Analyzing Bargain Stocks

The construction industry is notoriously cyclical, and isn't exactly helped by a pandemic. Titon plc is an AIM listed manufacturer of ventilation systems. It derives 74% of its sales of GBP 27m from old-fashioned trickle ventilation systems and the balance from newer mechanical ventilation systems. The company serves the UK (55% of sales) and Korean markets (30% of sales) along with the EU and US. It holds a dominant 75% share of the Korean market in trickle ventilation systems and this is reflected in a 14% pre-tax margin in Korea versus under 6% in the UK. The company holds 51% in its Korean subsidiary and a 49% stake in its primary distributor there. Management reported a decline in sales in the year ended September 30 th , 2019 and the business has faced headwinds ever since. The Korean market is challenged by government policies to restrict lending and construction activity. In addition, higher pollution levels are raising demand for mechanical ventilation systems. T...

Even Warren Buffett seems to have given up on newspapers. Reach plc is one Britain’s largest news publishers by circulation reaching nearly 47m readers per month. It owns titles such as Daily Mirror and Daily Express, among nine national newspapers, over 110 regional papers and two national magazines. The key issue is here is the steady decline of the print business due to secular factors. Management is placing their bets on the digital business making up for these losses. They value the intangibles, which includes publishing rights, at over GBP 800m after impairments. This constitutes book value of GBP 593m. The market disagrees – valuing it at under half that at GBP 300m. There may be a bleak future for national papers competing online. The regional papers, however, do seem to possess a competitive advantage offering local content to an interested community of readers. Nevertheless, examining the financials, the company generates cash from operations of about GBP 14...

There are few occupations nobler than building somebody's home. Abbey plc is an AIM listed builder and developer. Its principal activities also include plant hire and property rentals. It operates in the UK, Ireland and the Czech Republic. The vast majority of activity – 82% by revenue is generated from the UK. The equity sells for EUR 278m. This is below the net current asset value of the company (a general proxy for liquidation value), which is stated as EUR 331m as on October 31 st , 2019. The key figure in the valuation in this instance is the inventory balance at EUR 273m – this appears to be valued conservatively at the lower of cost or net realizable value (market value less costs to complete and sell). The company generated EBITDA (a proxy for cash earnings) of EUR 60m on revenues of EUR 230m. It converted these earnings to operating cash flows of EUR 50m, which is fairly efficient for a property developer.  Debt is negligible and the company held a substa...

The purpose of this website is to analyze the quantitatively cheapest 1% - 2% of common stocks on the planet as measured by price to value derived from basic elements of earning power and balance sheet position. As a group, this portfolio is likely to outperform the market significantly. We will, however, evaluate each stock to determine investment value - with the aim of continually improving investment performance, and business analysis. There is likely to be good cause for fear in each stock we analyze. We will seek to prioritize inherent stability as the key qualitative factor in our analysis. This could be trumped if the risk/reward equation is skewed in our favor (as it usually is with such cheap stocks, though not always). We are aware of the multiple biases that creep into a selective approach and the pitfalls in investment performance to those who attempt this. In any case, we press forward towards the goal of superior analysis. We hope this exercise will also enligh...