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INVESTING IDEAS - page 40

Discover and validate investing ideas with valuation models and charts.

When Should You Buy Kulicke and Soffa Industries Inc. (NASDAQ: KLIC)?

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Shares of Kulicke and Soffa Industries Inc. (NASDAQ: KLIC) are receiving a lot of investor interest as of late due to the stock’s 15.7% increase over the last month. Shareholders are now asking themselves whether the company’s current stock price is reflective of its true value or if shares have even further upside from here.

Let’s take a look at Kulicke and Soffa’s value and outlook based on its most recent financial data to see if there are any catalysts for a price change.


What’s The Opportunity In Kulicke and Soffa?

Welcoming news for investors, Kulicke and Soffa is still trading at a fairly cheap price. According to our 10 valuation analyses, the intrinsic value for the stock is $33.48 per share and is currently trading at $25.81 in the market. This means that there is still an opportunity to buy now.

Kulicke and Soffa Industries Inc. Valuation Detail
Analysis Model Fair Value Upside (Downside)
10-yr DCF Revenue Exit $35.04 35.8%
5-yr DCF Revenue Exit $35.11 36.0%
Peer Revenue Multiples $31.05 20.3%
10-yr DCF EBITDA Exit $40.03 55.1%
5-yr DCF EBITDA Exit $42.54 64.8%
Peer EBITDA Multiples $31.60 22.4%
10-yr DCF Growth Exit $34.34 33.0%
5-yr DCF Growth Exit $34.05 31.9%
Peer P/E Multiples $23.75 -8.0%
Earnings Power Value $27.32 5.8%
Average $33.48 29.7%

Click on any of the analyses above to view the latest model with real-time data.

What’s more interesting is that Kulicke and Soffa’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.


Can We Expect Growth From Kulicke and Soffa?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matters the most, a more compelling investment thesis would be high growth potential at a cheap price.

When Should You Buy Kulicke and Soffa Industries Inc. (NASDAQ: KLIC)?

source: finbox.io data explorer

With net income expected to grow at an average rate of 14.5% over the next couple years, the future certainly appears bright for Kulicke and Soffa. It looks like higher cash flows are in the cards for shareholders, which should feed into a higher stock valuation.


What This Means For Investors

Growth investors typically look to invest in companies that are expanding sales, gaining market share and building customer bases. On the other hand, value investors often argue that the most successful investments are in companies that deliver the highest cash flows while trading at the lowest valuation.

But why not put those hands together? A company that has both growth and value characteristics would certainly make the most attractive investment. So what did we find out about Kulicke and Soffa?

Kulicke and Soffa’s optimistic future growth does not appear to have been fully factored into the current share price with the stock still trading below its intrinsic value. Therefore, it may be a good time to purchase shares or increase your position in the company.

It is important to note that there are a variety of other fundamental factors that I have not taken into consideration in this article. If you have not done so already, I highly recommend that you complete your research on Kulicke and Soffa by taking a look at the following:

Risk Metrics: what is Kulicke and Soffa’s Altman Z score? It’s a famous formula used to predict the probability that a firm will go into bankruptcy within two years. View the company’s Altman Z score here.

Efficiency Metrics: how much free cash flow does Kulicke and Soffa generate as a percentage of total sales? Has it been increasing or decreasing over time? Review the firm’s free cash flow margin here.

Forecast Metrics: what is Kulicke and Soffa’s projected EBITDA margin? Is the company expected to improve its profitability going forward? Analyze the company’s projected EBITDA margin here.


Author: Matt Hogan

Expertise: Valuation, financial statement analysis

Matt Hogan is also a co-founder of finbox.io. His expertise is in investment decision making. Prior to finbox.io, Matt worked for an investment banking group providing fairness opinions in connection to stock acquisitions. He spent much of his time building valuation models to help clients determine an asset’s fair value. He believes that these same valuation models should be used by all investors before buying or selling a stock.

His work is frequently published at InvestorPlace, Benzinga, ValueWalk, AAII, Barron’s, Seeking Alpha and investing.com.

