The Current Market Conditions
Anybody got any truly deep value picks at the moment?
The Current Market Conditions
I'm looking at:
Electricite de France
All below book...
SHOS is a net net
OSG is well below book generating good free cash flow.
I like the look of that EDF other then that debt ratio. CCJ looks passable as well. I'll give them more of a look tomorrow.
I have one very solid value stock trading at half its book value. It's non you mention but take a look at CIBT Education. It trades as MBAIF in the US and is a Canadian student housing REIT and education company that owns multiple universities in Canada, as well as a few other education related assets.
On a recent trip to Canada, it was hard to not notice the burgeoning foreign student population (particularly of Chinese origen) and a generally vibrant and welcoming immigration climate unlike the climate currently in the US. When researching further into the education market, it became clear that CIBT education is perfectly positioned for growth backed up by actual earnings.
The Net Current Asset Value per share, or the fair value that the company should receive if it was to be liquidated today, is hovering at .71 - .79 cents per share, compared to the stock which is currently trading at .47 cents per share indicating that this stock is a great bargain!
The trailing PE value is just under 5 compared to the PE value of comparable student housing stocks like ACC (PE of 64) or EDR (PE of 139). ACC and EDR are US student housing companies, and the only comparable companies that we can use to compare to MBAIF, because there are no comparative publicly traded student housing stocks in Canada. This is important to note because this shows MBAIF won't be facing much competition as it scales. There are private student housing companies in Canada but not publicly trades ones, only MBAIF.
CIBT Education debt is high, but that's typical of a REIT, and their debt is in line with ACC, its comparable competitor in the US. Compared to other industries, their debt would be high, but for the student housing sector, it's in line with its very profitable US counterpart, ACC and also in line to other REITs. REITs are just fundamentally debt heavy.
History and Company Growth
There is tons of room for growth with this company over the next 5 years because they plan to add $1 billion in assets by 2020 with 9 new housing properties whereas they currently have only about $150M in assets. They plan to take 10-30% equity in each of their projects and also have 20 year management rights on each one solidifying a constant stream of income. If they grow to 5k beds at current rental rates of about $12k per year for a studio, that's $60M a year under management, and that's just their student housing sector under management, not including their other income streams from their education assets and also appreciation of their real estate assets in the in demand Vancouver real estate market. To compare, their last quarterly reported revenue was about $30M, so tons of room for growth.
As a developer of student housing, they have a competitive advantage over their competitors (again none are public like MBAIF) because they have a unique system in place to funnel students from their universities and schools into their housing.
The vacancy rate in Vancouver is extremely low, at .5%, and rental rates are skyrocketing.
The US is no longer seen as a friendly place for immigration with the Trump administration's agenda on immigration. Just over the border in Canada, Justin Trudeau's administration is very welcoming to immigrants, making it a point of his administration to bring in more international students (state visits to China and the opening of 7 new visa offices in China), his administration reducing barriers to entry, and an agenda to make an easier pathway to citizenship. Canada has set a goal of an 88% increase in foreign students from 240k in 2012 to 450k in 2022. As Canada is opening its arms, the US is going in the complete opposite direction. This is a good article about the US change in immigration policies and how Canada is treating immigration:
Vancouver is very accessible to Chinese as there are direct flights to Vancouver from China, and their is a huge Chinese population already in Vancouver.
Canada's defense minister is a Sikh with very deep Indian roots and an expanding great relationship with India, which is set to overtake China in population in a few years. As India grows and becomes wealthier, more of its students will seek higher education in places like Canada.
This is my analysis of the stock and for full disclosure I have invested in MBAIF, but you can also view a professional analyst's breakdown from Fundamental Research Group here:
Let me know what you think? Thanks!
Not sure how you calculated that NCAV on the most recent quarterly report has
Current assets - Total liabilities at
17..4- 77.8 = -60.4
So this wouldn't actually be a net net. Its liquidity in the current year is negative as well with a current ratio of .7.
I would say less then canada taking u.s students that what you said about india is correct. They are going to be growing economically for years to come. Many students at my school in the mba program are from India.
In other words, school has never been more important to societies, and the demand for school is yet to drop even with ridiculous price increases.
I think the price still looks cheap though. Also how do you say its trading at half its book value? Do you mean half its fair value that you estimated?
