Fundamental Value Buys - add yours

Despite the market lifting off its lows there is still a lot of cheap stocks out there. What value buys are you looking at now, and what is the P/E?

Spark Infrastructure - SKI - 4.61
Forge Group - FGE - 6.71
Nexbis - NBS - 3.26
Netcomm - NTC - 6.95
Nomad Group - NOD - 6.14 (excluding impairment)
Pan Pacific Petroleum - PPP - 6.07
Jumbuck - JMB - 4.54

Re: Value Buys - add yours

One of my good performers at present is OKN.

Re: Value Buys - add yours

This thread is starting to look like turning into a rampfest as these threads invariably do. If it continues down this path it will be closed.

As the original poster indicated, please post the P/E and ideally a short statement detailing why you believe a particular company represents "value".

I think it is also prudent to disclose whether or not you hold the stock.

Re: Value Buys - add yours

Joe Blow said:

This thread is starting to look like turning into a rampfest as these threads invariably do. If it continues down this path it will be closed.

As the original poster indicated, please post the P/E and ideally a short statement detailing why you believe a particular company represents "value".

I think it is also prudent to disclose whether or not you hold the stock.

Click to expand...

Re my earlier post on OKN, I don't know the PE because I don't use the PE as a decider of whether to buy the stock.
It's up over 100% since I bought it in June. If the trend reverses, it will be sold.
So, at the risk of diverting the thread, I don't buy on the basis of 'value' depicted by the PE.
Others will undoubtedly disagree.

Re: Value Buys - add yours

Joe Blow said:

This thread is starting to look like turning into a rampfest as these threads invariably do. If it continues down this path it will be closed.

As the original poster indicated, please post the P/E and ideally a short statement detailing why you believe a particular company represents "value".

I think it is also prudent to disclose whether or not you hold the stock.

Click to expand...

Disclosure: I have holdings in SKI, FGE, NBS.

My intention in creating this thread was for people to share and discuss possible value buys (good value as judged by fundementals specifically). If future posts aren't on topic I'll be happy to see the thread closed.

Re: Value Buys - add yours

Interesting topic, we all love looking at stocks, however, you are both borderline ramping if the info is this thin and inaccurate, I would call a value "stock" something that has a PE less than 7 (maybe 9 or 10 for some debt free companies) and/or next years PE can be proven to be likely to fall below 7 due to real earnings, also it is nice to have a low debt in today's environment and be a bit inflation proof and/or deflation proof... phone, gas, electricity, roads, water... i.e. boring essential utilities can modify their prices to suit inflation because you need them. They are slightly regulated though.

SKI 45.00
FGE 7.50 (interesting)
NBS 3.00 rofl... http://www.theage.com.au/business/falling-down-on-the-town-20090909-fhoo.html
might be ok I suppose, I mean lots of us get pissed like that in Australia, counts as advertising in my books, you might want to read every report first for something like this though, maybe there is a reason for his being drunk.
NTC 6.5 (I hold this one, the only obvious risk is that Telstra has been unpredictable in the past, they also have to deal with constant change) recommended by the AFR twice this year as a bargain. Debt free, expanding to provide services with the hardware, going world wide, making lots of big friends, huge upside.
NOD 10.00 (interesting though)
PPP 6.25
JMB 4.50 (Jumbuck is interesting, but a previous director was very dumb and margin loaned all his shares and lost so an uncaring third party has the shares, also a director in the other company Q has a bad reputation... they just diluted the Q thing with a 2 for 3 offer right after it got a good writeup in the AFR, also I think they need to re-brand OZAtion.. it is a stupid name, if I was them I would use the Jumbuck domain for the auction site, way cooler). Q was recommended by the AFR this year as a bargain.

OKN has a PE of 25.25 (22 the other day I think), I did not read about it, I don't know how it could be value unless there is an announcement somewhere about more than tripling profit or something?

Re: Value Buys - add yours

As a practitioner of the value school of investing I have recently added more Forge Group (FGE) to my portfolio despite the incredible run it has had recently. At the present moment my screen is showing a PE of 7.55. This is obviously not the only reason I have purchased it.

The company has strong cash earnings, 34.3 cents per share. If you use the 08 capex of 9.2 cents per share (to be extra conservative because 2009 was only 2.4cps) the company has a free cash flow of 25.1 cents per share (accounting earnings are 20.5cps). Plug this in to a discounted cash flow formula assuming absolutely no future growth whatsoever and a discount rate of 12% and you get a value of $2.10. I know these numbers are ridiculously rough (especially my usage of capex figures) but they give an indication of approximately what region the companies intrinsic value lies is.

