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Ideas and Strategies on Investing.

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American Farmland

12/29/2015

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American Farmland Company was founded in October 2009 by D. Dixon Boardman, Harrison LeFrak and Thomas S.T. Gimbal along with other significant founders to acquire a diversified portfolio of high quality farmland that can generate stable and growing cash flow. It remained a private company until this past October when it had its initial public offering and got my attention. The idea of owning shares in a company that owns farmland or timberland has appealed to me in the past so when I came across this company it immediately got my attention.
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The central idea behind the American Farmland Company was to accumulate and then to lease farmland. The founders noted that U.S. farmland property values generally increase over the long term while having lower than historical debt to equity and debt to asset ratios. They have also risen during both increasing and decreasing interest rate environments. This historical perspective is expected to increase in the future as well.

With less debt, farmland has been and may be more resistant to interest rate changes, credit shocks and financial recessions. And more specifically and timely, during the financial crisis of 2008, the NCREIF Farmland Index generated robust gross cumulative gains while the S&P 500 Index and the MSCI World Index generated substantial losses. Since inception the company has maintained this consistent, institutional business strategy, and in its implementation they have adhered to four core principles: (i) diversification, (ii) high quality standards, (iii) a value added approach and (iv) risk management. In maintenance of these four core principles the company expects to continue to acquire additional high quality properties.

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​American Farmland Company, a real estate company, owns and operates a portfolio of farmlands in the United States. The company operates through four segments: Permanent Crop, Specialty/Vegetable Row Crop, Commodity Row Crop, and Development. The Permanent Crop segment consists of Kimberly Vineyard, Golden Eagle Ranch, Quail Run Vineyard, Blue Heron Farms, and Falcon Farms properties with an aggregate of 3,069 tillable acres and 3,882 gross acres. The Specialty/Vegetable Row Crop segment includes Sandpiper Ranch and Sweetwater Farm properties with an aggregate of 1,608 tillable acres and 1,808 gross acres. The Commodity Row Crop segment comprises Pleasant Plains, Macomb Farm, Kane County Farms, and Tillar Farms with an aggregate of 4,446 tillable acres and 4,726 gross acres. The Development segment consists of Blue Cypress Farm, Roadrunner Ranch, Condor Ranch, Grassy Island Groves, Pintail Vineyards, and Hawk Creek Ranch properties, with an aggregate of 3,487 tillable acres and 4,962 gross acres. The company leases its farms to professional farmer tenants under various lease structures with staggered durations, including fixed and participating leases. The trust qualifies as a real estate investment trust for federal income tax purposes. American Farmland Company was founded in 2009 and is based in New York, New York.
(Summary) (Company) (Chart)
27 December 2015
Price $7.07
1yr Target $9.50
Analysts 7
Dividend $0.25
Payout Ratio %

1yr Cap Gain 34.37%
Yield 3.53%
1yr Tot Return 37.90%
EPS (ttm) $0.05
EPS next yr $0.28
EPS next 5yr N/A
1yr Price Support N/A
P/E 141.40
PEG ---
Beta ---
Market Cap $142.46 Mil
Revenues $9.40 Mil
Earnings $0.60 Mil
Profit Margin 6.38%
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1yr EarnGR %
3yr EarnGR %
5yr EarnGR %
1yr DivGR %
3yr DivGR ---
5yr DivGR ---
Quick Ratio ---
Current Ratio ---
Debt/Equity 0.51
ROA 0.40%
ROE 0.70%
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Company History
2009
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American Farmland Company was founded in October by a team of investment professionals across the agriculture, real estate, and alternative investment industries: Optima Fund Management, Harrison LeFrak, Alfonso and J. Pepe Fanjul of Florida Crystals Corporation, and William von Mueffling of Cantillon Asset Management.
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2010
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The Company began deploying capital by acquiring four high-quality farmland properties across the United States: two Illinois row crop farms, a California Merlot wine grape vineyard and a mixed vegetable farm in Florida.
2011
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AFCO continued to diversify its portfolio with a citrus development, an Arkansas row crop farm, additional Midwestern row crops, a lemon and avocado development and a strawberry and lettuce property in California.
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2012
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The Company acquired an almond orchard, a second parcel to our strawberry farm, a Chardonnay/Pinot Noir vineyard and a citrus development in Florida. Additionally, the Company formally elected status as a Real Estate Investment Trust, and subsequently paid its first dividend to shareholders in December.
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2013
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AFCO acquired three new development properties to be converted into a mixed vegetable farm in Florida and a pistachio orchard and vineyard in California. A fully mature walnut orchard was also added to the Company’s growing portfolio.
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2014
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The Company hired Robert L. Cowan as President and CIO, who complemented and strengthened the existing team with his 30 years of experience in diversified farmland investment, acquisition and management. Acquisitions included a pecan orchard in Georgia and Alabama and second parcels expanding previously purchased properties.
2015
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In the third quarter, AFCO acquired a pistachio orchard and an additional almond orchard parcel. In October, the Company completed its Initial Public Offering and officially began trading on the New York Stock Exchange.
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​Important Company Assets

