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Hi Cliff, thanks for your reply. We'll see what will happen. They're absolutely unknown over here in Germany -- to the contrary of Urban Outfitters. - beme.
Toggle Commented Mar 16, 2012 on FIRST KNOW YOU'RE RIGHT at Phil Town
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Hi Abe and jason, TEVA is heading it's 200 day low, any insights? cheers, - beme.
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Hi Cliff, how do you value ARO? When I just look at the current historical numbers they are lightyears away from a MOS. When you take out last year, it's much better. I would assume the following: currentEPS: 0.85 growthRate: 15% (10Y BVPS looks reasonable to me) futurePE: 18,5 (historical high third average) That gives me a sticker price below what they're currently traded at. Looks like you found them too late ;-(
Toggle Commented Mar 16, 2012 on FIRST KNOW YOU'RE RIGHT at Phil Town
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Hi Cliff, thanks for mentioning TBVPS. I love every aspect on how to get a feeling on the inner value of a company and this sounds very reasonable. But what bugs me is to determine what is good and what is bad. Some examples I fetched for companies I am tracking (as of today): AAPL: 91,917 price is 4.87 of TBVPS CMI: 25,656 price is 3.69 of TBVPS URBN: 7,169 price is 2.97 of TBVPS GIL: 7,061 price is 2.94 of TBVPS RIO: 19,44 price is 2.16 of TBVPS CLF: 31,586 price is 1.62 of TBVPS TEVA: -6,809 negative, oops. As you can see, all of them are way above the 50 to 60% you mention and also way above the 1.6 (except CLF). It's hard for me to determine what "what is normal". -- It's clear that Total Assets can be very different for tech and hardware companies. For example the biggest position in the Apple balance-sheet is "Long Term Investments", while for Cliffs it's "Property/Plant/Equipment". Any clues? cheers - beme.
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In search of fear I just discovered the following article: http://seekingalpha.com/instablog/121744-mark-anthony/368751-the-darkest-star-in-the-commodities-boom The author makes some good points about the extremely low market price for coal and gas compared to oil: "Today Brent crude oil is $125 per barrel. US coal is $60 per ton. US natural gas is $2.50 per mmBtu. [in fuel energy equivalence] coal is priced at $15 per barrel of oil while natural gas is priced at $14 per barrel of oil. Isn't $15 or $14 per barrel ridiculous, when the Brent crude oil is $125 a barrel" In such situations of low prices, some coal miners start to become un-profitable and cut production. But given that oil is so much more expensive, coal and gas prices will increase sooner or later as the demand is still there. (though heating/electricity coal is only one commodity Cliffs is dealing with, iron ore is more important to their business ) Next the author writes about labor in China. One problem Chinas mining business seems to face is that they cannot anymore find cheap migrant workers for their mining facilities. The author saw job ads of up to 10,000 yuan ($1600) per month for freshman coal miners while typical city jobs for migrant workers pay about 2000 to 3000 yuan pointing to a coal miner shortage. I totally agree with Phil that Cliffs does not really have a moat. While Mike and I wrote the analysis I absolutely had no other Idea of a moat than the growing deficit of skilled labor in the global mining industry. As Cliffs management states in the presentation they also see this as one of their strengths. I may be too superficial -- though I am yet unable to find anything else -- but as it looks to me the single most important factor of fear is that all mining companies are currently affected by the slower growth rate of China. So I very much like the Growth rate correction Phil did and 8% seems very reasonable compared to the 7.5-8% growth rate estimated for China. Another observation: when you compare the pricing charts for RIO, CLF and BP (http://www.google.com/finance?q=RIO%2CBP%2CCLF), it looks to me that RIO and CLF share a similar development, though CLF dives deeper down. But given that Rio Tinto has a much broader portfolio than Cliffs, it seems that a parent effect is pursuing both which means that Cliffs could very well recover soon, though that is a short term effect. I must not hope, I know. - beme.
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Hi Shane, Yes, Cliffs must have meaning to you otherwise all the hard work is useless. At a certain point one has to ask themselve if you really want to get into this business and track its destiny. But nonetheless there is always something to learn when you start working on what you believe in. And we all know that Phils examples from the book are too well chosen and unfortunately unmatched by what you find when you look out for your own wonderful company of choice. So what's your current favorite? Does it have what it needs to be worth a closer look at? That said, great findings on the chart analysis. But please note that when you share charts, you must use the "Linkable Version" button and then copy / paste from the address bar. Otherwise we won´t be able to see your settings. And annotations cannot be shared unless you register with the service. For the interested readers here: To use the advanced tools use the "Annotate (flash)" button. In the interactive version they have tools in there for a real time analysis by dragging along the trading line -- (Horizontal Line tool, Fibonacci fans, Raff Regression and Auto Support Resistance Tools). Very cool stuff over there -- for free… have fun, - beme.