Matt can be reached at matt@finbox.io.

As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.

When Should You Buy Kulicke and Soffa Industries Inc. (NASDAQ: KLIC)?

Source: finbox.io investing ideas
When Should You Buy Kulicke and Soffa Industries Inc. (NASDAQ: KLIC)?

Should You Buy GrubHub Inc (NYSE: GRUB) When Prices Drop?

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GrubHub Inc (NYSE: GRUB), an information technology firm with a market capitalization of $9.6 billion, saw its share price increase by 54.0% over the prior three months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But is there still an opportunity here to buy? Let’s examine GrubHub’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.


What Is GrubHub Worth?

According to our 9 valuation models, GrubHub seems to be fairly priced in the market at 2.3% above its intrinsic value. This means if you were to buy GrubHub today, you’d be paying a reasonable price for it. If you believe that the stock is really worth $103.46, then there isn’t much room for the share price to appreciate beyond where it’s currently trading.

GrubHub Inc Valuation Detail
Analysis Model Fair Value Upside (Downside)
10-yr DCF Revenue Exit $145.10 37.0%
5-yr DCF Revenue Exit $137.11 29.4%
Peer Revenue Multiples $62.58 -40.9%
10-yr DCF EBITDA Exit $130.24 22.9%
5-yr DCF EBITDA Exit $110.49 4.3%
Peer EBITDA Multiples $54.16 -48.9%
10-yr DCF Growth Exit $129.66 22.4%
5-yr DCF Growth Exit $108.82 2.7%
Peer P/E Multiples $52.97 -50.0%
Average $103.46 -2.3%

Click on any of the analyses above to view the latest model with real-time data.

In addition, it seems like GrubHub’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its beta of 0.61.


How Much Growth Will GrubHub Generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations.

Should You Buy GrubHub Inc (NYSE: GRUB) When Prices Drop?
source: finbox.io data explorer

GrubHub’s revenue growth is expected to average 24.3% over the next five fiscal years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.


Why Combine Value And Growth Techniques?

While many investors tend to categorize stocks as either value or growth plays, the most successful investors view growth in conjunction with a company’s value. Take legendary investor Peter Lynch for example, who is widely known for popularizing the term growth at a reasonable price (GARP).

GARP is a strategy that combines aspects of both growth and value investing techniques by finding high growth companies that don’t trade at overly high valuations. In the application of this strategy, Lynch achieved 29% annualized returns as the manager of Fidelity’s Magellan Fund from 1977 to 1990. Needless to say the importance of analyzing a company’s fair value in addition to its growth prospects.

Unfortunately, GrubHub’s optimistic future growth appears fully factored into the current share price with the stock now trading near its intrinsic value. As a shareholder, you may have already conducted your fundamental analysis on the company and the stock’s recent 54% appreciation may have been expected. Therefore, it may be time for investors to take some chips off the table. For prospective investors looking to purchase shares of GrubHub, it may be worth holding off until the stock develops a wider margin of safety.

However, if you have not done so already, I highly recommend you complete your research on GrubHub by taking a look at the following:

Valuation Metrics: how much upside do shares of GrubHub have based on Wall Street’s consensus price target? Take a look at our analyst upside data explorer that compares the company’s upside relative to its peers.

Risk Metrics: what is GrubHub’s CapEx coverage? This is the amount a company outlays for capital assets for each dollar it generates from those investments. View the company’s CapEx coverage here.

Forecast Metrics: what is GrubHub’s projected EBITDA margin? Is the company expected to improve its profitability going forward? Analyze the company’s projected EBITDA margin here.

A Closer Look At Ken Griffin’s Citadel Advisors

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A detailed review of Ken Griffin’s investing approach and Citadel Advisors’ largest holdings which includes SPDR S&P 500 ETF Trust (NYSEARCA: SPY), Amazon.com, Inc. (NasdaqGS: AMZN), and Facebook, Inc. (NasdaqGS: FB).


