The Next GE – Interview #2 With Eric Schleien of The Intelligent Investing Podcast

The Next GE – Interview #2 With Eric Schleien of The Intelligent Investing Podcast

In the first interview I did with Eric Schleien of The Intelligent Investing Podcast in 2016, we talked about more general value investing concepts, mindsets and processes.

In today’s interview, we talk about an investment I made in 2015 that I called ‘The Next GE’.

In the 27 – minute interview linked below, we go over this investment case study style that I recommended in October 2015 exclusively to Press On Research subscribers.

We do this to figure out a couple of things…

  • Why I titled this company’s recommendation issue ‘The Next GE’
  • Why they’re now up 460% as of this writing since I recommended them

Some of the other things we also talk about in the interview are…

  • Valuation
  • How this company compared to its competition
  • Where I found this company
  • How I found this company
  • How you can find extreme value in the small cap OTC and ADR arenas
  • And more

Here is the description of the interview from Eric’s podcast site…

In this interview, Eric Schleien goes through an investment case study Jason Rivera recommended to his subscribers and for the portfolios he manages about a small and obscure company that has almost tripled since 2015.

When he recommended them, he titled the issue The Next GE and in this interview we go over why he thought that.

His podcast has interviews with other great up and coming value investors as well so make sure to listen to them.

You can listen to the interview here if you don’t have iTunes.

Or you can listen here if you do have iTunes.

Make sure to follow Eric on Twitter, and subscribe to his great podcast when listening to either of the above places.

I hope you enjoy and find some great value in the interview.

Oh, and by the way…

If you listen to the interview, you also get a couple of free resources to learn from that I provided exclusively to listeners of this interview.

One I’ve never released before other than to paying subscribers.

I hope you enjoy 🙂 and let me know your thoughts on this company in the comments below once you listen to the interview and download the FREE resources.

P.S. The analysis I did on this – and EVERY company I evaluate – is based on the preliminary analysis template I developed over the last 11 years, and after evaluating thousands of companies. If you’d like a copy of this to do your own preliminary analysis, you can get yours for free here.

P.P.S. I put on a FREE webinar last Thursday teaching The 3 Secrets That Have Helped Me Beat Buffett In The Stock Market, so you can possibly do the same. If you’d like to sign up for FREE to view the replay of the webinar, you can do so here.

Preliminary Analysis Case Study #1 Part 10 – Final Part

Preliminary Analysis Case Study #1 Part 10 – Final Part – Inventory, Footnotes, And How To Evaluate Management

Last week I announced we were going to begin doing a real-world case study on Constellation Brands – Stock Ticker STZ.

Well, after releasing this post, my team reminded me that there was actually a preliminary analysis my client did before this one. So before we get to the STZ case study, we’re doing to take a detour to talk about Canopy Growth Corp –  Stock Ticker WEED.

I didn’t want to skip this one because there’s a lot of context and talk in this discussion that we don’t necessarily go over in the later training sessions because we’ve already talked about them.

This post is a continuation of the prior posts in this ongoing case study. All parts thus far are below.

Below is his unedited preliminary analysis for reference – without any of my comments – for you to get a  look at.

Canopy Growth Corp – WEED

***

WEED – Canopy Growth Corp (Canadian Company)

All numbers are in millions of CAD unless noted otherwise.

  • FY Ends March 31st, 2017
  • 3,404 market cap (medium)
  • N/A dividend yield.
  • P/B TTM = 4.92
  • TTM Operating Margin is -39.2 and has somewhat increased over last 2 years.
    • 5 year average OM is N/A
  • Share count has done increased from 77 to 119 from FY16 to FY17. Current TTM is 149m.  Statement of shareholder’s equity??
  • Book value per share has increased from 1.34 to 1.55 from FY16 to FY17. Current TTM is 3.73.
  • Morningstar ROIC TTM is -6.58 and a little higher than the last 2 FY’s
    • 5 year average Morningstar ROIC is N/A
  • TTM ROE is -6.45 and a little higher than the last 2 FY’s
    • 5 year average ROE is N/A
  • TTM FCF/sales is -151 and we can’t tell any pattern. See con note on FCF
    • 5 year average FCF/sales is N/A
  • CCC: No info on the payable period (assume the product is cheap to grow) but DIO exploded on FY2017 to 5,494 days (FY2016 and 2015 avg is about 650 days). Research online says cannabis takes up to ½ year to grow so I would need much more investigation on why inventory takes so long to turnover.
  • EV=3,312
  • EV/EBIT is -73.6
  • EV/FCF is -37.6
  • EBIT/EV (earnings yield) -1.3%
  • FCF/EV (earnings yield) -2.6%

