I just had my first article published on Seeking Alpha in almost two years!
My most recent article was inspired by a message sent to me by a reader about my last article, which described how the publicly stated return on equity of the Crédit Agricole regional banks dramatically understates their profitability. Instead, he argued, a better way to analyze them is to look at their book value per share growth and annual dividends, the same approach I used in my previous articles about investment companies such as Anworth
Mortgage, Dynex
Capital, and Sixth
Street Specialty Lending.
After reading his message, I was inspired to write an article analyzing Credit Agricole Du Languedoc, one of the Crédit Agricole regional banks, using that methodology; you can check it out here.
Charbroil
Thursday, May 2, 2024
Credit Agricole Du Languedoc's Past Value Creation May Offer Insights Into Its Future Returns
Monday, September 12, 2022
500 Followers on Seeking Alpha!
I just hit the 500 follower mark on Seeking Alpha!
Thank you to everyone, especially my readers, who helped make this possible!
Tuesday, August 16, 2022
The Impact of Local GDP Per Capita on the ROE of Crédit Agricole's Regional Banks
Tuesday, May 24, 2022
A Look At 'Gloomy Goldman's' 20 'Safety' Stocks
A recent Marketwatch article, titled “Gloomy
Goldman offers 20 ‘safety’ stocks with valuations below the previous 2 bear
markets,” listed 20 “safety stocks” that Goldman Sachs (GS) chief U.S. equity
strategist David Kostin proposed for a potential downturn. According to Kostin,
the companies are not only large and have strong balance sheets, they are also
cheap:
'…[their] price/earnings multiple after a 20% haircut to expected 2023 earnings is below the forward p/e at the bottom of either or both of the March 2009 and March 2020 bear markets.
“Importantly, given the different real interest rate environments, the highlighted stocks are more attractively valued today on a yield gap basis relative to the rest of the index than they were in either 2009 or 2020,” said Kostin and the team.'
A stock that is cheaper than in 2009 and/or 2020 does sound cheap! In that context, I looked at the list...(Read More)
Sunday, January 16, 2022
A Look At Why World Acceptance Corporation's Stock Is Outperforming Its Peers
World Acceptance Corporation (WRLD) is an
installment lender that generally makes loans at higher rates of interest to
people with weaker credit. The company’s stock has performed strongly since the
end of 2020, rising by around 112%.
At first glance, it seems obvious why the
company’s stock has gone up. When COVID struck the U.S., many lenders feared a
wave of defaults as borrowers lost their jobs and got sick. One April 2020 US News article described how
“financial institutions around the world are bracing for consumers and
businesses to default on outstanding loans.” Once investors realized that wave
of defaults wouldn’t materialize due to government stimulus and a quick end to
lockdowns in many states, it makes sense they would start buying the stock of
lenders such as World. Moreover, we’ve seen a bull market in the past year, so
it makes sense World’s stock would rise at the same time.
Though these arguments make sense, once we compare World to
some of its peers, it becomes less obvious that they are the reasons for the
stock’s rise...(Read More).
Friday, December 31, 2021
A Valuation Of Chesapeake Energy Based On Its Reserves
Happy New Year's Eve, everyone! I just had my first SeekingAlpha article published in over a year; I hope you all enjoy it!
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For many
investors, Chesapeake Energy (CHK) needs no introduction. Under its founder
Aubrey McClendon, the company pioneered the use of fracking to extract oil and
natural gas from shale deposits. Later, in June 2020, the company went
bankrupt. The company exited bankruptcy in February 2021 and its stock has
risen since then by around 40%.
Historically,
post-bankruptcy stocks have outperformed the
market,
which makes Chesapeake Energy’s stock interesting. To see if it might
outperform the market, we need to know if the company is undervalued. We can
know that by looking at its oil and gas reserves, which are the company’s
ultimate source of value. If Chesapeake is trading at less than the value of
its reserves, its stock may outperform in the future. (Read More)
Monday, September 14, 2020
Sixth Street Specialty Lending's Historical Value Creation May Offer Insights Into Its Future Returns
Sixth Street Specialty Lending, Inc. (TSLX) is a business
development company, or BDC. The company primarily invests in companies with
earnings before interest, taxes, depreciation, and amortization, or EBITDA,
between $10 million and $250 million, according to the company’s most
recent earnings presentation. Almost all of Sixth Street’s investments are
in the companies’ first-lien secured, floating-rate debt.