​Investments in real estate as of September 30, 2015 and December 31, 2014 are comprised of the following: 
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The Company has the following properties as of September 30, 2015 and December 31, 2014: 
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My Perspective

Anyone who reads any of the articles I've written over the years knows that I have an affinity toward companies that invest in farmland and timberland. I believe these investments are obviously great investments if bought at a reasonable price.

The real value in this type of investment is in the inherent value of the land itself. I believe that the land will grow in value by 6-8% per year and hence so will the value of the company. But that's not the only value. Farmland needs to be farmed and companies like American Farmland Company will benefit from the annual lease payments made by farmers to the company usually in the vicinity of 2-3%. Together this is a nice stream of income. While farmland prices often increase in relation to commodity prices, I expect this investment to increase at an average of 10-12% per year.

My intention is to begin accumulating shares in American Farmland very soon (probably this week). Like other companies I intend to start out with a small position and then grow that position over time through dividend reinvestment and additional buys at opportune times. 
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Aristocrat Yields

12/27/2015

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The following is a list of some recent Dividend Aristocrats along with their current yields and their P/E ratios. These numbers are useful because they'll tell you what you'll receive as a percentage of your investment in the form of dividends and how much you'll be paying for that investment relative to its earnings. Most of these companies have fairly lofty valuations simply because there is always a select group of investors generally known as Dividend Growth Investors who are willing to pay a premium for a reliable source of growing dividends. For them, a growing dividend is everything.

Many of these companies have been having a rough time of it recently, so many of them have been beaten down quite badly. Some have had their P/E ratios pushed higher as their earnings fell with the economy. For some of these companies, their dividend payout may be reaching a high percentage of their earnings and the dividend may be in trouble. For those companies (like the oil companies) that have come out during their quarterly announcements and said that their dividends are of utmost importance, they'll probably see very limited growth in those dividends over the next couple of years. 

But for many of these companies their current yields are hitting all time highs. As a result this may just be the best time in years to start, or add to, positions an investor may have already started. These may just be some of the best dividend yields from some of the best large capitalization companies in a very long time. Especially for dividend growth investors that tend to buy and hold their positions for years or decades. 
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Yield
​2.79%
2.34%
4.09%
​2.77%
​2.46%
​3.08%
​5.58%
​2.50%
1.71%
2.56%
​1.60%
1.74%
4.77%
3.15%
1.18%
2.28%
4.08%
​0.51%
2.81%
1.22%
4.26%
3.78%
1.60%
​2.06%
​2.94%
6.10%
1.47%
2.42%
2.92%
2.85%
​3.04%
1.49%
2.01%
3.05%
1.38%
1.97%
​3.65%
2.82%
1.50%
3.39%
0.66%
2.10%
3.00%
​2.93%
3.14%
1.72%
2.41%
3.05%
1.05%
​2.39%
2.41%
1.70%
​3.24%
Company
3M Co.
Abbott Laboratories
AbbVie
AFLAC
Air Products & Chemicals
Archer Daniels Midland
AT&T
Automatic Data Processing
Becton, Dickinson
Bemis Company
Brown-Forman
Cardinal Health
Chevron
Cincinnati Financial
Cintas
Colgate-Palmolive
Consolidated Edison
CR Bard
Dover
Ecolab
Emerson Electric
Exxon Mobil
Family Dollar Stores
Franklin Resources
Genuine Parts
HCP
Hormel Foods
Illinois Tool Works
Johnson & Johnson
Kimberly-Clark
Leggett & Platt
Lowe's Companies
McCormick & Co
McDonald's
McGraw Hill Financial
Medtronic
Nucor
Pepsico
PPG Industries
Procter & Gamble
Sigma-Aldrich
Stanley Black & Decker
Sysco
T. Rowe Price Group
Target
The Chubb Corp
The Clorox Co
The Coca-Cola Co
The Sherwin-Williams Co
V.F. Corp
W.W. Grainger
Walgreen
Wal-Mart
P/E Ratio
19.54
15.02
​33.91
10.53
​22.65
​12.66
​36.45
​27.25
​46.54
18.37
31.29
​22.48
19.96
15.29
16.29
24.80
17.36
​107.94
11.23
31.02
12.10
16.76
39.01
11.24
​18.56
75.79
31.43
18.65
19.90
78.71
​23.05
24.20
28.10
25.68
422.03
44.36
​21.02
29.83
23.59
30.03
34.18
21.66
37.82
​15.64
N/A
15.32
25.58
27.77
25.53
​25.91
18.08
21.61
​13.02
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Select Medical Holdings

