ASX List: Value & Quality Breakdown Comparison

[Macros]

Composition:
Company size > $100m
Currently earnings positive
Does not have problems with data metrics or forecasts (about 5 stocks removed)

The rating is based on a combination of value and quality. Quality is determined quantitatively based on factors such as:

• Profitability
• Outlook
• Growth of company value
• Liquidity
• Debt levels
• Share holder dilution
• Free cash flow

This list does not take in to account individual company risks, qualitative factors, macro or company specific trends.

Right now, there are many companies which have a good combination of value and quality, whilst also paying a solid dividend yield. It is surprising how few are substantially over-priced. This fits within my theme that the markets should enjoy solid returns in 2012 - at least in the first half.

I may track 6 and 12 month performance figures to compare with this data series.

Stand-out companies:

Mt Gibson Iron
Silver Lake Resources
Troy Resources
Medusa Mining
Maca
Mastermyne Group
Decmil Group
Seek
Cash Converters
Computershare
K2 Asset Management
Seymour Whyte
Cabcharge Australia
Industrea
Sirtex Medical
Global Construction Services
McPherson's
Corporate Travel Management
Flight Centre
Reject Shop
Kathmandu Holdings
NRW Holdings
M2 Telecommunications Group
Automotive Holdings Group
Oakton
Mineral Resources
Rio Tinto
ASG Group
QBE Insurance Group
Slater & Gordon
Fantastic Holdings
TPG Telecom
Imdex
iiNET
BHP Billiton
Reece Australia
Woolworths
Breville Group
Iress Market Technology
DWS
Credit Corp Group
STW Communications Group
Gerard Lighting Group
GR Engineering Services
Sedgman
David Jones
Myer Holdings
Orica
Austin Engineering
Retail Food Group
Codan
GUD Holdings
SMS Management and Technology

 

[robusta]

Interesting list, looks a lot like my watch list (except for the materials sector), strange how we use different search criteria but come up with a lot of the same companies.

You have come up with a few I am not familiar with however, time for some research - thankyou

 

[Macros]

Interesting list, looks a lot like my watch list (except for the materials sector), strange how we use different search criteria but come up with a lot of the same companies.

You have come up with a few I am not familiar with however, time for some research - thankyou

There really aren't that many companies.

It is a static view, but useful for filtering purposes and to more easily pick companies to look in to further. I felt like I needed a wider view of things.

Good luck on your research!

 

[odds-on]

Top work Macros. Thank you for posting.

1. Do you have the data to show which companies on the list were trading at a premium but are no longer?
2. Would you be able to reduce the list using your screening tools to just 12 companies that are the best value? I would like to do an experiment and create a dummy portfolio for the year. 12 equal holdings with a stop loss at 15% and see how it performs against my supposedly smart picks.

Cheers

Oddson

 

[Macros]

Top work Macros. Thank you for posting.

1. Do you have the data to show which companies on the list were trading at a premium but are no longer?
2. Would you be able to reduce the list using your screening tools to just 12 companies that are the best value? I would like to do an experiment and create a dummy portfolio for the year. 12 equal holdings with a stop loss at 15% and see how it performs against my supposedly smart picks.

Cheers

Oddson

Yes and Yes - I like my data.

Was already intending to create a couple of theoretical portfolios based on specific criteria. I'll post more info when available.

 

[odds-on]

Yes and Yes - I like my data.

Was already intending to create a couple of theoretical portfolios based on specific criteria. I'll post more info when available.

I look forward to the post. Just for entertainment i will create a dummy portfolio using a few screening criteria.

Cheers

Oddson.

 

[So_Cynical]

Composition:
Company size > $100m
Currently earnings positive
Does not have problems with data metrics or forecasts (about 5 stocks removed)

The rating is based on a combination of value and quality. Quality is determined quantitatively based on factors such as:


This list does not take in to account individual company risks, qualitative factors, macro or company specific trends.



Stand-out companies:

Mt Gibson Iron
Silver Lake Resources
Troy Resources
Medusa Mining
Maca

Interesting list and as a starting point for more research fine.