I think the price still looks cheap. I'll read the rest of your analysis report it looks well done. How did you find them?
edited March 2017
Thanks for looking into this analysis Tim and thanks for catching my mistake - I cant edit it at this point but I simply made the mistake of writing NCAV instead of NAV (net asset value). Your calculation of NCAV is correct, however, using the NCAV wouldn't be appropriate for an REIT like this bc it does not take into account the fixed /intangible assets (student housing buildings in this case), inherent to an REIT - that's why I went with NAV, aka Book Value.
I should be more clear when using those two terms, but I use book value and NAV (net asset value) interchangeably. So yes, I mean to say that the stock is currently trading at half its book value or NAV, and it shows a considerable bargain at the moment.
Regarding their working capital, your are correct it's negative at around .7 but I believe that should go away soon with forecasted growth and this negative can be rationalized bc of the intense investments they are currently making.
Re: finding them, it's a long story but I'll make it short. On a recent trip to Vancouver, it was obvious to me that Canada is now the
destination in North America for foreign students (particularly Chinese, Indians and Australians and I assume a much more diverse group of nationalities if I had more time to spend in Vancouver). I then researched "online education companies in Canada" and ultimately found CIBT. The information I found on them is presented above, the macro regarding Trump immigration policies is a catalyst to an already growing foreign student industry, and it's fundamentals backed up my iclination upon first visiting Vancouver, so I invested.
Ok, net asset value would be 30 cents a share so how is the stock at half book value?
Total assets (144M) - total liabilities ($77M) = NAV aka Book Value ($67M) divided by 71M outstanding shares is $.94 per share
How did you calculate it to get 30 cents?
Your right morning star had it at .31 so I didn't calculate it. When I did I got the same thing, It is $.94 as of the most recent. Also the research report has the price the book at 1.8? Market watch and Morningstar also have this or around 1.5. Would you know why that is?
I am not sure how those other sites calculate it but I am going off the most recent quarterly report from the CIBT website. I would need those other sites to break down their calculations. I do know that in the analysts report they are including the recently reported debt of KGIC schools so that adjusts the book value.
Also, I forgot (but I did this in this in my original analysis to this forum) to convert the .94 to American dollars. That then comes out to .69 (I had it at .71 a week ago). I think it has to be converted bc I think the market price of the stock at .47 is in American dollars - must have apples to apples comparison.
You are right, I should adjust my title "trading at half its book value" because it's not - I should have wrote a different title, as "trading at an amazing bargain". Bc no matter how you look at it, it's trading at a great bargain with strong catalysts.
I took at look at SHOS, and from my point of view it looks interesting. It trades way below NCAV, and Eddie Lampert (apperently an activist investor) has bought a lot on the way down and owns more than 50% of the company. Last purchase was in December.
However, is it a Net-net? From what I can tell the NNWC is about .86 cents, and it trades at 3.4$. However, maybe the 0.5*inventory is too low for a store?
CIBT is up 8% today due to a successful acquisition adding nearly $25M of revenue to their portfolio on a $12M purchase. This catalyst is small potatoes compared to the value this company is adding due to the development of their student housing portfolio as I mentioned in the above analysis.
This company trades as MBAIF in the US and will mirror its Canadian security MBA.TO's 8% pop. Time to buy, MBAIF if you are in US or MBA.TO if you are in Canada.
edited March 2017
A net-net is trading below (current assets-liabilities) ... so yes.
PetroChina Co Ltd ADR
CNOOC Ltd ADR
I know oil prices are low, but what are your thoughts?
In addition to looking for a great deep value, MBAIF is a great hedge against the speculative US stock market as we saw today with the DOW dropping more than 200, and MBAIF being less affected than the DOW overall. As we saw today, and likely more over the next months, The market can quickly turn for the worse if Trump's policies aren't getting implemented. And if the political wrangling in DC is any indication of how it will be over the next months, than Trumps big stimulus agenda of cutting taxes and infrastructure spending, are going to be pushed back for a while. Therefore MBAIF represents a great hedge bc the more chaotic and unwelcoming toward immigrants the US appears to be, then the more foreign students will be attracted to Canada for higher education.
In summary, use MBAIF as a hedge as well as a great net-net deep value play.
