March 2016 Press On Research Issue Released Tomorrow

Below is an excerpt from the March 2016 Press On Research issue to release exclusive to subscribers tomorrow March 15th.  If you’d like to subscribe to Press On Research go to the links above or below.

Press On Research High Def

What Do You Do When A Company You Own Drops In Price?

March 2016 Press On Research Issue

By Jason Rivera

Press On Research Volume 1 Issue 10

What do you do when a company you own stock in drops in price?  What about when it drops a lot in price?

Do you panic and get anxious?  Do you buy or sell more without doing any extra work?  Do you ask your buddies what they think of the company even if they know nothing about investing?

If you do any of these things don’t worry as you’re not alone.  This is how most investors react when something they own drops significantly in price.

But the goal of Value Investing Journey and Press On Research is not only to find the best investments possible to build long-term wealth.  But also to teach so we can become better investors and thinkers.

And a major trait of any great long-term investor is the ability to control emotions.

If you can’t control your emotions it doesn’t matter what you invest in because you’ll always buy and sell at the wrong times.  This is what most investors do.

Study after study shows most normal – average – investors buy at the height of stock prices and sell at the bottom of the price swing.

This is awful and is one reason most people don’t beat the market over time.

So how can you stop being an average investor?

There are several ways but today I want to talk about how to control emotions.

If you can’t control your emotions it doesn’t matter how great of an analyst you are you’ll still be a terrible investor.

In April 2015 I recommended what I thought was a great asset manager NAME REMOVED.  Since then the stock price has dropped ~35% depending on what price you bought at.  And I’ve gotten email from several readers asking for an update on the company.

Because of this today’s Press On Research isn’t a normal recommendation issue.

We’re going to reevaluate NAME REMOVED to see if I made a mistake in my analysis last year.  And to show you the step by step process I take when reevaluating companies I own to take emotion out of my decision making processes.

***

I go on from here to reanalyze the company in full and show the step by step process I use so you can learn to do this yourself.

I found that while the company has dropped in absolute dollar terms and the economics have deteriorated a bit that the company is cheaper now than it was last April compared to its profits.  And the business model and economics are still fantastic.

The company has an FCF/Sales of 40.3%.  Pays a huge dividend.  Is selling at only ~2 times its estimated 2015 full year profits.  And is now selling below its book value by a significant margin.

I found nothing new that would destroy the investment thesis I laid out last April.  And I was so happy after reevaluating the company that I recommend subscribers up their position in the company.

To find out what this great company is and to learn a valuable lesson on what you need to do when reevaluating a company you own subscribe to Press On Research.

And if you’re a Value Investing Journey subscriber remember you also get a 50% discount on a one year Press On Research subscription.  Or you can join for only $49 to get tomorrow’s released issue and all back issues.

Similar newsletters to Press On Research sell for several thousand dollars at a big newsletter company so you’re getting a great value here.

If you have further questions about Press On Research please go to the link in this sentence or email me at jasonrivera@valueinvestingjourney.com.

2014 And 2015 Portfolio Reviews – Still Kicking Mr. Market’s Ass

2014 and 2015 Portfolio Reviews

Still Kicking Mr. Markets Ass

The above quote from Benjamin Graham is one of my favorites.

It means in the short-term the market is driven by emotion and psychology more than anything.  But in the long-term the market – and individual stocks – get judged on how well they’ve operated and grown over time.

This is great news for us long-term oriented value investors.

If we can find a few great companies at cheap to fair prices and hold them for the long-term, we’ll have great returns over time.  Why?  Because…

“Time is the friend of the wonderful company, the enemy of the mediocre.”  Warren Buffett

With this as a backdrop, below are the 2014 and 2015 portfolio reviews for all companies I’ve recommended.

For links to 20122013, and 2013 updated numbers portfolio reviews go to previous links…  Cumulative gains below combine 2012, 2013, 2014, and 2015 results together.

2014

I realized when doing my 2015 portfolio review that I didn’t do a review of 2014.  So I’ve included both 2014 and 2015 portfolio reviews in this post.

I didn’t do much in 2014 because I started a business at the beginning of the year.  Didn’t buy or sell anything for almost a full year.  And got hired by the investment newsletter in September 2014.

These are why I didn’t write a portfolio review for 2014 here.

