October Press On Research Issue – The Next GE?

October Press On Research Issue – The Next GE?

I don’t hype investments.  And my biggest fear while the investment newsletter was courting me last year was I would have to hype.  Use hyperbole to explain how you’d gain 10,0000% owning XYZ stock in the next three days.  Or even outright lie.

But I got lucky.

While I learned a ton of investment newsletters are terrible.  And will lie and promise returns they can’t hope to deliver.  The investment newsletter I worked for wasn’t one of those.

One of the biggest rules all analysts had to abide by was “Write about the biggest returns you want and the investment time frame you want.  But you have to be able to prove the investment thesis and returns out or we can’t use them.”  In other words don’t promise what you – or we in that case – can’t deliver.

I was relieved when I found out this was one of the biggest rules analysts had to follow the company.  And while I still don’t hype investments.  I learned it’s not hype if you can prove your thesis out.

Even though you might think a title of The Next GE? for an issue is hype its not. In the October 2015 Press On Research issue releasing today I prove that this company could become the next GE.

If this still isn’t enticing enough how about an excerpt from the upcoming issue where I lay the groundwork for my thesis.  The unfinished excerpt below is from the October 2015 Press On Research issue being sent out to subscribers today.

October 2015 Press On Research Issue

By Jason Rivera

Press On Research Volume 1 Issue 7

The Next GE Pays You A 10% Dividend Now

While We Earn 34.5% In The Next Year

If you’ve studied business and management you’ve read or seen GE from the early 1980’s talked about a huge amount.  And have learned how Jack Welch saved the company by introducing a radical concept.

GE was going to number one or two in each business it operated.  Or it was going to sell or close down the businesses.

This was a drastic – but necessary decision – because GE had become an inefficient bureaucratic nightmare.

Quoted below from Wikipedia.  Emphasis is mine.

“During the early 1980s he was dubbed “Neutron Jack” (in reference to the neutron bomb) for eliminating employees while leaving buildings intact.

In Jack: Straight From The Gut, Welch states that GE had 411,000 employees at the end of 1980, and 299,000 at the end of 1985.

Of the 112,000 who left the payroll, 37,000 were in businesses that GE sold, and 81,000 were reduced in continuing businesses.

In return, GE had increased its market capital tremendously. Welch reduced basic research, and closed or sold off businesses that were under-performing.”

And this changed fortunes for GE shareholders in a huge way going forward  During Welch’s tenure from 1981 to 2001 the company’s share value rose 4,000%.

That’s not a typo.

Whether you thought his slash and burn tactics were humane or not; for GE shareholders Jack Welch’s tenure was amazing.

And because of how well GE did during his tenure Mr. Welch is regarded as one of the best business leaders of the 20th century.

But why did this approach work so well?

Because it enforced strict competition standards within GE.  It forced every subsidiary to work towards becoming the best company it could be.

GE employees at all subsidiaries knew if they didn’t work towards becoming great.  And achieve those goals.  That its business may be sold to another company.  Downsized.  Or shut down.

This led to more innovation.  Better productivity.  Less bureaucracy and more efficiency at all subsidiaries and GE.  And this led to better margins, compounding of value within the company, and higher returns for shareholders.

But Press On Research is about small, safe, undervalued companies, which have management I can trust.  And we can’t buy GE from the early 80’s today.

So why am I talking about it in Press On Research?

Because today’s recommendation operates using Jack Welch’s rule of being number one or two in each business unit it operates in.  And because of a multi trillion trend within its industry could become the next GE over time.

But before we get to what the company is.  I need to tell you what it does.

Investing In Picks and Shovels

“During the Gold Rush, most would-be miners lost money, but people who sold them picks, shovels, tents and blue-jeans (Levi Strauss) made a nice profit.” Peter Lynch

In the August 2015 Press On Research issue I told you about a great company in the tech sector that works with some of the biggest tech companies in the world.

But it wasn’t a typical tech company…

It didn’t have a social network.  Introduce a new game or app.  Or even improve graphics or processing speed for games and computers.

It operates in what’s referred to as the picks and shovels part of the technology industry.

What does this mean?

The picks and shovels part of any industry is something that’s necessary to the survival of the industry.  But most people don’t think about.

