Portfolio Update and A New Dole Article Planned

I just sold my entire position in Taseko Mines (TGB).  TGB released its most recent quarterly report yesterday and yet again it was a disappointment.  It seems that ever since I bought into this company every quarter has been a disappointment at least on some level with excuses being given by its management for why it is not performing as good as it could.  Also of note is that TGB had to resubmit its New Prosperity mine assessment report at the end of September and now a decision will not be made until sometime in 2013 about if the mine will be approved or not.  The original plan was to have a decision by this month which was the only reason I had even held onto it this long.

This is yet another company I bought before doing any kind of valuations and only minimal research and again I paid the price with a total loss of 47%.  The only thing that again saved me was that at least I was smart enough to make my positions pretty small when I first started out so I didn’t lose a ton of money.

My portfolio is now 23% in cash and I am down to owning stock in only six companies. After clearing out the only remaining company that I knew for sure I was going to sell at some point, I now only own stock that I think are good companies and have the potential to continue to compound into the future.

The three remaining companies I own from before doing valuations and anywhere near the amount of research that I am doing now: $MAIN, $MO, and $PM, are all by my estimates either fairly valued or overvalued by quite a bit and I may sell stock in each of these three companies if I detect deterioration in any of their businesses.  If I do not see deterioration in the businesses I will most likely hold these companies for years because I think each of these companies will compound their results well into the future, unless of course I find a better company to put my money into.

The three companies I have bought into since doing valuations and the amount of research I am doing now are: $CMT, $VIVHY, and $DOLE.  At this point I still think that CMT and VIVHY are undervalued and will let you know if I decide to buy any more stock in either of those two.

This gets me to Dole.  I got a request from one of the readers of my original Dole article that I posted on Seeking Alpha who liked my original analysis series on Dole, Chiquita, and Fresh Del Monte and he was asking if I would do an updated valuation and analysis article on Dole now that it has sold some of its assets and is able to pay off most of its debt.

The reader asked if I would do an updated article giving my thoughts on how Dole stands now after it sold some of its assets and paid down debt, if I still think that it is undervalued, and what I think of its operations going forward now that it eliminated its biggest problem.

I have learned a lot since that time and hope to use some of my new knowledge to see what I think about Dole now, if I still think they are undervalued after rising in price as much as 75% at one point and currently still being up 47% since I originally bought into it.  I am researching its land, other assets, and history more fully now in preparation so that when its next quarterly report comes out on November 15th I am ready to value the company with updated numbers and post the article shortly after that.

In the mean time I will continue to post any updates and links that I think contain knowledge.  I may also every once in a while ask some questions of you since I know some of you are more knowledgeable in certain areas than I am.  Since I am planning on adding some new things to this article I may need some feedback making sure I am applying the new techniques correctly.

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Selling stocks, emotion, and potential loss of money

Does anyone else find it hard to sell stocks that they have researched, valued, and analyzed? Sometimes having spent weeks researching the company.

Normally I have had no problem with my selling decisions thus far.  However, almost all of them were the companies I bought when I first started and wasn’t doing the amount of research I am doing now.

I am finding it hard right now to sell Taseko Mines (TGB), even though I think I have found some other opportunities to put more money into.  All I think about when trying to decide whether to sell or not, is the potential it has if the New Prosperity Mine is approved in November and how that could enable me to make my money back.

I hate losing money and at this point I am down about 50% on this investment.  Remember I bought this before I started the valuation and research that I am doing now, and bought when it was way overvalued.

I know that this is considered speculation, and something I don’t really do now, but I would feel like a complete jackass if I sold now, only for the stock to go up a lot, which would lead to me making my money back.  That is if and when the Prosperity Mine is approved.

I guess the lesson of the day is that this is what I get for buying companies that are overvalued and that at the time I had not researched or valued properly.

Anyone who has any advice out there, it would be much appreciated if you could share that with me in this predicament.

Taseko Mines, (TGB) valuation and my mistakes.

Taseko Mines, (TGB) is a mining company with operations in Canada.  Their only currently operating mine is Gibraltar, a copper and molybdenum mine, that they own 75% of in a joint venture with another company.  They also own the New Prosperity, Aley, and Harmony mines that are in various stages of exploration.

The following valuations are only considering the Gibraltar mine since it is currently the only operating mine.

First ever valuation done. Done on 2-26-2012, using trailing twelve month numbers from December 2010-September 2011.  All numbers in Canadian dollars unless otherwise noted, except per share numbers.

I also recently realized I forgot to convert the numbers to US dollars.  Luckily US dollars and Canadian dollars are pretty equivalent in their prices, so it did not effect the valuations too much and I will leave the numbers as I did them in my valuation.

• Cash and Cash equivalents of 257.3 + short term investments of 114
• Number of shares are 195.4
• Current liabilities of 56.2

Cash and cash equivalents of 257.3+short term investments of 114-current liabilities=315.1

• 315/1/195.4=$1.61 in net cash per share
• EBIT of 116.4 TTM number.

8X-14X EBIT=931.2-1629.6 in EBIT+257.3 in cash and cash equivalents=a range of 1188.5-1886.9

• 1188.5/195.4=$6.08 per share.
• 1886.9/195.4=$9.67 per share.

Current price at that time was $4.20 per share.  Market cap was 821.4 million

Enterprise Value=Market cap+debt, minority interest & preferred shared-total cash and cash equivalents-short term investments.

• EV=821.4=241+0+0-257.3-114=691.1
• EV/EBIT=5.81

I learned some valuable lessons from this valuation and getting better with subsequent valuations.  First, I should have converted the numbers that were in Canadian dollars to US dollars.  Second and more importantly I should have used as my lowest multiple 5X instead of 8X for a more conservative estimate of their value.  I also should have added the short term investments into the  cash and cash equivalents number to get a more realistic number to multiply by, getting me closer to the intrinsic value. That would have gotten me to: 5X 116.4+cash and cash equivalents and short term investment=897 as my low number.  Dividing 897/195.4 you get $4.59 per share, only slightly above the then share price.

On a more recent asset valuation doing things properly, I got a price per share of $3.70 per share.

This was a stock I bought before doing the amount of research I am doing now, and with doing no valuations.  I bought my set of shares in TGB without reading any 10K’s or 10Q’s, and only reading about the potential value that they hold in their mines in the minerals of copper, gold, molybdenum, and niobium.

I am currently paying the price for my previous “investing” transgressions with a current -45% loss on this stock.  Originally bought shares at $5.98 per share with a total cost basis currently of $4.77 per share current share price is $2.80 per share, OUCH!

Holding onto my current shares in the hopes, (otherwise known as speculating, or gambling, which is not a good thing to do in the stock market), that the New Prosperity gold and copper mine gets approved in November, and jumps the stock up to a price where I can sell at a minor loss or profit and move on to something that has a bigger margin of safety.