Below are 2014 portfolio results.

  • CMT gained 2% in 2014.
  • VIVHY gained 3% in 2014 before I sold my position on June 4th 2014 for a total gain of 50% in less than two years.
  • BOBS lost 15.4% during 2014 before getting bought on May 2015 for a total 129% gain.  I’ll get back to this in the 2015 section.
  • PARF lost 21.7% in 2014.
  • Cash earned 0% in 2014.  And this was my biggest position after selling and getting bought out in several positions.

Average gain in 2014 was 3% after including 50% realized gain from sold Vivendi position.

For context on the following numbers please read the 2012 and 2013 portfolio reviews linked above.

Cumulative average gain for my stock picks at the end of three years is 101.1%.  Or an average gain of 33.7% each year. (Not a compounded gain).

Cumulative average three-year portfolio gain equals 64.9%.  Or 22.6% each year over the last three years after accounting for cash position.  Cash made up more than 50% of portfolio for most of 2013 and 2014 after selling several positions.

Not a great year by earlier years standards but I expected a drop in results after huge years in 2012 and 2013.  I’ll explain why at the end of this post.

For now let’s got to 2015.

2015

I included two picks I made while working at the investment newsletter in 2015’s results.  The spreadsheet is below.

2015-VIJ-and-POR-Performance-Review

I’ve blocked out the names of the picks above for non Press On Research subscribers.  If you’re a Press On Research subscriber I’m sending an unedited version of the spreadsheet your way.

If you’d like to know what the companies are you need to subscribe to Press On Research.  And remember Value Investing Journey free subscribers get a 50% discount on a Press On Research subscription.

Press On Research picks gained on average 5% as of the end of 2015.

Like in 2014, 2015 wasn’t a great year for my picks either.  Even with this down year we still beat most investors.   Almost 70% of investors lost money in 2015.  And unlike the investors who lost money we continued to grow our money.

As noted above I sold out of BOBS after it got bought out in May 2015 for a total gain of 129%.

Cumulative average stock gains for my stock picks at the end of four years are 168.1%.  (Not a compounded gain)  Or an average gain every year for four years of 42%.

Cumulative average four-year portfolio gain equals 109.6% after accounting for cash position.  Or an average gain every year for four years of 27.4%.  (Not a compounded gain)

Cash made up more than 50% of portfolios for most of 2013, 2014, and 2015 after multiple sales of companies.

What does this mean?  That we’ve kicked Mr. Market’s ass over the last four years.

What’s Mr. Market Done Since 2012?

From the beginning of 2012 to the end of 2015 the Russell 3000 index gained 38%.  Or an average gain of 12.7% every year.  This index includes the 3,000 largest companies listed on US stock markets.  This is the closest thing to a micro cap index.

This means my stock picks have crushed the market by 130.1 total percentage points.  And the whole portfolio beat the market by 71.6 total percentage points since the beginning of 2012.  Even when over the last three plus years the portfolios I manage had more than 50% cash positions earning zero.

How big of a difference is this over time?

Let’s say you invested $100,000 in my stock picks at the beginning of 2012 until December 31st 2015.  At the end of four years – with no new additions in money – your money would have grown from $100,000 to $406,587.

If you followed the same above, but instead invested 50%+ of your portfolio in cash like I did, your $100,000 would turn into $263,438 at the end of the last four years.

The Russell 3000 index would have turned your $100,000 into $161,323 after the last four years.

I could have made you $102,115 and $245,264 in excess of what the market would have.

I started posting my results publicly in 2012 because this is when I began doing “real”, in-depth, investment research and analysis instead of speculating.

Results have been great thus far…  Better than I expected… But there’s still a lot of work and improvement to do as seen from the last two years subpar results.

Conclusion Thoughts

As expected my average gain per year over the last two years dropped a lot.

With the market’s continued rise I’ve sold or gotten bought out of most positions.  At one point the portfolios I managed held only two companies.  And until late 2014 I wasn’t able to deploy any of the cash towards better use.

At its height after multiple sales of companies cash in the portfolios I manage was 85% of the portfolios.  This of course means lower returns.

I also knew I wasn’t going to repeat the huge gains earned in 2013 due to the markets ever rising valuations.  This made it harder to find great and cheap companies.  In 2012 and 2013 the market was still fairly to a bit overvalued making it easier to find cheap companies then.

