Wendy’s: Great Fast Food, Bad Investment

Wendy’s: Great Fast Food, Bad Investment

About a month and a half ago I wrote an article stating that I believe Jack In The Box to be overvalued despite the recent positive hype around the company.  Lately I have been researching Wendy’s $WEN because it has had JACK’s opposite problem; very negative recent press and wanted to see if this might turn out to be a potential contrarian value play or a value trap.

I will be referencing and comparing Wendy’s to Jack In The Box and the other fast food companies I wrote about in my $JACK article so if you would like to see how Wendy’s compares to other fast food companies please reference my JACK article that I link to above.

Wendy’s Overview

Wendy’s is an owner, operator, and franchiser of 6,543 fast food restaurants, 1,447 of the restaurants are owned directly by Wendy’s with the remaining amount owned by franchisees.  Wendy’s offers hamburgers, chicken sandwiches, salads, wraps, fries, and the rest of the typical fast food restaurant offerings but at a higher quality profile than most of its other fast food competitors.  Higher quality also leads to higher prices for its individual product offerings and meals which greatly affected the company during the recession with customers generally looking for cheaper food.  In the past several years to combat the low cost offerings of its competitors, Wendy’s has brought out its own value and extra value menus with prices generally under $2 per item.

Since the recession Wendy’s has streamlined operations by selling off its Arby’s subsidiary, enacting cost cutting measures,  updating its menu to offer new products including breakfast at some locations, and has started reimaging some of its restaurants by starting its Image Activation Program.  The program has been put into place to update its restaurants making them look more modern, offering more amenities to get customers to stay longer at its restaurants, and making the food ordering and cooking process more efficient so customers can get their food faster.

Unlike JACK who has recently finished up its reimaging of its restaurants and who should see at least small margin growth due to lower capital expenditures, Wendy’s has only just started this process with only a few dozen restaurants having been updated thus far.  Wendy’s hopes that by 2015 about half of its company owned restaurants will be reimaged so this process is going to take a while.  As we saw with Jack In The Box that will lead to generally higher cap ex for the foreseeable future, most likely lower or stagnant margins, possibly more debt, and potential loss of sales due to having some of its restaurants closed for construction periods of as long as eight weeks currently.

Valuations

These valuations are done by me and are not a recommendation to buy stock in any of the following companies mentioned. Do your own homework.

All numbers are in millions of US dollars, except per share information, unless otherwise noted. The following valuations were done using its 2011 10K, 3Q 2012 10Q, and its 3Q 2012 investor presentation slides.

Asset Reproduction Valuation

Assets: Book Value: Reproduction Value:
Current Assets
Cash And Cash Equivalents 454 454
Accounts Receivable (Net) 65 55
Inventories 12 8
Prepaid Expenses & Other Current Assets 32 16
Deferred Income Tax Benefit 95 48
Advertising Funds Restricted Assets 75 50
Total Current Assets 734 631
Properties 1241 745
Goodwill 877 439
Other Intangible Assets 1315 658
Investments 118 89
Deferred Costs & Other Assets 57 29
Total Assets 4340 2591

Number of shares are 390

Reproduction Value:

With goodwill and intangible assets:

  • 2591/390=$6.64 per share.

Without goodwill and intangible assets:

  • 1494/390=$3.83 per share.

EBIT and Net Cash Valuation

Cash and cash equivalents are 454

Short term investments are 0

Total current liabilities are 344

Number of shares are 390

Cash and cash equivalents + short-term investments – total current liabilities=454-344=110.

  • 110/390=$0.28 in net cash per share.

WEN has a trailing twelve month EBIT of 120.

5X, 8X, 11X, and 14X EBIT + cash and cash equivalents + short-term investments:

  • 5X120=600+454=1054/390=$2.70 per share.
  • 8X120=960+454=1414/390=$3.63 per share.
  • 11X120=1320+454=1774/390=$4.55 per share.
  • 14X120=1680+454=2134/390=$5.47 per share.

