Dump it Here

[Skate]

This is interesting

ASX January jitters! Aussie investors' 2024 seasonal roadmap

Seasonal trends indicate January is usually a good month for the Australian stock market, but data suggests it usually underperforms after strong Decembers – like the one we experienced in 2023.

www.marketindex.com.au

Skate.

 

[Skate]

# Also - this is worthy of a listen

Buy Hold Sell: 6 stocks that could surprise in 2024 | Buy Hold Sell, by Livewire Markets

As we round out another year of Buy Hold Sell, we're taking the chains off. Normally, we try to keep things civil by putting a handful of stocks to our guests and asking for their analysis. Whilst guests don't always agree, at least they don't have to analyse each other's highest conviction...

buyholdsell.podbean.com

Skate.

 

[Skate]

Informative - a short 11-minute video
Sit back, relax and enjoy the most anticipated list of stocks for 2024.



# Edited Transcript below
Looking at the list below something might interest you.

#1. Nike Inc (NYSE: NKE)
Mary Manning: My #1 stock pick for 2024 is Nike. I like Nike for three main reasons. The first is Nike is just starting to be in an earnings upgrade cycle. It had a difficult two years with respect to COVID supply chain issues, and inventory build in the US, which led to discounting and margin compression, but now that is all in the rearview mirror and Nike is starting to be in a nice earnings upgrade cycle.

I also like Nike's valuation. It's trading at 28x PE versus a historical average of 33x, and it has mid-teens earnings growth going forward. So, the PEG ratio (price/earnings-to-growth) is very attractive.

Lastly, I like Nike because it's one of the best brands in the world. Some sportswear brands come and go, but Nike is here to stay. If you're thinking of buying a stock and buying Nike for 2024, just do it.

#2. Australian Clinical Labs (ASX: ACL)
Marc Whittaker: I think some great opportunities are emerging in the small-cap healthcare space. So in that context, I think Australian Clinical Labs is my #1 stock pick. It's the third-largest pathology player in the country. The key to success in pathology is just pushing volume through your fixed laboratory network.

So if you look at ACL, its top line is growing at 4-6%, that's not high growth, but when you think about the fixed cost base they're operating across, those volumes coming through will provide good operating leverage going forward. It has a very good management team. I'm really impressed with the way they've built that business over the last few years, and where they've taken it to be the #3 national player over time.

They have great prospects in terms of M&A and winning national contracts, which they haven't had before. It puts them in what I think is a pretty good competitive advantage compared to the likes of Sonic (ASX: SHL) and Healius (ASX: HLS).

And, of course, they've been topical in the press lately because they have proposed a merger with Healius. The industrial logic of a merger between those two is indisputable. It would be highly profitable for both sets of shareholders. And we're really encouraging both sets of management teams to have that conversation. And if that were to happen, that would be a tremendous outcome for us as ACL shareholders.

#3. ResMed (ASX: RMD)
Emma Fisher: I'd love to have some undiscovered gem for you. We've just done a podcast where I talked about this stock. It is a consensus view, I think, but there are no prizes for originality in funds management and I've just got to go with what our largest position is, which is ResMed.

2023 was the year that everyone decided that obesity was cured by these weight-loss drugs. And I think 2024 is the year that reality will hit - that they are not a panacea for weight loss and that they aren't a panacea for sleep apnea, which is what ResMed treats. So that's one that I think will have a very big 2024.

#4. Healius (ASX: HLS)
Dr. Philipp Hofflin: A little bit of soul-searching as to how to answer that one. And I thought I'd go down the controversial path, with a stock that's been in the headlines for the wrong reasons and has had a terrible run. Healius is a pathology and imaging business. And traditionally, this is a very good industry. It's very consolidated in Australia, the government provides your revenues. But everything's gone wrong. They lost control over their costs during COVID. They did some terrible M&A. They've got a cost blow-out. It got so bad they had to do a capital raising. But that's all behind us.

But there's an interesting question there. For some reason, we don't have as many GP visits in Australia as one would expect. So the question is, what's going on there? And it seems to be that the most likely reason is that it's because bulk billing rates have fallen. So why is that happening?

Well, for six years or so, the government rebates on Medicare for the GPs were lagging costs enormously. But the federal government, from November 1, has increased those by 30-50%. That probably means more GP visits again, and that probably generates pathology referrals. And it's really important for those businesses because most of their costs are fixed. The marginal test is almost all profit. So volumes are really important.

Now, it's a small company and it's a turnaround, so it's riskier than most. It's a small position for us, but it's high risk, high return. But it's worth thinking about because, fundamentally, it is in a very good industry overall.

#5. Metals X (ASX: MLX)
Joel Fleming: I am going to hedge my bets here, but base metals have had a really tough year. So we think tin, nickel, and copper all look really interesting to us at the moment. We see improving demand. We see issues on the supply side. So we'd highlight Metals X in the tin space, Lunnon Metals (ASX: LM8) in nickel, and AIC Mines (ASX: A1M) in copper as being really interesting ways to play that base metal recovery.

James Marlay: Well, that's three names. Appreciate the generosity at this time of year. It's a good time for giving. If I had to push you for one, which one would it be?

Joel Fleming: It's got to be Metals X. That's the standout.