12/21/2015

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Select Medical Holdings Corporation is a leading operator of specialty hospitals in the United States. As of September 30, 2015, Select operated 110 long-term acute care hospitals and 17 acute medical rehabilitation hospitals in 28 states. Select is also a leading operator of outpatient rehabilitation clinics in the United States, with approximately 1,033 locations in 31 states and the District of Columbia. Select also provides medical rehabilitation services on a contract basis at nursing homes, assisted living and senior care centers, schools and worksites.
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​Select Medical Holdings Corporation, through its subsidiary, Select Medical Corporation, operates specialty hospitals and outpatient rehabilitation clinics in the United States. It operates in two segments, Specialty Hospitals and Outpatient Rehabilitation. The Specialty Hospitals segment provides long term acute care hospital services and inpatient acute rehabilitative hospital care. This segment offers various medical services for the treatment of respiratory failure, neuromuscular disorders, traumatic brain and spinal cord injuries, strokes, non-healing wounds, cardiac disorders, renal disorders, and cancer. The Outpatient Rehabilitation segment operates clinics that provides physical, occupational, and speech rehabilitation services. This segment also offers medical rehabilitative services to residents and patients of nursing homes, hospitals, schools, assisted living and senior care centers, and worksites. In addition, this segment provides specialized programs, such as functional programs for work related injuries, hand therapy, and athletic training services; and services that are designed to prevent short term disabilities from becoming chronic conditions. As of December 31, 2014, it operated 113 long term acute care hospitals and 16 acute medical rehabilitation hospitals in 28 states; and 1,023 outpatient rehabilitation clinics in 31 states and the District of Columbia. Select Medical Holdings Corporation was founded in 1996 and is headquartered in Mechanicsburg, Pennsylvania.
(Summary) (Company) (Chart)
20 December 2015
Price $12.01
1yr Target $13.50
Analysts 6
Dividend $0.40
Payout Ratio 41.23%

1yr Cap Gain 12.40%
Yield 3.33%
1yr Tot Return 15.73%
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EPS (ttm) $0.97
EPS next yr $0.98
EPS next 5yr 12.50%
1yr Price Support $12.25
P/E 12.38
PEG 0.99
Beta 1.19
Market Cap $1.58 Bil
Revenues $3.48 Bil
Earnings $123.40 Mil
Profit Margin 3.53%
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1yr EarnGR 10.97%
3yr EarnGR 8.53%
5yr EarnGR 30.54%
1yr DivGR 33.33%
3yr DivGR ---
5yr DivGR ---
Quick Ratio 1.30
Current Ratio 1.30
Debt/Equity 2.88
ROA 4.30%
ROE 20.10%
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​Background

Co-founded in 1996 by Rocco Ortenzio and Robert Ortenzio, Select Medical began as a regional provider of outpatient physical rehabilitation. Contract therapy was added to the company's specialized health care offerings in 1997, and was quickly followed by the introduction of long-term acute care in 1998. In 1999, Select Medical made one of its largest acquisitions by purchasing NovaCare Physical Rehabilitation and Occupational Health.

In April 2001, the company completed an initial public offering and was listed on the NASDAQ exchange. Fourteen months later, Select Medical moved to the New York Stock Exchange, where it is currently traded under the symbol SEM.