TEV/EBIT and EV/EBIT Valuation

Total enterprise value is market cap+all debt equivalents (including the capitalized value of operating leases, unfunded pension liability, etc) -cash-long term investments-net deferred tax assets.

  • TEV/EBIT=3310/120=27.58
  • TEV/EBIT without accumulated deficit counted=2833/120=23.61
  • Regular EV/EBIT=2946/120=24.55

The average EV/EBIT in the fast food industry that I found when analyzing JACK was 15.68 and the only company to have a higher EV/EBIT than Wendy’s is Chipotle Mexican Grill $CMG which had an EV/EBIT of 26.53.

I usually like to buy companies that have an EV/EBIT multiple under 8 so the fast food industry as a whole appears to be massively overvalued to me.  Not only that but Wendy’s current EV/EBIT multiple is comparable to Chipotle’s which generally has very high margins, which is exactly the opposite of Wendy’s.  As we will see later Wendy’s margins do not even come close to Chipotle’s and are generally much worse than even the rest of the fast food companies margins, so its extraordinarily high EV/EBIT multiple is astounding and I will explain later why it is so high.

I also did my normal other valuations but they did not work because after you take out the company’s debt and or goodwill and intangibles from the other valuations you get negative estimates of intrinsic value for Wendy’s equity.

Margin comparison

Please reference my JACK article above to see my thoughts on each of the other company’s margins as I will only be commenting in this article about Wendy’s margins.  The below chart has been updated to include Wendy’s margins for comparison to the other fast food companies.  The industry averages are still only including the previous five companies I talked about.

All numbers in the table were put together using either Morningstar or Yahoo Finance.

Jack in the Box (JACK) Sonic Corp (SONC) McDonald’s (MCD) Yum Brands (YUM) Chipolte Mexican Grill (CMG) Company Averages Wendy’s (WEN)
Gross Margin 5 Year Average 16.28% 34.30% 37.94% 26.20% 24.28% 27.80% 25.70%
Gross Margin 10 Year Average 17.08% 43.38% 40.42% 35.59% 11.73% 29.04% 39.86%
Op Margin 5 Year Average 7.46% 16.24% 27.42% 14.22% 12.76% 15.62% -1.70%
Op Margin 10 Year Average 7.07% 18.05% 22.62% 13.50% 6.64% 13.57% 0.21%
ROE 5 Year Average 20.16% 66.33% 30.26% 131.56% 18.55% 53.37% -6%
ROE 10 Year Average 18.77% 43.71% 23.19% 105.85% 10.27% 40.36% -4.68%
ROIC 5 Year Average 11.17% 3.38% 17.38% 24.97% 18.49% 15.08% -3.77%
ROIC 10 Year Average 10.91% 8.97% 13.37% 23.54% 10.22% 13.40% -2.45%
FCF/Sales 5 Year Average -0.26% 6.48% 15.90% 7.70% 6.92% 7.35% 1.07%
FCF/Sales 10 Year Average 0.80% 7.10% 12.86% 6.70% 2.26% 5.94% -3.74%
Cash Conversion Cycle 5 Year Average 0.78 1.23 0.91 -36.35 -5.24 -7.92 -4.18
Cash Conversion Cycle 10 Year Average 0.27 1.14 -1.22 -49.02 -5.21 -10.81 -4.53
P/B Current 2.9 12.4 6.7 14.3 8.2 8.9 0.9
Insider Ownership Current 0.38% 6.12% 0.07% 0.50% 1.64% 1.74% 6.83%
EV/EBIT Current 14.25 9.65 12.16 15.81 26.53 15.68 24.55
Debt Comparisons:
Total Debt as a % of Balance Sheet 5 year Average 30.78% 80.91% 35.28% 45.24% 0 38.44% 34.03%
Total debt as a % of Balance Sheet 10 year Average 26.84% 50.77% 35.22% 40.72% 0.14% 30.74% 38.58%
Current Assets to Current Liabilities 1.02 1.38 1.24 0.97 4.13 1.75 2.13
Total Debt to Equity 1.03 9.69 0.97 1.6 0 2.66 0.81
Total Debt to Total Assets 30.50% 71.20% 41% 37.21% 0 35.98% 36.87%
Total Contractual Obligations and Commitments, Including Debt $2.6 Billion $1 Billion $27.20 Billion $11.42 Billion $2.20 Billion $8.88 Billion $1.9 Billion
Total Obligations and Debt/EBIT 21.67 8.85 3.15 5.4 5.82 8.98 13.33