Other encouraging features of the company:

- Management has issued a revenue guidance of $200+ million for FY2010 - up from $169 million in FY2009. They will be providing further earnings guidance for 2010 at the AGM next month.
- Low debt.
- Has exposure to the Gorgon project (albeit small) but this could lead to other opportunities at the project and in other upcoming gas projects one would think.
- Announced yesterday that it would be recommencing work on Lynas Ltd projects that were suspended last year.

I think this is definitely a medium term hold and investors are looking for a distinct indication of a recovery in the economy before investing in a company that has exposure to a volatile and highly cyclical industry - mining construction. To me Forge represents a brilliant opportunity for a counter-cyclical play in a company with fundamentals that haven't changed at all throughout the GFC. Sit back and relax.

Re: Value Buys - add yours

BottomDraw said:

Interesting topic, we all love looking at stocks, however, you are both borderline ramping if the info is this thin and inaccurate,

Click to expand...

Joe has removed posts he considers ramping.

I would call a value "stock" something that has a PE less than 7 (maybe 9 or 10 for some debt free companies) and/or next years PE can be proven to be likely to fall below 7 due to real earnings, also it is nice to have a low debt in today's environment and be a bit inflation proof and/or deflation proof... phone, gas, electricity, roads, water... i.e. boring essential utilities can modify their prices to suit inflation because you need them. They are slightly regulated though.

Click to expand...

You're entitled to your view of what constitutes 'value'. To me it's a rising share price. It's a bit hard to make money if this isn't happening.
You can buy a stock with the greatest fundamentals ever and the lowest PE but if market sentiment doesn't agree that it's just the greatest, and the stock doesn't rise in price, you're not going to make money, are you!

OKN has a PE of 25.25 (22 the other day I think), I did not read about it, I don't know how it could be value unless there is an announcement somewhere about more than tripling profit or something?

Click to expand...

As I said earlier, I don't focus on the PE at all. You might like to read "Secrets for profiting in Bull and Bear Markets" by Stan Weinstein which will explain how to use price action/charts.

Re: Value Buys - add yours

"Stock is good value because it went up" is just spin and often touted as the worst mistake you can make. I never said your stock is good or not, I never looked at it properly but it is trading above any obvious value and you still provided no explanation for why that would inspire any detailed research.

Re: Value Buys - add yours

Ok i have re-opened this thread.

This is not a thread to debate TA vs FA.

This thread is for fundamentalists to discuss stocks they consider value. Each stock mentioned must contain the PE ratio, as requested by the OP. Other figures and reasoning would also help to provide a logical argument

Any posts not on topic or within the rules will be removed and infracted.

Re: Value Buys - add yours

BottomDraw said:

"Stock is good value because it went up" is just spin and often touted as the worst mistake you can make.

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Really? Just spin when it makes you money? Why?
And "touted as the worst mistake you can make"? By whom, and again, why?
Perhaps you could provide a link to this authority who deems a rising SP spin?

How is it a mistake to buy into a strong uptrend and stick with it until it changes?

Why is this not getting best value for your invested dollars?

I never said your stock is good or not, I never looked at it properly but it is trading above any obvious value

Click to expand...

Is it really? It's the market that determines what it sees as 'value',
not just some set of figures and a low PE.

If you wish to restrict the discussion to fundamentals of stocks, rather than "value", then the thread should be renamed, so that those of us who see value as a rising share price will not waste our time offering such a suggestion.

The practice of buying cause something is going up and selling just cause the price is going down has got nothing to do with investing

It is what star trader, George Soros calls 'reflexivity'.........a philosophy he attributes much of his trading success too

Only George acknowledges the practice to be just trading and openly concedes it has very little to do with 'investing' or value

I see that since I last posted the thread has been renamed Fundamental Value Buys.

I will happily withdraw and leave you to your very specific interpretation of what constitutes value. Good luck.

PE is pretty bad way to judge if a company is worth buying or offer good value..
actually PE is the last thing you should look it's a quick and dirty look but
this look can be dead deceiving.

I buy many companies that trades at high PE and
continue trade at high or higher PE after stock gone through the roof ..

I'm not talking spec mining stocks..these are solid Money cow companies
that keep increase stagering profit each year

here are some see if you can spot why they are the best and you can buy them
at the right price not because of the PE ratio

REH COH CSL NVT DMP

I'm not saying you jump in and buy now but when the price is right for you
I dont know what that is for you guys because everyone look at a business differently and comes up with a different price.

