Suggestions for a sound share investment

adindas

Millyonare said:

Apple Q4 2022 results were quite bad today (Thurs). May slow the recent S&P500 rally.

Quick scan checking on multiples:

https://www.multpl.com/s-p-500-pe-ratio

S&P 500 P/E Ratio is currently 22.34

Both companies have dominated the S&P 500 due to their market caps.

Apple (AAPL)

LFY P/E Ratio  23.39; LFY P/S Ratio 5.7;  LFY P/FCF 23.44 

Alphabet (GOOGL or GOOG). It is already mentioned on this thread a while ago as arguably a sound share investment

LFY P/E Ratio 17.28; LFY P/S Ratio 4.99  LFY P/FCF 19.18

Both have moats.

Most people already have both stocks on their funds such as on VLS, VUSA (S&P500), etc.  But If people want to choose between the two to add their more speculative positions in addition to their existing funds which one to choose. But this is not to say that AAPL is a bad company.

Multiples is just a few thing to check as there are still many other other things to check rather than simple multiples. The things like to future plan for share buy back, future growth, new product launching, etc.

adindas

https://www.cnbc.com/2023/03/06/new-bipartisan-senate-tiktok-bill-will-be-unveiled-tuesday.html

New bipartisan Senate TikTok bill will be unveiled Tuesday (TODAY). Mon, Mar 6 2023

TikTok get banned ? META., GOOG/GOOGL, Snapchat will be skyrocketing.

NedS

Steve182 said:

Another suggestion for what I consider a sound investment - Diversified Energy Company - DEC

I have mentioned them on this board before, but that was some time ago. 

Their revenue, profits and divi keep increasing year by year but the SP does not seem to move much. They now have a forward P/E of 5.1 and are paying a circa 12% divi. Their business model is buying operational, long life onshore gas and oil wells (mostly gas) in the US, then operating them more efficiently than the previous owners. They now have circa 70,000 wells, and they usually announce several new large acquisitions every year.

Their accounts can be difficult to understand because they hedge much of their production to provide financial stability. The hedging position can then result in a pre-tax loss being shown so that needs to be understood when scrutinising their accounts. 

It's a FTSE 250 listed US company so there is withholding tax of 15% on divis, even in ISA's (there is no withholding tax in a SIPP).

I'm just happy to hold it in my SIPP, take the full 12% tax free divi and watch the revenue and earnings increase year by year, without the stress of concerning myself with movements in the SP. This is one of my core holdings.

Stocko report below. do your own DD -

 

@Steve182 just wondering on your thoughts on DEC now? How has the rise in interest rates affected them wrt debt on the balance sheet (which seems to have increased)? I'm trying to understand if that dividend is sustainable.

Steve182

NedS said:

Steve182 said:

Another suggestion for what I consider a sound investment - Diversified Energy Company - DEC

I have mentioned them on this board before, but that was some time ago. 

Their revenue, profits and divi keep increasing year by year but the SP does not seem to move much. They now have a forward P/E of 5.1 and are paying a circa 12% divi. Their business model is buying operational, long life onshore gas and oil wells (mostly gas) in the US, then operating them more efficiently than the previous owners. They now have circa 70,000 wells, and they usually announce several new large acquisitions every year.

Their accounts can be difficult to understand because they hedge much of their production to provide financial stability. The hedging position can then result in a pre-tax loss being shown so that needs to be understood when scrutinising their accounts. 

It's a FTSE 250 listed US company so there is withholding tax of 15% on divis, even in ISA's (there is no withholding tax in a SIPP).

I'm just happy to hold it in my SIPP, take the full 12% tax free divi and watch the revenue and earnings increase year by year, without the stress of concerning myself with movements in the SP. This is one of my core holdings.

Stocko report below. do your own DD -

 

@Steve182 just wondering on your thoughts on DEC now? How has the rise in interest rates affected them wrt debt on the balance sheet (which seems to have increased)? I'm trying to understand if that dividend is sustainable.