To continue the example from the Peter Lynch quote above; when people flocked to the gold rush they wanted to get rich by focusing on finding gold.

But most people didn’t.  And the people who didn’t lost fortunes and became destitute.

The people who made out best during the Gold Rush were people who sold things like tents, jeans, picks, and shovels.

The same thing is happening in today’s tech arena…

Everyone is focusing on the next big app, game, or social network.  But most of these ventures fail.  And while we have greater social and economic safety nets today than we did in the 1800’s.  Vast fortunes are still being lost today chasing the quick cash.

That is unless you’re in the picks and shovels part of the industry.  And like (NAME REMOVED) from the August 2015 Press On Research issue.  Today’s company operates in that same necessary semiconductor and processor packaging industry.

Handle With Care Part 2

The number one tenant of value investing is buying companies selling at a discount to their intrinsic – or true – value.

This is done so that even when making a mistake in our analysis we still have a good chance of making some money.  Or at least not losing much.

Different value investors also incorporate things like profitability.  Management trustability.  Cash generation.  Trends.  Etc. into their analysis.

But the biggest thing for value investors after buying a company with a margin of safety is the ability to understand the business the company operates in.  And the stability of that industry.

These two concepts are why most value investors keep away from investing in the tech industry.  Where valuations are higher than average.  And the industry changes at a rapid pace.

The best kinds of businesses are ones that are necessary.  Today’s business is.

As with (NAME REMOVED) in August, today’s pick packages microchips and processors for the tech industry.  And as I said in the August 2015 Press On Research issue:

Companies manufacturing parts going into computers and other electronics have to make sure the parts work when finished.

Since most of these hardware manufacturers have assembly lines set up only to make 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.

This would take money away from R&D for new products.

So not only does 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.

This industry will experience wild swings when giant chip makers like Intel and Micron slow down.  But it will remain necessary for the foreseeable future.

This is one of the reasons why I have no problem investing in “tech” for the second time as a strict value investor.  But there are a lot more great things about this company.

Today’s pick is a $640 million company.  It has better margins than (NAME REMOVED).  It could turn into the next GE in time.  It’s undervalued by as much as 40% now.  Will pay us a 10% dividend while we wait for its shares to rise.  And produces and has a ton of cash compared to little debt.

All the above combine to make this an ultra safe investment. None of this considers the huge trend that could explode its shares.  And turn the company into the next GE.

But before I tell you what the company is let’s do a quick comparison…

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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.

***

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*Repost* Strattec Security Corporation $STRT: Potential Double From Today’s Stock Price

*Repost* Strattec Security Corporation $STRT: Potential Double From Today’s Stock Price

Introduction, Overview of Operations, And Brief History

The company I will be focusing on in this article is Strattec Security Corporation (STRT).  Strattec is a nano cap with a current market cap around $75 million and it is in the very boring and shunned automotive parts industry.  The company has expanded to become a worldwide auto parts supplier through its various joint ventures and alliances.

The company makes and sells various automotive parts such as: Keys with radio frequency identification technology, bladeless electronic keys, ignition lock housings, trunk latches, lift gate latches, tailgate latches, hood latches, and side door latches.  With its acquisition of Delphi Corporation’s Power Products in 2009 it is now also supplying power access devices for sliding side doors, lift gates and trunk lids.

In 2001 Strattec formed an alliance with Witte-Velbert Gmbh.  The alliance allowed Strattec to sell Witte’s products in the US, and allowed Witte to sell Strattec’s products in Europe.  In 2006 the alliance expanded to include ADAC plastics and a joint venture with all three companies owning 33% was formed called VAST or Vehicle Access Systems Technology.  ADAC makes such products as door handles.  The VAST Alliance has helped Strattec become a worldwide auto parts supplier as the alliance allows all companies involved to market and sell each other’s products in various jurisdictions around the world including in the US, Europe, Brazil, China, Japan, and Korea.  The VAST Alliance should have its first profitable year as a company this year which would help Strattec’s bottom line.  Full complement of VAST’s products can be viewed here.

VastPlacemat

Picture taken from ADAC Plastics which shows how the VAST Alliance is structured.

