Share Selection - Take Your Pick or Suggest Another...

marathonic

Hi,

I was thinking it might be a good idea to start a thread where we can post our opinions on shares that we're considering buying and receive suggestions for alternatives. We could possibly have a number of rules. I'll suggest the rules and let me know what you think.


RULES

1. Each post should refer to a maximum two share choices;
2. Both choices must be from the same sector;
3. You must include your own opinions on your choices (to make it an informative post);
4. Respondees should give their opinion on the posters two choices;
5. If respondees are suggesting alternatives, they must be from the same sector as the posters choices;
6. Respondees should suggest no more than two alternatives.

I'm going to give my two choices in a separate post using a template that we could all use.

It should be noted here, that anything that does appear on this thread are the posters opinions and you should do your own research before purchasing any shares based on this thread.

marathonic

Industry: Utilities

Choices:
The Laclede Group (LG) - Current Price $30.15
Consolidated Edison (ED) - Current Price $34.50

Opinions:

• The Laclede Group is a relatively small company with a market cap of $665 million. Consolidated Edison is much larger with a market cap of $9.5 billion. The larger company should provide more stablity in the stock price but the smaller company should offer more prospects for growth. Personally, I like the extra growth potential and am (slightly) edging towards LG here. Revenue growth for ED has been about 7% whilst for LG it has been about 13.5% over the past 5 years and the difference in share price stability can be seen by doing a compare of the 1-year charts in Google Finance
• The price earnings ratio for ED is 7 whilst for LG it's 9.8. This is an obvious advantage for ED. However, if LG manage to continue their addional earnings growth, the difference in P/E's will close. If earnings continue growing at the 5-year rate for each company, the P/E ratios will be the same in less than 7 years. Therefore, although ED has a better price earnings ration when looked at in isolation, when you take growth rates into consideration, PG is the winner over the long term. Also, if the higher growth rate of LG continues, people will always be willing to pay a higher P/E meaning the share price should rise quicker
• The dividend yield for ED is 6.8% whilst, for LG, it's 5.1%. The payout ratios are similar too (50 for LG and 47 for ED). Therefore, ED is better in this respect. However, the 5-year dividend growth rate for LG is 2.3% whilst, for ED, it's 0.83%. This is a marginal advantage for LG and should close the 1.7% difference by about 0.1% per year (assumming all else is equal)
• The total debt to equity for LG is 0.73 whilst, for ED, it's 1.08. As a result, the interest coverage is also higher for LG (4.5 v' 3.2). The quick and current ratios are similar. Therefore, debt-wise, LG is in a better position.
• Price to Tangible Book is 1.25 for LG and 1.03 for ED. This means ED is the stock of choice in this respect

Conclusions:

LG is a more volatile stock but is currently trading at 52-week lows of around $30. It has a safe dividend yield of around 5.1% and is growing at a faster pace. It also has less debt.

ED is a larger stable company with a lower P/E and higher dividend. It's also trading at closer to book value.

Overall, I think LG looks the better pick. Assuming the growth continues as it has for the past 5-years for each company, any advantages currently present in ED's stock will be wiped out.


Let me know your thoughts on the above analysis and if you have alternative suggestions.

marathonic

Industry: Technology: Semiconductors

Choices:
Intel Corp (INTC) - Current Price $15.18
Taiwan Semiconductor Manufacturing (TSM) - Current Price $10.41

Opinions:

