Should you invest in this company?

Look to the multiples of this hypothetical company:

ROE: 26%
Net Margin: 17%

The numbers are recurrent and the company has a promisor growth prospect.
It's look like a nice company, don't you think?
Now, consider these another multiples:

P/E: 34.5
Yield: 2.9%

Would you invest in this company?
I particularly won't. Despite being an excelent company, it's a bad investment because it's seems overvaluated.

COMGAS

The change in accounting standards made the comparison with past periods more difficult. The reason is the end of the regulatory asset/liabity account. The earnings presentation, fortunately (on page 12) shows the evolution of this account since december 2008.

Complete Nonsense

I can't get used to this kind of complete nonsense:

Santander tem sinergias com Real de quase 1,9 bilhão de reais
Valor ficou 87 milhões de reais acima do previsto


So what? Who's gonna know whatever they calculated?
Information completely unnecessary, to say the least.

Contax

Apesar de resultado operacional "fraco", Banif reitera compra de Contax.

Nasdaq hits 10-yr high

Also, Russell 2000 Index ends at record high of 858.31.
A new bubble?

Source: Reuters

We learn from history that we learn nothing from history

Look at what I've just read in Exame. It seems the same bullshit they're talking now. Any resemblance isn't purely coincidental. As George Bernard Shaw said "we learn from history that we learn nothing from history"

Just amazing!

The economic miracle of so blinded authorities and investors. The year was 1972 when the American daily The Wall Street Journal ran a laudatory article about the country. "Brazil, before a monumental mess, now stars in an economic miracle," the newspaper said.

The only exception was inflation, which was around 20%. But that did not take the sleeping then Finance Minister Delfim Netto. "An inflation of 19% in Brazil causes less harm than 5% in the U.S.," he said. The WSJ then predicted that within ten years, our economy would be the fifth largest in the world.

Wonderful Companies

I wonder when I'll be able to buy these wonderful companies at a fair price.
Today it's a bad investment at current valuation (maybe it doesn't apply to BBDC).

RDCD3 - Redecard

Main numbers for 1Q11 Redecard results (growths 1Q11 x 1Q10):

Transactions with debit and credit cards: 30%
Revenue: <1%
Cost of Services and Operating Expenses: >40%
Earnings: -20%

So it's clear that competition increased when market was opened. And there are new players coming.
Considering that from now then on growth will equal margins drop, RDCD would have a P/E of 15.000 / (4 x 280) = 13.
Still a nice valuation, but I'm not sure if my premise is reasonable.

WEGE3 - Weg

Weg is a wonderful company, but sadly, it's still priced as it were growing like it was until 2008. Currently revenue and earnings are stagnated and the price level it's unreasonable. Current and 3 years median P/E are at a range of 23/25. FCF is only 2.9% and yield is miserables 2.4%.
In the 1Q11 margins dropped, mainly because of raw material increases and weaken dollar.

I wonder when the Mr. Market will get tired and crazy and will offer this beautiful asset at an attractive price.

Balance of Payments

I was taking a look at Brazilian Balance of Payments and what drove my attention was a line called Foreign Stocks Investments. We can see from the graph below that it has increased a lot and is now about BRL 140 billions accumulated (since 1995). It's more than a month of Ibovespa trade!
By the way, that amount enter in the computation of brazilian's reserves?

Richest Countries Debt

The debt of a handful of rich countries increased by US$ 16 trillion (more than the U.S. GDP) since 2007 and now reaches US$ 42 trillion, or 61% of global GDP, representing one of the main threats to the recovery the world economy. This debt worries the United States today, countries in the euro zone, Britain and Japan, just the richest part of the world, which for centuries was the engine and the vanguard of the expansion of human prosperity.
A lot of money!

Source: Exame.

China's International Reserves

China's International Reserves has grown to above US$ 3 trillions, an annual increase of almost 25%!
That's more than half its GDP!