#6. Star Entertainment Group (ASX: SGR)
Matthew Haupt: The #1 would be Star Group, so Star Casino, by the mere fact that it's fallen so much and it's been a terrible investment for us this year. But we look at the asset backing of the company now and we can get around 80 cents in pure asset backing through the hotels and their property. It's trading currently at 47 cents. So when you go through lists of no-brainer companies, Star, at this point, looks like an absolute no-brainer.

They do have AUSTRAC to clear (the fine), and also the dealing with Multiplex up in Queensland. But for us, that looks like an absolute standout. And if you value the operating business, you can get around $1.20 per share. So it looks like incredible value.

#7. Light & Wonder (ASX: LNW)
Chris Stott: We've gone with Light & Wonder. In the gaming space, Light & Wonder is the Aristocrat (ASX: ALL) of the next decade. Over the last 10 years, Aristocrat shareholders have had a great experience, and essentially when you look at Light & Wonder, they've picked off maybe 70 or 80 of the best people out of Aristocrat and put them into this business.

It's trading on a PE, a price-to-earnings ratio, of 15x, and is growing at north of 20%. So trading at a large discount to the overall segment and market with superior growth characteristics. Some of their key games are experiencing well above floor average market share. And when you look at the Australian market, Aristocrat represents about 70% of the overall floor market share. They're ripe for the picking in our view.

Some of the games that Light & Wonder have - Dragon Train, Monsters and Frankenstein - we think can take share. The early signs in Australia for some of those games are good, and they've got plenty of others in the bank that are going to launch over the next couple of years.

Then we haven't talked about the North American market yet. So as they launch those games in Australia, they can push them into the North American market, and we think that can significantly drive earnings growth over the medium-term. Finally, they've put out an earnings target of $1.4 billion of EBITDA for 2025. We think they'll beat that quite comfortably. And on current earnings run rates, we think that they will be way ahead of consensus in terms of what they can deliver.

#8. MongoDB (NASDAQ: MDB)
Francyne Mu: I think MongoDB is a great company to own. It can be volatile, but we think that the secular growth drivers underpinning that name will mean that it will be able to manage through that volatility.

Essentially, it provides database management for companies. And in a world where we're increasingly trying to draw upon that data where you've got different data types, MongoDB is well-placed to benefit from that over time.

#9. Nike Inc (NYSE: NKE)
Bob Desmond: Our #1 pick for 2024 is Nike because I think there's been a lot of transitory headwinds there. For example, margin pressure from freight, they've been discounting inventory, and China's been shut down. That's coming back online.

The valuation's very, very supportive. It's probably one of our best-value names at the moment, and we can see a clear catalyst. So that's probably our #1 pick for 2024.

#10. Ivanhoe Mines (TSE: IVN)
Daniel Sullivan: Given copper is the backbone of all this transitional activity, and even though it has probably held up a bit better than expected over this year, we'd still say copper's the thing that investors should get exposure to. And as I say, Ivanhoe's copper grade is around 5-6%, and most copper companies are 0.5-1%. They've got an exceptional advantage in that respect. They'll expand over the next few years to become the second biggest or the biggest copper company in the world. And that's all come from almost nothing 10 years ago.

It's a fantastic new venture. It's working really well. If you look at the pictures and see it, it looks just like other good mining jurisdictions, like Western Australia. So they've done a fantastic job bringing it on. And they also have additional optionality and projects in zinc and platinum.

So there are a lot of things there, and the founder is a deal-doer. So this has got a good setup to both grow, have the commodity work, have corporate action, and have new projects. There are lots of things layered into that, which we quite like in a stock.

#11. Sendas Distribuidora (NYSE: ASAI)
Vihari Ross: I'm going to give you a very different one here. I'm going to go Sendas Distribuidora. That's a Brazilian cash-and-carry business. Cash and carry is the most popular grocery format in Brazil. The reason the stock is cheap is that they've had their series of troubles. The first one was they've had food deflation. That doesn't help any grocer around the world. They've also had interest rates go from 2% to almost 14%, which obviously hit the consumer hard. They also bought these supermarkets just before those interest rates started climbing and took their debt level up.

Now, we're in this situation where that debt level has peaked. It's passed three times net debt to EBITDA. And when you look at these stores that they bought, they've closed them, they've refurbed them and they've converted them, and they're opening up at three times the level of sales than when they bought them. They're also now generating significant amounts of free cash for this business.

So you've got a company that's passed those troubles and you're going to be growing your operating profits at 20% per annum over the next three years, and stock's trading on a multiple of 14 times. So that's my pick for you today.

#12. Bell Financial Group (ASX: BFG)
Matthew Kidman: I'm going to stick with a financial stock. Earlier we talked about how markets can be up [in 2024], and I said small caps can be up even more. So what company is leveraged to a rising market? Almost like a second derivative. And I think one that could really do that is the Bell Financial Group, BFG, the big friendly giant. I think it can grow into a bigger company this year.

What everyone knows it for, the stockbroking and the corporate advice and the capital raisings, that's the leverage play that's been dead the last two years. That can spike earnings. Underneath that are a couple of quite nice businesses that don't get recognition. So the online platform, Bells Online, has been growing nicely, with steady earnings. They've also got a bunch of services, the main one being margin lending. Another part of the business that's been growing quite nicely, because of not much competition in that area.