As you can see from the above margin comparison, Wendy’s margins are almost all quite a bit worse or at best about even with industry averages in comparison to its fast food competitors.  Even if we were to exclude Wendy’s absolutely horrible 2008 from its numbers, its margins are still quite a bit lower than its competitors.

Especially of note are the horrible in comparison to its competitor’s margins: ROIC, ROE, FCF/Sales, EV/EBIT, and Total obligations and debt/EBIT ratios, which are all a lot worse than its competitor’s ratios.  Wendy’s EV/EBIT is especially inflated due to its high amount of debt in comparison to its profitability which is why it has a comparable EV/EBIT to the much higher margin Chipotle.  My calculations of ROIC are a bit different than Morningstar’s numbers and help out Wendy’s a bit, but even at 5.4% without goodwill and 3.85% with goodwill those numbers are still generally quite inferior to its competitors.

About the only thing that Wendy’s has in favor for itself out of the entire above table is that its P/B ratio of 0.9 is a lot lower than its competitors.  A P/B ratio that low generally means that the company could be undervalued. That P/B ratio in this case is a bit of a farce because goodwill and other intangible assets make up the vast majority of current book value as just those two combine for an estimated $2.2 billion in value.  After subtracting goodwill and intangible assets tangible book value is actually negative.  The $2.2 billion is actually more than the current market cap so I think that it is fair to say that those values are probably massively overstated and may soon have to be restated or written down to a more reasonable level, thus eliminating some further perceived value and bringing the P/B value up closer to its competitors.

I also think that Wendy’s debt levels and costs are too high in comparison to its profitability as 83% of operating profit (EBIT) goes to interest expenses.  Costs and other expenses, not including interest expense and loss on extinguishment of debt, take up 95% of total sales.  Other expenses include general and administrative, depreciation and amortization, etc.  If you include interest expenses and loss on extinguishment of debt that takes total costs and expenses over 100% of sales, which is why Wendy’s recent earnings have been negative.

Pros

  • Pays a dividend and recently upped it 100%.
  • After a lot of the stores are reimaged margins should improve due to lower cap ex and higher same store sales.  Of the stores that have thus far been reimaged Wendy’s says they have seen 25% increases in sales.
  • Has positive net cash.
  • Has a good amount of cash on hand.
  • Same store sales have risen for 6 straight quarters and a total of 2.3% in the past 9 months.
  • Wendy’s has recently paid off some of its 10% coupon debt by taking out lower interest debt, which should lead to lower interest expenses going forward.
  • Wendy’s recently overtook Burger King as the second biggest fast food burger chain.
  • Owns a lot of its restaurants and the property underneath the buildings so Wendy’s does hold some valuable assets in case it has some problems.
  • Just fewer than 80% of its restaurants are owned by franchisees that pay a 4% royalty to Wendy’s.  Collecting franchise royalty fees is a very high margin business.
  • The company produces positive FCF excluding cap ex.