Cons

  • Young company – only about 3 years old after name change (used to be Tweed)
  • Note only balance sheet on Morningstar has FY2015 so we need to look at 10K for data.  We cannot really tell any direction with a 2/3 year old history
  • SG&A & Other are over 163% of Revenue
  • SG&A roughly decreasing and “Other” is increasing
  • Op Income and Margin are (-) but are generally decreasing over time
  • Outstanding shares are significantly increasing over time
  • FCF is increasingly negative as both op cash flow and CapEx are also both increasingly negative
  • Not much experience with Canadian companies
  • Goodwill and intangible assets exploded on FY2017
  • Regulation laws in Canada and USA
  • They bought a lot of companies in FY2016

Pros

  • Cash exploded in FY2017
  • FY2017 Cash & Equiv – Total Liabilities = $39m
  • Book value/share is generally increasing but only for last 3 years
  • Low Debt (also reflected by the ROE and ROIC being similar numbers)
  • Revenue is increasing over time
  • STZ bought about 10% interest in WEED.  Industry took notice and WEED most likely gained some legitimacy with large companies
  • COGS is only 23% of Revenue (doesn’t take much cost to grow product?)
  • High Working Capital Ratio = 9.8 but this high typically suggests either too much inventory or not investing excess cash…

***

In this video, we talked more about the inventory, how they’re accounting for inventory in the footnotes, a major issue in its inventory, how to evaluate management, and more.

For some reason, when I talk, the audio cuts out so I’ve added narration to the video above for context.

If you have any comments or questions, please post them in the comments section below and I’ll answer them.

I’d also love to see your preliminary analysis as well, so feel free to post these in the comments below.

If you’d like more information about the coaching program this client is in, go to this page.

For reference, he’s in the $ 10,000, year-long program, and this is only after 1 month of coaching, doing nine 1-hour training sessions via Skype.

P.S. This analysis is based on the preliminary analysis template I developed over a number of years, and after evaluating thousands of companies. If you’d like a copy of this to do your own preliminary analysis, you can get yours for free here.

P.P.S. I put on a FREE webinar last Thursday teaching The 3 Secrets That Have Helped Me Beat Buffett In The Stock Market, so you can possibly do the same. If you’d like to sign up for FREE to view the replay of the webinar, you can do so here.

Preliminary Analysis Case Study #1 Part 9 – NCAV, Major Inventory Issues, and More.

Preliminary Analysis Case Study #1 Part 9 – NCAV, Major Inventory Issues, and More

Last week I announced we were going to begin doing a real-world case study on Constellation Brands – Stock Ticker STZ.

Well, after releasing this post, my team reminded me that there was actually a preliminary analysis my client did before this one. So before we get to the STZ case study, we’re doing to take a detour to talk about Canopy Growth Corp –  Stock Ticker WEED.

I didn’t want to skip this one because there’s a lot of context and talk in this discussion that we don’t necessarily go over in the later training sessions because we’ve already talked about them.

This post is a continuation of the prior posts in this ongoing case study. All parts thus far are below.

Below is his unedited preliminary analysis for reference – without any of my comments – for you to get a  look at.

Canopy Growth Corp – WEED

***

WEED – Canopy Growth Corp (Canadian Company)

All numbers are in millions of CAD unless noted otherwise.