So it has good underlying businesses, but you're going to get the real kick, the real leverage in the earnings when the market takes off. And I think that's one you can play, 50-60% this year, if it works.

James Marlay: It might put you in the top spot.

Matthew Kidman: You never know!

Skate.

 

[divs4ever]

Informative - a short 11-minute video
Sit back, relax and enjoy the most anticipated list of stocks for 2024.



# Edited Transcript below
Looking at the list below something might interest you.

#1. Nike Inc (NYSE: NKE)
Mary Manning: My #1 stock pick for 2024 is Nike. I like Nike for three main reasons. The first is Nike is just starting to be in an earnings upgrade cycle. It had a difficult two years with respect to COVID supply chain issues, and inventory build in the US, which led to discounting and margin compression, but now that is all in the rearview mirror and Nike is starting to be in a nice earnings upgrade cycle.

I also like Nike's valuation. It's trading at 28x PE versus a historical average of 33x, and it has mid-teens earnings growth going forward. So, the PEG ratio (price/earnings-to-growth) is very attractive.

Lastly, I like Nike because it's one of the best brands in the world. Some sportswear brands come and go, but Nike is here to stay. If you're thinking of buying a stock and buying Nike for 2024, just do it.

#2. Australian Clinical Labs (ASX: ACL)
Marc Whittaker: I think some great opportunities are emerging in the small-cap healthcare space. So in that context, I think Australian Clinical Labs is my #1 stock pick. It's the third-largest pathology player in the country. The key to success in pathology is just pushing volume through your fixed laboratory network.

So if you look at ACL, its top line is growing at 4-6%, that's not high growth, but when you think about the fixed cost base they're operating across, those volumes coming through will provide good operating leverage going forward. It has a very good management team. I'm really impressed with the way they've built that business over the last few years, and where they've taken it to be the #3 national player over time.

They have great prospects in terms of M&A and winning national contracts, which they haven't had before. It puts them in what I think is a pretty good competitive advantage compared to the likes of Sonic (ASX: SHL) and Healius (ASX: HLS).

And, of course, they've been topical in the press lately because they have proposed a merger with Healius. The industrial logic of a merger between those two is indisputable. It would be highly profitable for both sets of shareholders. And we're really encouraging both sets of management teams to have that conversation. And if that were to happen, that would be a tremendous outcome for us as ACL shareholders.

#3. ResMed (ASX: RMD)
Emma Fisher: I'd love to have some undiscovered gem for you. We've just done a podcast where I talked about this stock. It is a consensus view, I think, but there are no prizes for originality in funds management and I've just got to go with what our largest position is, which is ResMed.

2023 was the year that everyone decided that obesity was cured by these weight-loss drugs. And I think 2024 is the year that reality will hit - that they are not a panacea for weight loss and that they aren't a panacea for sleep apnea, which is what ResMed treats. So that's one that I think will have a very big 2024.

#4. Healius (ASX: HLS)
Dr. Philipp Hofflin: A little bit of soul-searching as to how to answer that one. And I thought I'd go down the controversial path, with a stock that's been in the headlines for the wrong reasons and has had a terrible run. Healius is a pathology and imaging business. And traditionally, this is a very good industry. It's very consolidated in Australia, the government provides your revenues. But everything's gone wrong. They lost control over their costs during COVID. They did some terrible M&A. They've got a cost blow-out. It got so bad they had to do a capital raising. But that's all behind us.

But there's an interesting question there. For some reason, we don't have as many GP visits in Australia as one would expect. So the question is, what's going on there? And it seems to be that the most likely reason is that it's because bulk billing rates have fallen. So why is that happening?

Well, for six years or so, the government rebates on Medicare for the GPs were lagging costs enormously. But the federal government, from November 1, has increased those by 30-50%. That probably means more GP visits again, and that probably generates pathology referrals. And it's really important for those businesses because most of their costs are fixed. The marginal test is almost all profit. So volumes are really important.

Now, it's a small company and it's a turnaround, so it's riskier than most. It's a small position for us, but it's high risk, high return. But it's worth thinking about because, fundamentally, it is in a very good industry overall.

#5. Metals X (ASX: MLX)
Joel Fleming: I am going to hedge my bets here, but base metals have had a really tough year. So we think tin, nickel, and copper all look really interesting to us at the moment. We see improving demand. We see issues on the supply side. So we'd highlight Metals X in the tin space, Lunnon Metals (ASX: LM8) in nickel, and AIC Mines (ASX: A1M) in copper as being really interesting ways to play that base metal recovery.

James Marlay: Well, that's three names. Appreciate the generosity at this time of year. It's a good time for giving. If I had to push you for one, which one would it be?

Joel Fleming: It's got to be Metals X. That's the standout.

#6. Star Entertainment Group (ASX: SGR)
Matthew Haupt: The #1 would be Star Group, so Star Casino, by the mere fact that it's fallen so much and it's been a terrible investment for us this year. But we look at the asset backing of the company now and we can get around 80 cents in pure asset backing through the hotels and their property. It's trading currently at 47 cents. So when you go through lists of no-brainer companies, Star, at this point, looks like an absolute no-brainer.

They do have AUSTRAC to clear (the fine), and also the dealing with Multiplex up in Queensland. But for us, that looks like an absolute standout. And if you value the operating business, you can get around $1.20 per share. So it looks like incredible value.

