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.

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The analysis and valuation series on Dole, Chiquita, Fresh Del Monte, and my conclusions, which is the finale in the series that just got published, is exactly how I am planning on going about my analysis in the future.  I am light years ahead of where I was when I first started, but I am still light years from where I need to be.  The main thing I need to keep working on is my ability to judge competitive advantages.

I am now going to be finishing up Competition Demystified, which will help me judge competitive advantages better, and I will be searching for my next company to study.

More bad news for Chiquita.

An article from The Motley Fool on how shorts are targeting Chiquita, which I think is a very justifiable position at this time.

Dole VS Chiquita VS Fresh Del Monte (Part 4)

This article is the fourth and final article in the series detailing the businesses of Dole (DOLE), Chiquita (CQB), and Fresh Del Monte (FDP).  If you want to see the valuations and brief descriptions of these companies please view these articles: DOLE, CQB, and FDP.

In this article I will go over the margins of all the companies to determine if there are any sustainable competitive advantages.  I will decide whether I would buy any of these companies as they currently stand, without the possibility of any kind of merger, spin off, or massive asset sales.  I will also look into whether or not a merger between any of the companies would be a good thing.

Before I start with my analysis of the three I need to go back and look into Dole’s total contractual obligations in comparison to Chiquita’s and Fresh Del Monte’s.  At the time I did Dole’s valuations I wasn’t doing as thorough of research as I am doing now, and did not talk about their total obligations in the original article I wrote.

On page 40 of Dole’s 2011 10K they list their total obligations and commitments as of December 31, 2011.  The total obligations and commitments, including debt is $4.68 billion, and over the next two years it comes out to $2.661 billion.  Their current market cap is $765 million. Not a great ratio, but not terrible like Chiquita’s. The total obligations/market cap ratios for all of the companies are:

• Dole: 4680/765=6.12
• Chiquita: 3167/220=14.40
• Fresh Del Monte: 1992/1310=1.52

Fresh Del Monte has by far the most sustainable ratio in my mind and should have no problems if another crisis hits them individually or the economy as a whole.  Dole might be able to make it through another crisis, even if they don’t decide to do some kind of asset sale or spin off like they are looking into right now.  Chiquita’s ratio is horrendous and I would be worried about them if I was a shareholder of theirs.

All of these companies have low amounts of cash and cash equivalents on hand, which is another thing to possibly worry about with Dole and Chiquita if something bad were to happen in the economy.  In any kind of emergency they would most likely either default on some of their obligations,  have to draw down their credit facilities or, try to take on some more debt if they could, most likely on unfavorable terms.

Now let us get to the margins of all three and try to determine if any of them have a competitive advantage.

			Dole (DOLE)		Chiquita (CQB)		Fresh Del Monte (FDP)
Gross Margin (Current)			10.5		12.9		8.8
Gross Margin (5 years ago)			9		12.4		10.8
Gross Margin (10 years ago)			16		16.1		16.1
Op Margin (Current)			2.7		-0.3		3
Op Margin (5 years ago)			1.9		0.7		5.2
Op Margin (10 years ago)			6.5		2.2		10.3
Net Margin (Current)			0.75		0.69		2.84
Net Margin (5 years ago)			-0.83		-1.05		5.34
Net Margin (10 years ago)			0.83		0.91		9.34
FCF/Sales (Current)			-0.58		0.12		2.66
FCF/Sales (5 years ago)			N/A		-0.08		2.42
FCF/Sales (10 years ago)			N/A		2.37		11.86
BV Per Share (Current)			$9.30		$17.42		$30.41
BV Per Share (5 years ago)			N/A		$21.03		$23.65
BV Per Share (10 years ago)			N/A		$15.80		$13.51
ROIC (Current)			2.16		1.53		5.21
ROIC (5 years ago)			-2.12		-2.72		11.66
ROIC (10 years ago)			1.98		1.63		22.56
Insider Ownership (Current)			59.06%		3.33%		35.72%

These companies for the most part all have operations in the same segments and the next table will be showing the margins of those comparable operations.