ADAC and Strattec have formed a separate company, ADAC-Strattec de Mexico, ASdM,  whose operations are in Mexico due to cheaper labor prices, where the two companies separate expertise are combined to manufacture some of the above products for sale. In Strattec’s fiscal years ending 2012 and 2011, ASdM was profitable and represented $31.0 and $25.2 million, respectively of Strattec’s consolidated net sales.

With the help of VAST and its other joint ventures, Strattec’s export sales have risen to 37% of total sales which amounts to $107 million.  In 2001 exports only accounted for 14% of its sales which amounted to $29 million, which illustrates Strattec’s worldwide growth since then.

During the recession three of Strattec’s biggest buyers filed for bankruptcy protection, and the overall auto industry went to the brink of death before being saved by the US federal government.  Because Strattec’s major buyers were having so many problems, it also faced some very serious problems and had its only unprofitable year in 2009, lost more than $40 per share in value during the recession, about 2/3’s of its share price in total, and its share price has not recovered since.

Since that time Strattec restructured, improved its operations and expanded its product lines, signed various joint venture and alliance agreements which have allowed the company to become a worldwide auto parts supplier.  The restructuring, expanded product lines, and worldwide operations have helped Strattec become a more diversified auto parts manufacturer and has grown its sales and margins in the ensuing years.  With the help of VAST and its other joint ventures Strattec is a truly worldwide company with operations now in the US, Europe, Brazil, China, Japan, Korea, Canada and Mexico.

Strattec was spun off from Briggs & Stratton in 1995 as an independent company.  After Strattec was spun off from Briggs & Stratton, and through most of its entire history, it enjoyed massive market share of over 60% in the US and a 20% market share of the world’s vehicle lock and key operations.  With its huge hold of the market the company was able to dictate high prices to its buyers which enabled the company to enjoy a competitive advantage for a long period of time.

However, shortly after Strattec was spun off there were massive changes in the lock and key industry which deteriorated the company’s market share and competitive advantages. Due to Strattec’s managements excellent foresight and planning, it was well prepared for the change from basic locks and keys and the diminishing of the amount of locks and keys needed per vehicle, and has transitioned into the electronic key arena as well as expanding its operations into various fields though its partnerships with the VAST Alliance including: Door handles, power doors, trunk latches, lift gate latches, tailgate latches, hood latches, side door latches, ignition lock housings, sliding side doors, lift gates and trunk lids.  Since Strattec’s restructuring during the Great Recession, along with its VAST Alliance and other joint ventures, improved operations, and expanded product lines, Strattec’s sales and margins have both been growing and improving.  The trend of growing sales and margins should continue unless another recession hits.

Excellent Management

Due to the excellent leadership of Harold Stratton II, former CEO and current chairman, current CEO and board member Frank Karecji, and the other members of Strattec’s management team and board of directors, it has been able to adjust its original lock and key operations and changed massively to become a truly worldwide auto parts supplier with the products listed above.

Normally I do not talk much about management in my articles because I usually deem management to be either average or subpar, and as Charlie Munger says I want the business to be simple enough to be able to be run by the proverbial “idiot nephew” so management is generally not a factor in my analysis unless they are doing things that bother me quite a bit.

In this case I wanted to point out that I believe Strattec’s management to be excellent and I think that will continue now that Mr. Stratton has transitioned out of the day to day operations and handed the handling of those over to Mr. Karecji.  For the full view of why I believe Strattec’s management to be excellent I recommend reading its annual reports from 1999 to the present to get the true view of why I think its management has been fantastic, and to get a glimpse of the obstacles management has helped the company overcome to become an even stronger company.  Here is a profile of Mr. Karecji, Strattec’s new CEO from 2010 right after he joined the company.

For those who do not want to read all that information I will list a few pluses from management in recent years that I have not already talked about.

  • Strattec has bought back and reduced its shares outstanding by 3.66 million, or more than 50% of its original shares outstanding after being spun off, at a cost of approximately $136 million.
  • Most purchases have been at what I think are good prices to do buy backs.  I think now would be an even better time to buy back more shares (Strattec management has authorization to buy back more shares) because of Strattec’s current undervaluation which I will get to later, but I understand that it wants to put money into expanding its operations and product lines.
  • Another reason Strattec has not bought any shares back in the past couple years as it has been concentrating on reinstating its dividend and expanding its VAST Alliance operations. The company currently only has 3.3 million shares left that are outstanding.
  • Management compensation is fair and straight forward in my opinion which is another plus for management.