#7. Light & Wonder (ASX: LNW)
Chris Stott: We've gone with Light & Wonder. In the gaming space, Light & Wonder is the Aristocrat (ASX: ALL) of the next decade. Over the last 10 years, Aristocrat shareholders have had a great experience, and essentially when you look at Light & Wonder, they've picked off maybe 70 or 80 of the best people out of Aristocrat and put them into this business.

It's trading on a PE, a price-to-earnings ratio, of 15x, and is growing at north of 20%. So trading at a large discount to the overall segment and market with superior growth characteristics. Some of their key games are experiencing well above floor average market share. And when you look at the Australian market, Aristocrat represents about 70% of the overall floor market share. They're ripe for the picking in our view.

Some of the games that Light & Wonder have - Dragon Train, Monsters and Frankenstein - we think can take share. The early signs in Australia for some of those games are good, and they've got plenty of others in the bank that are going to launch over the next couple of years.

Then we haven't talked about the North American market yet. So as they launch those games in Australia, they can push them into the North American market, and we think that can significantly drive earnings growth over the medium-term. Finally, they've put out an earnings target of $1.4 billion of EBITDA for 2025. We think they'll beat that quite comfortably. And on current earnings run rates, we think that they will be way ahead of consensus in terms of what they can deliver.

#8. MongoDB (NASDAQ: MDB)
Francyne Mu: I think MongoDB is a great company to own. It can be volatile, but we think that the secular growth drivers underpinning that name will mean that it will be able to manage through that volatility.

Essentially, it provides database management for companies. And in a world where we're increasingly trying to draw upon that data where you've got different data types, MongoDB is well-placed to benefit from that over time.

#9. Nike Inc (NYSE: NKE)
Bob Desmond: Our #1 pick for 2024 is Nike because I think there's been a lot of transitory headwinds there. For example, margin pressure from freight, they've been discounting inventory, and China's been shut down. That's coming back online.

The valuation's very, very supportive. It's probably one of our best-value names at the moment, and we can see a clear catalyst. So that's probably our #1 pick for 2024.

#10. Ivanhoe Mines (TSE: IVN)
Daniel Sullivan: Given copper is the backbone of all this transitional activity, and even though it has probably held up a bit better than expected over this year, we'd still say copper's the thing that investors should get exposure to. And as I say, Ivanhoe's copper grade is around 5-6%, and most copper companies are 0.5-1%. They've got an exceptional advantage in that respect. They'll expand over the next few years to become the second biggest or the biggest copper company in the world. And that's all come from almost nothing 10 years ago.

It's a fantastic new venture. It's working really well. If you look at the pictures and see it, it looks just like other good mining jurisdictions, like Western Australia. So they've done a fantastic job bringing it on. And they also have additional optionality and projects in zinc and platinum.

So there are a lot of things there, and the founder is a deal-doer. So this has got a good setup to both grow, have the commodity work, have corporate action, and have new projects. There are lots of things layered into that, which we quite like in a stock.

#11. Sendas Distribuidora (NYSE: ASAI)
Vihari Ross: I'm going to give you a very different one here. I'm going to go Sendas Distribuidora. That's a Brazilian cash-and-carry business. Cash and carry is the most popular grocery format in Brazil. The reason the stock is cheap is that they've had their series of troubles. The first one was they've had food deflation. That doesn't help any grocer around the world. They've also had interest rates go from 2% to almost 14%, which obviously hit the consumer hard. They also bought these supermarkets just before those interest rates started climbing and took their debt level up.

Now, we're in this situation where that debt level has peaked. It's passed three times net debt to EBITDA. And when you look at these stores that they bought, they've closed them, they've refurbed them and they've converted them, and they're opening up at three times the level of sales than when they bought them. They're also now generating significant amounts of free cash for this business.

So you've got a company that's passed those troubles and you're going to be growing your operating profits at 20% per annum over the next three years, and stock's trading on a multiple of 14 times. So that's my pick for you today.

#12. Bell Financial Group (ASX: BFG)
Matthew Kidman: I'm going to stick with a financial stock. Earlier we talked about how markets can be up [in 2024], and I said small caps can be up even more. So what company is leveraged to a rising market? Almost like a second derivative. And I think one that could really do that is the Bell Financial Group, BFG, the big friendly giant. I think it can grow into a bigger company this year.

What everyone knows it for, the stockbroking and the corporate advice and the capital raisings, that's the leverage play that's been dead the last two years. That can spike earnings. Underneath that are a couple of quite nice businesses that don't get recognition. So the online platform, Bells Online, has been growing nicely, with steady earnings. They've also got a bunch of services, the main one being margin lending. Another part of the business that's been growing quite nicely, because of not much competition in that area.

So it has good underlying businesses, but you're going to get the real kick, the real leverage in the earnings when the market takes off. And I think that's one you can play, 50-60% this year, if it works.

James Marlay: It might put you in the top spot.

Matthew Kidman: You never know!

Skate.

of those mentioned i ( still ) hold BFG ,
i have held MLX in the past until they diluted me down to an unmarketable parcel and booted me out with a couple bucks

and i held HLS but sold out during the take-over excitement

 

[Skate]

of those mentioned i ( still ) hold BFG ,
i have held MLX in the past until they diluted me down to an unmarketable parcel and booted me out with a couple bucks

and i held HLS but sold out during the take-over excitement

Posting about investment opportunities and methodologies used by some members can provide an alternative perspective to active trading. Investing, in particular, offers a lower learning curve and a passive approach that can lead to wealth accumulation through the power of compounding.

