On October 1, 2018, we posted 10-Year price targets for Starbucks (SBUX) . At the time, we had estimated 2020 undervalued and extreme undervalued targets of $72.88 and $43.97, respectively.
Since October 2018, SBUX has had an intra-day low of $50.02 on March 18, 2020.
see also: All 10-Year Targets
Posted in SBUX, Target Achieved
On February 9, 2019, we posted 10-Year price targets for Cracker Barrel Old Country Store (CBRL) . At the time, we had a 2020 undervalued and extreme undervalued targets of $85.35 and $55.92, respectively.
Since that time, CBRL has had an intra-day low of $53.61 on March 19, 2020.
see also: All 10-Year Targets
Posted in 10-year Targets, CBRL
The NLO team executed the following transaction(s): Continue reading
On June 15, 2019, we published our Crude Oil Cyclical Trends (WTI). In that review, we said the following:
“Our assessment of the data, as is commonly the case, is to default to the most conservative scenario. In the case of the latest decline in the price of oil from June 27, 2018 to the present, we calculated the decline of -52.98% as a possible turning point for the price of oil. A decline to such a level would bring the price of oil to $36.40, an additional decline of -29.40%.”
As seen in the table that we provided at the time, there was precedent for the price of oil to decline to $22.71. We always start from the conservative view and that is why we utilized the -52.98% level as a target (the smallest decline for a full cycle). If we had applied the previous worst case scenario, we would have generated a decline in oil to $16.15.
As absurd as it sounds, oil stands at $14.62 and that is a rebound from a staggering low. Below, we project the upside resistance targets and provide strategies to employ if you must own oil related investments. Continue reading
The bounce from the low was fast and furious and pushed many companies out of the 52 week low range. There are only a handful of companies this week but it’s worth revisiting companies on the April 3rd list as a good alternative.
Before we jump into this week’s list, let’s review the performance from last year. The best performing strategy was buying companies with low payout ratio. Two companies that came through was AmerisourceBergen (ABC) and Kroger (KR) both gaining more than 20%. Worse performing strategy was purchasing low P/E, a classic value investing strategy. Occidental Petroleum (OXY) and GAP (GPS) lost 78% and 68% respectively.
| April 19, 2019 | ||
| Strategy | High | Low |
| Yield | -26.6% | 1.6% |
| P/E | -0.7% | -36.2% |
| Payout Ratio | -1.9% | 6.6% |
| P/B | -10.6% | -26.1% |
| Closest to Low | -16.3% | |
| S&P 500 | -1.0% | |
| Dow Jones Ind | -8.7% | |
| Top 5 companies except for Index | ||
| Symbol | Name | Price | % Yr Low | P/E | EPS (ttm) | P/B | Yield | Payout Ratio |
| QNTO | Quaint Oak Bancorp, Inc. | 10.08 | 3.92% | 8.1 | 1.24 | 0.7 | 3.6% | 29% |
| PRK | Park National Corp. | 73.31 | 7.05% | 11.7 | 6.29 | 1.2 | 5.6% | 65% |
| STBA | S&T BanCorp. | 26.03 | 9.42% | 9.2 | 2.83 | 0.9 | 4.3% | 40% |
| BEN | Franklin Resources | 16.34 | 9.59% | 6.5 | 2.51 | 0.8 | 6.6% | 43% |
Disclaimer On our current list, we excluded companies that have no earnings. Stocks that appear on our watch lists are not recommendations to buy. Instead, they are the starting point for doing your research and determining the best company to buy. Ideally, a stock that is purchased from this list is done after a considerable decline in the price and extensive due diligence. Our view is to embrace the worse case scenario prior to investing. It is important to place these companies on your own watch list so that when the opportunity arises, you can purchase them with a greater margin of safety. It is our expectation that, at the most, only 1/3 of the companies that are part of our list will outperform the market over a one-year period.