Cons

  • Wendy’s is overvalued by every one of my valuations, sometimes in extreme cases, except when including the massive amount of goodwill and intangible assets.
  • Wendy’s margins overall are generally a lot worse than its fast food competitors.
  • Book value is only positive because of goodwill and other intangible assets.
  • The company has had recent negative earnings.
  • 83% of operating profit went to interest expense.
  • The company’s equity has negative value after subtracting goodwill and intangible assets on various valuations.
  • The company has been buying back a lot of stock at what I think are overvalued prices.
  • The company’s debt levels and costs are too high in my opinion in comparison to its profitability levels.
  • Wendy’s will have higher cap ex for the foreseeable future due to the reimagining of its stores.
  • The reimaging of Wendy’s stores could be going on for at least a decade if not more as it hopes to have around 750 stores reimaged by 2015 leaving around 5,750 stores to be reimaged after that, not including new stores that are opened by Wendy’s itself or its franchisees.
  • Cap ex this year has been around $225 million and will likely stay close to that elevated level for many years due to the reimagining of its stores and which should either lead to lowering or stagnating margins for the foreseeable future.
  • The company has negative FCF when including cap ex.
  • This year the company spent $126 million in cash on cap ex with the remaining $99 million coming from other sources.  To me that means Wendy’s will have to either increase its margins and FCF to pay the remaining cap ex costs, or more likely it will continue to have to issue debt to fund the reimaging of its stores.
  • While sales have been rising within Wendy’s, costs have also been rising at about the same amount which is why margins have not been increasing much as sales have improved.
  • The company has quite a few, what seem to me questionable related party transactions within the company, including with Mr. Peltz (former Wendy’s executive and current chairman) and Trian Partners the investment fund Mr. Peltz has formed with a couple Wendy’s other board members.
  • Just one example of the questionable transactions is that Wendy’s paid just under $640,000 in security costs for Mr. Peltz who is a billionaire and could easily pay these costs himself.
  • Trian Partners currently owns just under 25% of Wendy’s and has three members on Wendy’s board of directors so Trian could exert a lot of pressure on Wendy’s if it saw fit to do so.
  • Due to some of the what seem to me to be questionable transactions; I do not trust management to do what is right for shareholders and to increase shareholder value.

Potential Catalysts

  • The reimaging of its stores will most likely eventually lead to margin and sales growth.
  • If Wendy’s can get its costs under control, which it is trying to do now, it could achieve some margin growth.
  • In my opinion Wendy’s has overstated its goodwill and other intangible assets and may have to restate or write down some of the value of each.  Wendy’s warns it may have to do this in its most recent annual report, which would lead to less perceived value in the company, and would probably drop the price of the stock further.

Conclusion

Wendy’s has recently overtaken the number two spot for hamburger fast food chains in the United States from Burger King.  Growth in this case appears to be bad for shareholders as its costs have been rising about in line with sales which are why margins have not seen much growth as Wendy’s sales have been growing.  Wendy’s margins are also generally quite a bit worse than its other fast food competitors, in my opinion its debt levels and costs are too high, and I do not trust its management to do what is right for shareholders.

Wendy’s appears to be destroying shareholder value with its high costs and debt levels, buying back its stock at overvalued prices, and continuing to grow its restaurant count and sales but not improving its margins.  Because Wendy’s margins have not improved as sales have been rising, it looks like Wendy’s is growing at less than its cost of capital which in my opinion has led to value destruction for shareholders.  The destruction of shareholder value will not reverse unless Wendy’s can cut its costs and debt levels and or improve profitability which probably will not happen for a while due to some of the reasons stated above.  Unless something drastic happens, in my opinion shareholders of Wendy’s stock can only look forward to further value destruction of their shares into the future.

Having stated all of the above I would estimate Wendy’s intrinsic value to be my 5X EBIT and cash valuation of $2.70 per share.  Due to all of what I stated in the above article I do not think that Wendy’s is even worth its reproduction value and I would not even be a buyer of the company at my $2.70 per share estimate of value.

Even if Wendy’s margins and sales do rise after reimaging of its stores, which should happen, that will not take place for many years as Wendy’s has only recently started to reimage its restaurants.