Skate.

 

[ducati916]

#2. BHP

View attachment 167210

Skate.

So this was interesting in that this was a rather negative assessment.

Why?

So I have started a Balance Sheet analysis.

1. A balance sheet shows how much capital is invested in the business (not banks) and how that capital structure is divided between senior issues and common stock; and

2. It reveals the strength or weakness of the working capital position; and

3. It provides a check on the validity of the reported earnings via the income statement; and

4. It supplies the basis of a longer term study (analysis) of the relationship between the earning power and asset values. This is particularly true for mining concerns and industrials. Less true for technology based operations.

Working Capital Position:

Credit position: is fine. Accts Pay = 73/72 days in 2022/23
Receivables = 35/34 days in 2022/23

Inventory Turn: Poor.

Inventory = 24/35 days in 2022/23

This is a red flag.

To investigate this red flag the issues were largely contained within depreciation schedules and charges.


2020.....................................................2021......................................................2022........................................................2023
Gross Plant

$141,571...........................................$151,361..................................................$121,130.................................................$135,346

Net Plant

$72,362..............................................$73,813...................................................$61,295.....................................................$71,818.

CAPEX

$6,900............(-18%)............................$5612..................(+4%)...........................$5885......................(+15%)....................$6733.
As % of Gross Plant
9%.........................................................7.5%..........................................................9.5%..........................................................9.3%
As % of Net Plant
4.8%......................................................3.7%..........................................................4.5%.........................................................4.9%

Depreciation Charge

$6112.................(-17%).........................$5084.................(+11%)........................$5683........................(-11%)....................$5061

Depreciation Charge as % of
Gross Plant
8%...........................................................6.5%.......................................................$9.2%.......................................................7%
Net Plant
4.3%........................................................3.3%.......................................................$4.3%.......................................................3.7%

Cash from Ops
$13,743..................................................$26,050...................................................$32,887...................................................$21,957

CAPEX as %
50%........................................................21%............................................................17%.........................................................30%
Depreciation as %
44%.........................................................19.5%........................................................17%........................................................23%

Cash
$13,426..................................................$15,246...................................................$17,236...................................................$12,428

CAPEX/Depreciation
112%........................................................110%........................................................103%.......................................................133%

Cash from Ops/Operating Income
115%........................................................104%.........................................................97%..........................................................85%



What would be included within the charge-offs

(a) Cost of used reserves;
(b) Special tools;
(c) Auto's and trucks;
(d) Machinery and equipment;
(e) Factory buildings etc.

Summary:

A much slower turnover of inventory is creating a deterioration within working capital. This has the effect of reducing the amount of cash generated. To hide or disguise this deterioration, the CAPEX and Depreciation charges are being manipulated.

The 'effect' is that the future earning power is being compromised as depreciation requirements are not being met. This will require going forward reductions in earnings or an increase in debt, which increasing debt servicing costs and/or a reduction in dividends paid out.

The deterioration is already significant in earning power. Which is why (probably/possibly) this was highlighted in the report that was posted.

Dividend 'cuts' are hated by the market. Often (usually) they are accompanied by a reduction of market capitalisation.

Now the technicals are showing:




Very optimistic.

Now some combination of both methods of analysis would ( pun intended) pay dividends. If the 'holder' of BHP were aware that the fundamentals were less than par, close attention to market sentiment, viz. the chart, could be part of the risk management plan.

A downturn, rather than an opportunity to BTD, would be an exit, possibly if the fundamentals (price/value) were positive, generate a new buying opportunity.

jog on
duc

 

[divs4ever]

Posting about investment opportunities and methodologies used by some members can provide an alternative perspective to active trading. Investing, in particular, offers a lower learning curve and a passive approach that can lead to wealth accumulation through the power of compounding.

Skate.

i would disagree there,

investing provides a different learning curve , like will that company still be listed in a year , the patience to watch and analyze ( do i wait add or sell depending on company news )

will you investment pay you any returns ( the answer comes next year )

less adrenaline rush in investing , but often increased anxiety

 

[divs4ever]

So this was interesting in that this was a rather negative assessment.

Why?

So I have started a Balance Sheet analysis.

1. A balance sheet shows how much capital is invested in the business (not banks) and how that capital structure is divided between senior issues and common stock; and

2. It reveals the strength or weakness of the working capital position; and

3. It provides a check on the validity of the reported earnings via the income statement; and

4. It supplies the basis of a longer term study (analysis) of the relationship between the earning power and asset values. This is particularly true for mining concerns and industrials. Less true for technology based operations.

Working Capital Position:

Credit position: is fine. Accts Pay = 73/72 days in 2022/23
Receivables = 35/34 days in 2022/23

Inventory Turn: Poor.

Inventory = 24/35 days in 2022/23

This is a red flag.

To investigate this red flag the issues were largely contained within depreciation schedules and charges.


2020.....................................................2021......................................................2022........................................................2023
Gross Plant

$141,571...........................................$151,361..................................................$121,130.................................................$135,346

Net Plant

$72,362..............................................$73,813...................................................$61,295.....................................................$71,818.