No matter what the market continues to do, over time I’m confident we’ll continue to beat the market by a wide margin.  And continue to compound our wealth over time.

But this isn’t all we’ve done in the last few years…

Since Value Investing Journey started on a free WordPress site until now on a paid WordPress site there have been more than 200,000 total views on the joint sites.

And after coming back from the investment newsletter at the beginning of 2015 there have been a lot of changes and improvements on the blog.

The major change being the blog is now dedicated towards helping others instead of myself.

Some other highlights from 2015 are below.

Here’s looking forward to an even bigger and better 2016.

Thanks so much for everyone who’s been a part of this journey so far.  And please let me know how I can continue to improve things going forward in the comments below.

Jason Rivera

P.S.  And remember if you want access to my exclusive stock picks that are crushing the market over the last four years you need to subscribe to Press On Research.  And free Value Investing Journey subscribers get a 50% discount on a year-long Press On Research subscription.

September Press On Research Issue Out Today – Back To Business

September Press On Research Issue Out Today – Back To Business

I got in bed last Tuesday night like any normal night.  But all the sudden something popped into my head and I began to panic.

Two weeks leading up to this I told you I was taking some time off to recharge my mental batteries.  And I did.  But I didn’t stop doing everything.

I worked on finding the next Press On Research pick and did all the valuations for the pick.  Worked on the case study talked about here.  And read a lot.  But one thing I didn’t do was write.

So when I got into bed last Tuesday night realizing that the next issue was due out next week – today – I began to panic because I hadn’t written anything yet.  And the issues are longer now.  Most of the time over 30 pages.

For some reason leading up to last Tuesday night I kept thinking I had plenty of time to write the issue because I had two weeks until its release.  I don’t know why I thought this.  So the next day I got to work and ended up writing 7300 words – 37 pages – in less than three days.

Yes I had a massive headache from staring at my luminous computer screen doing so much work in such a short amount of time. But it was worth it.

I’ve spent the rest of the time editing and cutting the issue down. And I think this is the best issue thus far.  But I just need to go over it one more time to check for things like spelling and punctuation errors before its release later today.

But since I’m so happy excited about this pick I wanted to share an exerpt with you below.

Investing In “Sin” At A Huge Discount

By Jason Rivera

Press On Research Volume 1 Issue 6

There’s not much for teenagers and young adults to do in Western South Dakota where I’m from.

Rapid City is the biggest “city” in the area.  And even including the surrounding areas it has a population of maybe 90,000. Tops.

Rapid City is a small beautiful city where most people are nice and polite.  Is a great place to visit in the spring and summer.  But there’s not much to do here.

Combine this with the long winters where you can’t do much outside unless you like skiing, snowboarding, or ice fishing.  And younger people complain of severe boredom here.

But there’s one thing young people can look forward to here once hitting the age of 21.  And this is one thing we have that most in the country don’t.  Gambling.

Welcome To Deadwood

About 30 minutes from where I live is the town Deadwood South Dakota.  Yes, that Deadwood if you’ve seen the HBO TV series.

While Deadwood’s no longer a wild west frontier and gold mining town.  People from all over the world come to the town now to find gold in the towns many casinos.

Because of Mt. Rushmore and the Sturgis Motorcycle Rally.  Both held within 45 minutes from where I live.  Western South Dakota sees between three and four million tourists from all over the world every year.

Here’s a picture of Deadwood during the rally.

And because gambling is outlawed most places in the developed world many of these people also go to Deadwood trying to win fortunes.

Most people don’t win though.  And this is what makes casinos great businesses to own.

Which Casinos Are Best?

The first two times I gambled in Deadwood me and my girlfriend (now wife) went up by ourselves for the day to eat some good food.  Have fun.  And try to win a little money.

And we did all three.

The first two times we went up there we won more than $800 and thought to ourselves man this is great.

But this is how casinos keep you coming back.  With the promise of fun, great food, and easy money.

We’ve gone back dozens of times since and while we still have fun and eat great food.  Every time we’ve gone since we lose money.

I don’t go much anymore because I’ve studied casinos a lot from a psychology and investment perspective.  And I now know the odds are always stacked against the gambler.

