Maybe UBNT, SWIR, AMBA, BOFI, ELLI, GILD, BIDU, and WAB would suit your fancy and the research would be readily available here either on Saul’s forum or elsewhere on TMF. I’m not recommending these stocks as ‘Buys’, I’m just saying they are interesting and popular here on TMF.
Good luck with your investing challenge. (Now I’m going to look up more information about your stocks.) (-:
The tickers are: KORS, VNET, AFSI, CJES, CRUS, CLR, EOG, THRM, IPGP, $ NOAH. Several of these companies have MF coverage, but many don’t. I’m currently most interested in THRM as it looks like a true growth stock and its PEG ratio is awesome.
I can give you some backround on some of them:
KORS- I had a small position but I sold it for a small loss. This will probably be my sole foray into the fickle world of women’s fashion. The problem with a company like KORS is that their advantage is the prestige bestowed upon those who own their products. Unfortunately, as soon as everybody has one, then nobody wants it anymore.
AFSI- I have a position in Amtrust but it is significantly smaller than it had been in the past. They are under attack by Barron’s and a company called GeoInvesting for supposedly shady accounting practices. I don’t understand enough about insurance accounting to verify whether or not these allegations are accurate so I decided to take most of my money and move it elsewhere. I do have a smallish position because they are gorwing like gangbusters and they very cheap on a P/E basis - if it grows from here great, but my capital at risk will probably remain on the smallish side. I know there’s a TMF service that covers them - I just don’t know which one it is.
CRUS- I had this company but sold out of it. They make the audio chips for Apple but Apple is a very concentrated customer. They kept promising that other new products would materialize to decrease their Apple concentration but those new products never seemed to hit the market. I haven’t really followed it since I sold out and there are other places that I would put Apple/mobile derivative money if I wanted to play it (such as SYNA or SWKS, Saul owns both and both have been discussed on this board). Of course, you could also opt for the FB, GOOG, anf LNKD of the world who are monetizing the mobile revolution with their software and services.
IPGP- I own some. Growth has slowed a little so the stock price hasn’t performed as well as I’d hoped but it’s a good solid company with what I consider a pretty wide moat. Probably wouldn’t be first on the list of companies I would add to right now but I like the company.
Hope this helps
Thanks for your reply to my request for assistance. I ended up going with CRUS and wished I hadn’t. Apparently the long awaited diversification out of the captive shop status held by Apple hasn’t materialized. I didn’t do my full due diligence on Cirrius They are on the “D” side of the A/D indicator. I learned a lesson that cost me a little less than $100. I’ll know better in the future. In the words of some famous trader, I think it was Buffet, but I could be wrong, you should be trembling with greed befor you place you order. I should have trusted my instincts and gone with THRM.