Troy Resources a stand-out? i held Troy for years and only recently sold out, they didn't pay a dividend for over 12 months and have only recently started again, risk will increase with under ground operations due to begin soon in Brazil, and the SP is totally dependant on POG sentiment...and the SP is and has been trading at an all time high for the last 6 or so months.

What's the Margin of safety based on?

 

[Macros]

Interesting list and as a starting point for more research fine.

Troy Resources a stand-out? i held Troy for years and only recently sold out, they didn't pay a dividend for over 12 months and have only recently started again, risk will increase with under ground operations due to begin soon in Brazil, and the SP is totally dependant on POG sentiment...and the SP is and has been trading at an all time high for the last 6 or so months.

What's the Margin of safety based on?

Yes, obviously it is difficult to include enough information in one image to make an informed decision on a particular company, but rather the intention is to have ready access to data to pick up on new ideas, put some things in perspective - and to help with portfolio allocation.

All stocks are based on my quantitative metrics and not subject to my personal influence - albeit a marginal input through lower or higher risk ratings, which are mostly tailored toward what the market thinks.

With regards to Troy:
- Casposo now online with around 7,000oz /m at $100 cash cost net of silver credits
- Andorinhas production at 50k oz pa at $500 cash cost
- Moving towards higher grades and increasing resources
- Consensus forecasts of forward earnings of $1 per share, or net profit of around $92m (currently trading at $4.26).
- At $1600 gold, forward earnings estimates seem more than reasonable to me. Also appears to be a buffer for any unexpected events impacting on net earnings.
- Very low debt, strong ROE, growing revenue per share at growing margins, low shareholder dilution over recent years, stable cash position and good cash flow.
- POG sentiment? Of course - it is a gold mining company. You don't invest in them if you are negative on the price. However the bull market is still on and if you look at the ECB balance sheet expansion the POG is likely to be stable if not much stronger from here.

Margin of safety is based on the differential between the current price and an an indicative value placed on Troy meeting its earnings expectations.

Troy is a smaller position in my portfolio and my only hesitation is the potential geopolitical risk in Argentina.

 

[So_Cynical]

Yes, obviously it is difficult to include enough information in one image to make an informed decision on a particular company, but rather the intention is to have ready access to data to pick up on new ideas, put some things in perspective - and to help with portfolio allocation.

All stocks are based on my quantitative metrics and not subject to my personal influence - albeit a marginal input through lower or higher risk ratings, which are mostly tailored toward what the market thinks.

With regards to Troy:
- Casposo now online with around 7,000oz /m at $100 cash cost net of silver credits
- Andorinhas production at 50k oz pa at $500 cash cost
- Moving towards higher grades and increasing resources
- Consensus forecasts of forward earnings of $1 per share, or net profit of around $92m (currently trading at $4.26).
- At $1600 gold, forward earnings estimates seem more than reasonable to me. Also appears to be a buffer for any unexpected events impacting on net earnings.
- Very low debt, strong ROE, growing revenue per share at growing margins, low shareholder dilution over recent years, stable cash position and good cash flow.
- POG sentiment? Of course - it is a gold mining company. You don't invest in them if you are negative on the price. However the bull market is still on and if you look at the ECB balance sheet expansion the POG is likely to be stable if not much stronger from here.

Margin of safety is based on the differential between the current price and an an indicative value placed on Troy meeting its earnings expectations.

^ All good points and all true....the last time i brought TRY shares was in the cap raising to help pay for Casposo, issued at $2 per share, the most i ever paid was $2.46 about 3 and a half years ago.

Your ratings seem to be reflecting what's happened and not what will happen...the top ten (bottom of the list) are all miners and energy stocks 8 years into the mining and energy boom.

 

[Macros]

^ All good points and all true....the last time i brought TRY shares was in the cap raising to help pay for Casposo, issued at $2 per share, the most i ever paid was $2.46 about 3 and a half years ago.

Your ratings seem to be reflecting what's happened and not what will happen...the top ten (bottom of the list) are all miners and energy stocks 8 years into the mining and energy boom.

That is a fair point, and whilst possible, I don't agree.

Gold stocks have been terribly under-priced by the market and are yet to reflect their earnings capacity.