Insider and Fund Ownership

  • GAMCO Investors-Collectively Mario Gabelli’s Funds-Own 18.6% of Strattec.
  • T. Rowe Price and Associates through its Small Cap and Small Value funds own-15.5% of Strattec.
  • FMR-Fidelity Management and Research Company own-12.2% of Strattec.
  • Vanguard Horizon Funds own-6.2% of Strattec.
  • Dimensional Fund Advisors, a Small Cap Value Fund, owns-5.8% of Strattec.
  • Insiders Own-7.82% according to Reuters.
  • The above insiders and funds own a combined 66.12% of Strattec which partially explains why there is a very low average daily trading volume of around 2,000 shares per day in the stock.

Like I have said in my various other articles I love to see high insider and value oriented fund ownership of the companies I invest in so this is another plus for me.  Another possibility that might arise in the future is that due Strattec only having 3.3 million shares outstanding, its small overall size as a company, and some of the other factors I will mention or have mentioned in the article, I think that Strattec could be taken private or become a potential buy out target for one of the bigger automotive supply companies.

Competitors

The company faces stiff competition from the following three companies.

  • Magna International (MGA)-I talked about Magna a bit in my Core Molding Technologies (CMT) article and how I did not think that Magna was a major threat to CMT’s area of operations.  The story as it pertains to Strattec’s operations is different however.  Magna competes with Strattec in several of its product lines including the power access area and Magna appears to be a major player in those areas.  In 2009 Strattec bought the Power Access portion of Delphi’s business segment after it went bankrupt and renamed the unit Strattec Power Access.  For fiscal years ending 2012 and 2011, Strattec Power Access was profitable and represented $62.7 and $62.8 million, respectively of Strattec’s consolidated net sales.  Just for comparison Magna did $1.2 billion in sales just in its closure systems (power access) business in 2011.  Magna could present a problem for future growth of Strattec’s product lines as it will have to compete vigorously on price and quality for contracts.  It could also present a potential opportunity as with CMT, I could see Magna possibly buying out Strattec to expand its operations into more product fields.  This makes further sense since Strattec is such a small company in comparison to Magna and it being an $11+ billion market cap company.
  • Huf huelsbeck & fuerst-Huf and its various subsidiaries including Huf North America is a privately held company with operations worldwide and whose product lines compete directly with Strattec’s on almost every product around the world.  This company presents the same problem as Magna does to Strattec, but the same potential buy out opportunity exists as well.
  • Tokai Rika-This is a Japanese publically traded company who competes directly with Strattec on several products and who also has operations around the world.  Tokai Rika, like the two companies mentioned before, also dwarfs Strattec in size which could present problems to Strattec’s growth.

Strattec faces much stiffer competition from multiple much bigger competitors, sometimes directly on the same products than CMT did, who I thought carved out a bit of a niche in its industry.