In 2004 the company acquired the Kessler Institute for Rehabilitation formally adding inpatient medical rehabilitation to its patient care offerings. Further growth in this newest care line continued through joint ventures with Penn State Milton S. Hershey Medical Center, SSM Health Care - St. Louis and Baylor Health Care System in 2011.

In 2015 Select Medical completed its largest acquisition to date when it entered into a joint venture partnership for the purchase of Concentra, a national health care company that delivers a wide range of medical services, including urgent care, occupational medicine and physical therapy.

Today Select Medical encompasses four areas of expertise: long-term acute care, inpatient medical rehabilitation, outpatient physical therapy and contract therapy. All of this is provided by a staff of 42,000 care providers across the United States.
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​My Perspective

Every once in a while the market seems to get it right. In the case of Select Medical I think the market has valued this company correctly. It's growing at about 12% per year, has a P/E ratio of approximately 12, and a PEG of approximately 1. That pretty much hits it on the head when it comes to figuring out value on a napkin. 

For the most part, an investor can figure on an increase of about 12% each year in the value of the stock over the next couple of years combined with a continuing dividend of a little over 3% for a total return of about 15%. That's not bad for just about any investment. 

I personally have no exposure to the hospital industry and this may be a nice way to gain some exposure. With the aging of the Baby Boomers, long term acute care and physical rehabilitation may just be an area that's set to take off over the next 10-20 years. If that's the case, this might just be a great company for a long term dividend growth investor like myself. 
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Quarterly Revenues 2004-2015
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Tractor Supply Company

12/16/2015

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Dividend growth investors tend to worry about a company's stock price only when they're buying the stock. They rarely worry about a stock's price once they own it. That's because they tend to own shares forever, and the initial price they paid for the stock sets the initial yield they'll receive. From that point forward they expect that dividend to increase. This makes their yield-on-initial-cost more impressive each year. But future dividend increases are highly dependent on future increases in the company's revenues and earnings. It's from those earnings that dividends are paid.

But as we all know, expectations of future growth are only guesses, at best. The only real comfort a DGI has is the expectation that a company that has increased revenues, earnings and dividends in the past will continue to do so in the future. And that may or may not happen. That's why DGIs tend to invest in companies on the lists of Dividend Aristocrats and Dividend Champions. 

So why do dividend growth investors often put restrictions on their stock selections like yield and P/E ratios? If the only thing that matters to a DGI is dividend growth and the increasing stream of income it produces, why not just look for any company that increases its revenues, earnings and dividends over time? That would seem obvious to me. I've found a lot of companies that fall into this category of increasing dividends, and one of these companies is Tractor Supply Co. It's one of middle America's favorite stores, but if you live in a large city you may have never heard of it. 

Tractor Supply Company is to rural farmers and small town gardeners as Home Depot and Lowe's are to builders and Walmart and Target are to shoppers. It's where rural shoppers do a lot of their shopping simply because they have what the rural shoppers need. So today I decided to take a look at TSC's numbers and charts.
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Tractor Supply Company operates rural lifestyle retail stores in the United States. It offers a selection of merchandise, including equine, livestock, pet, and small animal products necessary for their health, care, growth, and containment; hardware, truck, towing, and tool products; seasonal products, such as heating products, lawn and garden items, power equipment, gifts, and toys; work/recreational clothing and footwear; and maintenance products for agricultural and rural use. As of March 28, 2015, the company operated 1,422 stores in 49 states. It operates its retail stores under the Tractor Supply Company, Del's Feed & Farm Supply, and HomeTown Pet names. The company also operates an e-commerce Website at TractorSupply.com. It sells its products to recreational farmers, ranchers, and others, as well as tradesmen and small businesses. Tractor Supply Company was founded in 1938 and is based in Brentwood, Tennessee.
​(Summary) (Company) (Chart)
13 December 2015
Price $87.90
1yr Target $102.43
Analysts 21
Dividend $0.80
Payout Ratio 26.66%

