Shifting gears, Dole news, and my valuations on L.B. Foster

Shifting Gears

Recently I have been concentrating pretty heavily on trying to find, assess, and value new companies that I could invest in.  I am now going to be shifting gears for a bit to expand my knowledge.

The Manual of Ideas that I posted about a few days ago, and the 32 free books from csinvesting are amazing,  I am most of the way through the MoI free publication and the information in it is incredible.

I am going to be studying specifically from the MoI publication the valuation techniques that they go over, try to learn them, revalue some of the companies I have already valued, and incorporate some of them into my valuation techniques.

When I feel comfortable with the new techniques I will post some of the new valuations here, and see if that changes my assumptions on some of the stocks I have already talked about.

After I finish up with the MoI, I am going to start one of the free books that I downloaded yesterday from csinvesting’s site, so it will probably be a little while before I look for a new company to evaluate.

In the meantime I will still be posting any news I find on companies I own, my random thoughts, and any new, good information I find from websites and blogs.

Dole News

The first article talks about the best and worst boards in the country, Dole came out as one of the worst.  The main reason being that Dole, being majority owned by one person, is not a very transparent company.

The second article is another article, from another analyst, saying that if Dole decides to do some kind of asset sale or spin off they could be worth $16 a share, and talks about how the packaged fruit business has amazing margins. I have specifically talked about all of this in my article here.  So why am I posting this?  Because stated in the article from Dole CEO David DeLorenzo “Our goal would be to accomplish something by the end of this year. We have come across some opportunities that, if we are able to execute, would be good for both the packaged foods business and the commodities business.” That is new news.  Emphasis is mine.

For those who are interested in the company, which I am, it looks like we have the rest of this year to accumulate shares before they announce anything on the spin off or asset sale front.

Latest article posted 

My latest article, on L.B. Foster, has been posted to Seeking Alpha and can be viewed here, for those who want to follow the discussion in the comments section.

Minority Report, Batman tech, and a few good articles on stocks I have written about

Minority Report and Batman Tech

This first article is kind of scary and the people who developed it must not have watched Minority Report.  Clip is 10 minutes.

There is a new program that cops are using under the name PredPol, that is supposed to predict crime.

Very scary in my opinion due to where it could lead.  It will only be a matter of time until something exactly like what was used in Minority Report is being used.

The article also talks about other tech that cops could be using in the near future.  The one that caught my eye is “A ShotSpotter system uses microphones positioned around a city to detect gunshots and triangulate their location within 40 to 50 feet. A human at ShotSpotter’s headquarters confirms if it’s a gunshot and alerts the police. The system starts at $40,000 for every square mile of coverage.”  Sounds like this from Batman.  The clip is just over a minute long and I think they should heed Fox’s words from the movie.

Stock articles and valuations on stocks I own from others.

The first stock article talks about how Vodafone might be getting another big dividend from Verizon and what Vodafone might do if they get the dividend.

The second stock article goes over three value stocks and talks about their growth characteristics.  One of the stocks he talks about is Dole.  While I generally agree with his assessment that Dole could be worth upwards of $16 if there is some kind of spin off or asset sale, I think he is downplaying the risk from the debt which I talked about in my article on Dole.

He also talks about Forest Oil and NVR.  Both look like opportunities that should be researched.  Here is an amazing analysis on NVR from 2001 that I originally got from csinvesting’s site.  I also recommend reading the comments section here for more on NVR from 2001.  Read his analysis carefully and the discussion in the comments section.  The way he thinks about things, his reasonings for buying, and how he researches are to be learned from.

The third article talks about Fresh Del Monte, Dole, and Chiquita.  In my opinion this is a very good analysis and includes some if the reasons I will look to buy FDP when the stock price drops.  Here is my article comparing the three companies.

Alexander and Baldwin: Post spin off analysis and valuation

In my previous article on Alexander and Baldwin, I got into the valuation and analysis of the combined Alexander and Baldwin (ALEX) and Matson (MATX) companies.

In this article I will detail the post spin ALEX, value and analyze the company and, determine if I will be a buyer now.  I will be using newer, and I think better estimates of the land value.

I will also assess and value the non-landholdings of the company.  I will value the buildings they own and their potential value through either sale or rent.  I will also talk about the Agribusiness portion of the company which farms, produces, and sells sugar cane.  The Agribusiness also produces power for some of the land they own.  For a discussion of ALEX in general either view my article listed above or the company website here.

I am now going to detail their individual businesses a bit before the valuations.

Alexander & Baldwin, through its real estate subsidiary A&B Properties Inc., develops and sells real property, primarily in Hawaii, and operates a commercial portfolio comprising nearly 8 million square feet of retail, office and industrial space comprising 45 properties located in Hawaii and in eight states on the U.S. Mainland. A&B Properties also owns over 88,000 acres of land, primarily on the islands of Maui and Kauai.

Much of the landholdings on Maui are farmed by Hawaiian Commercial & Sugar Company (HC&S). On Kauai, McBryde Resources, Inc. leases our 4,000-acre coffee plantation to an international, vertically-integrated coffee company. Both HC&S and McBryde are significant renewable energy producers, generating over 200,000 megawatt hours of electricity from renewable energy in 2011.  Taken from their website here, where you can also go for more information.  Also here is a link for pre-spin ALEX’s annual and quarterly reports.

Valuations done on July 4th 2012.  These valuations are done by me, using my estimates, and are not a recommendation to buy the stock.  Do your own homework.