I hope I am wrong about Wendy’s because food wise it is by far my favorite fast food restaurant.  I hope it can fix its problems, and hope that it starts to thrive as a company.  However, as an investment I think Wendy’s is the proverbial value trap and I plan to keep my investment funds far away from the company.

Links From Geoff Gannon, Oddball Stocks, Greg Speciher, OTC Adventures, GuruFocus, MicroCapClub, and Others

I hope everyone had a great Thanksgiving weekend.  Other than eating great food and spending time with family I also got a lot of work done.  I spent a lot of this weekend looking into Wendy’s as a possible investment and my article about them should be up later this week.  I also spent a lot of time catching up on articles that I have been saving to read, some of which I will be sharing with you below.

Oddball Stocks: My Investment Process Applied To eOn, a net net trading at 3X FCF.

Geoff Gannon: When To Sell A Stock.

OTC Adventures: Retail Holdings NV $RHDGF

Pick The Brain: The One And Only Law Of Success

Columbia Business School: Think Small, A Different Perspective On Economies of Scale.

MicroCap Club: 8 Habits of Highly Effective Micro Cap CEO’s

Greg Speicher: Comprehensive Resources On Charlie Munger

MicroCap Club: The Case For Micro Caps

Geoff Gannon: The Most Time Efficient Way To Find Cheap Stocks

Value Uncovered: Tessi, High Quality Owner Operator

Dole Is Still Undervalued: Updated Valuation And Analysis Article After Sale To Itochu

Dole Is Still Undervalued: Updated Valuation And Analysis Article After Sale To Itochu

Earlier this year I completely dedicated myself to learning the techniques, process, and proper mind set to become an excellent value investor.  I wrote my first full article back in June about Dole Food Company (DOLE).  Here are my thoughts on Dole back in June, and my conclusion thoughts after comparing Dole to Chiquita (CQB) and Fresh Del Monte (FDP).  Due to its big change since that time I have been asked by a reader what my thoughts about New Dole are now that it has eliminated what was its biggest problem; its debt.  Here is just one of the many articles outlining the sale to Itochu for $1.7 billion that is expected to close by the end of the year.

The reader wants to know what I think about New Dole’s prospects going forward, if I still think the company is undervalued, or if I would think about selling now if I find it to be overvalued.

The reader also asked me about the 2009 Dole Food Automatic Common Exchange Security Trust which I talk about here.

Since the transaction has not closed still, most of the information in the above articles remains intact as it pertains to margins and debt levels about Dole’s current state.  I will first value the business as I see it after the sale of its worldwide operations and then comment on what I think about New Dole’s prospects after the transaction closes.  When I refer to Dole as a whole I mean Dole before the sale of its worldwide operations.  New Dole is in reference to my estimates of Dole’s operations after the sale of its worldwide operations.  I have a call into Dole investor relations to get exact revenue and EBIT numbers for New Dole, but to this point I have not received a call back.  I am estimating that New Dole will lose about 36% of its EBIT after the sale of its worldwide operations.  I came to that estimate from looking at Dole’s sale to Itochu presentation from September which can be viewed here.

These valuations were done by me, using my estimates, and are not a recommendation to buy any stock in any of the companies mentioned. Do your own homework.

All numbers are in millions of U.S. dollars, except per share information, unless otherwise noted. Valuations were done using Dole’s 2011 10K, second quarter and third quarter 2012 quarterly reports and presentations, and Dole’s presentation of what it should look like after its asset sale.

The main thing I was worried about with any asset sale is that Dole would have to unload some of its very valuable land assets.  Thankfully after the transaction is completed New Dole will still own 113,000 acres of land including some very valuable land in Hawaii.  All assets below are being kept by New Dole.

Sum of the Parts Valuation

Land Holdings

Dole owns 25,000 acres of noncore land in Oahu valued by Dole at $500 million or $20,000 per acre.  Dole also owns 22,100 acres in Costa Rica, 3,900 acres in Ecuador, and 25,500 acres in Honduras.  Only part of each countries acreage are being used for growing fruit: 8,200 in Honduras, 7,300 in Costa Rica, and 3,000 in Ecuador meaning the rest could presumably be sold without interfering with current operations, about 33,000 acres.