But this change of perspective has also given me insights on owning casinos instead of gambling in them

While I don’t own any of the casinos in Deadwood.  I’ve been up there enough to know which do best and why.

If you’ve ever been to a casino you’ve likely felt overwhelmed or lost inside.

Between the buzzers and sirens going off announcing people winning big.  Those same people cheering.  Free alcohol when you’re at a card table or slot machine.  Nonstop talking and lights everywhere.  And the odd layout of the insides of casinos it’s easy to get overwhelmed and lost.

But this assault on our senses is purposeful.  It’s all done to play on our psychology to get us to gamble more.  Even the design of casinos is deliberate.

The maze design of casinos is meant to get you lost so you have to walk around more.  Which makes it more likely you’ll see something you want to play or do.

Have you ever noticed there aren’t any clocks in casinos as well?  This is on purpose too so you don’t know how much time you’ve spent in them.

Do I hold these “tricks” against them?  No because every business uses knowledge of psychology to get us to guy things.  And casinos are businesses just trying to make money like the others.

But which kinds of casinos do best?

The biggest ones with the most amenities.  Best restaurants/eateries.  Most tables and slot machines.  Having the most hotel rooms.  That cluster close to other big casinos do best.

Why?

Because the more stuff a casino has for you to do.  The longer you’ll stay in the casino to spending money on food and games.

And the more casinos clustered near each other means the more people can drink without having to walk or drive around while drunk.  Again, the more people drink the more people gamble and spend money.

Almost every small casino has gone out of business or gotten bought by a bigger casino in Deadwood.  And the same holds true in gambling the gambling Mecca’s of Las Vegas and Macau.

The most expensive casino in the world – The Venetian Macau – cost $2.4 billion to build.  And it’s the seventh biggest building in the world in terms of square footage.  Like in many aspects of life bigger is better when it comes to casinos.

I could go on and on but this issue isn’t about the psychology of casinos.  It’s about an investment.  But if this stuff interests you go to the following articles for more information.

So why am I telling you all this?

Because today’s recommendation is a company that owns casinos and hotels.

Not only is this company undervalued by as much as 182%.  But it’s got above average margins.  Is a sub $50 million company with hidden assets on its balance sheet.  And offers us a huge margin of safety.

But before we get to what the company is.  You need to know where it does business…

If you’d like to see what this company is.  And the other five great picks in Press On Research so far.  Make sure to subscribe here for access.  Remember that Value Investing Journey subscribers get a 50% discount on their Press On Research subscription.

So if you want a 50% discount make sure to subscribe to Value Investing Journey here first to get the link.

Dole Shareholders Win

Dole Shareholders Win

Yes I said I was taking some time off…  And I am…  But this is too good not to talk about.

Dole shareholders fighting back and winning $148 million.

One of the first companies I analyzed in a real way was Dole Food Inc. (DOLE) which is now a private company.

In 2012 I found the company undervalued by a substantial margin.  It had up to $585 million dollars worth of land and property it could sell to pay off debt.  And that it should undergo a special situation to unlock some of the value within the company.

I even did my first comparison analysis where I put Dole up against its public competition Chiquita, and Fresh Del Monte.

After seeing this.  Comparing the companies.  And deciding I had enough margin of safety I bought the company for myself and the portfolios I manage.

I only held a full position in Dole for 104 days before selling with a 70% gain after Dole announced it was selling its worldwide operations to Japanese company Itochu for $1.2 billion.

I continued to hold a half position in Dole because even after a 70% rise Dole was still undervalued.  But by selling out I was protecting my gains and only risking some of the money I’d already earned.

About a year after this I sold the rest of my Dole position in all the portfolios I manage because the company announced it was taking the company private at a low ball price.  And then started making some crazy decisions.

Below is an unedited excerpt from my book talking about these things.

“As I have been writing, editing, and revising this book, Dole’s Chairman Mr. Murdock has put in an offer to take the company private once again like I thought that he may do so I wanted to write my thoughts on the ridiculous offer being given to Dole shareholders.  I did think that Mr. Murdock may have wanted to take the company private again but what I didn’t expect was the manipulation of the company’s stock price in my opinion before that happened.  Shortly after Dole sold its worldwide operations to Itochu Dole management began to do some very strange things.  The value of its land holdings, that Dole management themselves estimated to be worth around $500 million when they were getting ready to sell their worldwide operations to Itochu, suddenly stated that they thought their land now was worth only around $250 million only a few months later.