ALEX own 8,000,000 square feet of commercial, industrial, and retail buildings that I am conservatively valuing at $100 a square foot.  ALEX could also rent out their properties conservatively for $1 a square foot per month.

  • 8,000,000 X 100=$800,000,000 in potential building value through sale.
  • Or 1 X 8,000,000=$8,000,000 in rent per month from renting the properties.  $8,000,000 X 12 months =$96,000,000 per year in potential rents earned.

ALEX also owns 88,000 acres of land.  However, after doing some further research I now know that 36,000 of that is used in the growing, producing, and selling of sugar cane, and at this time would likely not be sold.

Valuing of the land:

  • 88,000 X $6,000=$528,000,000 potential value of all the land.
  • 88,000-36,000=52,000 acres of land after taking out the land for sugar cane production.
  • 52,000 X $6,000=$312,000,000

If you read my previous article you might have noticed that I upped the per acre price from $5,000 to $6,000 per acre.  I did that because Larry Ellison recently bought 88,000 acres of land in Hawaii for approximately $500 million, which comes out to a per acre price of $5,682 per acre.  I upped  it a bit higher than his price per acre because most of the land ALEX owns in on Maui and Kauai, presumably higher priced locations.  However, I left the price per acre pretty low and am still likely undervaluing the land because I am no Hawaiian real estate expert and I want to be as conservative as possible.

  • Number of shares are 42 million.
  • 800,000,000 + 528,000,000=$1.328 billion
  • 1328/42 =$31.62 per share.
  • 800,000,000+ 312,000,00=$1.112 billion
  • 1112/42=$26.48 per share.

The $26.48 per share is not including income from sugar cane acreage, production, and sale.  It is not including power production and sale.  The $26.48 per share is just including the 52,000 acres of land that could be sold and the conservative potential of all buildings.  They also have a conservative potential of $96 million incoming rent from those properties if they keep them.

A more moderate to high valuation.

In place of the $1 per square foot per month that was used in the above valuation now we are going to use $2 per square foot per month X 8,000,000 = $16,000,000 per month.  Times that by 12 months to get $192,000,000 in potential rental income per year.

Replacing the $100 per square foot sale price above, we are now going to assume a $200 per square foot sale price.

  • 8,000,000X200=$1.6 billion

Still leaving out the sugar cane acreage above and using the same dollar amount for that land potential you get.

  • 1.6 billion + 312 million=$1.912 billion
  • 1912/42=$45.52 per share.

Again the $45.52 per share is not including the things talked about at the end of the first valuation.

In my opinion ALEX should either sell off or start developing some more of the 88,000 acres of land.  I also think they should keep leasing their buildings because that is huge potential cash flow every year.

Since I am a very conservative investor I use very conservative numbers in my valuations.  I am most likely undervaluing the land at least a little bit, and the buildings probably a little bit more than I should.  However, since I am no Hawaiian real estate expert I need a good margin of safety.  I usually like at the very least a 30% margin of safety and preferably a 50% margin of safety.  I generally use the lowest value I get as my base case, this time the $26.48 per share.   Thus not getting me the margin of safety I need.

Stating that, I still will not be buying into the post-spin ALEX, especially after the stock is up about 30% in the past three trading sessions.  I will continue to research ALEX and I will be waiting for my opportunity when the price goes down.  I am still very intrigued by the land that they own and the potential rental income from the buildings they own.

I did not talk about margins because I am waiting for the 10Q of the new ALEX before I make any judgements on those.  However, if the company is overpriced, like I think this one currently is, I still would not buy even if the margins are great.

I did not talk about the sugar cane and power production portions of the business much because I do not want to count future, highly uncertain earnings from a commodity type business.  I only want to count things that are a little bit more certain like land prices and building prices into this valuation.  Probably a bit too conservative but I want to be safe.  The rest of the company is just icing on the cake to me.

As always feedback is welcome.

China news, More Vivendi News and a look at the overall gaming industry.

Found some interesting and disconcerting news on China this weekend.

The first article, here,  talks about a potential “Hard Landing” for the Chinese economy and some of the reasons.  It also has other links throughout the page discussing China and some of their current and future problems in their economy.  Very interesting reads.

The second article is to me the more important one because I found something very disturbing in it.  In general it talks about how China’s PMI keeps dropping and how it looks like the Chinese economy keeps slowing.  PMI is a measure of the level of manufacturing and is further explained here.

About half way through the Fox Business article is the disturbing part though:

To shore up growth, Beijing lowered interest rates once and reduced banks’ reserve requirement ratio [RRR] twice this year.

Traders said on Friday they anticipate the central bank to lower banks’ RRR soon to ease a recent liquidity squeeze, triggered by regulatory requirements and a large initial public offer.

Isn’t that how the economic bubble and housing crisis started here in the US by lowering interest rates and reserve requirements for banks?  The US government and Federal Reserve started allowing banks to lower their reserve requirements, meaning they had less cash on hand, in order to encourage more lending, leading to more speculation, and the eventual crash.  Not a good sign in my opinion.

More Vivendi and Activision Blizzard news.  Also an overview of the overall video game industry:

The first article here, talks about ATVI and in his opinion that the video game industry is in decline.

The second article is a more in depth discussion of the overall video game industry.

I would also encourage everyone to read the comments sections of both articles as there is a good discussion, and opposing views to what the article states.

The third article is a different perspective on Vivendi from another contributor on Seeking Alpha.

If anyone has thoughts on any of the above articles please feel free to post.  Enjoy.