They've continued to make acquisitions, including a very large acquisition from Tanos recently, paid for principally by debt and  fund raise. They do appear to be very good at making these deals which offer favorable returns after factoring in the cost of debt.    

They've also just increased the quarterly dividend from 4.25c to 4.38c, which went ex last week. Divi is now circa 14.5%

Gas prices have dropped significantly this year, but most of this years production is hedged at significantly higher than current  prices, around 30 to 35% higher on average if my fag packet calculations are correct.

So at current interest rates and current hedge prices I have no real concerns about the sustainability of the divi. I think it will be interesting to see how the gas price moves over the coming months/years, which will affect hedge prices obtained for the following years' production. The dividend policy is based on returning circa 40% of FCF to investors, so I think it goes without saying that a medium to long term decline in the commodity price, combined with increased borrowing costs would affect the FCF and therefore the sustainability of the divi, which I think is nuts at this level!

bostonerimus

To paraphrase Conrad “The numerology!”.

adindas

This is what Super investors like  Warren Buffett, Charlie Munger, Michael Burry, Li Lu, Seth Klarman, Ray Dalio, Mohnish Pabrai,  Bill Ackman, Carl Icahn have been buying. Hedge funds are required to file Form 13F within 45 days after the last day of the calendar quarter. Most funds wait until the end of this period in order to conceal their investment strategy from competitors. So that date below is slightly lagging

adindas

Oh META Platform (META)

Become a contrarian don't just follow the crowd, The time to buy is when there is a blood on the street as long as they are undervalued.

With the current PE around 23, P/FCF=28.66 I believe they are now selling at the fair price. So IMO time to sell. Not suggestion to buy/sell/hold.

Also from the candle stick chart (Technical Analysis) there is gap around $155-$170, typically (not always) this gap will be filled at the later date.

But based on DCF calculation they are still slightly undervalued so there are still room to rise.

adindas

Ford (F) and Tesla (TSLA) Partnership.

https://www.youtube.com/watch?v=D23nxNhbGL0

Ford-Tesla partnership a 'wonderful' move for Tesla, says Gerber Kawasaki CEO CNBC Television  May 26, 2023.

Ford is reasonably good Fundamentally, also they pay a juicy dividend currently, Dividend yield is 4.96%. But their Debt is very high. This is probably the reason why analysts give it quite low Price target.

VALUATION:

Price / Earnings

P/E excluding extraordinary items - LFY16.86

P/E excluding extraordinary items high - TTM281.64

P/E excluding extraordinary items low - TTM3.69

P/E Basic excluding extraordinary items - TTM17.44

P/E Normalized - LFY8.91

P/E including extraordinary items - TTM16.86

Price / Sales

Price to sales - LFY0.31

Price to sales - TTM0.29

Price / Book

Price to book - TTM1.19

Price to book - LFY1.16

Price to tangible book - MRQ1.16

Price to tangible book - LFY1.14

Price / Free cash flow

Price to free cash flow per share - LFY-

Price to free cash flow per share - TTM-

Net debt

Net debt - MRQ99.78B

Net debt - LFY94.9B

Dividend yield

Dividend yield4.96%

Current dividend yield - Common stock primary issue - TTM4.55%

Dividend yield - 5Y average 3.52%

FINANCIAL STRENGTH

Quick ratio

Quick ratio - MRQ1.03

Quick ratio - LFY1.06

Debt / Equity

Long term debt / Equity - MRQ215.37 

Long term debt / Equity - LFY205.37

Not a recommendation DYOR.

Voyager2002

If you should 'buy the dip', then now is the time to pile into Evofem (EVFM).

adindas

FAANG Stocks are no longer Popular. It is now replaced with Magnificent seven.

https://www.morningstar.com/news/marketwatch/2023121276/something-remarkable-and-extremely-rare-happened-in-the-us-stock-market-on-monday

https://www.investopedia.com/magnificent-seven-stocks-8402262

Observe their five years performance.