New stock ideas from BMW screen

Investment Analysis Clubs Where Angels Fear to Tread
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Having been burned by a certain concentration in certain hypergrowth stocks, and being in an uncomfortably long cash position (sounds like this should follow a Whereas), I’ve looked in other directions for new stock ideas. I’ve posted something similar over on the BMW free board. Got a couple of comments but no enthusiasm for diving into the candidates. This somewhat relates back to A Tad Upset thread. Stuff that has survived the Great Purge and things that are unfortunately gone.

Over at Saul’s, the 1yrPEG Google spreadsheet is still available, the last update on any stock apparently made in 2017. An interesting artifact. I have some still functioning stock screeners on my E*Trade IRA account. Look at it once a year or so. Nada. TMF1000 had his Superstocks and and a LOOOONNNNGGG data base. That withered when he became Back to Research after he walked away from Supernova Phoenix project. Greg (sarknz) had a site that auto-populated similar data on any stock. He quite reasonably let that go as it had a significant cost to pay for the data access. I asked about it and he said that I and two others were the only ones asking about it in the last two years. So nothing is forever. I’m sure that Tom Engle is still holding his superstocks and trading around the edges. Sigh.

Anyway, as I posted over on BMW, I looked at the 25-year buy/sell screen which had, as I recall, 54 possible companies based on historical stock prices only. I selected six companies to research–bough micro amounts of each They are:

PVH        Calvin Klein and Tommy Hilfiger
VFC        Vans shoes and other apparel 
SMG        Scotts Miracle Grow
SWK        Stanley as in tools and such
OLED       Universal  Display, Organic Light Emitting Diode materials
MNRO       Monro, Yep, shock absorbers, etc.

Here is the link to BMW: BMW Method Screen Cross Reference

So far I have looked at OLED and SWK SWK is restructuring, selling off parts, buying tuck ins, reorganizing Financials are difficult due to continuing operations, discontinued operations, etc., etc.

I’ll think about posting my portfolio and show how it evolves as I move back to “fully” invested.

KC

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I can’t offer much, except I have never had much luck uncovering new “gems” with screens. I think it has to do with the fact that the data is just a starting point of “hey…may want to check these out further” to understand the present and future fundamental story of each stock. Too often I would immediately find holes. I like tech stocks because perhaps I understand and appreciate the concept of disruption. Might be the scifi fan in me…who knows.

So I look at your list and the first two scream “retail” and outside of the SPG/mall investments, I am hesitant because I always think they can win/lose based on fads and the fickle whims of teens, etc… Malls were sort of like the cloud…doesn’t matter if the companies using it (retail stores in this analogy) come and go, as long as the mall stays full. Cloud/mall wins either way.

I looked at SMG a few years back when it seemed like marijuana was the next big thing. The lack of federal legalization has made it the cousin of china/ADR stocks…just seems untrustworthy as a whole. Anyway, SMG had an angle…I forget what exactly, but it was for self-growers I think…not sure if they had commercial arrangements. Think; picks and shovels for the pot industry. Not sure where their pot biz is these days, but that could still be a potential growth industry off their traditional biz, if intact and promising.

SWK - I don’t know how much of their biz is consumer vs commercial, but either way, won’t that get hurt in a recession? May be a good one to play coming out of recession, ala SPG coming out of covid.

OLED - don’t know enough about display tech, as I bought a bunch of tvs 2-3-4 years ago and haven’t felt urge to replace any, so not up on latest tech. So my question would be is if OLED is still innovating or if getting disrupted, etc…

MNRO - the only thing I know about cars is the phone number to the local shop that repairs mine for me. But I did read that Ford was taking page from Tesla and saying “eff you” (eventually) to independent dealerships and thinking of cutting out middlemen. Not an expert here, but I think many of these dealerships make part of their income from operating service centers. The article I read seemed to indicate the dealerships may all get converted to glorified service centers. Sort of like how I imagined all the existing gas stations would one day turn into ev-charging pitstops. Anyway - my question would be, is MNRO a leader and have rock-solid relationships with all the big auto dealers, so that if control went from local repair shops to centralized decision-makers at auto mfrs that decide the supply chain winners for their network of repair shops, that MNRO is positioned as a long-term winner, no matter how the repair shop future unfolds?

