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Value Stock Picks – December 2016

I’m a value investor which means I buy stock in profitable companies trading at a discount.

I have hopes for a paid stock newsletter (Global Value Intelligence). But I’ve decided to put GVI on hold and share what I’ve written in past GVI issues, as well as provide new stock information. I intend for this information to remain free for some time.

I’ll be tracking the stocks I like over at my Value Stock Picks page.

The information presented here, like all the content on this website, is not investment advice. These are stocks I own (or intend to own) but they might not be suitable for you. The information presented is accurate to the best of my knowledge, but no guarantee of accuracy is made.

Prices are as of 9 December 2016 on market close, unless otherwise noted. Market data is from morningstar.com.

Below are some of the stocks I like:

Nissan (NSANY on NYSE)

PriceMarket CapShareholder’s EquityPrice to BookEarnings per ShareYieldReturn on Equity (TTM)Price to Earnings (TTM)
$19.58$38.7 bil$40.9 bil (converted from JPY)1.0$2.16 (converted from JPY)4.20%10.5%9.5

Nissan has a price to book of 1.0 and an attractive 4.20% yield. It is an ADR and has no options. I generally prefer to own a stock on it’s native exchange, with the ability to sell covered calls, but I still like this stock for it’s attractive metrics, brand and yield.

Transocean (RIG on NYSE)

PriceMarket CapShareholder’s EquityPrice to BookEarnings per ShareYieldReturn on Equity (TTM)Price to Earnings (TTM)
$15.42$5.6 bil$14.5 bil0.4$2.168.1%4.7

The oil market in general has been pretty beaten down of late. The price to book is 0.4 which amounts to a 60% off sale. Despite the low price, Transocean is profitable, boasting $791 million in net income in 2015.

Mount Gibson Iron (MGX on ASX)

PriceMarket CapShareholder’s EquityPrice to BookEarnings per ShareYieldReturn on Equity (TTM)Price to Earnings (TTM)
A$0.34A$372.8 milA$392 mil0.9A$0.0824.7%4.4

I first discussed MGX in the October 2016 Global Value Intelligence Dispatch (GVI has since been put on hold). At that time it was trading at A$0.29.


Writeup as of October 2016

MGX is an iron ore mining company in Western Australia. It can boast A$392 million in shareholder’s equity but is trading at a market capitalization of just A$318 million. This means the company’s stock could rise by over 23% before its market value would even be equal to its equity.

Mount Gibson Iron recently received a A$86 million insurance settlement and is set to receive an additional payout in the future. Not only is this company undervalued but it brought in A$6 million in the three month quarter ending in June.

PanTerra Gold (PGI on ASX)

PriceMarket CapShareholder’s EquityPrice to BookEarnings per ShareYieldReturn on Equity (TTM)Price to Earnings (TTM)
A$0.08A$9.6 milA$39 mil0.2A$0.41138.9%0.4

I first discussed PGI in the October 2016 Global Value Intelligence Dispatch (GVI has since been put on hold). At that time it was trading at A$0.08.


Writeup as of October 2016

This stock is currently trading for 1/3 the book value and presents an exceptional value.
Despite the low Price to Book ratio PGI is still profitable. PGI brought in A$8 million in cash in 2015. In the most recent quarter PGI reported a 4% increase in gold production over the prior quarter and operating costs
3.7% lower.

Gold and gold miners have been beaten down over the past few years. By purchasing a stock in a depressed sector below book value there is a great deal of downside protection.

Triton International (TRTN on NYSE)

PriceMarket CapShareholder’s EquityPrice to BookEarnings per ShareYieldReturn on Equity (TTM)Price to Earnings (TTM)
$19.23$674.3 mil$665 mil1.0$2.679.16%10.7%9.4

I first discussed TRTN in the October 2016 Global Value Intelligence Dispatch (GVI has since been put on hold). At that time it was trading at $13.19.


Writeup as of October 2016

Triton International trades and leases intermodal containers and chassis. It features an attractive price to book ratio combined with a high dividend yield.

Triton recently merged with TAL and paid out a $.45 dividend on 22 September. This high dividend is most likely not sustainable. Shipping has been declining of late, but TRTN still managed to bring in $18.2 million in pre-tax income in Q2 2016.

Noble Energy (NE on NYSE)

PriceMarket CapShareholder’s EquityPrice to BookEarnings per ShareYieldReturn on Equity (TTM)Price to Earnings (TTM)
$7.64$1.9 bil$6.69 bil0.2$2.065.07%3%7.8

I first discussed NE in the October 2016 Global Value Intelligence Dispatch (GVI has since been put on hold). At that time it was trading at $6.34.


Writeup as of October 2016

Oil has been falling and with it the value of energy producers. Despite falling oil prices, NE is a fantastic value. The company has $6.7 billion in shareholder’s equity, but is trading with a Market Capitalization of $1.5 billion.

The 5.36% yield is attractive but not sustainable. Despite low oil prices Noble Corp is profitable. The most recent quarter that ended in June resulted in $687 million in cash from operations.

Anthem (ANTX on NYSE)

PriceMarket CapShareholder’s EquityPrice to BookEarnings per ShareYieldReturn on Equity (TTM)Price to Earnings (TTM)
$47.07$12.4 bil$23 bil0.5$9.382.77%9.5%5.5

I first discussed ANTX in the November 2016 Global Value Intelligence Dispatch (GVI has since been put on hold). At that time it was trading at $46.83.


Writeup as of November 2016

Anthem is a mid-sized health benefits company that works with employers and individuals to offer network based healthcare plans. While recent government incursions into the healthcare industry make me leery to invest in this sector I find the metrics to be quite favorable.

The Price to Book ratio is excellent, the yield is attractive and the company is profitable. I also think Anthem is well positioned to benefit from the “baby-boomer” generation (those age 50-85) as more of them retire each year.


Disclaimer:

As of 11 December 2016 John owns shares of NSANY, RIG, MGX, PGI, TRTN, NE, and ANTX. When possible he has also sold covered calls on these same securities.

Data is from morningstar.com.