Sunday, August 26, 2018

Looking for Value, Part 3, Analysis on the Telecom Majors

Sorry I didn't get right on this after the 21st, I meant to publish this final section on the 22nd, but some life came up.

As mentioned on Tuesday, I'm going to look at Telecom Majors to see if anything looks good.  This analysis will be in three parts: an analysis on year over year growth in earnings, a quality of earnings review and valuation using Ohlson Clean Surplus.  I discussed the latter two on Seeking Alpha and published links on this blog.  For convenience the links are in this article too.

Year over Year Growth in Earnings


This calculation looks at how many years the company has been able to achieve year over year growth in its earnings per share.

What the graph below shows is the number of times the company has grown its earnings with respect to its previous year.  The maximum score is six.


T and SHEN have done fairly well with a score of four each.  What I want to check next is how reliable those earnings results are.  For that I use the quality of earnings.

Quality of Earnings


This quality of earnings measure looks at multiple factors and scores each factor with a pass (1) or a fail (0).  These scores are summed to give a grand score out of eight.  Here's how they did.


VZ - 4
T - 5
SHEN - 6
CNSL - 3
BCE - 4
ALSK - 4
ATNI - 3
CBB - 2

SHEN at six is a good score, which makes me even more confident when coupled with its good earnings growth.  But is it fairly valued or even better, under-valued?

Valuation Using OCS


The graph below charts the percentage difference between the theoretical price and the stock's current price, therefore a value above zero indicates the company is trading at a discount relative to the theoretical price.

VZ and T are the only two at a discount, the rest appear to be over-valued which unfortunately includes SHEN.

Conclusion


I like to sleep easy at night so I look for a number of factors to be in alignment.  I've had very good results when there is an intersection between good earnings growth, good earnings quality and a theoretical value below the actual value.

We didn't have it this time, but that's OK, it's a big world of stocks.  Maybe we'll hit on the next analysis which will be on the cannabis phenomena in Canada.




Tuesday, August 21, 2018

Looking for Value Part 2b) Which Industry Within the Sector?

The next part of this analysis will determine which of the three industries look the most promising from a value perspective.  I'll then do a more thorough analysis on it.

Methodology

Within each industry I'm going to compare the earnings per share growth to the change in price and then take an average.  I'm looking for the industry that has had the highest EPS growth but the smallest share price growth.

Telecom Majors

Security Earnings Per Share - Fiscal Period (Y) Earnings Per Share - Fiscal Period (Y-3) Price (Current) Price (M-36) 3 YEAR CHANGE IN EPS 3 YEAR CHANGE IN PRICE
VZ 7.36 2.42 54.79 46.01 2.0413 0.1908
T 4.7652 1.19 33.03 33.2 3.0044 -0.0051
SHEN 1.33 0.695 37.45 19.345 0.9137 0.9359
CNSL 1.07 0.3458 12.07 19.51 2.0943 -0.3813
BCE 2.4037 2.6982 41.54 40.44 -0.1091 0.0272
ALSK -0.12 -0.06 1.63 2.22 1 -0.2658
ATNI 1.9425 2.9382 73.53 71.45 -0.3389 0.0291
CBB 0.58 1.55 13 3.43 -0.6258 2.7901
Average 0.9974875 0.4151125

Telecom Specialty

I had to remove a bunch of securities from the portfolio - most because they're now private (STRP, SHOR, LMOS, IQNT, HCOM, LVLT, GNCM.A/B, WSTC), one because it was merged into another company (FRP) and one because it trades too infrequently (SGRB). 
After much internal debate I also removed TEUM as it didn't have enough history (in Q3 2016 it was spun out of Elephant Talk Communications, ETAK).