On side note, I think Musk is winging it (shocker) with neuralink, but if I could expand my brain’s capacity and, ideally, parallel processing capability (like a boss NVDA top of line GPU) think of all the stocks I could research at once. Instead, I see a list like this and immediately come up with a lot of work I have to undertake, and there just isn’t enough time in the day is there?

First world problems.

Dreamer

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I’ve started a small position on VFC. I can speak to that one. This is about a half-size stake for me. I bought at $40 and of course it’s down from there. I haven’t set a price at which I’d pick up the other half and I probably should do that.

VFC is a holding company of several well-known apparel brands.

  • Activewear: Vans, Eastpak, Jansport, Supreme, others.
  • Outdoors: The North Face, Timberland, Smartwool, others.
  • Work: Dickies and Timberland Pro.

The long-term thesis here is that VFC’s management has shown an ability to curate its stable of brands. The proof is that this used to be Vanity Fair Corporation, but they sold off the Vanity Fair brand some years ago. The growth may not blow your socks off, but it’s been a long-term performer and pays a fat dividend while you wait.

The short-term thesis is that the share price has been absolutely hammered on the belief that China is slowing down, and thus the demand for western brands like Vans will hurt future sales. Also a slowdown in the United States would also impact sales.

It’s a little hard to believe the stock price reaction here is justified. This is the 30-year BMW chart for VFC. The stock is down more, on a relative basis, than it was during the 2001 recession or the 2008 Financial Crisis. That just doesn’t seem right to me.

VFC currently pays out a 7.23% dividend yield. Payout ratio is 76%. That’s high but potentially sustainable. VFC has raised its dividend for 49 straight years and is a Dividend Aristocrat. I expect the board will do damned near anything to keep that streak going.

This is a profitable company, in a long-term stable business, with strong brand names, selling at reasonable valuation. You should see capital appreciation when the market comes around, and you will get a big dividend payment in the meanwhile. Understand this is a value buy and everyone will think you’re crazy.

Regards,

– HCF

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I have these notes on SMG in my journal for 20 Sept 2022:

So Scotts Miracle-Gro (SMG) is just a spitshow.

  • Cash from operations is down in recent years.
  • They lost like $8 a share in the most recent quarter.
  • This isn’t a growth story, and it’s not clear it’s a value story, either.
  • They’re paying like a 4.5% dividend but with the cash flow issues you have to wonder. Payout ratio is just below 50% but If you’re not earning money consistently where is that cash coming from?

So I don’t have something I would sell to get on board with this. I’d need to understand if recent issues are transitory or permanent, and then decide if I’m getting a big enough discount to eventually make a turnaround worth while. This is not going to be a permanent core holding.

Now admittedly this is based on about 5 minutes of research, primarily on Seeking Alpha. I’m probably wrong about something. I keep a dedicated notebook for investments I’m serious about and this didn’t even merit a “keep these notes” tab in that notebook. Also I didn’t have the word “spitshow” in my notebook but the TMF sensor didn’t like my original term.

But what I see here is a company that doesn’t have a strong growth story. That’s OK but you need to price that accordingly. The current PE is about double what I would want to pay here. I think there’s a lot of pain for SMG in the near future. I’d be in at maybe $25/share but $52 is just too much.

Regards,

– HCF

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I have done Scotts Miracle grow and yes marijuana grown in doors under grow lights was the growth element but seems not to have much impact. I think it is not a growth stock. Maybe tied to new housing sales. Mostly lawn and garden. Turf sales, golf courses. I see tied to population growth.

Stanly makes Dewalt and Black and Decker and many more. All made in China i think. A marketing arm of products made in China. Margin tied to strong brand name recognition. Off name imports are a constant threat.

Auto parts. Careful. Borg Warner just announced plans to spin off part to get ready for electric vehicles. Auto parts demand falling by half. Man the lifeboats. Titanic is likely to sink.

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On auto parts I neglected to mention that retail auto parts seem to be the exception. They have a counter cyclical component. When new cars are expensive or unavailable, people repair the old one and keep it longer. And when prices are high or money is short, people tend to service their own.