Medium Banks

Planner recomenda distância de bancos médios

Papel P/L P/VP ROE Patrim. Líq
BBAS3 7,06 1,64 23,29% 50.495.700.000,00
BICB4 8,17 1,46 17,82% 1.954.650.000,00
SFSA4 8,24 0,81 9,86% 770.870.000,00
ABCB4 9,09 1,36 15,00% 1.347.920.000,00
PRBC4 9,2 1,31 14,19% 827.660.000,00

CTSA3 - Santanense

I was revising Santanense because I'm thinking in increasing position (I already have a little bit).
In the financial notes to the statements I found these numbers (in BRL millions, rounded):

Fixed Assets at cost: 275
Fixed Assets minus Depreciation: 110
Fire Amount Insured: 370

What could be that? Why the company is paying for fire risks an amount insured of 370 mi?
Could be possibly because assets at market value are now worth this amount instead of 110 mi registered?
Or could be just a way to embezzle money?

Natural Gas / CGAS / PETR

Petrobras anuncia desconto nos contratos de gás natural brasileiro a partir de maio

Good news for Comgas. Petrobras changed its price policy to avoid destroy the competitiveness of natural gas.

ETF

Today in CNBC Website: ETFs: New Warnings of Systemic Risk

They are creating leveraged ETFs, wich offer multiple of the indexes they track. There are also options on ETF shares.

The creativity goes on, leading us to the next big opportunity to buy cheap assets.

FJTA4 - Forjas Taurus

That a look at this and tell me what you think.

Aprovação de Garantia de Aval.

Well, do you remenber the email I sent to Taurus investor relations director? They never replied. I sent it twice. I received only silence.

Now they are, for the second time, endorsing it's main stakeholder debt. For what purpose? What do the other stakeholders gain back? What is Forjas Taurus receiving for this liability?
___________________________________________________________
(Edited by Sid at April, 18)

From 4Q2010 FJTA Fact Sheet:

• The company's flagship is fire gun business, that's too risky, and has dropped 30% last year (probably because of weaken dollar)
• The Achilles' heel is the machine sector, that is indebted and can't earn a dime.

So I'm still waiting for a greater safety margin.

USIM5 - Usiminas

I don't know why this share has plunged so much!
It's now at 17, while USIM3 is at 27.
At this price, USIM5 is trading at a median P/E of 5 years of just about 7,0.
Do you know something?
I've read something about CSN and Gerdau taking control, but why is it dropping?

Klarman's 2008 Interview

What gave you the resolve to say no to all the other investment approaches?

There are several answers. First, value investing is intellectually elegant. You’re basically buying bargains. It also appeals because all the studies demonstrate that it works. People who chase growth, who chase highfliers, inevitably lose because they paid a premium price. They lose to the people who have more patience and more discipline. Third, it’s easy to talk in the abstract, but in real life you see situations that are just plain mispriced, where an ignored, neglected, or abhorred company may be just as attractive as others in the same industry. In time, the discount will be corrected, and you will have the wind at your back as a holder of the stock.

BEEF3 - Minerva

Orbe announced in its last release that bought Minerva. The main reasons exposed were:

• Minerva is completing an intensive investment program started in 2006 that prompted the company to a slaughter capacity of 3,400 head per day to almost 10,000 head daily during the year 2011.
• As a result, net debt increased, but the company has 600 mi in cash and the debt maturity is most due in 2019. But the company is now ready to start a deleveraging process.
• Has initiated a joint venture with Dawn Farm to sell cooked frozen products and food service business. Minerva is now a global supplier to pizza Hut and Subway. 

I have to confess I'm not so much excited about this company/sector, but I'll take a look, because I know nothing about the it.

BAHI3 - Bahema

Now it's my turn to suspect I'm crazy!
Bahema has a net cash/investments fund of  71.261 - 6.127 = 65.134 mi, but worth now just 61.108 mi !
And I'm not considering investments of 8.585.
Is there a chance to be right?

Food for Thought

I finished my hard work analyzing five years financial statements for 230 companies. I ranked by Greenblatt criteria considering median of earnings and ROE for the last 3 and 5 years.
Now starts the work of analyzing those results. You can access the whole list here, on Google Spreadsheet (listed only the 140 that has data for 5 years).

Grendene (GRND3)

Please correct me. There must be something wrong here.