CAPEX

$6,900............(-18%)............................$5612..................(+4%)...........................$5885......................(+15%)....................$6733.
As % of Gross Plant
9%.........................................................7.5%..........................................................9.5%..........................................................9.3%
As % of Net Plant
4.8%......................................................3.7%..........................................................4.5%.........................................................4.9%

Depreciation Charge

$6112.................(-17%).........................$5084.................(+11%)........................$5683........................(-11%)....................$5061

Depreciation Charge as % of
Gross Plant
8%...........................................................6.5%.......................................................$9.2%.......................................................7%
Net Plant
4.3%........................................................3.3%.......................................................$4.3%.......................................................3.7%

Cash from Ops
$13,743..................................................$26,050...................................................$32,887...................................................$21,957

CAPEX as %
50%........................................................21%............................................................17%.........................................................30%
Depreciation as %
44%.........................................................19.5%........................................................17%........................................................23%

Cash
$13,426..................................................$15,246...................................................$17,236...................................................$12,428

CAPEX/Depreciation
112%........................................................110%........................................................103%.......................................................133%

Cash from Ops/Operating Income
115%........................................................104%.........................................................97%..........................................................85%



What would be included within the charge-offs

(a) Cost of used reserves;
(b) Special tools;
(c) Auto's and trucks;
(d) Machinery and equipment;
(e) Factory buildings etc.

Summary:

A much slower turnover of inventory is creating a deterioration within working capital. This has the effect of reducing the amount of cash generated. To hide or disguise this deterioration, the CAPEX and Depreciation charges are being manipulated.

The 'effect' is that the future earning power is being compromised as depreciation requirements are not being met. This will require going forward reductions in earnings or an increase in debt, which increasing debt servicing costs and/or a reduction in dividends paid out.

The deterioration is already significant in earning power. Which is why (probably/possibly) this was highlighted in the report that was posted.

Dividend 'cuts' are hated by the market. Often (usually) they are accompanied by a reduction of market capitalisation.

Now the technicals are showing:


View attachment 168379

Very optimistic.

Now some combination of both methods of analysis would ( pun intended) pay dividends. If the 'holder' of BHP were aware that the fundamentals were less than par, close attention to market sentiment, viz. the chart, could be part of the risk management plan.

A downturn, rather than an opportunity to BTD, would be an exit, possibly if the fundamentals (price/value) were positive, generate a new buying opportunity.

jog on
duc

BHP has been slimming down in recent years , one might wonder if the headcount reduction will result in lower costs , lower costs might nibble away at the balance sheet deficits , but that would imply that demand stay high ( and i don't think it will mid-term )

BTD ?? not above $20 for me

how long will this mining super-cycle last ??

 

[Skate]

So this was interesting in that this was a rather negative assessment.

Why?

So I have started a Balance Sheet analysis.

1. A balance sheet shows how much capital is invested in the business (not banks) and how that capital structure is divided between senior issues and common stock; and

2. It reveals the strength or weakness of the working capital position; and

3. It provides a check on the validity of the reported earnings via the income statement; and

4. It supplies the basis of a longer term study (analysis) of the relationship between the earning power and asset values. This is particularly true for mining concerns and industrials. Less true for technology based operations.

Working Capital Position:

Credit position: is fine. Accts Pay = 73/72 days in 2022/23
Receivables = 35/34 days in 2022/23

Inventory Turn: Poor.

Inventory = 24/35 days in 2022/23

This is a red flag.

To investigate this red flag the issues were largely contained within depreciation schedules and charges.


2020.....................................................2021......................................................2022........................................................2023
Gross Plant

$141,571...........................................$151,361..................................................$121,130.................................................$135,346

Net Plant

$72,362..............................................$73,813...................................................$61,295.....................................................$71,818.

CAPEX

$6,900............(-18%)............................$5612..................(+4%)...........................$5885......................(+15%)....................$6733.
As % of Gross Plant
9%.........................................................7.5%..........................................................9.5%..........................................................9.3%
As % of Net Plant
4.8%......................................................3.7%..........................................................4.5%.........................................................4.9%

Depreciation Charge

$6112.................(-17%).........................$5084.................(+11%)........................$5683........................(-11%)....................$5061

Depreciation Charge as % of
Gross Plant
8%...........................................................6.5%.......................................................$9.2%.......................................................7%
Net Plant
4.3%........................................................3.3%.......................................................$4.3%.......................................................3.7%

Cash from Ops
$13,743..................................................$26,050...................................................$32,887...................................................$21,957

CAPEX as %
50%........................................................21%............................................................17%.........................................................30%
Depreciation as %
44%.........................................................19.5%........................................................17%........................................................23%

Cash
$13,426..................................................$15,246...................................................$17,236...................................................$12,428

CAPEX/Depreciation
112%........................................................110%........................................................103%.......................................................133%

Cash from Ops/Operating Income
115%........................................................104%.........................................................97%..........................................................85%



What would be included within the charge-offs

(a) Cost of used reserves;
(b) Special tools;
(c) Auto's and trucks;
(d) Machinery and equipment;
(e) Factory buildings etc.

Summary:

A much slower turnover of inventory is creating a deterioration within working capital. This has the effect of reducing the amount of cash generated. To hide or disguise this deterioration, the CAPEX and Depreciation charges are being manipulated.