Ken Griffin’s Knack For Investing

Ken Griffin is the founder and CEO of Chicago-based hedge fund manager, Citadel Investment Group. He is widely recognized as one of the most successful hedge fund managers of the last two decades. Griffin also owns Citadel Securities, a market making firm.

Griffin began trading actively while still an undergraduate at Harvard. He reportedly made big profits in the crash of 1987, at the age of 19. In 1989, after graduating, he joined Frank Meyer’s Glenwood Capital Investments in
Chicago. He is believed to have returned 70% on his positions in his first year of trading at Glenwood. The following year, Meyer helped Griffin raise $4.6 million to found Citadel.

Today, Citadel is the second largest multi-strategy hedge fund firm in the world, and manages over $27 billion. Citadel, which employs a staff of over 1,400 individuals, is highly regarded by those wishing to work in the investment industry. In 2015, Griffin said the company would interview 10,000 candidates to fill 300 positions. He also said it was easier to get into Harvard than to get a job at Citadel.

Griffin’s successful career has helped him accumulate a personal fortune of $9.1 billion. He is a prominent and often outspoken political donor and supports candidates and groups that support his belief in a limited government. Griffin is also a prominent art investor – in 2006 he paid $80 million for a Jasper Johns painting, which at the time was the highest price ever paid for a work by a living artist.


A Master of the Business of Money Management

Citadel engages in multiple strategies, including market-making and investing in distressed assets. While Ken Griffin has an enviable personal track record as a trader, Citadel’s success may have more to do with his leadership. The firm emphasizes employing the best talent, investing in the best technology and a focus on risk management and rigorous quantitative analysis. Citadel doesn’t have a particular investing or trading style, but aims to be the best at everything it does.

In a letter to investors, Griffin stressed the role partners and staff have played in Citadel’s success. He stressed the importance of recruiting the best talent, saying, “The early days of Citadel had a constant rhythm: research, problem-solve, program, trade, interview.”

The firm has always invested heavily in technology to give it an edge. In 2009 Citadel turned its IT department into a profit center by spinning it off as a separate company, Citadel Technology.

Citadel manages strategies across multiple asset classes including equities, bonds, credit and commodities. It uses exhaustive quantitative analysis to underpin its strategies in each market. It also runs 500 ‘doomsday scenarios’ each day to stress test its portfolios. The company’s risk management center is reported to have 36 monitors displaying all the firm’s positions.

Citadel is also very opportunistic. Griffin will often buy distressed assets when he believes investors are capitulating. If one looks at some of his notable investments, they often occur when a particular market is in the middle of a large sell-off. Griffin believes that these are the times when sentiment is at its lowest point, creating rare opportunities. In 2006, Citadel bought Amaranth Advisor’s natural gas positions when the fund was in the midst of a high-profile collapse.

Citadel itself ran into trouble in 2008 when liquidity in the convertible bond market dried up. Griffin only managed to save the fund by barring investors from withdrawing their funds. Citadel’s two largest funds finished 2008 down 55 percent, though they did manage to return 62 percent in 2009.

The firm also enters new markets when established players are in trouble. For instance, Citadel entered the energy trading business in the wake of Enron’s collapse. More recently, Griffin hired 17 equity traders and analysts from Visium Asset Management when the company closed down after former traders were charged with fraud.

Citadel consists of autonomous teams that focus on specific strategies and markets. As an aggressive business manager, Griffin will often shut down underperforming units, redeploying the best staff to other teams and retrenching the rest. Earlier this year he dismissed 21 staff members at one of its equity trading desks, Aptigon Capital.

Below I take a look at the hedge fund’s largest holdings as revealed in its most recent 13F filing.