1yr Cap Gain 16.53%
Yield 0.91%
1yr Tot Return 17.44%
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EPS (ttm) $3.00
EPS next yr $3.58
EPS next 5yr 15.26%
1yr Price Support $54.63
P/E 29.30
PEG 1.92
Beta 1.06
Market Cap $11.81 Bil
Revenues $6.16 Bil
Earnings $410.70 Mil
Profit Margin 6.65%
1yr EarnGR 14.65%
3yr EarnGR 20.54%
5yr EarnGR 26.69%
1yr DivGR 25.00%
3yr DivGR 25.70%
5yr DivGR 41.70%
Quick Ratio 0.20
Current Ratio 2.10
Debt/Equity 0.15
ROA 18.10%
ROE 30.80%
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​Looking at the forward estimates from 21 analysts, revenues are expected to be up 10.50% in 2015 and another 11.00% in 2016. That may look like a slowdown from the recent past but it's still a very nice increase. And if history is a precursor of the future, just look at the chart of the company's revenues below for the last 15 years. I think it would be difficult to find a prettier chart than that. If Dividend Growth Investors are primarily concerned with increasing dividends, it all begins with a company's increasing revenues. 
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But it doesn't stop there. Increasing revenues have to translate into increasing earnings. And those earnings need to increase faster than inflation if a DGI wants his dividends to increase faster than inflation (and that's important if an investor doesn't want his income to fall relative to inflation!). For TSC the earnings picture was growing nicely until the recession of 2008-2009 (see below) when earnings stagnated for about 2 years. But since then they have really taken off. And taken off significantly. 
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​Yield vs Growth

So here's the conundrum that almost every dividend growth investor is confronted with at some point in his investing career. Does he go after yield or does he go after dividend growth. The easy answer is he goes after growth since that's what defines a true dividend growth investor. But often investors demand a minimum yield that they'll accept. And that can eliminate some of the best dividend growth companies listed on the exchanges. Tractor Supply Company just happens to be one of these companies that would be overlooked. 

Personally I think a dividend of less than 1% is a difficult yield to accept. That's approaching the kind of yield that any investor can easily get by investing in CDs at a local bank. And CDs come without all the risks associated with investing in the stock market. But the interest rate on CDs won't increase over the length of the CD. Common stock can, and often does. In the case of Tractor Supply Company, its dividend is expected to increase. And increase at a very fast rate.

With estimated revenues increasing at a rate above 10% per year in the next few years, I expect earnings to increase in the mid-teens. This should allow the dividend to grow in the mid-teens also. And that's without increasing the payout ratio which is relatively low at 26%.

​Those types of increases will swell an investor's income very quickly. In a few short years that stream of income will produce a tremendous amount of money. And that's what a dividend growth investor should be most interested in. 

​My Perspective

I am, by my own confession, a dividend growth investor that invests in companies that increase their revenues, earnings and dividends over a relatively long period of time. I'm also an investor that likes to buy securities as cheaply as possible. So I've also had to become a patient investor too. I also use put and call options at times to enter and exit positions and to allow me to get the prices I need, want or expect.

In the next couple of weeks I intend to start a position in this stock. I intend to buy TSCO shares with my own money, with dividends I receive from other companies, and with income I receive from selling options in other companies. This has been my strategy and it's how I leverage my portfolio to accumulate additional shares of companies I both own or want to own. It's how an investor builds wealth.
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0 Comments

Wabtec Corp

12/14/2015

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​Wabtec Corporation provides highly engineered, value-added products and services to freight rail, passenger transit and industrial customers throughout the world to assist them in increasing their safety, efficiency and productivity. Through its subsidiaries, the company manufactures a wide range of products for locomotives, freight cars and passenger transit vehicles, builds new commuter and switcher locomotives, and manufactures cooling systems and related equipment for the power generation and transmission industry. Wabtec Corp strives to combine practical innovations with the best in modern manufacturing and business practices to generate above average, long term returns for their shareholders. 

