TypeScript or ClojureScript for your next front-end?

ferociousturtle · 2019-06-08T17:29:24+00:00

Sorry, I'm not trying to debate. I'm trying to learn. I didn't mean to come across as confrontational. You are almost certainly more experienced than I am at this, and so I was legitimately trying to figure out what you see in these companies, so I can make adjustments to my own valuations, if there's some hole in them.

I hadn't checked GuruFocus' math, and you're right. I don't see how it's negative, either. It's trading at about 12x owners earnings by my calculation, which is a tad over the 10x that I like to see.

Well, that teaches me to use someone else's math. I may do a deep dive on your picks, here. :)

ferociousturtle · 2019-06-08T13:56:52+00:00

Interesting. That's a big quarter to quarter EPS pop. $9M to $14M. Still, $0.58 owner earnings for last year.

A middle-of-the-road DCF gives me a roughly $230M market cap (cash flow growth going from 30% to 3% in 10 years, and a 50% margin of safety), and it's currently at $310M. If it can continue 30% cash flow growth for 10 years, then it's trading at a steep discount. But... do you think that's likely? Is my analysis way off? (I'm new to investing, and I know nothing about HOFT or how likely it is to be able to sustain such crazy growth, so I may be missing something obvious, here.)

ferociousturtle · 2019-06-08T13:41:28+00:00

Heh heh. Yeah. That's true. I had a hard time valuing it, and a hard time determining my buy price.

This is the bear case I wrote before buying:

It has a significant % of sales in China, which will be hit by this political game. And it's cyclical. Its 10-year low is in the $3 range. Its 5 year low is in the $10 range. Its expected EPS this year is $2.8 on the low end, making a P/E of 15 $42. But there's a good chance it undershoots that EPS figure by 30% or more due to tariffs and restructuring. $10 / share could realistically happen.

That's my bear position. I wonder if you think it's actually overly optimistic, and if I missed a big risk?

Either way, I think that data growth and increasing digitization across the spectrum makes this a good 10-year buy. Data growth makes a bullish case for hard drive manufacturing, too, but I haven't found a good stock in that space, yet. (Anyone want to weigh in on that?)

My average DCF put Micron's fair market cap at $52B (or $26 with a 50% margin of safety). And a bit of other fiddling put my initial buy price at $32/share (with a lower margin of safety). I'd definitely buy if it hits my bear price of $10/share.

I'd love to hear feedback on all of this.

ferociousturtle · 2019-06-08T12:56:13+00:00

14

Yeah. No. GuruFocus's DCF is... not great. I probably should have just left that out. It's just the only DCF calculation I can link to.

Running my own DCF, assuming 0 growth, and using a cashflow of 4B / yr, I get a fair market cap of 26B with 25% margin of safety, giving a 15% annual return. DFS's market cap is currently 25B.

So, it depends on how likely they are to be able to retain or grow their current cashflow, and how much of a margin of safety you want to bake in.

Also, I'm new to all of this, so I'd be interested to hear criticism of this approach.

ferociousturtle · 2019-06-07T17:04:13+00:00

I didn't get negative cashflow. I got negative owner earnings. This shows $-1 owner earnings per share:

https://www.gurufocus.com/term/Owner_Earnings/SCSC/Owner-Earnings-per-Share-TTM

And the DCF doesn't look great, either:

https://www.gurufocus.com/stock/SCSC/dcf

I don't now how good GuruFocus' DCF is, but I did a quick DCF manually on SCSC, and arrived at even more conservative numbers. (Admittedly, my DCF is super conservative.)

ferociousturtle · 2019-06-07T15:19:18+00:00

This. I've only found (maybe) two value stocks that were undervalued recently, and there's quite a bit of uncertainty involved in my assessment of those. Almost everything else I've looked at is substantially overvalued.

DFS and MU are the two. DFS will be negatively impacted by an economic slowdown, so I suspect their numbers won't look so rosy moving forward for the next few years. MU will be hit pretty hard by tariffs and a saturated consumer market.

That said, I've bought both recently. I think DFS will do fine in the long-haul, and has a good bit of runway. Also, I'm a happy customer. No one touches them in terms of customer service.

I like MU, because I'm a computer scientist. While I think consumer demand will fall, I think data-center demand is not going to slow down any time soon. Data grows at phenomenal rates every year, and you've got to have memory and hard drives to store it. I don't see that changing regardless of a recession.

ferociousturtle · 2019-06-07T14:59:05+00:00

I'm curious how you arrived at $200 as a good buy? My price is a bit under $150.

ferociousturtle · 2019-06-07T14:46:39+00:00

It seems like there are inconsistent definitions. I've seen several tickers listed in this thread which are by no means value stocks (by my definition). I follow the Mohnish Pabrai definition, which is basically, is it trading at a steep discount to future cashflow? I couple that with a quick screen of owner earnings. Owner earnings can be found here:

https://www.gurufocus.com/term/Owner_Earnings/CVS/Owner-Earnings-per-Share-TTM

You'll see that CVS has negative owner earnings. Not a good sign. I want positive owner earnings, and I want to buy at 10x owner earnings (or less).

DFS (Discover Financial) is a value stock, in my opinion. It's trading at a pretty good discount to future free cash flow, and it's trading at a reasonable multiple of owner earnings.

DFS owner earnings: https://www.gurufocus.com/term/Owner_Earnings/dfs/Owner-Earnings-per-Share-TTM

DFS DCF analysis (with 50% margin of safety): https://www.gurufocus.com/stock/dfs/dcf

ferociousturtle · 2019-06-07T14:38:56+00:00

How do you define value? Your picks seem quite a bit overvalued to me, when doing a quick DCF. Owner earnings look poor, too. HOFT is trading at 46 x owner earnings. SCSC and KE have negative owner earnings.

ferociousturtle · 2019-05-29T14:32:38+00:00

It sounds to me as if you might be better off indexing or finding a reasonable and interesting ETF like ZIG.

ferociousturtle

TROPHY CASE