Citadel Advisors’ Largest Holdings

The Ideas section of finbox.io tracks top investors and trending investment themes. You can get the latest data on the holdings discussed below at the Citadel Advisors page. The following table summarizes the firm’s largest holdings reported in the last filing:

Citadel Advisors Largest Holdings
Ticker Name Holding ($mil) % Of Portfolio
SPY SPDR S&P 500 ETF TR $18,032.1 11.4%
AMZN AMAZON COM INC $5,614.5 3.5%
FB FACEBOOK INC $3,109.6 2.0%
IWM ISHARES TR $2,821.5 1.8%
QQQ POWERSHARES QQQ TRUST $2,795.8 1.8%
GOOG ALPHABET INC $2,602.3 1.6%
BABA ALIBABA GROUP HLDG LTD $2,352.1 1.5%

The seven positions above represent 23.5% of the fund’s total portfolio. SPDR S&P 500 ETF Trust (NYSEARCA: SPY) is its largest holding with a long position in the ETF worth $18,032.1 million.

Amazon.com, Inc. (Nasdaq: AMZN) is Ken Griffin’s second largest position and represents 3.5% of his firm’s total portfolio.

Facebook, Inc. Common Stock (Nasdaq: FB) is Citadel Advisors’s third largest position and represents 2.0% of his firm’s total portfolio.

Managers with more than $100 million in qualifying assets under management are required to disclose their holdings to the SEC each quarter via 13F filings. Qualifying assets include long positions in U.S. equities and ADRs, call/put options, and convertible debt securities. Shorts, cash positions, foreign investments and other assets are not included. It is important to note that these filings are due 45 days after the quarter end date. Therefore, Citadel Advisors’s holdings above represent positions held as of December 31st and not necessarily reflective of the fund’s current stock holdings.

However, most can agree that with thousands of stocks traded on U.S. exchanges, doing thorough research on each one is nearly impossible for smaller investors. Leveraging the resources of the largest hedge funds on Wall Street can be a powerful way to narrow down the list.


Author: Brian Dentino

Expertise: financial technology, analyzing market trends

Brian is a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian’s background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors.

Brian can be reached at brian@finbox.io.

As of this writing, Brian did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.

A Closer Look At Ken Griffin's Citadel Advisors

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Source: finbox.io mavericks analysis
A Closer Look At Ken Griffin’s Citadel Advisors

The 7 Most Undervalued Stocks In Larry Robbins’ Portfolio

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The most undervalued stocks that Glenview Capital Managment owns as disclosed by the firm’s most recent 13F filing.


Larry Robbins: The Suggestivist

Larry Robbins is a hedge fund manager and CEO of Glenview Capital Management. He is also well known for his quarterly letters to investors.

He began his career as an analyst at Gleacher and Company, an M&A firm. Later Robbins spent six years running long/short strategies for Leon Cooperman at Omega Advisors.

In 2001 Robbins started Glenview Capital Management which now runs several hedge funds and long-only funds. The firm invests in equities as well as bonds and holds both long and short positions. It has been reported that Glenview Capital Management’s flagship fund returned 15% annually between 2000 to 2013.

Robbins has been described as a ‘Growth at a Reasonable Price’ (GARP) investor and as a ‘multi-strategy investor’. He’s said that he backs companies with predictable cash flows and recurring revenue streams. He often holds positions for significant periods, even when those positions move against him. As a result, he has earned a reputation for experiencing persistent winning and losing streaks.

While Robbins is not an activist investor, he does voice his opinions when it comes to some of his largest positions. In fact, he has said he would rather be ‘suggestivist’ than activist. In this way, he has been instrumental in bringing about corporate action at Tenet Healthcare Corp (NYSE: THC) and Community Health Systems (NYSE: CYH).

Below I take a closer look at Robbins’ holdings as reported in the hedge fund’s recent 13F SEC filing to find his most undervalued stocks.


Glenview Capital Management’s Most Undervalued Holdings

On February 14th, Larry Robbins’ firm Glenview Capital Management filed its quarterly Form 13F regulatory filing. The firm’s stock portfolio totals $18.5 billion with 58 positions according to the latest filing. The list value of stock holdings is up 7.3% when compared to the last quarter. As a benchmark, the S&P 500 was up 6.1% over the same period.