• Both companies are large cap companies with a market cap of $87 billion for INTC and $54 billion for TSM. Revenue growth for TSM has been over 10% whilst for INTC it has been about 2.5% over the past 5 years.
• The price earnings ratio for TSM is 21.5 whilst for INTC it's 19.7. This is an obvious advantage for INTC. However, if TSM manage to continue their additional earnings growth, the difference in P/E's will close. Therefore, although INTC has a better price earnings ratio when looked at in isolation, when you take growth rates into consideration; TSM is the winner over the long term. Also, if the higher growth rate of TSM continues, people will always be willing to pay a higher P/E meaning the share price should rise quicker. Analysts estimate for future growth is also higher for TSM.
• The dividend yield for INTC is 3.6% whilst, for TSM, it's 3.7%. The payout ratios are similar too (71 for INTC and 69 for TSM). TSM is slightly better in this respect. However, for the past three years INTC’s dividend has been 0.41, 0.45 and 0.56 whilst TSM’s has been 0.31, 0.36 and 0.40. Therefore, INTC’s has grown by 36% whilst TSM’s has grown by 29%. INTC is better in this respect.
• The total debt to equity for both companies is 0.05.
• Price to Tangible Book is 2.41 for INTC and 3.77 for TSM. This means INTC is much better in this respect.

Conclusions:

TSM is a faster growing company. This faster growth is reflected in its’ P/E ratio. However, I believe the difference in growth rates between the two companies in both revenue and earning per share suggests that TSM is the cheaper of the two.

The dividend yield is slightly better for TSM but the dividend growth rate would suggest that INTC will soon pass TSM out.

Debt for both companies is similar.

Price to Tangible book is high for both companies – very much so for TSM. However, Intel’s recent European Commission fine of 1.06 billion Euro ($1.44 billion) leaves it open to lawsuits from various competitors such as AMD. There’s also the possibility of a US fine. This will close the gap slightly – the book value is currently about $36 billion dollars which suggests the EU fine will increase price to tangible book to 2.51 or so.

The risk due to the very high price to tangible book and the relatively high P/E ratios for both companies is offset by the large profit margins. The Gross Margins for both companies are similar at around 67 whilst the net margin for TSM is much higher at 34 v’ 18.

Given the above analysis, I think I’d prefer TSM over INTC as it’s fundamentals should improve over the medium-long term and there’s a lot of uncertainty with INTC and it’s exposure to lawsuits.

TTNYWWBM

marathonic wrote: »

Hi,
I was thinking it might be a good idea to start a thread where we can post our opinions on shares that we're considering buying and receive suggestions for alternatives.

What a great idea!

My 2 hot tips for 25th May 2009

Newcourt Group. NEW.I / NEW / N6G
A Small Cap share floating around the 5c each.

Newcourt is a leading operator of outsourced services in Ireland. The group
has three operating divisions: support services, recruitment and student
accommodation. The group is the leading provider of security services in
Ireland, while Sigmar is the number-two recruitment provider.

In the near future will see funding secured for Newcourt's student accommodation pipeline. Once this is in place, market visibility on the potential earnings for the division will materialise and with it the stock will potentially rise exponentially.

Buying a lot of a small share, even buying at 6 cent and selling at 7 will net 16.666% less commission!

The founders of this company tried to stage a buy out in Dec 08 as they knew this share would rocket once the coming 2009 problems for "buy to rent to students" landlords in the UK which have happened and when the funding comes through for new student residential developments, this will further drive this share into another rally.

Stock opened the year at 2 cents, rose to 8c back to 4.5c now 5c it's going to rise again now in anticipation of the new developments.

I'm sitting pretty on my considerable stock holding, any day now it'll soar !
http://www.newcourtgroup.com/

+++++++++++++++++++++++++++++

Bank of Ireland BKIR.I + AIB ALBK.I

Once the "Bad Bank" is put in place, BOI and AIB will be more insulated. Stocks will rise to reflect new found confidence and prevent future major falls in their share price. Now is the time to pop a few euro in BOI/AIB!!!

Not so long ago these 2 stocks were over 10 euro! It's not unimaginable that this level will be achieved from its current average price of 1.50 each, by the end of 2009! Buy and hold, you'll see major gains!

PS. I make my comfortable living as a private trader!

daithijjj

TTNYWWBM wrote: »

What a great idea!

My 2 hot tips for 25th May 2009

Newcourt Group. NEW.I / NEW / N6G
A Small Cap share floating around the 5c each.

Newcourt is a leading operator of outsourced services in Ireland. The group
has three operating divisions: support services, recruitment and student
accommodation. The group is the leading provider of security services in
Ireland, while Sigmar is the number-two recruitment provider.