Security Earnings Per Share - Fiscal Period (Y) Earnings Per Share - Fiscal Period (Y-3) Price (Current) Price (M-36) 3 YEAR CHANGE IN EPS 3 YEAR CHANGE IN PRICE
WIN -62.6 -13.5 5.18 7.19 3.637 -0.2796
ZAYO 0.35 -0.7502 37.96 27.97 -1.4665 0.3572
VG -0.1506 0.09 14.48 5.55 -2.6733 1.609
RNET -0.9 0.87 14.3 28.83 -2.0345 -0.504
NULM 1.93 0.54 19.3 7.5 2.5741 1.5733
OOMA -0.71 -0.3621 16.3 8.82 0.9608 0.8481
LICT 1063.801 444.34 14300 5250 1.3941 1.7238
LBRDA 11.1 -1.52 78.36 54.47 -8.3026 0.4386
IDT 0.35 0.82 5.43 15.62 -0.5732 -0.6524
GTT -1.71 -0.85 38.35 21.99 1.0118 0.744
FSNN -1.08 -0.9071 3.84 2.12 0.1906 0.8113
FTR -25.99 1.95 5.73 5.07 -14.3282 0.1302
ENT -4.07 -0.78 2.68 11.77 4.2179 -0.7723
ETAK -0.7628 -3.75 2.57 0.3 -0.7966 7.5667
CTL 2.21 1.36 23.86 27.04 0.625 -0.1176
CCOI 0.13 0.02 52.65 27.77 5.5 0.8959
Average -0.628975 0.8982625

Telecom Wireless

Security Earnings Per Share - Fiscal Period (Y) Earnings Per Share - Fiscal Period (Y-3) Price (Current) Price (M-36) 3 YEAR CHANGE IN EPS 3 YEAR CHANGE IN PRICE
USM 0.14 -0.51 44.55 36.92 -1.2745 0.2067
TELDF -0.1466 -0.5704 4.39 5.4079 -0.743 -0.18822
TDS 1.37 -1.26 30.67 28.44 -2.0873 0.0784
TMUS 5.2 0.3 65.84 41.86 16.3333 0.57286
SBAC 0.86 -0.19 157.9 118.2 -5.5263 0.3359
S 1.81 -0.85 6.17 5.06 -3.1294 0.2194
PDVW -1.7 -1.46 30.2 31.97 0.1644 -0.0554
ORBC -0.84 -0.08 10.83 6.09 9.5 0.7783
NIHD -3.0102 -11.535 5.45 8.59 -0.739 -0.3655
ICTG 6.64 1.64 63.25 21 3.0488 2.0119
IMASY 0.4043 0.7569 7 15 -0.4658 -0.5333
I -1.5 1.99 22.96 9.67 -1.7538 1.3744
IRDM 1.82 0.69 20.7 7.45 1.6377 1.7785
GSAT -0.08 -0.5 0.5343 1.76 -0.84 -0.6964
FETLF 1.6419 1.7392 39.0095 2.15 -0.0559 17.144
CEL 0.3086 0.9812 6.02 5.8443 -0.6855 0.0301
AMX 0.4672 1.0034 16.77 17.9403 -0.5344 -0.0652
SPOK -0.76 0.94 15.55 16.3911 -1.8085 -0.0513
GOGO -2.17 -0.99 4.55 15.89 1.1919 -0.7137
Average 0.643826316 1.150601962


Telecom Majors looks like the best industry to start a more in depth analysis.

Monday, August 13, 2018

Looking for Value, Part 2a) The Industries

I'm looking at the the industries that make up the telecom sector in this phase of this top-down analysis,  .

The INVRS software divides the sector into three industries: wireless, major and specialty.  The sector has close to 500 securities.

When I create a portfolio for analysis, I use the "advanced search" feature on the research dashboard page which gives a list of every publicly company in North American in the particular industry and sector I'm looking at.  I then weed out micro-cap companies and ones not trading on an American exchange (this is a US analysis).  From this smaller list I read the profiles of each company and remove those who operate in a different jurisdiction.