To determine which stocks are trading below their intrinsic value, aka “fair value” I used the finbox.io Fair Value estimates. I also wanted to blend in some indication of which stocks might be ready to make a move up soon because they’re popular with Wall Street analysts.

I calculated an average using the finbox.io fair value upside and analyst upside to create a blended upside which I then used to rank the most undervalued holdings.

Below are the top 7 stocks based on my calculations.

Brookdale Senior Living, Inc. (NYSE: BKD)

Brookdale Senior Living, Inc. owns and operates senior living communities in the United States.

Larry Robbins’ Glenview Capital Management holds a position in the company worth $177.0 million. This represents 1.0% of the firm’s portfolio.

The 7 Most Undervalued Stocks In Larry Robbins' Portfolio

Source: finbox.io

Shares of the company are down -28.2% over the last three months. The stock last traded at $6.89 as of Wednesday and 2 separate valuation analyses imply that there is big upside relative to its current trading price. Maybe worth taking a closer look at the company.

Meritor Inc (NYSE: MTOR)

Meritor Inc manufactures, sells and supports integrated systems, modules, and components to original equipment manufacturers (OEMs) and the aftermarket for the commercial vehicle, transportation, and industrial sectors. Meritor was founded in 1921 and is headquartered in Troy, Michigan.

Glenview Capital Management currently owns 4,863,111 shares of MTOR which represents 0.6% of the hedge fund’s stock portfolio.

The 7 Most Undervalued Stocks In Larry Robbins' Portfolio

Source: finbox.io

Shares of Meritor are down -8.0% over the last three months and finbox.io’s fair value estimate of $35.87 per share calculated from eight cash flow models imply 59.2% upside. The average price target from nine Wall Street analysts of $30.56 per share similarly imply nice upside potential.

CVS Health Corp (NYSE: CVS)

CVS Health Corp, together with its subsidiaries, provides integrated pharmacy health care services and also sells general retail merchandise. The company entered into a definitive merger agreement to acquire Aetna Inc (NYSE: AET) for $67.9 billion on December 3rd, 2017. As of March 13th, Aetna and CVS shareholders approved the merger and the transaction is expected to close in the second half of 2018.

Mr. Robbins currently holds a position in CVS Health Corp worth $494.6 million or 2.7% of his holdings.

The 7 Most Undervalued Stocks In Larry Robbins' Portfolio

Source: finbox.io

CVS Health Corp’s stock currently trades at $63.00 per share as of Wednesday, down -12.4% over the last three months. It’s important to note that the Aetna merger is expected to be accretive to earnings in the second full year after the close of the transaction. On a standalone basis, finbox.io’s seven valuation analyses suggest that shares could increase 39.9% going forward.

Shire PLC (ADR) (Nasdaq: SHPG)

Shire PLC (ADR), a biotechnology company, researches, develops, licenses and distributes specialist medicines for people with rare diseases and other specialized conditions worldwide. The company was founded in 1986 and is headquartered in Dublin, Ireland.

Glenview Capital Management currently owns shares of Shire worth $890.2 million. This represents the firm’s fourth largest position.

The 7 Most Undervalued Stocks In Larry Robbins' Portfolio

Source: finbox.io

Shares of the biotechnology company are trading -17.5% lower over the prior three months. However, the stock price could end up trading 38.9% higher in 2018 based on Shire’s future cash flow projections.

Platform Specialty Products Corp (NYSE: PAH)

Platform Specialty Products Corp produces and sells specialty chemical products worldwide. It operates through two segments, Performance Solutions and Agricultural Solutions. The company was founded in 1922 and is headquartered in West Palm Beach, Florida.

Larry Robbins is currently long the stock as revealed in his firm’s most recent 13F filing with a position worth more than $140 million.

The 7 Most Undervalued Stocks In Larry Robbins' Portfolio

Source: finbox.io

Platform Specialty Products’ stock currently trades at $10.40 per share as of March 21st, up 3.8% over the last three months. On a fundamental basis, the company’s stock is trading at a 35.9% discount to finbox.io’s intrinsic value estimate. Wall Street analysts estimate that there’s even more upside than that.