Toggle Commented Feb 26, 2012 on AND THE ESSAY WINNERS ARE: at Phil Town
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Just a quick sidenote for all using only (almost) free tools. I just realized how cool one of the free charting websites is. The tools at stockcharts.com let you easily set up the slow stochastic and MACD settings phil is recommending. What I like most is the trading volume chart that is more explicit than the yahoo charts. And the best of all is that you can switch over to an interactive version that lets you draw lines into the chart to check for floors and ceilings. What would you want more… http://stockcharts.com/h-sc/ui?s=CLF&p=D&b=5&g=0&id=p33201807072 And as a sidenote: All settings you do will be stored in an id. In the case above it's p33201807072 for Cliffs. So we possibly could play around with the charts and exchange our best experiences. What I have not yet managed to display are the red and green zones I saw in phils town tools teasers. But as it looks, the payed subscription service lets you add more data to the charts and define filters on stocks being bullish or bearish based on crossings and other market data symptoms. Have to check that out in the upcoming weeks. have fun, - beme.
Toggle Commented Feb 26, 2012 on AND THE ESSAY WINNERS ARE: at Phil Town
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I too now read a bit about Cliffs and chromite. Some excerpts from wikipedia: "The two main products of chromite refining are ferrochromium and metallic chromium, for those products the ore smelter process differs considerably." The result is a very heat resistant metal that is being "used as refractory materials for linings for furnaces, kilns, incinerators and reactors." Especially Incineration with decent filtering of pollutants is something -- in my point of view -- our economy has no alternative to -- if recycling is no option. I interpret Cliffs efforts into the chromite project as an investment for a future of higher regulatory constraints.
Toggle Commented Feb 26, 2012 on AND THE ESSAY WINNERS ARE: at Phil Town
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Hi Mike, regarding the quote "Cliffs also manages mines for some steel companies" I checked the sources and have found that it came from the wikinvest article. It's in the Competition section. Looking into the history of the document, the section originally contained a table stating the percentage of managed and owned mines that was later removed. However after re-reading the wikinvest article from the beginning, the following quote now makes sense: "Initially, Cliffs Natural Resources mostly managed iron mines for integrated steel companies; however, the company has turned its focus focused on acquiring direct ownership of ironmines, functioning more as a direct merchant of the resource" And that is the answer. I now have corrected the quote in the GoogleDoc writeup. I think if Phil publishes the snapshot still containing it, it will do no harm. best - beme.
Toggle Commented Feb 26, 2012 on AND THE ESSAY WINNERS ARE: at Phil Town
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BeMe added a favorite at Phil Town
Feb 25, 2012
Hi Garret, MikeM and Joey2, I just played a bit with the numbers and did come up with this: One problem we have on calculating the value of a company is that the base numbers can have huge differences depending on the source you get them from. From the publicly available data at msn.com I collected the following: Analysts growth: 20% (being the more conservative that the BVPS growth rate) FuturePE: 13,8 (being the average of the high third of historical PEs) This leads to a 79% MOS which obviously is too optimistic. Taking a growth rate of 10% (the average analysts expectations MikeM came up with from invest-tools) and a futurePE of 16 which I find slightly too high, leads to a 57% MOS which is still great. Third, let's assume an only 8% growth with a more optimistic futurePE of 15,26 (which is still in the range of being realistic) I come up with a 46% MOS. All that done, Cliffs is currently trading near or below it's MOS. Assumed they have meaning to me, they are a great company and have a great management. So Cliffs is definitely worth a veeery close look. Mike and I already have prepared a Rule#1 evaluation document obtaining more detailed information on them, though Mike -- chapeau -- your research is brilliant. Mike: should we close the document and submit what we have to Phil for that he can give his further guidance on this!? What about Cliffs being a cheap buy-out candidate for the big three RIO, Vale and BHP. Isn't that something we should consider as a very positive sign? best - beme.
Toggle Commented Feb 25, 2012 on AND THE ESSAY WINNERS ARE: at Phil Town
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