Strattec’s Margins

Gross Margin TTM 18.50%
Gross Margin 5 Year Average 15.32%
Gross Margin 10 Year Average 18.25%
Op Margin TTM 6.20%
Op Margin 5 Year Average 0.44%
Op Margin 10 Year Average 5.18%
ROE TTM 12.11%
ROE 5 Year Average 3.59%
ROE 10 Year Average 9.91%
ROIC TTM 11.90%
ROIC 5 Year Average 3.49%
ROIC 10 Year Average 9.85%
My ROIC Calculation With Goodwill 25.90%
My ROIC Calculation With Goodwill If EBIT% Reverts to 3 Yr Avg 15.41%
My ROIC Calculation Without Goodwill 25.82%
My ROIC Calculation Without Goodwill If EBIT% Reverts to 3 Yr Avg 15.37%
FCF/Sales TTM 2.25%
FCF/Sales 5 Year Average -3.49%
FCF/Sales 10 Year Average 1.71%
Cash Conversion Cycle TTM 54.43 days
Cash Conversion Cycle 5 Year Average 48.97 days
Cash Conversion Cycle 10 Year Average 42.42 days
P/B Current 0.9
Insider Ownership Current 7.82%
My EV/EBIT If EBIT% Reverts to 3 Yr Avg 5.77
My EV/EBIT Current Unadjusted 3.43
My TEV/EBIT If EBIT% Reverts to 3 Yr Avg 8.09
My TEV/EBIT Current Unadjusted 4.81
Working Capital TTM $46 million
Working Capital 5 Yr Avg $48.6 million
Working Capital 10 Yr Avg $60 million
Book Value Per Share Current $25.25
Book Value Per Share 5 Yr Avg $24.54
Book Value Per Share 10 Yr Avg $24.78
Float Score Current 0.53
Float Intensity 0.77
Debt Comparisons:
Total Debt as a % of Balance Sheet TTM 0.88%
Total Debt as a % of Balance Sheet 5 year Average 0.66%
Total debt as a % of Balance Sheet 10 year Average 0.33%
Current Assets to Current Liabilities 1.79
Total Debt to Equity 45%
Total Debt to Total Assets 22%
Total Obligations and Debt/EBIT 2.1
Total Obligations and Debt/EBIT If EBIT Reverts To 3 Yr Avg 3.53

All numbers were taken from Morningstar or Yahoo Finance unless otherwise noted.  Final four debt calculations are including total debt and obligations.

Margin Conclusion Thoughts

  • The very first thing that popped out to me from the above margins is that across the board Strattec has improved its margins, sometimes by multiple percentage points, in comparison to its 5 year and 10 year averages.  Looks like the restructuring that took place during the recession, the various joint ventures including the VAST Alliance, and branching out to new product lines has helped the company immensely.  Improvements in operating margin, ROE, and ROIC have all been especially impressive
  • My ROIC calculations make the company look even better as even if Strattec were to revert to its 3 year average EBIT, which I don’t think it will unless another recession happens, I am estimating it to have an ROIC of 15.37% without goodwill.  If Strattec is able to keep up its EBIT margin to current levels I estimate that without goodwill its ROIC is 25.82%, an astounding ROIC margin.
  • Also positive as it pertains to ROIC is that in Strattec’s case it is not being artificially inflated by high amounts of debt.
  • The cash conversion cycle has gotten worse over the years, meaning less efficiency in the company, which I generally do not like.  That is to be expected in a company that has expanded operations overseas though so no red flag there.
  • Its P/B ratio at 0.9 is less than half that of its industry P/B at 2 which means that at least on a relative basis Strattec is undervalued in comparison to its industry.
  • My current unadjusted EV/EBIT ratio estimate for Strattec is 3.43.  Unadjusted TEV/EBIT estimate is 4.81.  Generally I like to buy companies selling at an EV/EBIT ratio of 8 or less so again Strattec appears to be undervalued.
  • Even if Strattec’s EBIT margin were to revert back to its three year average, which as above I do not think it will do unless there is another recession, its EV/EBIT ratio is 5.77 and TEV/EBIT is 8.09, again undervalued or about fairly valued at worst.
  • Book value per share has grown slightly over time, and should grow further with its improved operations.
  • The company has minimal debt and even if we include its total contractual obligations and debt its total obligations/EBIT ratio is a paltry 2.1.  Much improved from some of the other companies I have evaluated and its current total debt and obligations should be nothing to worry about going forward.

Below numbers in graphs are taken from Morningstar.

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As you can see in the above graphs Strattec’s share price has not improved as its operations and sales have.  The last year Strattec had comparable margins to what it had this year is 2006, when Strattec was selling for between $33 and $50 a share. As I found after doing my valuations, which I will show below, I think Strattec should be selling somewhere in that range now.  Sales are actually almost $100 million more than they were in 2006, and margins should continue to improve as Strattec’s now worldwide operations and expanded product lines become more efficient.

Valuations

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

Valuations were done using 2012 10K and 2013 first quarter 10Q.  All numbers are in millions of US dollars, except per share information, unless otherwise noted.