			Dole		Chiquita		Fresh Del Monte
Total Fresh Fruit EBIT			172		N/A		N/A
Total Fresh Fruit Revenues			5,024		N/A		2,721
Fresh Fruit EBIT Margin			3.42%		N/A		N/A
Total Vegetable EBIT			31		N/A		N/A
Total Vegetable Revenues			1,002		N/A		523
Vegetable EBIT Margin			3.10%		N/A		N/A
Packaged Food EBIT			96.5		N/A		N/A
Packaged Food Revenues			1,197		N/A		355
Packaged Food EBIT Margin			8.10%		N/A		N/A
Total Operations EBIT			300		33.7		116
Total Operations Revenues			7,224		3,139		3,590
Total EBIT Margin			4.15%		1.07%		3.23%

In a perfect world Chiquita and Fresh Del Monte would have broken their operations out further like Dole does.  Instead they choose to combine their operations reporting data, especially the Operating Margin data, otherwise known as EBIT.  So at this point it is impossible for me to break out the data further than it is in the above table.

Taking the above information, combined with the information in the previous articles, I think that I have enough information to make some judgements on the companies.

As things currently stand I would NOT buy Chiquita under any circumstance, not even with the possibility of a spin off or asset sale.  Their low margins, combined with their huge amount of total obligations, and low cash on hand scare me too much to invest in them.  That is not even taking into account the fact that in my valuations I found them to be about fairly valued to slightly undervalued, not nearly enough of a margin of safety for me considering all the risks. I also do not see them being bought out by anyone due to their high amount of total obligations.  The only thing going in their favor is that they are selling for less than book value by a good margin, which is currently $17.42 per share, but at this point it looks to be justified.

Fresh Del Monte is interesting.  They are selling for less than book value by a good margin, which is currently at $30.41 per share, they generally have the best margins of the three companies, and they also have high insider ownership, which I always love.  However, by my estimates they appear to be slightly overvalued at this point, and have low cash on hand.  They are also the company out of the three in the best position to make some acquisitions, in my opinion a merger between Dole and Fresh Del Monte could possibly be a good thing. They have already been buying back a lot of shares and are the only one out of the three to pay a dividend, which are more pluses.  At this point I am not going to buy Fresh Del Monte, but I will wait for an opportunity when they are undervalued and will reassess at that time whether or not I will be a buyer then.

Without the possibility of a spin off or asset sale that I outlined in my original article on Dole, I would not be a buyer into their company right now either.  Pretty much the same problems as Chiquita: high debt/total obligations, low cash, low overall margins.  However, they do have high inside ownership, they are selling at a slight discount to book value, and by my valuations are extremely undervalued.  I do stick to my original assessment about Dole though, that they are a great spin off opportunity if they decide to do a spin off or asset sale.  If they do what I suggested in the original article I think they could unlock value, get rid of a lot of their debt, and become a much more focused and profitable company.  Especially if they put a lot of their resources into the packaged fruit portion of the business, as it has the highest margins in Dole’s operating structure.  Dole also has the 88,000 acres of land that they could sell some of to pay down debts as well.

I did buy half of a position in Dole based on the spin off thesis in my original article.  I am waiting to see if they announce a spin off or asset sale to jump fully into Dole at this point.  They are in the spin off portion of my portfolio which I plan to hold for 6 months to several years.  I do not consider them a long term buy and hold for decades company.

It also appears to me that none of the companies have any kind of sustainable competitive advantage, with their wildly fluctuating margins over the past 10 years, and no one becoming dominant.

I hope everyone has enjoyed and learned something from the analysis and valuation series on Dole, Chiquita, and Fresh Del Monte, and I look forward to some feedback.

Fresh Del Monte: Valuation and Analysis Series (Part 3)

In the first two of four articles in this series, here, and here, I got into valuations and analysis of Dole (DOLE) and Chiquita (CQP).