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Westinghouse Air Brake Technologies Corporation, doing business as Wabtec Corporation, provides technology-based products and services for the freight rail and passenger transit industries worldwide. It operates in two segments, Freight and Transit. The Freight segment manufactures and services components for new and existing locomotive and freight cars; supplies railway electronics and positive train control equipment; provides signal design and engineering services; builds switcher locomotives; rebuilds freight locomotives; and provides heat exchangers and cooling systems for rail and other industrial markets. This segment serves publicly traded railroads; leasing companies; manufacturers of original equipment, such as locomotives and freight cars; and utilities. The Transit segment manufactures and services components for new and existing passenger transit vehicles, including subway cars and buses; builds commuter locomotives; and refurbishes subway cars. This segment serves public transit authorities and municipalities, leasing companies, and manufacturers of subway cars and buses. The company’s products include positive train control equipment and electronically controlled pneumatic braking products; railway electronics, including event recorders, monitoring equipment, and end of train devices; freight car truck components; draft gears, couplers, and slack adjusters; air compressors and dryers; track and switch products; railway braking equipment and related components; friction products, including brake shoes and pads; door and window assemblies, and accessibility lifts and ramps for buses and subway cars; and traction motors. It also builds, remanufactures, and overhauls commuter and switcher locomotives, and transit cars. Westinghouse Air Brake Technologies Corporation was founded in 1869 and is headquartered in Wilmerding, Pennsylvania.
(Summary) (Company) (Chart)
13 December 2015
Price $70.12
1yr Target $94.92
Analysts 12
Dividend $0.32
Payout Ratio 8.02%

1yr Cap Gain 35.35%
Yield 0.45%
1yr Tot Return 35.80%
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EPS (ttm) $3.99
EPS next yr $4.48
EPS next 5yr 15.00%
1yr Price Support $67.20
P/E 17.57
PEG 1.17
Beta 1.31
Market Cap $6.77 Bil
Revenues $3.30 Bil
Earnings $388.30 Mil
Profit Margin 11.75%
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1yr EarnGR 20.26%
3yr EarnGR 26.86%
5yr EarnGR 24.81%
1yr DivGR 51.72%
3yr DivGR 63.05%
5yr DivGR 61.53%
Quick Ratio 1.70
Current Ratio 2.50
Debt/Equity 0.23
ROA 14.80%
ROE 25.60%
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Earnings for 2015 are estimated to come in at $4.10 versus $3.62 in 2014 which is an increase of 13.25%. Estimates for 2016 are at $4.48 per share which is an increase of 9.26% over 2015. Dividends for the full year 2015 are expected to be $0.30 per share versus $0.22 per share in 2014. That's a dividend growth rate of 36.36% which, although slowing, is still a very healthy growth rate.
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Industry Overview

Wabtec Corp primarily serves the worldwide freight rail and passenger transit industries and as a result their operating results are largely dependent on the level of activity, financial condition and capital spending plans of the global railroad and transit industries. Many factors influence these industries, including general economic conditions, traffic volumes as measured by freight tonnage and passenger ridership, government spending on public transportation, and investment in new technologies by freight rail and passenger transit systems.

According to a recent study the accessible global market for railway products and services is more than $100 billion and it's expected to grow 2.7% annually through 2019. The three largest markets, which represent about 75% of the total market, are Europe, Asia-Pacific and North America. The study projects the overall market to remain stable through 2020 as emerging markets show above average growth due to increases in urbanization and increasing government support as developed markets slow. Overall growth in all major product segments, with rail control and services expected to grow the fastest, is expected to be 3% each.

It's estimated that the global installed base of locomotives is approximately 110,000 units, with about 35% in Asia-Pacific, 25% in Russia-CIS and 20% in North America. It's also estimated that the global installed base of freight cars is approximately 5.2 million units, with about 30% each in Russia-CIS and North America, and about 20% in Asia-Pacific. Finally the global installed base of transit cars is estimated to be 330,000 units, with about 55% in Asia-Pacific, about 20% in Europe and about 10% in Russia.

In North America, railroads carry about 40% of intercity freight, as measured by ton-miles, which is more than any other mode of transportation. They are an integral part of the continent’s economy and transportation system, serving nearly every industrial, wholesale and retail sector. Through direct ownership and operating partnerships, U.S. railroads are part of an integrated network that includes railroads in Canada and Mexico, forming what is regarded as the world’s most-efficient and lowest-cost freight rail service. The railroads carry a wide variety of commodities and goods, including coal, metals, minerals, chemicals, grain, and petroleum. These commodities represent about 55% of total rail carloadings, with intermodal carloads accounting for the rest. Intermodal traffic has been the railroads’ fastest growing market segment in the past 10 years. Railroads operate in a competitive environment, especially with the trucking industry, and are always seeking ways to improve safety, cost and reliability. New technologies offered by Wabtec Corp can provide some of these benefits. Demand for the company's freight related products and services in North America is driven by a number of factors, including rail traffic, and production of new locomotives and new freight cars. In 2014, the Association of American Railroads (“AAR”) reported total carloads increased 4.4% including a 5.4% increase in intermodal traffic. Deliveries of new locomotives were about 1,450 units in 2014, compared to about 1,300 in 2013 and the average of about 1,200 in the past 10 years. Deliveries of new freight cars were about 67,000 units in 2014, compared to about 53,000 in 2013 and the average of about 50,000 in the past 10 years. 