This was shocking to me and led to me sell the stock I owned in Dole in my personal portfolio and the portfolios that I manage because I figured that Dole was doing something untoward to try to get the value of its shares down so the company could be taken private again at a cheaper valuation.  One of my followers on Seeking Alpha and I actually talked about this and both came to the same conclusion that something fishy was going on.

After selling my shares in Dole due to the above situation I stopped paying attention to the company all together to concentrate on the research of other companies until it came out that Dole was planning to do a massive buyback of its shares.  I thought this was a very good thing for them to do since I found the company to be very undervalued when writing my second article on them so I started to look into them a little bit again.  Before I could do even minimal research into the new situation at Dole though its management made another very strange decision.  A few days after Dole announced that it was going to buy back $200 million worth of its shares it changed its mind and all of the sudden decided to update its fleet of container ships instead and canceled the proposed share buyback program.

Of course this sent the share price falling and again led me to believe that its management was trying to manipulate the share price lower so that it could be taken private at an unreasonably low valuation.

Unfortunately it turns out that I appear to have been right because a month or two after Dole decided to cancel its proposed share buyback program to instead buy new container ships, which of course sent the share price lower, Mr. Murdock announced that he was putting in an offer to take Dole private at $12 a share.

Mr. Murdock brought Dole public in 2009 at $12.50 a share so this in and of itself is ridiculous since the company is much more financially stable now than it was then due to getting rid of its giant debt load.  In my opinion this entire situation from the changing of the estimated value of its land by 50% shortly after announcing that they thought it was worth $500 million, announcing the proposed $200 million share buyback and then a few days later canceling it, and then Mr. Murdock attempting to take the company private again at an incredibly low valuation should be investigated.  If Dole is allowed to be taken private at $12 a share, which it probably will because Mr. Murdock at my last check still owned 40% of the company, then the company should be investigated for manipulating its stock price.   If the company is taken private for a paltry $12 per share then its remaining shareholders are getting screwed.

If a situation like this happens to a company you own be very careful, trust your research, trust your instincts, and get out of owning the company if you think you need to.  There are a lot of other companies you can spend your time researching and owning rather than spending your precious time and capital having to worry about whether a company’s management is going to screw over shareholders.  Dole’s current shareholders are fighting back by suing the company and I wish them good luck because the proposed buyout offer is ridiculously low.”

Most of the time this would have ended things.  And shareholders would have no recourse.

But not in this case…

Not only did litigation continue.  But shareholders won a $148 million decision.  Below is quoted from the linked article above.

The billionaire chief executive of Dole Food Co and his top lieutenant must pay $148.2 million of damages to shareholders they shortchanged when the produce company went private in 2013, a Delaware judge ruled on Thursday.

In a decision that may cast a pall on management-led buyouts, Vice Chancellor Travis Laster said Dole Chief Executive David Murdock, 92, and former Chief Operating Officer C. Michael Carter were liable for depressing the stock so that Murdock, who owned 40 percent of Dole, could buy the rest at a lowball price.

The judge said the $1.2 billion buyout undervalued Dole by 17 percent, letting Murdock pay $13.50 per share rather than the $16.24 that Dole was worth.

And further down

JUDGE FINDS FRAUD

Shareholders accused Murdock and Carter of driving down Dole’s share price by downplaying the Westlake Village, California-based company’s ability to boost profit by cutting costs and buying farms, and canceling a stock buyback.

In his 106-page decision, Laster saw Carter as the main engineer of the scheme, calling him Murdock’s “right-hand man” and saying Carter “actually engaged” in fraud.

Still further down

But shareholders called the move a power play. Laster appeared to agree, calling Murdock “an old-school, my-way-or-the-highway controller, fixated on his authority and the power and privileges that came with it.”

The judge said Murdock hurt himself during trial testimony, where defense counsel portrayed him as both a “confused old man” and a disengaged CEO.

“By dint of his prodigious wealth and power, he has grown accustomed to deference and fallen into the habit of characterizing events however he wants,” Laster wrote.

“That habit serves a witness poorly when he faces a skilled cross-examiner who has contrary documents and testimony,” he added.