In my CAPs portfolio (if you can still see those) you will see I have AutoZone (AZO) and O’Reilly (ORLY). And I’m watching Genuine Auto Parts (GPC) who do business as Napa. They seem to be doing reasonably well in this environment.

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Look at you guys…feel like a proud papa.
Who knew that all it would take to get people to start discussing stocks would be for KC to post stuff from BMW screen!

This did make me add VFC to the watchlist. May be early now, but I like the unfairly beaten-down vibe with strong divvy…very deja vu feeling to SPG a couple years back.

good-job-clapping-0xrkvzp4jdktbyvy

Dreamer

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Great responses, people (PC for “guys”). I really appreciate them.

HCF captured the general rationale for the method. This is what one would look for:

This is a profitable company, in a long-term stable business, with strong brand names, selling at reasonable valuation. You should see capital appreciation when the market comes around, and you will get a big dividend payment in the meanwhile. Understand this is a value buy and everyone will think you’re crazy.

As to the retail aspect, that may be a feature–not a bug. TMF1000 thrived on retail, both business cycle and seasonal I don’t recall his being in teenage fashion brands which, I presume, are more fickle. Recession? Investing for the recovery, forward looking

SMG. After my 5 minutes of Seeking Alpha and the investor presentation, I would check the annuals for 2019, 2020 and 2021. See how overvalued it got in the cannabis speculation, how it is now on historical basis. Is this something that no one wants on the books year-end? Year-end loss harvesting (plenty of THAT available). I think the company is probably saddled with debt from investing in Hawthorne (cannabis). It presented in the William Blair growth stock conference the last couple of years. It is not the “same” company that it was 5 to 30 years ago.

More to look at for sure.

Thanks again,

KC

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As I careen toward retirement, I have piloted my portfolio toward value and income and capital preservation in recent years.

I’ve owned VFC for a decade. As mentioned above, it is a respected dividend aristocrat and has been very successful assimilating acquisitions without destroying them. Share price recently took a hit upon the retirement of the CEO and reduced guidance.

Others that have held up well for me include GPC, CVX, PEP, and RPM.

GPC is mostly NAPA, as mentioned above. I agree with pauleckler’s take above, plus NAPA’s offerings are generally regarded as better quality than the competition by the professional and serious amateur car people I know. PEP is, well, PEP, and they make money. RPM is a specialty chemical company, a holding company really, that is classically boring.

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Your handle makes me shiver :slight_smile:

This post could be subtitled “Investing Is Hard”. I looked at the other four via BMW 35 year screen, just to see. CVX is neutral as far as average and current CAGR. GPC is overbought at +2 RMS, and PEP and RPM are +1. This is not surprising as actual earnings are being valued. GPC has gone from low 60’s at the COVID bottom to 190 currently–has not come down in the rising interest rate period over the last year. That’s just information. These companies have CAGR’s of 10 +/-1 over 35 years. Just another dollop of information. And I think BMW just looks at stock price, does not include dividends–but I’ll have to ask over on BMW board.

Of course, what makes investing hard is the question of whether these companies are a good investment NOW. And are we anchoring at 52-week lows? Are we anchoring at -2 RMS? How much are these or other historical prices distorted by post-COVID free money? I looked at TREX because it is alive and well in Fooldom. What a history. It IPO’d around May 1999. I actually remember. I was living in San Francisco, bay area, and one had the obligatory deck, and unless one were a barbarian, it was made with redwood. Here came TREX with low maintenance, environment saving, composite material decking. IPO’s about $2 to $3. Crashed a bit, recovered, was $5 or $6 when housing crisis begat the Great Recession. Fell to $0.68. And like the Phoenix, arose and went parabolic to $140 about 13 months ago. But the thing was, in 2019, 20 and 21 the earnings growth rate was 21% and the p/e went from 20 to 65 and the stock price went from around $50 (pre-COVID) to $130 at the peak. P/e expansion, anyone?

So what? Maybe I’d trim GPC and RPM and add to VFC. Dunno. Investing is hard, or as hard as you want to make it.

KC

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Yes, indeed. Thanks for running those through the screen.