In the U.S., the passenger transit industry is dependent largely on funding from federal, state and local governments, and from fare box revenues. The New York City region is the largest passenger transit market in the U.S., but most major cities also offer either rail or bus transit services. Demand for North American passenger transit products is driven by a number of factors, including government funding, deliveries of new subway cars and buses, and ridership. The U.S. federal government provides money to local transit authorities, primarily to fund the purchase of new equipment and infrastructure for their transit systems. In 2014, the U.S. Congress passed a bill that includes transit spending of about $11 billion in fiscal 2015, an increase of about 2%. The number of new transit cars delivered in 2014 was about 850, compared to about 1,000 in 2013. The number of new buses delivered in 2014 was about 4,600 compared to about the same in 2013. In the past 10 years, the average number of new transit cars delivered annually is about 800, and the average number of new buses delivered annually is about 4,700. Public transit ridership provides fare box revenues to transit authorities, which use these funds, along with state and local money, primarily for equipment and system maintenance. Based on preliminary figures from the American Public Transportation Association, ridership on U.S. transit vehicles increased about 0.9% in 2014.

Outside of North America, countries such as Australia, Brazil, China, India, Russia, and South Africa have been investing capital to expand and improve both their freight and passenger rail systems. Throughout the world, some government-owned railroads are being sold to private owners, who often look to improve the efficiency of the rail system by investing in new equipment and new technologies. According to studies, emerging markets are expected to grow at above-average rates as global trade creates increases in freight volumes and urbanization leads to increased demand for efficient mass-transportation systems. As this growth occurs, Wabtec expects to have additional opportunities to provide products and services in these markets.

In Europe, the majority of the rail system serves the passenger transit market, which is expected to continue growing as energy and environmental factors encourage investment in public mass transit. France, Germany, the United Kingdom and Italy are the largest transit markets, representing about two-thirds of passenger traffic in the European Union. Western European rail markets are expected to grow at about 2.0% in the next few years, with the United Kingdom and France expected to invest in new rolling stock. According to the UK’s Office of Rail Regulation, passenger rail usage has steadily increased in the past decade, with the Office reporting a 4.4% increase in second quarter ridership in its most recent quarterly report. Germany has the largest rail network in Europe. The largest freight markets in Europe are Germany, Poland and the United Kingdom. In the first nine months of 2014, The Federal Statistical Office of Germany reported a 0.8% increase in freight volumes compared to the same period in 2013. For the first nine months of 2014, SNCF (French national railway) reported an increase of 3.4% in revenue for local and regional ridership, and an increase of about 0.8% in freight-related revenue. It's estimated that the European rail market consists of about 11,000 locomotives, about 750,000 freight cars and about 72,000 passenger transit cars.

The Asia/Pacific market is now the second-largest geographic segment. This market consists primarily of China, India and Australia. Growth has been driven by the continued urbanization of China and India, and by investment in freight rail infrastructure to serve the mining and natural resources markets in those countries, as well as in Australia. It's estimated that this market consists of about 35,000 locomotives and about 1.0 million freight cars. China is expected to increase spending on rail infrastructure and equipment in 2015, as it resumes investment in high-speed rail programs. In its most recent report, the Indian government reported that in the first nine months of its fiscal 2014 freight rail traffic increased about 5.3% and passenger rail traffic decreased about 1.4%. India is expected to increase spending significantly in 2015 as it seeks to modernize its rail system.
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Other key geographic markets include Russia/CIS, South Africa, and Brazil. With about 1.5 million freight cars and about 28,000 locomotives, Russia/CIS is among the largest freight rail markets in the world, and it’s expected to invest significantly in new rolling stock and infrastructure. Russian Railways, a state-owned company, provides both freight and passenger transportation. South Africa, in 2012, announced a major program to invest in its freight rail and passenger transit infrastructure during the next 20 years. As part of this program, PRASA, the Passenger Rail Agency of South Africa, plans to purchase about 3,600 new transit cars and about 1,000 new locomotives. Brazil has also been investing in its passenger transport systems in advance of hosting the 2016 2016 Olympics. 
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Business Segments and Products

Wabtec Corp provides its products and services through two principal business segments, the Freight Segment and the Transit Segment, both of which have different market characteristics and business drivers.