In the near future will see funding secured for Newcourt's student accommodation pipeline. Once this is in place, market visibility on the potential earnings for the division will materialise and with it the stock will potentially rise exponentially.

Buying a lot of a small share, even buying at 6 cent and selling at 7 will net 16.666% less commission!

The founders of this company tried to stage a buy out in Dec 08 as they knew this share would rocket once the coming 2009 problems for "buy to rent to students" landlords in the UK which have happened and when the funding comes through for new student residential developments, this will further drive this share into another rally.

Stock opened the year at 2 cents, rose to 8c back to 4.5c now 5c it's going to rise again now in anticipation of the new developments.

I'm sitting pretty on my considerable stock holding, any day now it'll soar !
http://www.newcourtgroup.com/

+++++++++++++++++++++++++++++

Bank of Ireland BKIR.I + AIB ALBK.I

Once the "Bad Bank" is put in place, BOI and AIB will be more insulated. Stocks will rise to reflect new found confidence and prevent future major falls in their share price. Now is the time to pop a few euro in BOI/AIB!!!

Not so long ago these 2 stocks were over 10 euro! It's not unimaginable that this level will be achieved from its current average price of 1.50 each, by the end of 2009! Buy and hold, you'll see major gains!

PS. I make my comfortable living as a private trader!

boi and aib?......10euro?......by end of 09?

I think you have been drinking heavily my friend.

2019....maybe.

TTNYWWBM

We'll see in a few days daithijjj, after the "Bad Bank", (do bookmark this post)

In only 3 months BOI has risen from 12c to 1.50 average. (over 1250%) Have you ever seen such a totally out of whack market? So you're questioning my out of whack comment? Fair enough.

We cannot compare this recession to previous economic downturns, we are in a faster moving world, and I've been around long enough to have lived through other recessions.

It's just my opinion, prediction, educated guess... ( no I haven't been drinking! )

daithijjj

..........fair enough, i will be lurking around the boards to wait for the banking sector to emerge over the next few days. I might aswell put some meat on the bones and give you my opinion while im here.

I dont think that unemployment levels have hit the bottom yet, id say maybe 6/12 months time for that. When this happens there will be a further bubble burst in the levels of previous credit card debt. A combination of the two will result in further foreclosures and this 'dead weight' will hang onto the coat tails of any aspirations of recovery. Its just my opinion that anyone who thinks that the only way is up from here is a bit naive.

I took a punt on boi at 39c and got out at 117c, the 'gamble' paid but the 'bet' wasnt to heavy to hurt. I expect a pull back to around 75c to 80c over the next 6 months but its just a prediction, i could never claim wisdom. In any case, predictions on how bank shares will do in this climate are very much like looking out into a proctologists waiting room, theres a very good chance you will just find 'holes' and 'red cheeks'.

marathonic

Hi,

The original idea of this thread was to post two shares from the same sector so that we could 'compare apples with apples' so to speak and offer our opinions on which choice is best.

Personally, I think the banks are very risky at the moment until the full details of the NAMA plan are revealed. It's true that there could be alot of profit to be made from the banks but there's also a hell of a lot of downside. At the moment, the bank is more of a traders share and alot of people have made quite a bit of money but you have to remember that short-term trading is a 'zero-sum' game meaning that for every profit made, someone is making a loss (and both sides are paying their broker commissions). As a long term hold, the banks could work out well but I would only consider it for the speculative portion of my portfolio (I dedicate about 5% of my total portfolio to holdings that are very risky but could also turn out to be 10-baggers - none of this is in the banks at the moment).

Regarding Newcourt, I'd also consider it very speculative. You just have to look at some of this years news stories to see this. The CFO stepped down earlier this year (you have to be extra careful with your research of a company after some of the senior people resign). According to their trading statement in March, they were in talks to obtain funding as they have to buy a London site for £22.5m - bear in mind that their total market cap at the moment is only £4.28 million. Earlier this month, they announced that they're not in a postion to release their accounts for last year due to discussions with banks about their debts. It's true that all this is likely reflected in the share price to a certain extent and, if any of the news turns out better that it looks like at the moment, the shares could surge. However, it's highly speculative and there's alot more shares out there with similar potential over the long term and less risk.