Low Estimate Of Intrinsic Value

Numbers:
Revenue:

284

Multiplied By:
Average 3 year EBIT %:

3.77%

Equals:
Estimated EBIT of:

10.71

Multiplied By:
Assumed Fair Value Multiple of EBIT: 8X
Equals:
Estimated Fair Enterprise Value of STRT:

85.68

Plus:
Cash, Cash Equivalents, and Short Term Investments:

12.94

Minus:
Total Debt:

1.5

Equals:
Estimated Fair Value of Common Equity:

97.12

Divided By:
Number of Shares:

3.3

Equals: $29.43 per share

Base Estimate Of Intrinsic Value

Assets:                  Book Value:                    Reproduction Value:
Current Assets
Cash And Cash Equivalents

16.3

12.94

Accounts Receivable (Net)

45.1

38.34

Inventories

25.5

15.3

Other Current Assets

17.1

8.6

Total Current Assets

104

75.18

Deferred Income Taxes

9.7

4.9

Investments In Joint Ventures

8.4

4.2

Other Long Term Assets

0.5

0

PP&E Net

47.6

28.6

Total Assets

170.6

112.88

Number of shares are 3.3

Reproduction Value

  • 112.88/3.3=$34.21 per share.

High Estimate Of Intrinsic Value

Cash and cash equivalents are 12.94

Short term investments are 0

Total current liabilities are 57.8

Number of shares are 3.3

Cash and cash equivalents + short-term investments – total current liabilities=12.94-57.8=-44.86

  • -44.86/3.3=-$13.59 in net cash per share.

Strattec has a trailing twelve month EBIT of 18.

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

  • 5X18=90+12.94=102.94/3.3=$31.19 per share.
  • 8X18=144+12.94=156.94/3.3=$47.56 per share.
  • 11X18=198+12.94=210.94/3.3=$63.92 per share.
  • 14X18=252+12.94=264.94/3.3=$80.29 per share.

From this valuation I would use the 8X EBIT+cash estimate of intrinsic value of $47.56 per share.

I discounted the cash a bit in the above valuations because about 55% of Strattec’s cash is in Mexico so if Strattec wanted to bring the funds to the US it would have to pay taxes on that portion of cash.

  1. Strattec is undervalued by 23% using my low estimate of value, which assumes that Strattec will revert back to its 3 year average EBIT margin, which as I stated above, I do not think will happen unless there is another recession.  This is the absolute minimum I think Strattec should be selling for.
  2. Strattec is undervalued by 33% using my base estimate of intrinsic value on a pure asset reproduction basis.
  3. Strattec is undervalued by 52% using my high estimate of intrinsic value with EBIT and cash at current levels.  Now that Strattec has restructured itself and made itself a worldwide company with expanded product lines and improved operations I actually think that EBIT should rise over time meaning Strattec’s intrinsic value could continue to grow and it would become even more undervalued.

Pros

  • Strattec has excellent management.
  • The company is undervalued by every one of my estimates of intrinsic value above and relative valuation estimates such as P/B, EV/EBIT, and TEV/EBIT.
  • Strattec restructured before and during the recession to cut costs, expand product lines, and became more efficient and less dependent on one single product line.
  • Strattec signed joint ventures, and created the VAST Alliance with two other companies that now allow Strattec to compete on a global scale.
  • Strattec’s margins have improved across the board in comparison to its 5 and 10 year averages and margins should continue to improve.
  • Sales have also been improving along with margins.
  • Strattec has almost zero debt.
  • Strattec management owns just fewer than 8% of the company.
  • Most importantly as it pertains to management is that I trust that they have shareholders best interests in mind.
  • Various value and small cap oriented funds own more than 50% of the company, including Mario Gabelli’s funds.
  • The VAST Alliance as a company should have its first profitable year this year which should help Strattec’s profitability even more.
  • My personal estimates of ROIC show that Strattec is even more profitable than I originally thought while looking at Morningstar’s numbers.
  • Strattec has a $25 million revolving credit facility if it wants to do any acquisitions, which the new CEO has said he will look into, or the $25 million could be used in an emergency situation if one arises.
  • Margins are not artificially inflated by debt so margins show a true picture of how Strattec is running.
  • Strattec has drastically reduced its share count in the past decade at what I think were good prices to be buying at.
  • Strattec is currently authorized to buy back more shares if it chooses to.
  • Strattec recently reinstated its quarterly dividend.