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This is my look at OLED. Summary: Cast iron balance sheet. Boring growth. Shows some operational leverage. Asset light, throws off cash, a small dividend. High gross margin (SAAS-like). Here goes:

Latest investor presentation:

Fabless
Balance Sheet, $844 million cash, no debt
Business : Material sales, License and Royalty Fees
Uses: Mobile, TV, IT and Wearables
Product Advantages: Foldable, Rollable, Flexible

Financial Highlights:

Earnings: 12.4% CAGR from 2018 to 2021 to smooth out COVID noise.
Revenue: 13.3% CAGR. Where is operational leverage?
Cash Flow from Ops: 34.6% of revenue
Dividend: 2019: $0.4 , 2020: $0.60, 2021: $0.80.
Link:

Why has the stock price been weak?

Seeking alpha: Universal Display Stock Is A Buy Before 2024 (NASDAQ:OLED) | Seeking Alpha

Analyst ratings that I have from E*Trade look like something you wouldn’t set your clock by. One Sell rating with $52 target. It was $87 when the rating was issued, $116 now. This guy is the top rated analyst. Go figure. Most price targets are $130 to $160, for whatever that is worth. For my purpose, I am looking at 2 or 3 years. These targets are for next week, more or less.

Morningstar tells us what we already know. Valuations are below historical. However, their standard tme frame is 3-years of history and this includes '19, '20 and '21.

Current and 3-year:
 Ratio    Current   3-yr.
P/S:        9.2     19.3
PE         29.9     65
P/CF       30       48
PEG         0.96     1.6

They show 3 year CAGR for revenue 30.8%, Net Income 46.3% and EPS 46.1%

News on OLED,

December 5, they entered into long term agreement with Samsung. This was an issue a decade-plus ago with rumors that Samsung was developing their own, that Universal Display’s IP was on shaky grounds, etc. Not sure of t he impact of this currently.

December 7, Founder and visionary entrepreneur died. Was chairman of the board until June of this year.

https://www.bloomberg.com/press-releases/2022-12-06/universal-display-corporation-announces-passing-of-founder-and-visionary-entrepreneur-sherwin-i-seligsohn

That is a lot of information but not much “guidance”. I don’t know that we know anything more than what we did, that the stock price is below historical levels. Doesn’t look like there is any existential issue, new competitor, disruptive technology. If anything, OLED is the disrupter.

KC

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I guess we do know something. It was overpriced, along with everything else in the tech space. But still, the longer term CAGR was not inflated that much by the Great Bloat and it has a lot of room to run to revert to mean.

KC

Postscript as prompted by whomever is sitting on high (regarding multiple posts) Suggested that I edit the previous. But will it be moved to “new”…???

Anyway, the following Fool article explains what ought to have been obvious to me, that OLED tech and materials are used in cell phones and cell phone sales are cyclical. O.k., assuming this is true, it would support the 2 to 3 investing thesis of modest long term growth and Year-over Year revenue and earnings growth and resulting multiple expansion.

KC

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I did take positions in the six companies I listed in the original post. The last on the list, Monro, released its Q3 yesterday and popped 11%. Before taking the bows, I’ll note that this was the smallest of my six positions, just 0.63% of a targeted 5%. Also, the stock was hammered the week before so it is just a few percent above recent highs.

Nothing like reading quarterly results to learn about a company, eh? Monro is not auto parts for DIY-types. They are a leading provider of automotive undercar repair and tire services. This quote gives a broad brush description of their “verticals”:

*Comparable store sales, adjusted for days, increased approximately 8% for tires and 7% for maintenance services compared to the prior year period. Comparable store sales, adjusted for days, decreased approximately 5% for brakes, alignments and front end/shocks. *

In any case, they got a good bounce for meeting expectations. They have sold off some wholesale tire distribution, bought some stores, bought back a couple of million shares==perhaps taking care of some issues that caused the underperformance of the last few years. So it is up 4.8% for me. Here are the results of my BMW stocks which I started accumulating around 12/7:

Stock      % or portfolio     % gain
MNRO          0.6               4.8
SMG           1.7              11.3
SWK           2.7               3.0
PVH           3.9              17.7
VFC           4.9               7.4  
OLED          4.0              13.0

Earnings presentation for Monro:

Enjoy,

KC

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