Campbell (CPB)
FTS International. Pressure pumping / fracking is a business with a TON of operating leverage. This is a really rough business due to cyclicality and lower barriers to entry, but when times are good you make a lot of money and their phones are probably ringing off the hook right now. Boom or bust industry but if you’re constructive on WTI over $60, it’s a boom period.
This is only 5x forward P/E and those aren’t off bogus EPS projections. Not many follow this b/c it was private and only IPO’d a few months ago. This type of business should naturally trade at a low multiple b/c its very cyclical but if WTI is above $60 they are making good money. This company was practically dead two years ago but they are a major beneficiary of higher oil prices. Lots of scale and leverage to U.S. oil recovery. You should consider other valuation metrics, too, but I think they are cheap on all of them.
reverse zach morris trust
interesting value play due to the fall in price, what happened to it?
i dont like their recent acq too with snyder. they seem to be justifying it a lot with synergies, at current prices the snyder is like 40x multiple pre acq. snyder is growing like a beast though so thats good, but they are overpaying unless their synergies do well and also assuming that snyder growth continues.
anyways what are your thoughts. personally i dont like acquisitions. nothing pisses me off more.
Nobody wants to own staples, efficacy of zero-based budgeting over, and too many new start-up in health food and snack category which is why they bought out snyder-lance. If you think market going up zero reason to own staples and low beta stuff in general.
Yeah but FCF yield is about 10% with ~4% dividend yield and good coverage from 2019 onward (2018 has some restructuring and CAPEX). Honestly, this is your prototypical Buffett consumer staples value play with solid metrics, stable performance, old time brand recognition and simple business model. A common feedback I’ve heard from people about this name is along the lines of “I’m almost surprised Buffett doesn’t own this.” I figure put this away in a long term portfolio on recent weakness and forget about it for a few years.
It’s definitely oversold. Why this over other staples for sample GIS or KMB? You think someone could buy them out? It’s not that big. Most strategists I’ve heard are telling clients to stay away from traditionally defensive names like CPB so this category is definitely out of favor since the recession basically. Just wondering if this is a good time to buy when rates are expected to rise thus making high yield stuff even less attractive and staples performing anything but defensively during previous sell offs.
I would buy this for my personal port tho that dividend is as safe as it can be.
I have nothing against GIS or KMB. This my sector is industrials / basics so I can’t get in depth on this one, just the beaten down valuation after the selloff and the fact that it is out of favor are the primary attractions for me. I’ll buy out of favor strong cash flow, strong dividend companies all day if I can and I like Campbell’s brand appeal and iconic image. The Snyder’s acquisition and leadership change gives it a little extra near term strain that I views as a buying opportunity. I do think them getting bought is possible and also think that an old timey value guy like Buffett with a lot of cash could see this as very attractive.
i dont think their cash flow is as secure as you think. consumer habits are changing. people dont like canned shit as much as before which are their legacy products and over 50% of rev. fresh foods, frozen crap, and snacks are the new desired items
also klaud you mention these new start ups. i read an article a good minute ago about how these starts up can now go toe to toe agains the juggernauts due to the rise of internet advertising. the commitments to advertise has dropped significantly plus retialers are actively trying to breed competition between products.
to add, debt is usually pretty substantial for these companies. which was good when the expectation was that these cash flows were secure, but on the off chance this is not, and their growth slows, they’ll face two things. even if stock prices were to drop the debt will still need to be paid in full, and if they cannot they will have to refi at higher rates due to secular changes as well as their shittier cash flow.
lastly these cos have been getting better valautions due to their zbb and cost cutting measures. but you can only cut for so long, at some point you need to create top line growth hopefully organically and not through acquisitions.
Debt to EBITDA is 4.5x with a 10% FCF yield on negligible sustaining CAPEX…
personally i think anything above 4x is a lot. in addition you are not talking post acq. 14b debt. ebitda of around 2b so thats 7x. when you include debt, that fcf does not look appealing. its less than 5%. of course this is pre synergies but im not really down to trust all those synergies.
Fake News. Moody’s puts pro-forma leverage at 4.8x in June down to 4.0x within 24 months of the acquisition and pre-acquisition the debt was around 2x. “We estimate that debt/EBITDA at closing will approximate 5.0x before synergies , compared to 2.2x currently. Campbell should be able to reduce debt/EBITDA below 4.0x within 24 months through core operating cash flow and cost synergies.”
Too risky from the guy who hyped SNAP. Next!
didnt know that the rise in debt in q1 reflected deal closure which occured q1. anyways if you think 5x is a great ratio then by all means! you a buyer now im guessing?
main point is deal is shitty. not accretive. which is why prices sunk.
also for the record i did say i didnt buy snap cuz i was too pussy to buy a risky stock. i was just trying to find a justification for the price. which imo is still plausible.
Let’s switch gears. Any short ideas??? Especially industrial related.
Haha, it’s fine I just need to dial back the trolling a bit sometimes.
I am a buyer of CPB at these levels, although I haven’t bit yet.
im keeping an eye on SIG. hope they have a bad quarter and stock falls a bit more.
love the business they need to get some thing in order and continue developing their e commerce platform.
KHC has some more room to fall IMO
What do you like about SIG? I would think the whole jewelry industry is getting disrupted by direct to consumer models like blue nile with super low margins. What makes SIG with retail presence competitive relative to those e-commerce platforms selling super low margins while customers are getting more and more value-oriented.
SIG has the #2 jewelry e-commerce platform. they entered e-sales party pretty late but that part is doing well.
i think they can leverage their zales/jarred names to increase presence online.
they are closing a bunch of stores and concentrating on the redundancy of having a jared and zales in the same mall.
only planning on opening 20-30 strategic stores.
cash flow is nice, debt pretty low. the ceo is working on a turnaround and i think with another drop it is an attractive bargain
could also be attractive to a PE firm
Thanks will keep an eye on this :>
in terms of product quality and price. from a consumer perspective, can yall tell me what’s it like to go to these diamond stores vs say a discount retailer or a random no name competitor or online shops c2c b2c. percent of sales online/off and level of growth off vs on yoy cagr past 5 yrs. why do you say turnaround?
All VVS’, put you in a necklace Girl, you look beautiful tonightStars on the roof, they matching with the jewelry