CIGNA Corporation (NYSE: CI)

CIGNA Corporation, a health services organization, provides insurance and related products and services in the United States and internationally. The insurance provider was founded in 1792 and is headquartered in Bloomfield, Connecticut.

Glenview Capital Management currently holds a position worth $531.9 million or 2.9% of its portfolio.

The 7 Most Undervalued Stocks In Larry Robbins' Portfolio

Source: finbox.io

Shares of the company are down -20.4% over the last three months. The stock last traded at $167.94 as of Wednesday and three separate valuation analyses imply that there is 48.7% upside relative to its current trading price.

Comcast Corporation (Nasdaq: CMCSA)

Comcast Corporation operates as a media and technology company worldwide, was founded in 1963 and is headquartered in Philadelphia, Pennsylvania. The company made an offer to acquire SKY PLC (LON: SKY) from Twenty-First Century Fox Inc (Nasdaq:FOXA) and others for £21.5 billion on February 27th, 2018.

Mr. Robbins currently holds a position in Comcast worth $110.6 million.

The 7 Most Undervalued Stocks In Larry Robbins' Portfolio

Source: finbox.io

Shares of Comcast are down -11.3% over the last three months and finbox.io’s fair value estimate of $44.40 per share calculated from 12 cash flow models imply 28.0% upside. The average price target from 24 Wall Street analysts of $49.08 per share imply even further upside.


Larry Robbins’ Most Undervalued Stocks

In conclusion, the table below lists the seven most undervalued stocks in Glenview Capital Management’s portfolio.

Larry Robbins’ Most Undervalued Stocks
Ticker Name Upside (finbox.io) Upside (Analyst Target) Blend Upside
BKD Brookdale Senior Living, Inc. 62.6% 49.1% 55.8%
MTOR Meritor Inc 59.2% 39.5% 49.3%
CVS CVS Health Corp 39.9% 40.7% 40.3%
SHPG Shire PLC (ADR) 38.9% 47.6% 43.2%
PAH Platform Specialty Products Corp 35.9% 35.1% 35.5%
CI CIGNA Corporation 48.7% 37.4% 43.0%
CMCSA Comcast Corporation 28.0% 42.0% 35.0%

The Ideas section of finbox.io tracks top investors and trending investment themes. You can get the latest data on the holdings discussed above at the Glenview Capital Management page.

Managers with more than $100 million in qualifying assets under management are required to disclose their holdings to the SEC each quarter via 13F filings. Qualifying assets include long positions in U.S. equities and ADRs, call/put options, and convertible debt securities. Shorts, cash positions, foreign investments and other assets are not included. It is important to note that these filings are due 45 days after the quarter end date. Therefore, Glenview Capital Management’s holdings above represent positions held as of December 31st and not necessarily reflective of the fund’s current stock holdings.

However, most can agree that with thousands of stocks traded on U.S. exchanges, doing thorough research on each one is nearly impossible for smaller investors. Leveraging the resources of the largest hedge funds on Wall Street can be a powerful way to narrow down the list.


Author: Matt Hogan

Expertise: Valuation, financial statement analysis

Matt Hogan is a co-founder of finbox.io. His expertise is in investment decision making. Prior to finbox.io, Matt worked for an investment banking group providing fairness opinions in connection to stock acquisitions. He spent much of his time building valuation models to help clients determine an asset’s fair value. He believes that these same valuation models should be used by all investors before buying or selling a stock.

His work is frequently published at InvestorPlace, Benzinga, ValueWalk, AAII, Barron’s, Seeking Alpha and investing.com.

Matt can be reached at matt@finbox.io.

As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.