Posted in Dividend Achiever Watch List, Dividend Achievers, Dividend Watch List
Tagged members
Below are the valuation targets for W.P. Carey (WPC) for the next 10 years. See our partial January 3, 2019 posting for reference. Continue reading
According to Charles H. Dow:
"The point of importance for those who deal in industrial stocks is whether the capitalization of the companies into which they propose to buy is moderate or excessive, when compared with the aggregate earnings of the various concerns forming the combination in a period of depression. It is probable that consolidated companies will be able to earn as much in the next period of low prices as the companies forming the combine were able to earn in the last one; hence the very foundation of investments in industrials should be knowledge of what these companies earned, say in 1893 to 1896, making, perhaps, reasonable allowance for economies under consolidation (Dow, Charles H. Review and Outlook. Wall Street Journal. April 27, 1899.)."
Dow’s point? To gauge the extent of a potential decline we need to consider the prior depressed levels as the benchmark for the next period of low prices and earnings.
How does this tie into the SPDR Dow Jones REIT ETF (RWR)? Below are the Speed Resistance Lines for RWR in the period from 2001 to 2009.
The downside targets were:
In the last period of decline, RWR achieved all of the downside targets. While achieving the extreme downside target of $33.29 is ideal, it isn’t the norm. For this reason, when the extreme downside target is achieved it stands out for what could happen in the next period of decline.
Below we provided the downside targets for the SPDR Dow Jones REIT ETF based on the price action from 2009 to 2020. Continue reading
Below are the upside resistance targets for Boeing (BA):
The upside resistance targets seem daunting. We’ve seen bigger and better companies bailed out and not able to recover from these levels. There is always a first.
Posted in BA, upside target
On January 24, 2020, we said the following of Palladium:
“Because of the precedent set in the period from 1996 to 2001, we expect that the conservative downside target of $1,627.93 will be achieved.”
Below is the charting of our assessment and the subsequent price action.
Not only did palladium decline below the target of $1,627.93, the price of palladium fell to $1,370 on an intraday basis on March 19, 2020, almost exactly half the distance between the conservative and mid-range targets.
Posted in palladium
Below are the upside and downside targets for Palladium based on the February 27, 2020 peak. Continue reading
While looking over the National Association of Real Estate Investment Trusts (NAREIT) website (https://www.reit.com/) in search of a price index, we found this note about the history of U.S. REITs:
"U.S. REITs were established by Congress in 1960 to give all investors, especially small investors, access to income-producing real estate."
Considering that REITs started in 1960, we were expecting that there would be a price index that goes back to 1960 with a full list of the original members of that index. Strangely, the only price index that could be found begins in 1972. We thought that this is highly unusual, especially from the leading source for information on REITs. The thought becomes, why isn’t there a list of those REITs from the beginning? As the leading source for information on REITs, what are the challenges to providing this information?
Such history and component information can be found for most major indexes like the Dow Jones Industrial Average, Dow Jones Transportation Average, and Dow Jones Utility Average. In the case of the Dow Jones Industrial Average, the index is famously known to begin in 1896 for the Wall Street Journal. However, lesser known is the fact that the Dow's first index of stocks appeared in The Customer's Afternoon Letter in 1884 and consisted of eleven companies:
Although there is a list of original members of the Dow Jones Industrial Average going back to the predecessor of the Wall Street Journal in 1884 with extensive history on those companies, there is no such detail from the NAREIT based on traded REITs from 1960.
While we’ve managed to compile a list of REITs from 1961 to 1991, below is the list of REITs that we could find for the period of 1961-1963 as provided by Norman E. Bailey’s paper titled “Real Estate Investment Trusts: An Appraisal.”
We would love to know if there is a full list of REITs from 1960 to 1972 with the price performance from the NAREIT. It would go a long way to improving the knowledge of REITs as investments if this data was made openly available.
When data from 1884 can be found with very little effort on the Dow Jones Industrial Average, what is the challenge of providing similar data from 1960?
see also: REIT Archives
source:
In a SeekingAlpha posting titled “Time to dust off investing strategies from 2009 crisis, UBS says” dated April 12, 2020, it is suggested that:
“A group of deep-value stocks were winners for investors through multiple parts of the cycle during the 2008-09 financial crisis, and a UBS analyst team says it is time to revisit those investing strategies.”