Just came across this thread and feel that a couple of risks with this stock were missed. I haven't looked at this company at all but if they are a student housing REIT in Vancouver be cautious, you are right that the real estate market in Van. is in demand, as a result, real estate prices are really inflated, so much so that the government has changed it's taxation laws on foreign owned real estate in Canada in attempt to cool the market. If this REIT is looking to aggressively acquire property, they are doing so at a premium and that's dangerous if it's all leveraged. Second, I wouldn't play this as a hedge against us stocks. Depending on the catalyst that drives down the price of U.S. Equities, Canada's economy will go down with it. Canada is very dependant on the US economy, and mimics us markets. Canada didn't have a sub prime mortgage crisis in 2008, our banks were sheltered from such practices because our lending laws were tighter, but banks in Canada still tightened up on lending, house prices still dropped. If the US equity market takes a hit, Canadian equities will too, and the first thing to cool will be our hot housing markets in TO and Van. Could leave MBAIF with debt servicing and debt covenant issues.
I'll take your risks in to mind. But yesterday when the DOW dropped nearly 1%, MBAIF beat the market by half, dropping only .04%. I do agree with you though, the Canadian and US markets are linked. But what I was really expressing as a hedge was that the more chaotic and unwelcoming the US continues to appear then the more foreign students will be attracted to Canada for higher education. So the hedge is 1) Canadian stocks will plummet less than US stocks and 2) the more unwelcoming Trumps policies appear to immigrants the more Canada student housing stocks will benefit.
Decent stock screener, type in Price/NCAV and the country you desire, I've found a few prospects using the screener, not the best quality platform but does the job.
My comment regarding the general question of value picks right now:
No, I don't think there are any. The market has never before been more broadly overvalued than today - meaning that everything is expensive.
While the Dot-com bubble had even more obscene valuations for a limited number of stocks, the bottom 80% were reasonably priced. Also bonds were fine.
But today everything is in a bubble- exciting stocks (think Tesla, Amazon, Netflix) as well as boring stocks (e.g. retail, utilities).
The bond bubble is just as crazy - no matter, if you look at government bonds, corporate bonds, high-yield, low-yield, etc.
In the last few years I have been quite heavily and successfully investing in many stocks. I made a lot of money.
But now I am just waiting. Holding cash. Yes, this is very boring and requires much patience.
Still, I am convinced that it is the right strategy. The market will significantly retreat in the next few years (think in the order of 50%) and then the time of us - true value investors - will come again.
Right now, this is not the time to invest.
Even WB had a time during his career, when he stopped investing - according to his own words, he did not understand the market at that time. I feel exactly the same right now. But better times will arrive. Count on it.
edited May 2017
Hi kavanaught6, SHOS is a net net unless you adjust for their operating lease commitments. This is something to consider as SHOS is impacted by the larger Sears group going down.
Hi Christoph, if you look beyond the US or even go into microcap territory there is still value to be found. Japan still has a few net nets with decent past earnings and who knows if/when their much prophesied macro economic meltdown will transpire - safety can still be mustered be buying securities cheaply enough relative to their fundamentals.
Buffett also said that if he were running "small sums" that he'd be fully invested. In addition, the research from Tweedy Browne ("What has worked in investing") shows that being fully invested is the best course of action in terms of return maximization.
What do you guys think of Greenbrier or Trinity as reasonable value picks?
Trinity seems cheaper but Greenbrier seems to have better operational efficiency and management. Trinity may be in more types of products and more US oriented market where as Greenbrier is also doing lots of operating in place like South America and Europe.
I would like to get exposure to Gold but I am not sure what the best way is. Maybe 2-5% position. I guess an etf but some gold companies show up in my screener. Centerra right now and previously Caledonia for a long time as well as one other I can't remember. The ones that do show up tend to have some geopolitical risk compared to your standard gold producers.
Also what does everyone think about Bond Index ETF's as a long term hold for a debt portion of a portfolio? I have guaranteed investment certificates coming up in a couple months.
I know the short term Bond index ETF's are much less affected by interest rate movement but if you get a very low mer aggregate index and plan to hold it as a 10-20 percent position would one be enough. In Canada I got VAB for the wife and I am looking at TDB for myself, very similar but slightly more corporate debt and slightly shorter average duration in the latter. Both mostly government issue.
I know it is better to be globally diversified even for debt however I feel like my local economy is better regulated and easier to understand. I feel I get enough international exposure through some of my larger cap equities. I looked at some US bond index and it's top holdings were all mortgage securities. If interest rates are able to come up around the world or at least the US again it may present a pullback and decent opportunity to move into a bond index position.