Why so much fail. It is not rocket science, list the PE's and why you think it is cheap fundamentally.

BottomDraw said:

Why so much fail. It is not rocket science, list the PE's and why you think it is cheap fundamentally.

Click to expand...

Exactly.

The OP has asked for PE's and fundamental reasons for 'value'. Perhaps he uses PE's as a starting point and investigates further.

Its not that hard people

ROE said:

PE is pretty bad way to judge if a company is worth buying or offer good value..
actually PE is the last thing you should look it's a quick and dirty look but
this look can be dead deceiving.

I buy many companies that trades at high PE and
continue trade at high or higher PE after stock gone through the roof ..

I'm not talking spec mining stocks..these are solid Money cow companies
that keep increase stagering profit each year

here are some see if you can spot why they are the best and you can buy them
at the right price not because of the PE ratio

REH COH CSL NVT DMP

I'm not saying you jump in and buy now but when the price is right for you
I dont know what that is for you guys because everyone look at a business differently and comes up with a different price.

Click to expand...

I will have a stab at your methodology, as I have recently been reviewing my own with a view to a long term core of value stocks.

Your signature gives the first clue.

1) High ROE
2) high return on capital
3) retain a high % of earnings
4) these figures should be over a reasonably long time if possible
5) any dividend preferably high % franked * ( note, I am in pension super phase, so I getting franking credits fully refunded)

most of the above stocks seem to meet the majority of these criteria

This narrows the search universe of stocks for the core of the portfolio.

I dont dismiss charts as a timing indicator to indicate buy or sell.

I also look at stocks that dont meet all these criteria, as you are most unlikely to get a 10 bagger in the short term.

Last purchase using the above criteria: CXP

present PE = 13.97
ROI since purchased +20%
XAO since purchased +6%

feedback from yourself ROE especially, or others, very welcome

awg said:

I will have a stab at your methodology, as I have recently been reviewing my own with a view to a long term core of value stocks.

Your signature gives the first clue.

1) High ROE
2) high return on capital
3) retain a high % of earnings
4) these figures should be over a reasonably long time if possible
5) any dividend preferably high % franked * ( note, I am in pension super phase, so I getting franking credits fully refunded)

most of the above stocks seem to meet the majority of these criteria

This narrows the search universe of stocks for the core of the portfolio.

I dont dismiss charts as a timing indicator to indicate buy or sell.

I also look at stocks that dont meet all these criteria, as you are most unlikely to get a 10 bagger in the short term.

Last purchase using the above criteria: CXP

present PE = 13.97
ROI since purchased +20%
XAO since purchased +6%

feedback from yourself ROE especially, or others, very welcome

Click to expand...

Many ways to skin a cat but those who understand Warren Language tend to skin the cat better

I got about 10 criteria after I understand the business...

if you work out 10 criteria including some of those mentioned

and apply these criteria to all the stocks you want to buy...

you be suprise not many companies made the grade ... buying is so easy when the price is right cos you dont have many to chose from

the one that dont made the grade, they may gain 100% here and there due to speculation but long term they probably go to corporate grave yard

you get rid of all the rubbish by a very simple elimination process.

It's not an idiot proof techniques but it's pretty good, you probably end up with a dud stock here and there due to laziness but the other will reward you far far more return than the dud stocks..

you easily outperform the market and the so called expert fund mangers by a mile.... you get lot of of capital growth and dividend growth you retire very rich on dividend income

I aint reaching retirement age, still in my prime and stock dividend fund my life style now and well into my retirement.

you should listen carefully to Warren Buffett speech and his annual report letter to shareholders try to deciper what he's trying to tell you..he provides the best advices money can buy and it's FREE.... once you understand Warren Language you straight away know a good company from a dud.

you should be patient and have a long term view and not tempted to trade because it's gone up 30% or cut your lost because it gone down 50% since you bought them.....maybe thinking of top it up rather cut your loss
rememeber company that made the 10 criteria grade RARELY or never go bankrupt so why not buy more when they are cheap.

I havent trade a stock for 12 months but I bought 8 times, some top up of existing one cos I get more for less, maybe I lie I may have sold one or two but I rarely sell on a regular basis and it's not my thing to buy and sell all the time..

some stocks now sitting at 100% gain not one but a few, since last year but still not tempted to trade.
cos it's still a good company and that 100% gain could be 400% gain in the future or more.. and as long as the dividend and earning grow with the stock, no reason to sell..