  • FY Ends March 31st, 2017
  • 3,404 market cap (medium)
  • N/A dividend yield.
  • P/B TTM = 4.92
  • TTM Operating Margin is -39.2 and has somewhat increased over last 2 years.
    • 5 year average OM is N/A
  • Share count has done increased from 77 to 119 from FY16 to FY17. Current TTM is 149m.  Statement of shareholder’s equity??
  • Book value per share has increased from 1.34 to 1.55 from FY16 to FY17. Current TTM is 3.73.
  • Morningstar ROIC TTM is -6.58 and a little higher than the last 2 FY’s
    • 5 year average Morningstar ROIC is N/A
  • TTM ROE is -6.45 and a little higher than the last 2 FY’s
    • 5 year average ROE is N/A
  • TTM FCF/sales is -151 and we can’t tell any pattern. See con note on FCF
    • 5 year average FCF/sales is N/A
  • CCC: No info on the payable period (assume the product is cheap to grow) but DIO exploded on FY2017 to 5,494 days (FY2016 and 2015 avg is about 650 days). Research online says cannabis takes up to ½ year to grow so I would need much more investigation on why inventory takes so long to turnover.
  • EV=3,312
  • EV/EBIT is -73.6
  • EV/FCF is -37.6
  • EBIT/EV (earnings yield) -1.3%
  • FCF/EV (earnings yield) -2.6%

Cons

  • Young company – only about 3 years old after name change (used to be Tweed)
  • Note only balance sheet on Morningstar has FY2015 so we need to look at 10K for data.  We cannot really tell any direction with a 2/3 year old history
  • SG&A & Other are over 163% of Revenue
  • SG&A roughly decreasing and “Other” is increasing
  • Op Income and Margin are (-) but are generally decreasing over time
  • Outstanding shares are significantly increasing over time
  • FCF is increasingly negative as both op cash flow and CapEx are also both increasingly negative
  • Not much experience with Canadian companies
  • Goodwill and intangible assets exploded on FY2017
  • Regulation laws in Canada and USA
  • They bought a lot of companies in FY2016

Pros

  • Cash exploded in FY2017
  • FY2017 Cash & Equiv – Total Liabilities = $39m
  • Book value/share is generally increasing but only for last 3 years
  • Low Debt (also reflected by the ROE and ROIC being similar numbers)
  • Revenue is increasing over time
  • STZ bought about 10% interest in WEED.  Industry took notice and WEED most likely gained some legitimacy with large companies
  • COGS is only 23% of Revenue (doesn’t take much cost to grow product?)
  • High Working Capital Ratio = 9.8 but this high typically suggests either too much inventory or not investing excess cash…

***

In this video, we talked more about NCAV valuation, inventory issues, and more.

For some reason, when I talk, the audio cuts out so I’ve added narration to the video above for context.

If you have any comments or questions, please post them in the comments section below and I’ll answer them.

I’d also love to see your preliminary analysis as well, so feel free to post these in the comments below.

If you’d like more information about the coaching program this client is in, go to this page.

For reference, he’s in the $ 10,000, year-long program, and this is only after 1 month of coaching, doing nine 1-hour training sessions via Skype.

P.S. This analysis is based on the preliminary analysis template I developed over a number of years, and after evaluating thousands of companies. If you’d like a copy of this to do your own preliminary analysis, you can get yours for free here.

P.P.S. I put on a FREE webinar last Thursday teaching The 3 Secrets That Have Helped Me Beat Buffett In The Stock Market, so you can possibly do the same. If you’d like to sign up for FREE to view the replay of the webinar, you can do so here.

Preliminary Analysis Case Study #1 Part 7 – Goodwill, Dilution, And The Cash Conversion Cycle

Preliminary Analysis Case Study #1 Part 7 – Goodwill, Dilution, And The Cash Conversion Cycle

Last week I announced we were going to begin doing a real-world case study on Constellation Brands – Stock Ticker STZ.

Well, after releasing this post, my team reminded me that there was actually a preliminary analysis my client did before this one. So before we get to the STZ case study, we’re doing to take a detour to talk about Canopy Growth Corp –  Stock Ticker WEED.

I didn’t want to skip this one because there’s a lot of context and talk in this discussion that we don’t necessarily go over in the later training sessions because we’ve already talked about them.

This post is a continuation of the prior posts in this ongoing case study.  All parts thus far are below:

Below is his unedited preliminary analysis for reference – without any of my comments – for you to get a  look at.

Canopy Growth Corp – WEED

***

WEED – Canopy Growth Corp (Canadian Company)

All numbers are in millions of CAD unless noted otherwise.