The 7 Most Undervalued Stocks In Larry Robbins' Portfolio

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Source: finbox.io mavericks analysis
The 7 Most Undervalued Stocks In Larry Robbins’ Portfolio

Why Steven Cohen Increased His US Concrete Stake By 64%

in INVESTING IDEAS by

A schedule 13G filing with the SEC on Friday evening revealed that Steven Cohen increased his stake in US Concrete Inc (Nasdaq: USCR) by $20.7 million. With the stock down -16.4% in the last month, it’s worth taking a closer look at the company.


Point72 Adds To Its US Concrete Stake

On February 14th, Steven Cohen’s firm Point72 Asset Management filed its quarterly Form 13F with the SEC. The filing showed that the investment firm held 529,956 shares of US Concrete worth $44.3 million as of December 31st.

However, a new filing on Friday revealed that Point72 Asset Management purchased an additional 337,927 shares bringing the hedge fund’s total ownership stake to 867,883 shares worth roughly $53.1 million. This also represents 5.2% of US Concrete’s total equity.

The company’s shares last traded at $61.15 as of Monday afternoon, down -16.4% over the last month. Could the recent buying activity signal a promising road ahead while the stock trades near its 52-week low?

Why Steven Cohen Increased His US Concrete Stake By 64%

source: finbox.io


Potential Reasons For Adding Shares

US Concrete produces and sells ready-mixed concrete, aggregates, and concrete-related products and services to the construction industry in the United States and Canada. It primarily serves concrete sub-contractors, general contractors, governmental agencies, property owners and developers, architects, engineers, and home builders. Wall Street analysts covering the stock often compare the company to a peer group that includes Eagle Materials (NYSE: EXP), Vulcan Materials (NYSE: VMC), Summit Materials (NYSE: SUM) and Martin Marietta Materials (NYSE: MLM). Analyzing US Concrete’s valuation metrics and ratios relative to peers provides further insight into why Point72 Asset Management purchased shares.

A company’s projected 5-year EBITDA CAGR is the average annual growth rate of EBITDA over a five year period. It’s calculated as follows:

5yr CAGR = [ EBITDA FY+5 / EBITDA FY ] ^ (1/5 years) - 1

The chart below plots the five year EBITDA compounded annual growth rate for US Concrete and its peers.

Why Steven Cohen Increased His US Concrete Stake By 64%source: finbox.io

The company’s projected 5-year EBITDA CAGR of 16.9% is above all of its selected comparable public companies: EXP (10.1%), VMC (12.4%), SUM (9.0%) and MLM (7.9%). In addition, US Concrete’s 1-year projected EBITDA growth of 63.6% is also well above all of its peers.

A company’s EBITDA multiple is calculated by dividing its Enterprise Value by EBITDA and is often used to benchmark the fair market value of a company. Its key benefit over the P/E multiple is that it’s capital structure-neutral, and, therefore, better at comparing companies with different levels of debt.

High growth stocks typically trade at higher valuation multiples. However, this does not appear to be the case as illustrated in the chart below.

Why Steven Cohen Increased His US Concrete Stake By 64%

source: finbox.io

US Concrete’s LTM EBITDA multiple of 11.7x is below all of its selected comparable public companies. Furthermore, its forward EBITDA multiple of 7.1x is also below the entire peer group. This make’s the company’s shares highly attractive purely on a relative valuation approach.

In addition, finbox.io’s average fair value estimate of $85.19 implies 40.3% upside and is calculated from 4 valuation models as shown in the table below. Each analysis uses consensus Wall Street estimates for the projections when available.

US Concrete Valuation Detail
Analysis Model Fair Value Upside (Downside)
Peer EBITDA Multiples $79.50 31.0%
10-yr DCF Growth Exit $97.56 60.7%
5-yr DCF Growth Exit $94.46 55.6%
Peer P/E Multiples $69.21 14.0%
Average $85.19 40.3%

US Concrete shares have traded lower over the last month and the stock now appears to be trading at a significant discount to its intrinsic value. This could be a reason why Steven Cohen’s hedge fund is adding to his stake in the company.

However, it is important to note that investors should never blindly copy the trading activity of illustrious money managers such as Mr. Cohen. However, keeping an eye on their buying and selling activity will help in making a more informed investment decision.