Only sell when you beleive it truely over value and you can find better value in another stock else sit back and eat frank dividend nothing better than that.....

and be true to yourself, dont be affaird to buy big when other jumpship if you believed you done your home work and you know it better than Reg Kermode for Cabcharge and Graham Turner for Flight Centre. (disclosure I own both stocks)

this will yield you crazy return when good company dump at bankruptcy price

That is how I view fundamental investing, there are more to it than just PE.
PE may get you some cheap stocks but Patient, independent thinker and buy wonderful company at the right price is the formular you need to build wealth.

and Warren is Absolutely right when he said

"You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ."

That's great and all, but nobody here is claiming anything is magic about PE or any other statistic. So you are sort of talking to your own assumptions and it is not even very coherent.

Interesting quote although, I think Warren is playing semantics because I believe someone with 130 IQ is going to outperform someone with an IQ of 115 on average. You don't need to be a genius but 130 is fairly smart.

Ozymandias said:

Despite the market lifting off its lows there is still a lot of cheap stocks out there. What value buys are you looking at now, and what is the P/E?

Spark Infrastructure - SKI - 4.61
Forge Group - FGE - 6.71
Nexbis - NBS - 3.26
Netcomm - NTC - 6.95
Nomad Group - NOD - 6.14 (excluding impairment)
Pan Pacific Petroleum - PPP - 6.07
Jumbuck - JMB - 4.54

Click to expand...

YES- I have been monitoring these exact same value based trades in one of my stock watch lists plus a few others. Please add the following to look over for the VERY FEW value based trades left as the market has been rising. I have not included the stocks that are not absolutely impaired with debt like BBP, Centro, etc.

There is usually always a reason why these shares are currently unloved. My view is that some Directors are clearly not good communicators and this appears very suspicious to us shareholders. For those poor Directors\Management we must make a major discount due to their lack of communication and discloser. Whether due to laziness, lack of ability or other reasons we must always discount 'fair value' for poor Management.

Others recommended:

Recommended as strong buys from various value based brokers...

GRR P/E= 2.38 Grange Resources Limited
NBS P/E= 2.52 Nexbis Limited
SRL P/E= 3.73 Straits Resources Limited
GCG P/E= 4.44 Greencap Limited
MIG P/E= 4.60 Macquarie Infrastructure Group

I must add with NBS that the P/E has trailed down below 3 in the last few days. As I posted on the NBS thread the main issue with this company is the NBS CFO's lack of discloser in relation to it's current cash position.

Something definately smells with this stock. Maybe to the advantage of those whom are quick. The CFO answered a query from ASX in relation to a large price drop and stated the following on the 2nd of Oct 2009 (Have a look a the last point listed- admits to non discloser of cash position then same Director buys up a large stake on the day of the drop that he created).


Australian Stock Exchange
20 Bridge Street
SYDNEY, NSW 2000
By Email
RE: PRICE QUERY
We refer to your inquiry in relation to a decrease in the Company’s share price high of $0.46 on Wednesday, 30 September 2009 to a low of $0.335 today and an increase in volume of trading in the securities over the same period.
1. The company is not aware of any information concerning it, that has not been announced and which, if known, may reasonably be regarded as an explanation for recent trading in the Company’s securities.
2. Not applicable
3. Although the Company has made no specific enquires to ascertain the reasons for today’s price change, there may be several reasons for the change:
• The Company released its statutory accounts to the market today and there may have been some expectations from shareholders that the split of revenue received by country for the Company would have been higher in Malaysia than that of its revenue in China. The ramp up on the Malaysian project has been slower than expected but the Company was able to offset this through its Chinese contracts;
• The statutory accounts also showed an amortisation charge of $3.77 million for a three month period. Some shareholders may consider an annualised figure of $15 million to be higher than expected although this is a non-cash expense; and
• The market may have been expecting a further update on the current cash position of the business, of which the Company did not provide in addition to the statutory accounts. The Company made an announcement of the first receipt of cash for the sale of its Nexcode product on 15 June 2009 and the Company stated at that time it would not be providing cash updates on a regular basis in the future. The Company is maintaining this position.
Nexbis Limited ABN: 81 071 275 253


The above points to a non discloser due to one of the following;

1) Management cannot be bothered...and\or
2) Directors can buy at a discount in the short term...and\or
3) They are hiding defaults impairments...and\or
4) Who knows???

As the Directors have made major purchases on-market I am gathering that their cash position will prove to be VERY strong. And they will release this information to the market when they are good and ready. Arrogance and non discloser is not a vitue in relation to a publically listed company. I am hoping ASX will deal swiftly with non discloser practises of this company very soon.