Here are the peer groups:

Major Telecom Peer Group:

Stock Name (Symbol)Last PriceMarket Cap
Verizon Communications Inc.(VZ:XNYS)$52.47216.8027B
AT&T Inc.(T:XNYS)$32.26234.1997B
Shenandoah Telecommunications Company(SHEN:XNAS)$36.001.7841B
Consolidated Communications Holdings, Inc.(CNSL:XNAS)$11.26802.3040M
BCE Inc. (USA)(BCE:XNYS)$40.5136.3777B
Alaska Communications Systems Group, Inc.(ALSK:XNAS)$1.7593.0720M
ATN International, Inc.(ATNI:XNAS)$69.981.1167B
Cincinnati Bell Inc.(CBB:XNYS)$11.55490.1838M

Specialty Telecom Peer Group:

Stock Name (Symbol)Last PriceMarket Cap
Windstream Holdings, Inc.(WIN:XNAS)$4.92210.0840M
West Corporation(WSTC:XNAS)$23.501.9639B
Zayo Group Holdings, Inc.(ZAYO:XNYS)$37.709.3746B
Vonage Holdings Corp.(VG:XNYS)$13.663.2623B
RigNet, Inc.(RNET:XNAS)$13.30256.2908M
Pareteum Corp(TEUM:XASE)$2.66148.1620M
Straight Path Communications, Inc. Class B(STRP:XASE)$183.372.3411B
ShoreTel, Inc.(SHOR:XNAS)$7.50514.9275M
SigmaBroadband Co.(SGRB:OOTC)$0.351.7587B
New Ulm Telecom, Inc.(NULM:OOTC)$19.99103.2338M
Ooma Inc(OOMA:XNYS)$16.20315.9000M
LICT Corporation(LICT:OOTC)$13900.00282.2256M
Level 3 Communications, Inc.(LVLT:XNYS)$53.6319.3861B
Lumos Networks Corp.(LMOS:XNAS)$17.98430.3693M
Liberty Broadband Corp. Class A(LBRDA:XNAS)$79.0614.3374B
Inteliquent, Inc.(IQNT:XNAS)$22.90788.3096M
IDT Corporation Class B(IDT:XNYS)$5.19128.9923M
General Communication, Inc. Class A(GNCMA:XNAS)$36.281.3043B
General Communication, Inc. Class B(GNCMB:OOTC)$37.651.3535B
GTT Communications, Inc.(GTT:XNYS)$32.801.4717B
FairPoint Communications, Inc.(FRP:XNAS)$15.95434.9053M
Fusion Telecommunications International, Inc.(FSNN:XNAS)$4.29102.3042M
Frontier Communications Corporation(FTR:XNAS)$5.14543.8634M
Hawaiian Telcom Holdco, Inc.(HCOM:XNAS)$28.92336.4876M
Global Eagle Entertainment, Inc.(ENT:XNAS)$2.47224.3826M
Elephant Talk Communications, Inc.(ETAK:XASE)$2.66148.1620M
CenturyLink, Inc.(CTL:XNYS)$21.3823.0612B
Cogent Communications Holdings Inc(CCOI:XNAS)$50.652.3524B

Wireless Peer Group:

Stock Name (Symbol)Last PriceMarket Cap
United States Cellular Corporation(USM:XNYS)$42.833.6834B
Telefonica Deutschland Holding AG(TELDF:OOTC)$4.3913.0583B
Telephone and Data Systems, Inc.(TDS:XNYS)$30.003.3600B
T-Mobile US, Inc.(TMUS:XNAS)$64.9855.0527B
SBA Communications Corporation(SBAC:XNAS)$156.1017.9253B
SmarTone Telecommunications Holdings Limited Sponsored ADR(STTFY:OOTC)$5.041.1302B
Sprint Corp.(S:XNYS)$6.0324.1924B
pdvWireless, Inc.(PDVW:XNAS)$32.30467.9511M
ORBCOMM Inc.(ORBC:XNAS)$10.93858.6937M
NII Holdings Inc(NIHD:XNAS)$5.38540.4533M
ICTC Group, Inc.(ICTG:OOTC)$63.2524.2332M
Inmarsat plc Unsponsored ADR(IMASY:OOTC)$7.093.2443B
Intelsat S.A.(I:XNYS)$24.213.3095B
Iridium Communications Inc.(IRDM:XNAS)$19.852.1984B
Globalstar, Inc.(GSAT:XASE)$0.52661.8719M
Far Eastone Telecommunications Co., Ltd. Sponsored GDR RegS(FETLF:OOTC)$39.018.4742B
Cellcom Israel Ltd.(CEL:XNYS)$5.71576.9240M
America Movil SAB de CV Sponsored ADR Class L(AMX:XNYS)$16.5537.1561B
Spok Holdings, Inc.(SPOK:XNAS)$15.40299.8726M
Gogo Inc.(GOGO:XNAS)$4.26372.1165M