It seems like we are due for a bit of global credit contraction. I try to focus on the micro but always have the macro in the back of the mind.
This article touches on both your opinions Christoph and Gman.
Kind of interesting as it agrees with both your positions.
Also interesting enough is there is mention of Taiwanese semiconductor companies as possible international value.
I like TSM right now but think it is a slightly over priced as a value investor. It seems to move sideways for a year or two and then move up for a year or two. Although it and the semiconductor market seem to beat the S&P nicely over the last 10-15 years. I would say semiconductors will continue to beat the benchmark for the next 10. I am not sure what other Taiwanese semiconductor companies there are.
Semiconductors are a big part of the future and TSM is exposure to China, Taiwan, Japan, Apple(although I heard they will start to produce some of their own semiconductors), Qualcomm and many other computer companies.
Hoping to revive this thread.
I also looked at Electricite de France (ECIFF) back in March. An obscure pick, surprised to see it here. I found it on the Financial Crisis Observatory monthly report listed as a Contrarian Buy. If you aren't familiar with this resource, I highly recommend you explore the website and the monthly reports. Unfortunately, I didn't purchase ECIFF, as it has seen a very nice bounce since then.
Personally I find KR very compelling right now and took a small position. Certainly not deep value, but definitely a value pick in this market. People seem to have really strong opinions about this one since AMZN is involved. Personally, I see no connection between AMZN acquiring WFM and the near-to-mid term success of KR. Thoughts?
Def looking into buying MBAIF.
With the current stock price at only $.54, MBAIF is trading at 66% of its 2017 NAV of $.82. Value investing generally accepts that investors will benefit greatly if they invest in companies where the stock prices are no more than 67% of their NAV per share. A study done by the State University of New York to price the effectiveness of this strategy showed that from the period of 1970 to 1983 an investor could have earned an average return of 29.4% by purchasing stocks that were trading at no more than 67% of the NAV and holding them for one year - CIBT is at 66% right now.
It's not as small cap as you think as it has at least $202M in assets at the moment event tho it's stock price is $.54.
This company is a bellwether for value investors with a lot of upside, and low downside.
Here's my analysis.
https://www.dropbox.com/s/15rcfdyc0i8ugh7/CIBT Education (MBAIF).pdf?dl=0
Here's a third party analysis.
Any comments or thoughts that the forum might have on these analyses would be greatly appreciated. Thanks!
What do folks here know about ICAGY? I have it on my watch list from early February but I forgot to write down where I found it. It's trailing PE is 3.2 and it seems to be well positioned in the airline industry. The market clearly likes it. Looks like a value pick on a steady uptrend, which is a solid combination. Reminds me a bit of AGO, which was highlighted by Carlisle recently on TIP.
A word of warning regarding MBAIF, the Vancouver real estate market is highly overvalued right now and Professor Steve Keen has highlighted Canada as a country highly likely to experience a recession based upon the level of private debt relative to GDP and the rate of growth in that level of private debt. Be extremely cautious here!
ICAGY looks to be carrying a lot of debt, have you dug into this Guy?
thank you you for the heads up on Steve Keen, can you point me to the article or paper he used to discuss the Vancouver real estate market? thanks!
I recommend watching this video featuring Prof. Keen;
The above short video is taken from this lecture;
If you watch some of his extended lectures found on Youtube you can see further explanation of his analysis.
As a note of interest, Prof. Keen was one of a few who predicted the 2007-2008 financial crisis based upon his study of private debt.
I will check it out, thx!
edited September 2017
My picks seem to have done fairly well, Nigeria is starting to show signs of life and has gained about 30% still very cheap though.
Cameco, still bumbling along but the Kazakhs have cut production and Uranium price has to go up eventually.
EDF is actually making a bit of money, biggest nuclear fleet in the world for less than 50% book. Will go up I think when gas etc goes up. Amazing assets You could probably be diluted by the French government quite a few times before you suffer any real pain regarding your margin of safety.
Gazprom is still amazingly cheap. Cheaper than a loss making taxi app. People say they don't invest in Russia but at this price everything is priced in I feel. Huge cashflow and state backed monopoly.
Anyone else been looking at Ensco plc...
another dirt cheap valuation and so confident they are trying to acquire Atwood Oceanics at the bottom of the cycle..
nice little presentation here:
these drillers make huge profits in an up cycle and get crushed in a situation like now, but I see the sea drilling scrapping count is up and the industry seems to be consolidating.