  • FY Ends March 31st, 2017
  • 3,404 market cap (medium)
  • N/A dividend yield.
  • P/B TTM = 4.92
  • TTM Operating Margin is -39.2 and has somewhat increased over last 2 years.
    • 5 year average OM is N/A
  • Share count has done increased from 77 to 119 from FY16 to FY17. Current TTM is 149m.  Statement of shareholder’s equity??
  • Book value per share has increased from 1.34 to 1.55 from FY16 to FY17. Current TTM is 3.73.
  • Morningstar ROIC TTM is -6.58 and a little higher than the last 2 FY’s
    • 5 year average Morningstar ROIC is N/A
  • TTM ROE is -6.45 and a little higher than the last 2 FY’s
    • 5 year average ROE is N/A
  • TTM FCF/sales is -151 and we can’t tell any pattern. See con note on FCF
    • 5 year average FCF/sales is N/A
  • CCC: No info on the payable period (assume the product is cheap to grow) but DIO exploded on FY2017 to 5,494 days (FY2016 and 2015 avg is about 650 days). Research online says cannabis takes up to ½ year to grow so I would need much more investigation on why inventory takes so long to turnover.
  • EV=3,312
  • EV/EBIT is -73.6
  • EV/FCF is -37.6
  • EBIT/EV (earnings yield) -1.3%
  • FCF/EV (earnings yield) -2.6%

Cons

  • Young company – only about 3 years old after name change (used to be Tweed)
  • Note only balance sheet on Morningstar has FY2015 so we need to look at 10K for data.  We cannot really tell any direction with a 2/3 year old history
  • SG&A & Other are over 163% of Revenue
  • SG&A roughly decreasing and “Other” is increasing
  • Op Income and Margin are (-) but are generally decreasing over time
  • Outstanding shares are significantly increasing over time
  • FCF is increasingly negative as both op cash flow and CapEx are also both increasingly negative
  • Not much experience with Canadian companies
  • Goodwill and intangible assets exploded on FY2017
  • Regulation laws in Canada and USA
  • They bought a lot of companies in FY2016

Pros

  • Cash exploded in FY2017
  • FY2017 Cash & Equiv – Total Liabilities = $39
  • Book value/share is generally increasing but only for last 3 years
  • Low Debt (also reflected by the ROE and ROIC being similar numbers)
  • Revenue is increasing over time
  • STZ bought about 10% interest in WEED.  Industry took notice and WEED most likely gained some legitimacy with large companies
  • COGS is only 23% of Revenue (doesn’t take much cost to grow product?)
  • High Working Capital Ratio = 9.8 but this high typically suggests either too much inventory or not investing excess cash…

***

In this video, we talked more about goodwill, dilution, and began to talk about the all-important cash conversion cycle.

For some reason, when I talk, the audio cuts out so I’ve added narration to the video above for context.

If you have any comments or questions, please post them in the comments section below and I’ll answer them.

I’d also love to see your preliminary analysis as well, so feel free to post these in the comments below.

If you’d like more information about the coaching program this client is in, go to this page.

For reference, he’s in the $ 10,000 year-long program, and this is only after 1 month of coaching, doing nine 1 hour training sessions via Skype.

P.S. This analysis is based on the preliminary analysis template I developed over a number of years, and after evaluating thousands of companies. If you’d like a copy of this to do your own preliminary analysis you can get yours for free here.

P.P.S. I put on a FREE webinar last Thursday, teaching The 3 Secrets That Have Helped Me Beat Buffett In The Stock Market, so you can possibly do the same. If you’d like to sign up for FREE to view the replay of the webinar, you can do so here.

Preliminary Analysis Case Study #1 Part 6 – Goodwill, Impairment, Acquisitions, Destroying Value, and More.

Preliminary Analysis Case Study #1 Part 6 – Goodwill, Impairment, Acquisitions, Destroying Value, and More.

Last week I announced we were going to begin doing a real-world case study on Constellation Brands – Stock Ticker STZ.

Well, after releasing this post, my team reminded me that there was actually a preliminary analysis my client did before this one. So before we get to the STZ case study, we’re doing to take a detour to talk about Canopy Growth Corp –  Stock Ticker WEED.