The 'effect' is that the future earning power is being compromised as depreciation requirements are not being met. This will require going forward reductions in earnings or an increase in debt, which increasing debt servicing costs and/or a reduction in dividends paid out.

The deterioration is already significant in earning power. Which is why (probably/possibly) this was highlighted in the report that was posted.

Dividend 'cuts' are hated by the market. Often (usually) they are accompanied by a reduction of market capitalisation.

Now the technicals are showing:


View attachment 168379

Very optimistic.

Now some combination of both methods of analysis would ( pun intended) pay dividends. If the 'holder' of BHP were aware that the fundamentals were less than par, close attention to market sentiment, viz. the chart, could be part of the risk management plan.

A downturn, rather than an opportunity to BTD, would be an exit, possibly if the fundamentals (price/value) were positive, generate a new buying opportunity.

jog on
duc

@ducati916, I agree with the analysis presented in your post. The financial health of BHP, as reflected in its balance sheet and cash flow statement, raises little concern. The deterioration of the working capital position, could suggest that the company's earning power may be compromised in the future, but unlikely.

The fact that the company's dividend payments have been consistently high is a bonus to investors. The high level of institutional ownership and the low level of short interest in the stock may also indicate that the market has not yet fully recognised the potential of BHP's outlook for the future.

Overall, I believe that the post presents a bearish view of BHP's financial health, and others should be cautious when considering investing in the company. For me, it was the first and biggest commitment of the portfolio of 6.

Skate.

 

[ducati916]

BHP has been slimming down in recent years , one might wonder if the headcount reduction will result in lower costs , lower costs might nibble away at the balance sheet deficits , but that would imply that demand stay high ( and i don't think it will mid-term )

BTD ?? not above $20 for me

how long will this mining super-cycle last ??

From 2022 to 2023 the COG increased by 24%. Revenue fell by 17.5%, Operating Income fell by 33%.

Management are not operating for shareholders that much is pretty certain.

jog on
duc

 

[Skate]

how long will this mining super-cycle last ??

@divs4ever, the ongoing mining super-cycle is expected to continue for the foreseeable future, driven by the insatiable demand for raw materials to support the world's growing population, technological advancements, and infrastructure development.

The mining industry plays a critical role in supplying the necessary resources for various sectors, ensuring a steady stream of dividends for investors well beyond our future. As technology continues to evolve, the mining industry will likely adapt and innovate, further solidifying its position as a vital contributor to the global economy.

Skate.

 

[ducati916]

1. @ducati916, I agree with the analysis presented in your post. The financial health of BHP, as reflected in its balance sheet and cash flow statement, raises little concern. The deterioration of the working capital position, could suggest that the company's earning power may be compromised in the future, but unlikely.

2. The fact that the company's dividend payments have been consistently high is a bonus to investors. The high level of institutional ownership and the low level of short interest in the stock may also indicate that the market has not yet fully recognised the potential of BHP's outlook for the future.

3. Overall, I believe that the post presents a bearish view of BHP's financial health, and others should be cautious when considering investing in the company. For me, it was the first and biggest commitment of the portfolio of 6.

Skate.

Mr Skate,

1. Clearly you do not agree. BHP's balance sheet should raise a high concern. You say BHP's earning power will not be compromised. Evidence?

2. Dividends have not been consistently high. They are x2 currently what they were 2020/21. Is that sustainable?

3. A bearish view. Yes it does. Indeed you have +/- $800K disclosed. Is that prudent? Not for me to say. What would make it prudent however is a level of analysis or expertise that demonstrated that BHP was worthy of whatever % of your portfolio it represents.

jog on
duc

 

[divs4ever]

@divs4ever, the ongoing mining super-cycle is expected to continue for the foreseeable future, driven by the insatiable demand for raw materials to support the world's growing population, technological advancements, and infrastructure development.

The mining industry plays a critical role in supplying the necessary resources for various sectors, ensuring a steady stream of dividends for investors well beyond our future. As technology continues to evolve, the mining industry will likely adapt and innovate, further solidifying its position as a vital contributor to the global economy.

Skate.

i disagree , i see the 'super-cycle running on vapors ( and promises )

now maybe investing in better tech will improve efficiencies , but it will take time to prove that

BTW mining gear is designed to be durable and survive heavy use , replacements will be capital intensive

 

[Skate]

Mr Skate,

1. Clearly you do not agree. BHP's balance sheet should raise a high concern. You say BHP's earning power will not be compromised. Evidence?

2. Dividends have not been consistently high. They are x2 currently what they were 2020/21. Is that sustainable?

3. A bearish view. Yes it does. Indeed you have +/- $800K disclosed. Is that prudent? Not for me to say. What would make it prudent however is a level of analysis or expertise that demonstrated that BHP was worthy of whatever % of your portfolio it represents.

jog on
duc

@ducati916 let me answer you in numerical order

1. I understand your concern about BHP's balance sheet, but I believe that the company's earning power will not be compromised. BHP has a history of shuffling "the deck chairs", so to speak, by selling off non-core assets and acquiring new ones that provide a strategic advantage. This approach has allowed the company to maintain a strong financial position and continue to generate earnings growth.

2. You're right that dividends have not been consistently high, but I believe that the current dividend payments are sustainable. BHP commits to returning value to shareholders through dividends, and the company has a history of paying dividends at an acceptable level.