The next step is to analyze each industry to determine which one(s) I want to look at.  That will be in Part 2 b) tomorrow.

Friday, August 10, 2018

Looking for Value After a Nine Year Bull Market - A Live Analysis, Part 1

Below are 22 sector graphs based on the S&P Total Market Indices.  There are a couple missing - Aerospace/Defense (which could be in capital goods) and real estate.  I'll add them when they become available, but there is more than enough to start with.
I'm looking for a sector that's lagged behind the S&P, something out of favour.
A visual review shows me that Energy & Telecommunications fit the bill. 
I'm going to focus on Telecommunications.  Energy is down relative to its starting point but Energy is highly volatile and I did an article on Energy a few months ago.  I haven't put the link in this blog yet, but if you are interested you can find it on Seeking Alpha.
If you click into the three horizontal lines at the top right of the chart there's the option to get a data table.  Using that I can see on March 10, 2014 the first data point for Telecommunication, the index had a value of 1335.27 and the S&P had a value of 1877.17.  On August 7, 2018 the values were 1417.34 and 2858.48 respectively.  In that almost 4.5 year period, the S&P gained 102% or annualized 16.9% and Telecommunications gained 41% or annualized 7.9%.
(It's actually still a good return it's only when it's compared to the S&P does it look anemic).
In the next installment I'll look at the industries and the constituents within the sector to see if anything looks good.
If you have any questions, please leave it in the comments sections below and I'll get to it as soon as possible.



Thursday, August 9, 2018

Gold Part 3, Canadian Perspective

Here's the final installment of the gold series published in Seeking Alpha.  This one covered Canadian stocks.

Article.

Part of the article series was a regression analysis against an S&P/TSX Global Gold Index, which is based on the price of the underlying member stocks.  I'd change that and use a better gold price indicator, like the gold monthly price supplied by index mundi.

Saturday, August 4, 2018

Thursday, August 2, 2018

AI, Machine Learning and the future of INVRS

Artificial intelligence and machine learning are two areas that hold great possibility in the field of finance and investing. 

Right now there are AI driven ETFs that consume huge amounts of data, learn from it and and then constantly re-balance a portfolio of securities designed to out-perform the market.  It's a fascinating frontier.

How will INVRS adopt this technology while still remaining true to our vision of empowering human analysts?

INVRS was founded on the notion of using technology to automate or make some of the more grueling, time consuming tasks easier, but still keep a human in charge of the creative elements of analysis.

Here are some of the avenues we may develop or are developing currently:

1) Allow users to back-test models to determine efficacy across stocks, industries and the broad market.  We expect that our users will find some of their models work better under certain circumstances and with certain industries.  This knowledge will help them select the "right tool for the job".

2) Allow users to feed INVRS their own data sets for analytical purposes. 

3) Expand the tool set beyond financial parameters to include language recognition.

4) Expand the tool set to include a programmable AI or machine learning interface giving the user the ability to direct the process and outcome.

These are some of the ideas we have.  We'd love to hear what you think.  Leave your ideas in comments section below or better still, sign-up for a free-trial at INVRS and then let your imagination run wild.