Fresh Del Monte (FDP) will be the subject of this article.  I will detail their operations, and do two valuations of the company.

In the fourth post of this series I will attempt to determine if a merger between any of the three companies should happen, and what I think would be the best options. I will go over the margins of each company and try to determine if any of the three have any sustainable competitive advantages. I will also put forth my thesis of which one, if any, would be a good long-term buy without the possibility of a spin-off or merger from any of the companies.

Fresh Del Monte Produce Inc. is one of the world’s leading vertically integrated producers, marketers and distributors of high-quality fresh and fresh-cut fruit and vegetables, as well as a leading producer and distributor of prepared food in Europe, Africa, the Middle East and the countries formerly part of the Soviet Union. Fresh Del Monte Produce Inc. markets its products worldwide under the Del Monte® brand, a symbol of product innovation, quality, freshness and reliability for over 100 years.  Description taken from their website here.

For further information and specifics of their operations please refer to their website.

Both Fresh Del Monte valuations were done on 6-20-2012. All numbers are in millions of U.S. dollars, except per share information, unless otherwise noted. Valuations done using March 2012 10Q and 2011 10K.

These valuations are done by me, using my estimates, and are not a recommendation for you to buy the stock. Do your own homework.

Assets:			Book Value:		Reproduction Value:
Current Assets
Cash			27.5		27.5
Marketable Securities			0		0
Accounts Receivable (Net)			407		300
Inventories			445		178
Prepaid Expenses			38.7		15
Deferred Taxes-Tax Liability			0		0
Total Current Assets			918.2		520.5
PP&E Net			1016		450
Goodwill			405		150
Intangible Assets			68.4		20
Total Assets			2407.6		1140.5

• Total Shares=59

Reproduction Value:

• With IA 1140.5/59=$19.33 per share.
• Without IA 1120.5/59=$18.99 per share.

Current price is $22.66 per share on 6-23-2012.

Second Valuation:

• Cash and Cash equivalents of 27.5
• Number of shares are 59
• Total current liabilities are 548.5

Short term investments + cash and cash equivalents – current liabilities =

• 27.5+0-548.5=-521
• -521/59=-$8.83 in net cash per share.

Fresh Del Monte has an EBIT of 106.5, using trailing twelve months numbers.

5X, 10X, and 14X EBIT.

• 5X106.5=532.5+27.5=560
• 10X106.5=1065+27.5=1092.5
• 14X106.5=1491+27.5=1518.5

• 560/59=$9.49 per share.
• 1092.5/59=$18.52 per share.
• 1518.5/59=$25.74 per share.

Current share price is $22.66 per share on 6-23-2012.

Current market cap is 1,350 million.

Enterprise value is 1,510 million.  Enterprise value taken from Yahoo Finance.

• EV/EBIT=1510/106.5=14.18

In the last article here on Chiquita, I got into one of my major gripes with them, their huge amount of total long term contractual obligations.  I am now going to compare Fresh Del Monte’s total long term contractual obligations with theirs.

On page 54 of Fresh Del Monte’s 2011 10K is a table describing their total contractual obligations, which come out to a total of $1.992 billion.  They have a current market cap of $1.31 billion.

That is a much more sustainable ratio than Chiquita’s total obligations of $3.2 billion and their total market cap of $220 million.

The fourth and final article in this series will be next.  I will try to determine which company, if any, I would buy without the possibility of any kind of spin off or merger.  I will try to determine if a merger between any of the three would be a good thing.  I will also go over margins of all the companies, and their specific operations to see if any of them have any sustainable competitive advantages.

Latest article published.

My latest article has been published on seekingalpha.com and can be viewed here for those wanting to follow the discussion in the comments section.

Chiquita Valuation. Part 2 Of Series On Valuation And Analysis Of Dole, Chiquita, And Fresh Del Monte

In post one of this series on Dole and their competitors here, I got into a valuation of Dole and the potential spin off that could unlock their value.