  • All Costa Rica land valued at $5,000 per acre equals $110.5 million.
  • Al Ecuador land valued at $3,500 per acre equals $13.65 million.
  • All Honduras land valued at $3,500 per acre equals $89.25 million.
  • Remaining 36,500 acres valued at $5,000 per acre equals $182.5 million.

Adding total land value estimates up equals $895.9 million just in land value or $7,928.32 per acre, which comes out to $10.18 per share in total land value.

Estimated value of unused noncore land 33,000 acres in the above three countries at $5,000 an acre for Costa Rica and $3,500 for Honduras and Ecuador land is $75.7 million.

Total noncore land assets that could be sold valued at $575.7million total, or $9,925.86 per acre; $6.54 per share in land assets that could be sold.

Ship and Ship Related Equipment

Dole owns 13,300 refrigerated 40ft containers at a very conservative $5,000 each equal $66.5 million.  This is a very conservative estimate as these containers can sell for as much as $50,000 a piece.  I am using $5,000 per unit as my estimate because I want to be extra conservative and because I have not been able to find an exact break down on how many of the 13,300 container units are the 40ft refrigerated units as Dole’s also has some 20ft refrigerated, and completely unrefrigerated containers, so I wanted a very conservative estimate of price to be safe.

Dole also owns 11 ships which I am very conservatively valuing at $1 million each.  I found a few container ships selling for under $1 million but most were well over that price, with some reaching prices over $100 million.  I am again just being conservative here because I do not have vast knowledge on the prices of Dole’s ships.

Adding all of the land, ship, and container value up gets us to a total of:

  • All land, ship, and container value=$973.4 million, or $11.06 per share.
  • Only noncore land that could be sold, ship and container value=$653.2 million, or $7.42 per share.

None of Dole’s operations, cash, debt, or any of its building or other equipment is counted in the above calculations.  I will include Dole’s cash in the below valuation.

I did not include any of its buildings or other equipment in the above valuation because I could not find any concrete information and again did not want to speculate on numbers.

Now I will value Dole’s operations.

EBIT and Net Cash Valuation

Cash and cash equivalents are 82 and it has 0 in short term investments.

Dole as a whole has a trailing twelve month EBIT of 180.7 for its entire current operations.  Per Dole’s sale to Itochu presentation I am estimating that it will lose approximately 36% of EBIT after the sale of its worldwide operations which leads to a trailing twelve month EBIT estimate of 115.65 for New Dole’s operations.

5X, 8X, 11X, and 14X EBIT + cash and cash equivalents + short-term investments:

  • 5X115.65=578.25+82=660.25/88=$7.50 per share.
  • 8X115.65=925.2+82=1007.2/88=$11.45 per share.
  • 11X115.65=1272.15+82=1354.15/88=$15.39 per share.
  • 14X115.65=1619.1+82=1701.1/88=$19.33 per share.

Combined Valuation Of New Dole

All values are per share values.

Total Land, Ship, and Container Value Only Non Core Saleable Land, Ship, and Container Value
5X EBIT $18.56 $14.92
8X EBIT $22.51 $18.87
11X EBIT $26.45 $22.81
14X EBIT $30.39 $26.75

The only thing the above values are not containing is the debt.  The reason I am not including the debt in any of the estimates of intrinsic value is because Dole as a whole now has total debt of $1.4 billion but will be able to pay off all of it if it chooses to after it receives the $1.7 billion from Itochu.   Thus making the above very good estimates of what New Dole should be worth after selling its worldwide operations and ridding itself of the debt.

I had an additional two paragraphs written about Dole’s TEV/EBIT and ROIC margins but those had to be scrapped since I have still not heard back from Dole investor relations about New Dole’s exact numbers and I did not want to speculate.