3. I understand that a bearish view of BHP's financial health may be warranted, but I believe that my investment decision is prudent. I have a combination of fundamental analysis and historical results that suggest that BHP is a strong investment opportunity. Additionally, the company's stable dividend paying with franking credits as a bonus provides an attractive return on investment.

If I were chasing high returns from my investment, I would continue trading, but I believe that BHP will offer adequate dividends well into the future.

Skate.

 

[divs4ever]

2. You're right that dividends have not been consistently high, but I believe that the current dividend payments are sustainable. BHP commits to returning value to shareholders through dividends, and the company has a history of paying dividends at an acceptable level.

i consider the BHP spin-offs are the important components to 'div. returns ' although some shareholders would be tempted to crystallize those bonus issues

the 'acceptability of divs. ' depends on the price you invested at , an undermentioned factor is the FX effect of investing in BHP , one might suggest it provides a currency hedge at an affordable cost

 

[Skate]

i disagree , i see the 'super-cycle running on vapors ( and promises )

now maybe investing in better tech will improve efficiencies , but it will take time to prove that

BTW mining gear is designed to be durable and survive heavy use , replacements will be capital intensive

@divs4ever, I appreciate your perspective on the mining industry's current situation. I understand that we have different views on the matter. I believe that by sharing our perspectives and listening to each other's thoughts, we can both gain a deeper understanding of the issue.

Let's not disagree, but rather acknowledge that we hold differing opinions. Being right or wrong holds no value in this thread.

Skate.

 

[Skate]

@ducati916, If you have a better group of 6 ASX companies to invest in, I'm eager to hear your suggestions. It's easy to criticise, but much more productive to offer constructive ideas and work towards building something valuable.

@ducati916, I wanted to follow up on my offer for you to provide me with a list of "6 ASX listed companies" for an investment portfolio.

I've always been drawn to the idea of receiving regular income from an investment portfolio, and my brief was to find companies that consistently pay dividends with franking credits attached. The potential for capital gains would be a bonus.

I settled on six companies that met my criteria: ANZ, BHP, CBA, FMG, MFG, and WDS. These companies may not be the most exciting, but they are solid, reliable, and have a proven track record of delivering for shareholders.

My reasoning for selecting these particular companies was straightforward. I wanted to invest in businesses that I understood and that had a strong presence in the Australian and New Zealand markets. ANZ and CBA are the two largest banks in their respective countries, and BHP and FMG are leaders in the mining industry. MFG and WDS were a bit of a wildcard, but I believe they offered significant value and had the potential for strong capital gains.

Skate.

 

[ducati916]

@ducati916, I wanted to follow up on my offer for you to provide me with a list of "6 ASX listed companies" for an investment portfolio.

I've always been drawn to the idea of receiving regular income from an investment portfolio, and my brief was to find companies that consistently pay dividends with franking credits attached. The potential for capital gains would be a bonus.

I settled on six companies that met my criteria: ANZ, BHP, CBA, FMG, MFG, and WDS. These companies may not be the most exciting, but they are solid, reliable, and have a proven track record of delivering for shareholders.

My reasoning for selecting these particular companies was straightforward. I wanted to invest in businesses that I understood and that had a strong presence in the Australian and New Zealand markets. ANZ and CBA are the two largest banks in their respective countries, and BHP and FMG are leaders in the mining industry. MFG and WDS were a bit of a wildcard, but I believe they offered significant value and had the potential for strong capital gains.

Skate.

Mr Skate,

I already provided 2 examples from US. QYLD and PFFD.

I don't trade or have any interest/expertise in ASX stocks.



So you have far more diversification, higher yields.

As a negative, there is currency risk.

jog on
duc

 

[Dona Ferentes]

growth stocks have a place and index inclusion helps liquidity ; from a chatsheet

Six stocks that could be future ASX 200 constituents​

• Australian Ethical Investment Ltd , AEF , $597.74 million
• Chrysos Corporation Ltd C79, $616.19 million
• Deep Yellow Limited DYL, $867.47 million
• Cettire Ltd CTT, $1.02 billion
• Macquarie Technology Group Ltd, MAQ, $1.61 billion
• GQG Partners Inc GQG, $4.90 billion

 

[Skate]

growth stocks have a place and index inclusion helps liquidity ; from a chatsheet

Six stocks that could be future ASX 200 constituents​

• Australian Ethical Investment Ltd , AEF , $597.74 million
• Chrysos Corporation Ltd C79, $616.19 million
• Deep Yellow Limited DYL, $867.47 million
• Cettire Ltd CTT, $1.02 billion
• Macquarie Technology Group Ltd, MAQ, $1.61 billion
• GQG Partners Inc GQG, $4.90 billion

From today's video
@Dona Ferentes, I've been looking at "Bell Financial Group" (ASX: BFG) as it never found its way onto my shortlist. This afternoon I'll check out your list of companies to ensure they meet my brief.

In the meantime, there are some positives around (BFG) as they have an online platform, Bells Online, which has been growing nicely, with steady earnings. They've also got a bunch of services, the main one being margin lending. Another part of the business that's been growing quite nicely, because of not much competition in that area.

A strong contender
BFG (Bell Financial Group) - Dividend Yield: 5.2%, Franking Credits: 100%

Skate.