I recommend investors continue their research on US Concrete to get a more comprehensive view of the company.


Author: Andy Pai

Expertise: financial modeling, mergers & acquisitions

Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights:

  • Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores.
  • Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets.

Andy can be reached at andy@finbox.io.

As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.

At $35.50 Per Share, Is Twitter Inc (NYSE: TWTR) A Buy?

in INVESTING IDEAS by

Twitter Inc (NYSE: TWTR), a highly followed social media firm with a market capitalization of $26.6 billion, saw its share price increase by 44.2% over the prior three months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But is there still an opportunity here to buy? I examine Twitter’s valuation and outlook in more detail to determine if there’s still a buying opportunity.


Is There An Opportunity In Twitter?

Twitter appears to be overvalued by -27.0% at the moment, based on 7 separate valuation models. The stock is currently trading at $35.51 on the market compared to our average intrinsic value of $25.92. This means that the buying opportunity has probably disappeared for now.

Twitter Inc Valuation Detail
Analysis Model Fair Value Upside (Downside)
10-yr DCF Revenue Exit $27.09 -23.7%
5-yr DCF Revenue Exit $25.93 -27.0%
Peer Revenue Multiples $19.27 -45.7%
Peer EBITDA Multiples $26.07 -26.6%
10-yr DCF Growth Exit $35.69 0.5%
5-yr DCF Growth Exit $37.47 5.5%
Earnings Power Value $9.92 -72.1%
Average $25.92 -27.0%

Click on any of the analyses above to view the latest model with real-time data.

Furthermore, Twitter’s share price also seems relatively stable compared to the rest of the market as indicated by its low beta of 0.61. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon. And once it’s there, it may be hard to fall back down into an attractive buying range.


Can We Expect Growth From Twitter?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matters the most, a more compelling investment thesis would be high growth potential at a cheap price.

At $35.50 Per Share, Is Twitter Inc (NYSE: TWTR) A Buy?source: finbox.io data explorer

With EBITDA expected to grow on average of 28.0% over the next couple years, the future certainly appears bright for Twitter. It looks like higher cash flows are in the cards for shareholders, which should feed into a higher share valuation.


What This Means For Investors

Many investors separate stocks into value and growth categories based on quantitative metrics. However, one of the most famous investors in the world views this as foolish. In Warren Buffett’s 1992 letter to Berkshire Hathaway Inc. (NYSE: BRK.B) shareholders, Buffett touches upon a subject at odds with much of the investment industry:

“Most analysts feel they must choose between two approaches customarily thought to be in opposition: ‘value’ and ‘growth.’ Indeed, many investment professionals see any mixing of the two terms as a form of intellectual cross-dressing.

We view that as fuzzy thinking… In our opinion, the two approaches are joined at the hip: Growth is always a component in the calculation of value, constituting a variable whose importance can range from negligible to enormous and whose impact can be negative as well as positive.”

While investors tend to categorize stocks into value and growth, some of the most successful investors view growth as simply one component of a company’s value. Twitter has positioned itself so that double-digit growth appears to be a reasonable assumption for the foreseeable future. However, this growth does not look highly attractive at current trading levels. As such, investors may want to hold off on buying or adding to their TWTR position for the time being.

I recommend you continue to research Twitter to get a more comprehensive view of the company by looking at:

Risk Metrics: what is Twitter’s cash ratio which is used to assess a company’s short-term liquidity. View the company’s cash ratio here.

Efficiency Metrics: return on equity is used to measure the return that a firm generates on the book value of common equity. View Twitter’s return on equity here.

Forecast Metrics: what is Twitter’s projected EBITDA margin? Is the company expected to improve its profitability going forward? Analyze the company’s projected EBITDA margin here.


Author: Brian Dentino

Expertise: financial technology, analyzing market trends

Brian is a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian’s background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors.

Brian can be reached at brian@finbox.io.

As of this writing, Brian did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.

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