Mt Gibson has almost halved in price over the last year, yet is in substantially better financial shape with better macro conditions.

My view of the markets is that they are constantly forward looking. Therefore what appears to be good value now, may not be so in the future. The companies at the bottom of the list represent the greatest margin of safety based on expectations of the future - which means that they are also likely to be volatile as the future meets current expectations.

My macro view is that we are potentially entering in a global bull market (based on the indicators I use). Obviously locally we have recession risk, but we are heavily reliant on overseas trends. This is my outlook for the next six months and it may falter - so it is subject to constant review. The companies at the bottom of the list look as though they could do well in such an environment - and that is forward looking.

In either case, there appears to be much value to be had in an environment which is becoming increasingly positive (for now).

 

[Macros]

I've put together four theoretical portfolios based on the data from the list.

I already have the 'infrastructure' in place to track them so it wasn't much of an effort.

They include:

• Larger cap balance of MOS/Quality & dividend > 2%
• Quality & dividend > 3%
• Highest Quality & MOS >0
• Highest Rating - combined MOS & Quality

This is a theoretical exercise - do your own research.

Happy to have suggestions for adjustments, the lists pretty much made themselves so there could be some debate.


First Portfolio: Larger cap balance of MOS/Quality & dividend > 2%

 

[Macros]

Second portfolio: Larger Cap Quality & dividend > 3%

 

[Gringotts Bank]

Very professional looking work macro, thanks. Is this your own software?

 

[McLovin]

Hmm...QBE has a way to fall before it gets to 12% div yield after last week's announcement.

I'd be pretty wary of CRZ and WTF. Both seem to have a few headwinds at the moment. How did you get a 39% MoS for JBH?

I agree with So_cynical, there does seem to be a lot of rear view mirror watching. Nice presentation though.

 

[robusta]

Hmm...QBE has a way to fall before it gets to 12% div yield after last week's announcement.

True - or maybe the dividend will rise in the future

 

[McLovin]

True - or maybe the dividend will rise in the future

According to macros' table, the current dy is 12% which implies a dividend of ~$1.35. Even for FY12 that's a lot of blue sky.

I'm not trying to be deliberately critical of his analysis, just pointing out some inconsistencies.

 

[Macros]

Very professional looking work macro, thanks. Is this your own software?

Thanks It is all done in Excel.

 

[Macros]

Hmm...QBE has a way to fall before it gets to 12% div yield after last week's announcement.

I'd be pretty wary of CRZ and WTF. Both seem to have a few headwinds at the moment. How did you get a 39% MoS for JBH?

I agree with So_cynical, there does seem to be a lot of rear view mirror watching. Nice presentation though.

I have a limitation with regards to my data feeds before I blow up Excel. Therefore I did a data download, so you can blame Thomson Consensus Estimates and also the fact that it may have been the day that QBE hit the low and before dividend forecasts were reduced.

I agree that there could be some rear view mirror watching on the margin, but I think it will be okay in aggregate. This is an initial attempt and is restricted by technology somewhat - it is difficult to make a specific input impacting on a factor such as quality based on the future environment, but also not impossible. This is just a start and I'll be looking to improve it over time.

Earnings forecasts for JBH are still optimistic. If they hit them, they I have a value target of around $18. Whilst the retail sector isn't doing well (as expected), that is also a rear-view problem and it may be the case that much of the problems are now priced in; unless of course we have a continuing poor environment for some time.

 

[Macros]

According to macros' table, the current dy is 12% which implies a dividend of ~$1.35. Even for FY12 that's a lot of blue sky.

I'm not trying to be deliberately critical of his analysis, just pointing out some inconsistencies.

As explained in my last reply.

Also wanted to point out that this is a starting point. Given that I did this in less than a day, and the number of companies involved, it is unlikely to be perfect yet. However, I think it is useful and will probably persist and improve. I'll try to squeeze as much data in to make the values as informed as possible, but it is a case of working around the constraints and will take time.

 

[McLovin]

What sort of data feed are you using if you don't mind my asking?

Yahoo have an API for their finance data, iirc. I was tempted to do it but starting from scratch just seemed like a lot of work.