New Dole is also forecasting that after the sale is finalized it will be able to save around $100 million in cap ex and corporate expenses by the end of fiscal 2013 which supposedly are going to be yearly savings going forward, and to be able to improve its overall business operations.  Even leaving improvement in operations, possible future acquisitions, and money savings out of all my calculations, New Dole should be selling at a very conservative minimum of $14.92 per share, and I actually think quite a bit higher.  Current share price for the whole of Dole is $10.70 per share, a 29% margin of safety.

Dole management has also stated that after the sale to Itochu is finalized that it may look to sell or spin off further assets, or make some acquisitions to bolster its operations within New Dole, any of which may help unlock further value in its shares.  This is pure speculation, but I could see Mr. Murdock who owns around 40% of Dole, possibly looking to take the New Dole private again now that its major problem has been eliminated so he can control its operations again, which would also help unlock shareholder value.

Why after all of the above has Dole as a whole been dropping in price lately?  My guess is that people have been selling for a combination of the following reasons:

  • That Dole just released bad quarterly numbers that missed analyst estimates and which sent the herd running.
  • Before that people were probably selling some personal shares that they owned to lock in profits since the stock has run up from around $8.50 a share to over $15 a share at one point.
  • A lot of it may also be that people are still treating this as a highly indebted, risky, poorly operated, and marginally profitable company that it is without looking deeper at the assets that it will still hold after receiving the $1.7 billion from Itochu, and how New Dole will now be a much healthier and less risky company.

However, even if you do not count any of its operations at all, Dole as a whole is selling now for less than JUST a conservative value of the land, ship, and containers that it owns.  Meaning the downside is covered by hard saleable assets even if New Dole’s operations were to become massively unprofitable, which I think is very unlikely.

New Dole looks to be massively undervalued, will still hold very good high value assets, especially saleable land, has some future potential catalysts that could help unlock value, it should be able to compete better with Fresh Del Monte and Chiquita, and New Dole will now be freed up to make acquisitions and improvements to its business and operations after the transaction with Itochu closes as it will not be burdened by the massive amount of debt that it has carried for years.

I plan to buy shares for my personal account and add more shares back into the accounts I manage after selling some Dole shares up 70% in September.

Here is a last minute update as Dole has set the shareholder meeting for December 6th to approve this transaction.

Update and Links From Mark Lin, Oddball Stocks, Guru Focus, Farnam Street, ValueFolio and Old School Value

The most recent company I was researching turned out to be another no go as I found it to be overvalued at the low end by as much as 30%.  Since then I have turned my attention to Dole and have been getting my updated article on them prepared.  I have already written a portion of the article and with Dole releasing its most recent results later today I should be all good to go and have the whole article up by early next week.

Until then here are some links.

The One Thing That Can Kill Your Portfolio

ROE, ROIC, and CROIC

All Roads Lead To Rome: Bridging the Graham Buffett Divide

Alternative Information Sources

Analyzing Working Capital-The Key To Successful Investing In Net Nets

Why Net Cash Is The Most Misleading Indicator Of Balance Sheet Strength

Characteristics of Value Stocks and Value Traps

The Principle of Incomplete Knowledge

Charlie Munger…..”If I Were Teaching Business School”

Psych Plays and Bayesian Probability

Weekend Reading Links About Valuations

With all the research I have been going lately I have gotten way behind on posting links so here are a bunch that I think are very good and found them very helpful. Take a look at them below:

Atul Gawande: Excellence Is Recognizing Details, Failures

The Price Of Paying Attention

How Not To Run A Hedge Fund: Geoff Grant Edition

Advice From Jeff Bezos

How Did R.A. Dickey Master The Knuckleball

Jason Zweig Interviews Seth Klarman

How Did I Come Up With My 16 JNets

What Drives Operating Metrics?

Free Ebook: 115 Profitable Investing Ideas

How Buffett Made Money In Bad and Volatile Markets