Cons

  • Strattec is highly dependent on only a few customers for its orders as General Motors, Ford, and The Chrysler Group combine for 68% of sales.
  • Strattec is highly dependent on how well the automotive industry and the overall economy as a whole are doing which can be seen in the above graphs.
  • Due to the cyclical nature of Strattec, if there is another recession or major problems in the auto industry again, its sales and profitability will be highly affected.
  • The company has some very stiff and much bigger competition.  The competition could possibly mean further price cuts on products in Strattec’s product lines if some kind of price war starts.
  • Due to competition and the overall cost reduction plans put into place by the big automotive companies, Strattec has had to drop prices on its products in recent years.
  • At this point I do not see any kind of long term sustainable competitive advantages within Strattec.

Catalysts

  • Since Strattec is very small in comparison to its competitors it could become a potential buy out candidate.
  • Strattec’s margins should continue to grow which could lead to the unlocking of value.
  • The new CEO Frank Karecji has said that he would like to do some kind of acquisition in the short term.
  • Strattec is authorized to buy back more shares.

Conclusion

With all of the above taken into account, I think that the absolute minimum Strattec should be selling for is $29.43 per share which assumes that Strattec’s EBIT margin will revert to its 3 year average.  I think that Strattec’s true intrinsic value is somewhere between $35 and $45 per share.  None of that is even taking into account that its sales and margins should continue to grow which would also grow the company’s intrinsic value.

The company does face some headwinds to future growth as I outline above, the biggest ones in my opinion is that Strattec has to compete with various bigger companies and I do not see any kind of long term sustainable competitive advantages within the company.

Normally I would want some kind of sustainable competitive advantage within a company that I am buying as a long term value hold, but at current valuations, with Strattec’s good and rising margins and other factors listed throughout the article, I think the risk/reward is in my favor by a substantial margin and I have already bought shares for my personal account and the accounts I manage making this only the fourth company I have bought into this year.

*Repost* Wendy’s: Great Fast Food, Bad Investment

*Repost* 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.

Excerpt From Press On Research Issue Released Tomorrow

Excerpt From Press On Research Issue Released Tomorrow

Press On Research High Def

Below is an excerpt from Press On Research issue released tomorrow.

Investing In China For The First Time In Five Years

The last time I invested in China my portfolio lost 50% of its value in a matter of months. This was more than five years ago.

But this will change today…

I’m still wary of the wide spread fraud many small Chinese companies allegedly practice.

But I’ve found a company that is so cheap its getting me to invest in China again. Even with panic and fear running through the country.

Most analysts and economists predict that China’s property market will crash. Or is already crashing. And this will lead to the entire Chinese economy crashing.

In 2007 and 2008 this is what happened in the United States. And what led to the Great Recession.

When people are afraid to invest in a market or industry I get excited. You find the best investment opportunities where people are afraid to invest.

I agree the Chinese market is beginning to show signs of crashing. And that at some point it’s stock market will tumble.

But I don’t base investment decisions on stock market or country valuation levels.

I base investment decisions on whether single companies are cheap or not.

Today’s recommendation is so undervalued. And the opportunity so great. That it’s the first company I will buy in China since 2009.

And my valuations all consider the worst case scenario of a Chinese property market meltdown.

If things don’t get as bad as analysts and economists expect than this company could be a multi bagger.

But this isn’t all the company has to offer…

To see what the company is you must subscribe to Press On Research.

But a years worth of great company recommendations aren’t all you’ll get when you subscribe to Press On Research. You’ll also get three free gifts. And priority access to two future services.

When you subscribe to Press On Research you’ll automatically get a PDF copy of my book How To Value Invest. And two resources that will help you evaluate companies faster.

You’ll also get priority access to How To Value Invest The Course when it launches. And priority access to a one on one value investment in-depth coaching program. Where you’ll learn everything I know about how to value and evaluate companies.

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This all comes with a 60 day money back guarantee too. If you aren’t happy with everything you get with your year-long Press On Research subscription I demand you fire me. And I’ll give you your money back.

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P.S. Or if you need more convincing still you can go to the Press On Research FAQ.

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