The benefit of an analyst is that they give good guidance beforehand. Assessing the recommendations after the fact is necessary but using such an approach could be argued as having elements of survivor bias or data mining. After all, if the company went out of business it isn’t even being considered for the possible mistakes or bad assessment.
In order to truly learn from the past, it is best to look at published recommendations at the peak in the market and review the performance. This is where we can learn the most that isn’t biased toward favorable outcomes.
Below we rate and review published recommendations by all UBS analysts that give specific recommendations in Barron’s throughout the period from January 2007 to December 2007 (that we could find).
Safeway (SWY): UBS analyst Neil Currie
“A compelling voice of dissent comes from UBS analyst Neil Currie, who pegs Safeway's core earnings at $1.65 a share in 2006 and $1.74 in 2007 once Blackhawk is stripped out. With the Street assuming a "best-case scenario," he assigns a more moderate multiple of 15 times 2007 projected earnings of $1.90, and says Safeway should be worth about 29. Smart shoppers might want to check out another aisle for something fresher (Tan, Kopin. Safeway: Ripe for a Fall?. Barron's. January 1, 2007).”
Safeway, as reflected in the chart, was expected to be value not much more than $29 and that the stock price would likely decline in value from there. UBS analyst Neil Currie was right on the mark as Safeway rose slightly in 2007 and then fell as low as $15 by 2012. A later buyout offer of reached for Safeway as the stock traded as high as $35 in 2015.
DBS Group Holdings (DBSDF): UBS analyst Jaj Singh
“Despite last year's rally, bank valuations remain reasonable at 1.75 times book, or accounting, value. UBS analyst Jaj Singh argues that they should be higher because average valuations over the past eight years tracked a deflationary period, and "a more relevant period is the early 1990s." Then, banks traded at 2.6 times book value; UBS' target ratio today is 1.9. In the banking group, DBS, or Development Bank of Singapore (DBS.Singapore), boasts strong deposits, low funding costs and a 67% loan-to-deposit ratio that leaves much room for expansion. Tan, Kopin. Singapore: the Safest Route to Asia's Riches. Barron's. Feb 12, 2007).”
The crosshair in the chart above, from February 12, 2007, should be all that needs to be said on this topic. At roughly $14.85, the price of DBS declined as much as -64%. Currently, DBS Group sits at nearly -7% below the 2007 recommendation.
Weyerhaeuser (WY): UBS analyst Richard Schneider
“Shareholders are pressuring Weyerhaeuser to change its status as a corporation to a REIT with better tax benefits and where gains are passed on to investors, but it is unclear whether the push will succeed. One hurdle: The company "may have to sell everything but timberland to qualify" for RE IT status, according to UBS analyst Richard Schneider. The analyst, who rates the stock Neutral, says Weyerhaeuser may seek to partially restructure and split off its containerboard business (Malik, Naureen S. Forest Grumps. Barron’s. March 19, 2007.).”
From the March 19, 2007 recommendation to the low of March 6, 2009, WY fell approximately -75.44%. Weyerhaeuser currently sits –29.61% below the 2007 recommendation.
Daimler AG (DDAIF): UBS analyst Max Warburton
“Notes Max Warburton, a UBS analyst in London: ‘Ex-Chrysler, Daimler is already an 8% margin business. Management is committed to unlocking value and the 'new Daimler' is set to be a high-margin, high-cashflow business.’ The stock, Jonas and Warburton argue, is worth over $100 (Palmer, Jay. If You Can Find a Better Stock, Buy It. Barron’s. May 21, 2007.).”
From May 21, 2007 to the low of 2009, Daimler AG declined approximately –76%. Currently, Daimler AG sits –63% below the 2007 recommended level.