In short, it could work out well over the long run with either the banks or Newcourt. However, I wouldn't have either as a major portion of my overall portfolio.

As always, don't take my advice as the be-all and end-all. I've only being investing with real money since last year. For a year before that, it was a fake money account which, obviously, lost alot of money. At the moment, I've got 11 holdings. The best and worst two of these are:

Sketchers (SKX) - (down 19%)
Chubb (CB) - (down 7%)
Johnson Controls (JCI) - (up 38%)
Intuitive Surgical (ISRG) - (up 51%)

The above shares are the type of companies I go for for the vast majority of my portfolio. I'm still quite confident about my two losing positions and would have no problems adding to them. At the moment, I've got about twice as big a holding in SKX so I'm probably going to add some CB with the next money I add to my account.

I also have quite a large number of companies in my watchlist, four of which are given in the second and third post in this thread.

There's also some companies that I'm very interested in, not just for their future prospects but also for the high premiums that you can get by selling naked puts or covered calls on the underlying shares. An example of this would be Allstate Insurance company who's shares are currently trading at $26.27. It's possible to sell naked puts for July expiry at a $22.50 strike price for $1 each at the moment. I don't have any shares in ALL at the moment. However, I did sell 2 June 22 Put options on the shares and received $220 in my account a couple of weeks ago. I could buy back these positions for $60 now and lock in the $160 gain. However, it looks very likely that they're going to expire worthless (in three weeks time) so I might as well squeeze out that last $60 profit. Even if they did drop below $22, I'd be happy enough purchasing the shares and, possibly, selling covered calls on them.

JOHNPT

Well as no expert but someone who has been investing in shares for last 10 yrs i am going to go with

1 Minco plc quoted on AIM. The have potentially one of the biggest zinc mines in Europe located in PAllas Green in Limerick. They are still Drilling but every new hole seems to confirm the potential size of mine and the last hole drilled was highest grade zinc found so far. There partners are Xstrata Zinc a huge mining company. The chairman recently put a potential value of 2 billion (yes billion) on this mine. However will have to wait for official JOC report to confirm zinc levels.

My other punt would be providence resources- good management - oil prices are only going to move forward- some very interesting drilling prospects one off west coast Ireland.

MrMatisse

JOHNPT wrote: »

Well as no expert but someone who has been investing in shares for last 10 yrs i am going to go with

1 Minco plc quoted on AIM. The have potentially one of the biggest zinc mines in Europe located in PAllas Green in Limerick. They are still Drilling but every new hole seems to confirm the potential size of mine and the last hole drilled was highest grade zinc found so far. There partners are Xstrata Zinc a huge mining company. The chairman recently put a potential value of 2 billion (yes billion) on this mine. However will have to wait for official JOC report to confirm zinc levels.

My other punt would be providence resources- good management - oil prices are only going to move forward- some very interesting drilling prospects one off west coast Ireland.

I lost a packet on this ( Minco) about three years ago, bought at 12p, as it was just about to bring a silver mine in mexico on stream.....it never happened. They have been drilling in Pallas Green for the guts of 6/7 years and have still not moved forward from where they were years ago. Pallas Green was supposed to be a side project to silver mining in Mexico. They have given up on mexico and are now focusing on Zinc mining, for some reason.

The company has a small amount of cash and xstrata will take it out if there is a sniff of a deposit which can be removed economically. Zinc mining is VERY messy, it will take another few years before they are ready to start applying for a licence to mine, which will take yet more time to obtain, meanwhile all the time burning cash. All Xstrata would have to do is let them hit the wall and take the rest of the rights for a pittance if there really is anything there.

Just my 2 cents from having gotten burnt with this before. This has been a hot prospect for 4/5 years now so the share price has dived as big prospects are announced lots of drilling happens but a mine has not yet been brought to fruition.