In my next two posts I will detail two of Doles biggest competitors, first Chiquita and then Fresh Del Monte, where I will value both of the companies and detail their businesses.

In the fourth post of this series I will attempt to determine if a merger between any of the three companies should happen, and what I think would be the best options. I will go over the margins of each company and try to determine if any of the three have any sustainable competitive advantages.  I will also put forth my thesis of which one, if any, would be a good long term buy without the possibility of a spin off or merger from any of the companies.

I will start with the valuations of Chiquita (CQB), and then get into the details and analysis a bit of their company.

Chiquita Brands International is a leading international marketer and distributor of high-quality fresh and value-added food products from energy-rich Chiquita® bananas and complimentary fruits to nutritious blends of convenient green salads. Description is taken from their website.  They do business under the Chiquita and Fresh Express premium brands and other related trademarks and operate in nearly 70 countries worldwide.  For further information please refer to their website.

Both Chiquita (CQB) valuations were done on 6-20-2012.  All numbers are in millions of US dollars, except per share information, unless otherwise noted.  Valuations done using March 2012 10Q and 2011 10K.

These valuations are done by me, using my estimates, and are not a recommendation for you to buy the stock. Do your own homework.

Assets:			Book Value:		Reproduction Value:
Current Assets
Cash			41		41
Marketable Securities			0		0
Accounts Receivable (Net)			267		190
Inventories			238		119
Prepaid Expenses			43		20
Other Current Assets			111		44
Total Current Assets			700		414
PP&E Net			370		185
Goodwill			177		77
Intangible Assets			555		166.5
Total Assets			1802		842.5

• Total Shares are 46

Reproduction Value:

• With IA: 842/46=$18.32 per share.
• Without IA: 676/46=$14.70 per share.

Current Price is $4.84 per share.

Second Valuation:

• Cash and Cash equivalents of 41
• Number of shares are 46
• Total Current liabilities are 383

Short term investments of 0 + cash and cash equivalents of 41- current liabilities of 383=-342

• -342/46=-$7.43 in net cash per share.

Chiquita has a trailing twelve month EBIT of 25.

5X, 10X, and 14X EBIT.

• 5X25=125+41=166.
• 10X25=250+41=291
• 14X25=350+41=391

• 166/46=$3.61 per share.

• 291/46=$6.33 per share.

• 391/46=$8.50 per share.

Current share price is $4.84 per share.

Being an extremely conservative investor I usually use the lowest valuation number I get and use that one as what the company should be valued at.  So not only are they currently overvalued with my low estimate at $3.61, there is even less margin of safety due to the -$7.43 in net cash per share.  Even if I used the $8.50 number as my estimate of value, subtracting the negative net cash per share only leaves you at $1.07 per share.

Enterprise Value, which is taken from Yahoo Finance is currently 756.72 million.

I adjusted, and added to their enterprise value because they have a lot of obligations over the next few years that aren’t counted in the regular debt number.

To their enterprise value I added TOTAL operating leases, pension, and purchase commitments.

Adjusting their enterprise value is 756.72+2392=3148.72

• Unadjusted EV/EBIT=30.27
• Adjusted EV/EBIT=125.95

Both numbers are incredibly high, especially as you compare them to Dole and Chiquita.

On page 9 of Chiquita’s 2011 10K they state total debt outstanding is at $572.5 million.  Page 10 is where they list the other “contractual obligations” with the total obligations being $3,167 million.

This is another reason why you MUST read annual and quarterly reports.  When I first started I would have never known about those other obligations.  I would have taken the $572.5 million number and compared that to Dole’s debt and thought that Chiquita was in a much better position.

With the above information I will not be buying into Chiquita at this time.

In my next post, the third of the series, I will value and talk about Fresh Del Monte’s (FDP) operations.

In the fourth and final posting in this series I will look into Dole’s numbers again to see if I missed any of their contractual obligations.  I will also compare all three companies margins and decide if any of the three companies meet my criteria for a long term value hold, without any spin off or merger.