Grendene reported it's plans for the next 5 years:

revenue growth: 8 - 12% (CAGR)
earnings growth: 12 - 15% (CAGR)

I calculated the average 2009/2010 cash flow in the following manner:

1. increase/decrease in cash holdings at the end of the period
2. plus dividends paid
3. plus debt paid
4. minus debt borrowed

I calculated the average for the 2 years period because there is significant diference caused by the increase in receivables in 2009 (111 days outstanding), wich was reduced back in 2010 to 97 days.

Randon is discounted!

Wait! I'm just kidding about how this guys makes a valuation:

Boas perspectivas e desconto pesam a favor da Randon em carteiras de abril

Desconto em bolsa

Além disso, os analistas também veem a empresa sendo negociada com um atrativo desconto em relação aos seus pares de mercado.

Para Artur Delorme, da Ativa Corretora, no ano passado, ao mesmo tempo em que a companhia apresentava um desempenho operacional “muito bom”, em linha com seus pares de mercado, a performance na bolsa era fraca. Assim, as ações da Randon teriam acumulado um “atraso” na comparação com outras empresas do setor de autopeças, como por exemplo, Marcopolo (POMO4) e Iochpe-Maxion (MYPK3).

Nothing about the business, earnings, yield, and the price in relation to that... I can understand why they publish this kind of news. I really do. But I can't understand that someone who sees that shit rush to buy some stocks!

Ibovespa P/E

I'm sick and tired of hearing those dumbs and biased analysts (or should I say experts?) claiming that Ibovespa is cheap, because its P/E currently is 9, or because its P/E is most attractive in relation to all emergents, blah, blah, blah...
So I decided to calculate myself the Ibovespa P/E. Here is my methodology:

• I've selected 231 companies to calculate the median P/E for the last 12 and 20 quarters. I prefer the median estimator, because it often better expresses the common-run, since it is not, as is the mean, affected by an excessively high or low figure, like a extraordinary result in determined quarter.
• For that group, I've excluded 31 companies that had median losses either for the last 3 years or 5 years, remaining 200 companies.
• For 5 years calculation, only 140 companies had enough quarters.
• I also managed to compute the current yield.
• All that median figures was then ranked by market value and liquidity. I don't give a shit for liquidity, but as it is too loved by most market "investors", it's interesting to calculate it anyway.
• All the data are of April 5, when Ibovespa was closer to 70k points.

I told you so

Today, on the investment news site Infomoney:

A Cielo apresentou forte recuperação em bolsa no último mês, com alta de 10,7%, a maior da carteira. Além de apresentar um elevado dividend yield em relação aos demais setores, o papel é eleito pela corretora por conta da percepção de que o fim da exclusividade entre as empresas de cartões não prejudicou de forma tão significativa o case de investimento da empresa e os resultados negativos já estarão absorvidos pelo mercado a partir do segundo trimestre de 2011.

Klarman: The Forgotten Lessons of 2008

In this excerpt from his annual letter, investing great Seth Klarman describes 20 lessons from the financial crisis which, he says, “were either never learned or else were immediately forgotten by most market participants.” Below I try the highlight the main points, in my opinion. The whole excerpt goes here.

• Things that have never happened before are bound to occur with some regularity. You must always be prepared for the unexpected, including sudden, sharp downward swings in markets and the economy. Whatever adverse scenario you can contemplate, reality can be far worse.
• When excesses such as lax lending standards become widespread and persist for some time, people are lulled into a false sense of security, creating an even more dangerous situation.

PTPA4 - Petropar

I'm starting to analyze Petropar, a holding company that operates through its subsidiaries in manufacture and trade in diversified portfolio of intermediate products for oriented industries to the market of consumer goods. The geographical scope of business in aluminium beverage cans is Brazil; in nonwovens, the Americas, and plastic covers the Southern Cone of South America.

Below the main facts I've already collected:

The right way to look at Brazillians's Debt

Debts swallow 24% of family income

According to this news, Brazilians spend 24.2% of their salary to pay off loans and interest. Commitment to debt already is higher in Brazil than in the United States. 

I'm just posting this because I do hate when those big fool analysts say that there is no bubble here because credit in relation to GNP is very low regarding USA, and blah, blah, blah...