I recently wrote
about another BDC, Prospect Capital (PSEC), that looks cheap because it trades
at a steep discount to book value.
Sixth Street Specialty Lending does not look cheap. The
company trades
at a price to book ratio of around 106.5%, compared to the average P/B
ratio for BDCs, which is around 83%. This means each dollar of stock buys only
93.9 cents in equity in Sixth Street, compared to around $1.20 in equity in the
average BDC.
That said, as in life, in investing you often get what you
pay for. In several recent articles, I’ve described two common types of
investment opportunities:
- High quality companies trading at a modest discount to intrinsic value.
- More average companies trading at a much larger discount to intrinsic value.
Tuesday, August 25, 2020
Dynex Capital's Historical Value Creation May Offer Insights Into Its Future Returns
Dynex Capital, Inc. (DX) is a mortgage real estate
investment trust, or mREIT. The company invests in mortgage-backed securities,
or MBS, securities whose income is based on the performance of pools of
mortgages.
I’ve written two recent articles about mREITs Ladder
Capital (LADR) and Anworth
Mortgage (ANH). Both those articles were written because those mREITs look
cheap. Dynex Capital does not look cheap. The company trades at a price
to book ratio of 94%. In contrast, Anworth and Ladder have, respectively, P/B
ratios a little over 60%. The market certainly seems to think it is a
higher quality company than other mortgage REITs, given how much higher its
valuation is.
To see if Dynex Capital is a high quality company, we can
use the methodology I used in my previous mREIT articles. We can look at how
much value the company has historically created for shareholders. This will
help us predict the company’s future value creation, and thus the company’s
possibilities for future share price growth and dividends. (Read More)
Sunday, August 16, 2020
Anworth Mortgage's Value Creation Since Its IPO May Offer Insights Into Its Future Returns
Anworth Mortgage Asset Corporation (ANH) is a mortgage real
estate investment trust, or mREIT. The company invests in residential mortgages
as well as mortgage-backed securities, or MBS, securities whose income is based
on the performance of pools of residential mortgages. Those securities include
both agency-backed MBS whose performance is guaranteed by Fannie Mae (OTC:FDDXD) and
Freddie Mac (OTC:FMCC), as well as non-agency MBS whose performance is not guaranteed.
According to the company’s most
recent quarterly report, over 70% of Anworth’s investments were in agency
MBS.
By several metrics, Anworth’s stock looks cheap. The company’s
price to book ratio on August 13th was 63%. This means each share of
the company’s stock trading at $1.81 a share corresponded to around $2.85 of
the company’s equity. Anworth also has a dividend yield of around 11%.
In that context, Anworth’s cheapness raises a question. Is it
a high quality company I can “buy and hold” forever while it compounds my
investment?
To see if Anworth Mortgage Asset Corporation is a high
quality company, we can use the same methodology I used in my recent article about Prospect
Capital. We can look at how much value the company has created for shareholders
since its 1998 IPO. This will help us predict the company’s future value
creation, and thus the company’s possibilities for future share price growth
and dividends. (Read More)
Tuesday, August 4, 2020
Prospect Capital's Value Creation Since Its IPO May Offer Insights Into Its Future Returns
Prospect Capital Corporation (PSEC) is a business development company, or BDC. The company invests in middle market companies with an “enterprise value between $5 million and $1000 million,” according to the company's profile. Prospect invests in both the companies’ secured and unsecured debt as well as their equity.
By several metrics, Prospect’s stock looks cheap. The
company’s price to book value ratio on July 31st was 63%. This means
each share of the company’s stock trading at $5.01 a share corresponded to
$7.98 of the company’s equity. Prospect also pays a monthly dividend of $0.06
per share, giving the company an annual dividend yield of over 14%.
Prospect Capital’s cheapness raises a question. Is it a high quality company I can “buy and hold” forever while it compounds my investment?
To see if Prospect Capital is a high quality company, we can use the same methodology I used in my May 2020 article about Ladder Capital. We can look at how much value the company has created for shareholders since its 2004 IPO. This will help us predict the company’s future value creation, and thus the company’s possibilities for future share price growth and dividends. (Read More)