This is great for Dole’s former shareholders.  And should send a message to companies doing terrible things to depress their own stock price.

But all is still not well here…

While the $148 million paid to shareholders is great.  It still undervalues the company by a huge margin.

By my conservative estimates the company was worth somewhere north of $20 a share when taken private.  But the judge in Delaware deemed the company to be worth only $16.24 per share.  Or at least a 19% discount to what I thought Dole was worth.

So while shareholders are getting paid some of this value I stand by what I said in my book in 2013…

If a situation like this happens to a company you own be very careful, trust your research, trust your instincts, and get out of owning the company if you think you need to.  There are a lot of other companies you can spend your time researching and owning rather than spending your precious time and capital having to worry about whether a company’s management is going to screw over shareholders.  Dole’s current shareholders are fighting back by suing the company and I wish them good luck because the proposed buyout offer is ridiculously low.”

What do you think of this situation?  And does it give you hope for shareholder rights going forward?  Let me know in the comments below.

***

If you want to follow this and all case studies.  Be entered to win prizes.  Get a 50% discount on Press On Research.  Get a few gifts.  And access to other exclusive content.  Make sure to subscribe to Value Investing Journey here.

August Press On Research Pick Out Tomorrow

August Press On Research Pick Out Tomorrow

The August Press On Research pick is out tomorrow.  And below is an unfinished excerpt from the issue.

We Can Buy This Company For Free

By Just Paying For It’s Cash

By Jason Rivera

Press On Research Volume 1 Issue 5

On two islands a small tech company is providing some of the biggest names in the tech world with necessary services most of us never think about.

When we think of tech Intel’s (INTC) microchips and processors.  Google’s (GOOG) search engine and Android.  Microsoft’s (MSFT) operating system.  And Apple’s (APPL) phones, tablets, and other gadgets come to mind.

If not new tech like of Facebook’s (FB) or Twitter’s (TWTR) social networking does.

The tech industry is rarely on the minds of value investors as an industry to research though.

Most of us stay away from it.  This is because of how fast things change in the industry.

And value investors love to invest in stable companies and industries.

But today’s recommendation isn’t in the tech hardware, software, or app businesses.  It’s in a stable industry.  And the service it provides is necessary for industry giants.

Not only does it meet my strict criteria for valuation, safety, and quality.  But one of the biggest and best value investors in the world owns a significant portion of the company.

I don’t research any company based on other prominent value investors owning portions of them.  But when I read in financials that a prominent value investor owns a company I’m considering recommending it’s always something I love to see.

And I’ve invested alongside this prominent value investor one time before…

That time led to a 50+% gain for the portfolios I manage.

The last time it was a ~$20 billion company going through a special situation.  The company had great margins.  A lot of cash.  A lot of debt.  And was undervalued by a substantial margin to my conservative valuations.

This time it’s a ~$450 million company that has great margins.  Its margins are even better than its bigger competition.  More cash than the company’s current market cap.  And it’s undervalued by a substantial margin to every one of my conservative valuations.

But before I tell you what the company is I need to tell you how it does business.

Handle With Care

When thinking about deep value investing in small caps.  The last companies you consider are high tech companies.

Technology changes so fast that it’s hard to evaluate high tech investments as a deep value investor.  Because deep value investors like stable, safe, businesses.

Most of the time value investors stay as far away from the tech sector as possible.

But there is another side of this industry most people don’t even know of.  And this is where our recommendation today does business.

Companies who build parts that go into computers have to make sure their parts work well once manufactured.  And since most of these hardware manufacturers have their assembly lines set up to make the chips, processors, and memory. They have to outsource the testing of their products to third parties

Without third party specialists like our pick today testing and packaging products.  The part and product manufactures would have to test them in house.  And would have to take money away from R&D that would have to be put towards expensive testing and assembly equipment.

Not only does this outsourcing save the tech giants and manufactures money and time.  But it also brought to life an entire specialized packaging, testing, and assembling industry.

Combined this industry does billions of dollars worth of work.  And saves the tech giants billions of dollars by letting other companies buy the expensive equipment to do these specialized processes.

To see what this company is.  And what the other four Press On Research picks have been.  You can subscribe here.

And remember that free Value Investing Journey subscribers get a 50% discount on their Press On Research subscription.