CSL (CSL.AX): UBS analyst Andrew Goodsall
“The outlook for CSL wasn't always so bullish. In 2003, its plasma business threatened to unravel when prices crashed due to oversupply; CSL shares plummeted from A$52 to a low of A$11.57. The glut spurred Aventis, now Sanofi-Aventis (SNY), to seek a buyer for its plasma unit. CSL Chief Executive Brian McNamee stepped in, paying almost A$1 billion to acquire the business-twice the size of his own plasma division-and the bet paid off.
“The deal helped improve the dynamics for the whole industry, as U.S. collection centers were consolidated. With several key barriers to entering the market, including a three-to-four-year lead time in setting up new centers, UBS analyst Andrew Goodsall estimates demand for plasma product should be "tight" until at least 2010 (Murdoch, Susan. Australia's First $100 Stock? Barron’s. May 21, 2007.).”
From May 21, 2007 to March 9, 2009, CSL increased +10%. More importantly, CSL increased +997% from May 21, 2007 to April 10, 2020.
Ameriprise Financial (AMP): UBS analyst Andrew Kligerman
“UBS analyst Andrew Kligerman predicted in our story that Ameriprise shares, then 45, would surge once investors realized what a money spinner the company was. He has a Buy rating with a target price of 73, or about 30% above recent levels (Willoughby, Jack. Ameriprise Shares Look Lofty. Barron’s. August 6, 2007.) ”
From August 6, 2007 to the low of November 2008, AMP declined -78%. As of April 9, 2020, AMP is up +109%.
Gold/GLD: UBS analyst John Reade
“Analysts say that buyers are set to return as the urge to avoid risk revives. Add to this an increasing physical demand from consumers, particularly in India, and gold's outlook is all the more bullish and its current price all the more attractive. Says UBS analyst John Reade: "In this environment, there's a meaningful chance that gold will attract the safe-haven bid that has been so far mostly absent during the credit crunch (Hotter, Andrea.Glimmers of Hope for Gold. Barron’s. August 27, 2007)."
At the time this was written, the iShares Gold ETF was trading at $65.98. The ETF went as high as $184.82 and settled at $70 at the lowest point in October 2008, gaining +6.09%. Currently, GLD sits below the 2011 peak but comfortably above the 2007 recommendation level.
British Airways (BA) or (IAG.L): UBS analyst Tim Marshall
“BA (British Airways) however, does have an ace up its sleeve: a new state-of-the-art terminal at Heathrow that opens in March. Known as Terminal 5, the huge facility will be for BA exclusively and offer travelers unusual comfort and speed in everything from security checks to baggage claims. The new terminal will ‘make the airline far more competitive and, in the end, will be a far greater positive for the airline than Open Skies will be a negative,’ maintains Tim Marshall, a UBS analyst in London. If he's right, the stock could actually rebound over the next 12 months (Palmer, Jay. Opening the Skies. Barron’s. December 3, 2007.).”
From December 3, 2007 to the low of October 10, 2008, IAG.L declined -68.02%. IAG.L sits
Thoughts
The winners, and still champions, are Safeway, CSL Limited and gold. The analysts, Neil Currie, Andrew Goodsall and John Reade, made calls that have stood the test of a major bear market and thrived through the subsequent bull market. These are analysts that should be tracked down and followed as their assessment may have been a function of timing, luck, or solid hard work.
Our favorite call is the Safeway assessment by Neil Currie because the price target given was very accurate and even after a buyout offer (years later) the stock did not get priced far above the 2007 valuation.
Those that didn’t do so well were at the mercy of the markets. Andrew Kligerman gets a mention for recommending Ameriprise Financial which crashed and recovered.
Posted in Analyst Estimate, Barron's, Barron's Data
On February 22, 2019, we posted 10-Year price targets for Berkshire Hathaway (BRK-A). At the time, we had 2020 undervalued and extreme undervalue targets of $306,061 and $222,006, respectively.
Since that time, Berkshire Hathaway has had an intraday low of $239,440 on March 23, 2020.
The 2020 targets have been in place since our May 6, 2012 posting on Berkshire Hathaway.
see also: All 10-Year Targets
Posted in 10-year Targets, Altimeter, BRK-A, Target Achieved