I didn’t want to skip this one because there’s a lot of context and talk in this discussion that we don’t necessarily go over in the later training sessions because we’ve already talked about them.

This post is a continuation of the last posts in this ongoing case study.  All parts thus far are below:

Below is his unedited preliminary analysis for reference – without any of my comments – for you to get a  look at.

Canopy Growth Corp – WEED

***

WEED – Canopy Growth Corp (Canadian Company)

All numbers are in millions of CAD unless noted otherwise.

  • FY Ends March 31st, 2017
  • 3,404 market cap (medium)
  • N/A dividend yield.
  • P/B TTM = 4.92
  • TTM Operating Margin is -39.2 and has somewhat increased over last 2 years.
    • 5 year average OM is N/A
  • Share count has done increased from 77 to 119 from FY16 to FY17. Current TTM is 149m.  Statement of shareholder’s equity??
  • Book value per share has increased from 1.34 to 1.55 from FY16 to FY17. Current TTM is 3.73.
  • Morningstar ROIC TTM is -6.58 and a little higher than the last 2 FY’s
    • 5 year average Morningstar ROIC is N/A
  • TTM ROE is -6.45 and a little higher than the last 2 FY’s
    • 5 year average ROE is N/A
  • TTM FCF/sales is -151 and we can’t tell any pattern. See con note on FCF
    • 5 year average FCF/sales is N/A
  • CCC: No info on the payable period (assume the product is cheap to grow) but DIO exploded on FY2017 to 5,494 days (FY2016 and 2015 avg is about 650 days). Research online says cannabis takes up to ½ year to grow so I would need much more investigation on why inventory takes so long to turnover.
  • EV=3,312
  • EV/EBIT is -73.6
  • EV/FCF is -37.6
  • EBIT/EV (earnings yield) -1.3%
  • FCF/EV (earnings yield) -2.6%

Cons

  • Young company – only about 3 years old after name change (used to be Tweed)
  • Note only balance sheet on Morningstar has FY2015 so we need to look at 10K for data.  We cannot really tell any direction with a 2/3 year old history
  • SG&A & Other are over 163% of Revenue
  • SG&A roughly decreasing and “Other” is increasing
  • Op Income and Margin are (-) but are generally decreasing over time
  • Outstanding shares are significantly increasing over time
  • FCF is increasingly negative as both op cash flow and CapEx are also both increasingly negative
  • Not much experience with Canadian companies
  • Goodwill and intangible assets exploded on FY2017
  • Regulation laws in Canada and USA
  • They bought a lot of companies in FY2016

Pros

  • Cash exploded in FY2017
  • FY2017 Cash & Equiv – Total Liabilities = $39m
  • Book value/share is generally increasing but only for last 3 years
  • Low Debt (also reflected by the ROE and ROIC being similar numbers)
  • Revenue is increasing over time
  • STZ bought about 10% interest in WEED.  Industry took notice and WEED most likely gained some legitimacy with large companies
  • COGS is only 23% of Revenue (doesn’t take much cost to grow product?)
  • High Working Capital Ratio = 9.8 but this high typically suggests either too much inventory or not investing excess cash…

***

In this video, we talk more about goodwill, impairment, acquisitions, companies destroying value, and more.

For some reason, when I talk the audio cuts out so I’ve added narration to the video above for context.

If you have any comments or questions, please post them in the comments section below and I’ll answer them.

I’d also love to see your preliminary analysis as well, so feel free to post these in the comments below.

If you’d like more information about the coaching program this client is in, go to this page.

For reference, he’s in the $ 10,000, year-long program, and this is only after 1 month of coaching, doing nine 1-hour training sessions via Skype.

P.S.  This analysis is based on the preliminary analysis template I developed over a number of years, and after evaluating thousands of companies.  If you’d like a copy of this to do your own preliminary analysis, you can get yours for free here.

P.P.S.  I put on a FREE webinar on last Thursday teaching The 3 Secrets That Have Helped Me Beat Buffett In The Stock Market, so you can possibly do the same.  If you’d like to sign up for FREE to view the replay of the webinar, you can do so here.