The Freight Segment primarily manufactures and services components for new and existing locomotive and freight cars , supplies railway electronics, positive train control equipment, signal design and engineering services, builds switcher locomotives, rebuilds freight locomotives and provides heat exchangers and cooling systems for rail and other industrial markets. Customers include large, publicly traded railroads, leasing companies, manufacturers of original equipment such as locomotives and freight cars, and utilities.  In 2014, the Freight Segment accounted for 57% of total sales, with about 75% of sales in North America and the remainder to international customers. In 2014, slightly more than half of the Freight Segment’s sales were in aftermarket.

The Transit Segment primarily manufactures and services components for new and existing passenger transit vehicles, typically subway cars and buses, builds new commuter locomotives and refurbishes subway cars. Customers include public transit authorities and municipalities, leasing companies, and manufacturers of subway cars and buses around the world. As discussed above, demand in the transit market is primarily driven by government funding at all levels and passenger ridership. In 2014, the Transit Segment accounted for 43% of the company's total sales, with about 45% of its sales in North America and the remainder to international customers. About two-thirds of the Transit Segment’s sales are in the aftermarket with the remainder in the original equipment market.

The following is a summary of the company's leading product lines in both aftermarket and original equipment across both business segments:

Specialty Products & Electronics:
  • Positive Train Control equipment and electronically controlled pneumatic braking products
  • Railway electronics, including event recorders, monitoring equipment and end of train devices
  • Signal design and engineering services
  • Freight car truck components
  • Draft gears, couplers and slack adjusters
  • Air compressors and dryers
  • Heat exchangers and cooling products for locomotives and power generation equipment
  • Track and switch products
Brake Products:
  • Railway braking equipment and related components for Freight and Transit applications
  • Friction products, including brake shoes and pads
Remanufacturing, Overhaul and Build:
  • New commuter and switcher locomotives
  • Transit car and locomotive overhaul and refurbishment
Transit Products:
  • Door and window assemblies for buses and subway cars
  • Accessibility lifts and ramps for buses and subway cars
  • Traction motors

Wabtec Corp has become a leader in the rail industry by capitalizing on the strength of their existing products, technological capabilities and new product innovation, and by their ability to harden products to protect them from severe conditions, including extreme temperatures and high-vibration environments. Supported by 1,200 engineers and specialists, Wabtec has extensive experience in a broad range of product lines, which enables them to provide comprehensive, systems-based solutions for their customers.
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During the last few years Wabtec has introduced several significant new products, including electronic braking equipment and train control equipment that encompasses onboard digital data and global positioning communication protocols. In 2007 the FRA (Federal Railroad Administration) approved the use of their Electronic Train Management System, which offers safety benefits to the rail industry. In 2008 the U.S. enacted a rail safety bill that mandates the use of Positive Train Control (“PTC”) technology, which includes on-board locomotive computer and related software, on a majority of the locomotives and track in the U.S. With Wabtec's Electronic Train Management System, the company is the leading supplier of onboard train control equipment and they are working with the U.S. Class I railroads, commuter rail authorities and other industry suppliers to implement this technology throughout the rail network. In 2014, Wabtec recorded about $290 million of revenue from freight and transit PTC projects. 
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Recent Acquisitions and Joint Ventures

​Wabtec has recently completed several significant acquisitions in support of its growth strategies:
  • In February 2015, the Company acquired Railroad Controls L.P., a U.S. based provider of railway signal construction services for a purchase price of approximately $63.7 million.
  • In September 2014, the Company acquired C2CE Pty Ltd., a leading provider of railway signal design services in Australia, for a purchase price of approximately $25.1 million.
  • In August 2014, the Company acquired Dia-Frag, a leading manufacturer of friction products in Brazil, for a purchase price of approximately $70.6 million.
  • In June 2014, the Company acquired Fandstan Electric Group Ltd., a leading rail and industrial equipment manufacturer for a variety of markets, including rail and tram transportation, industrial and energy, for a purchase price of approximately $199.4 million.
  • In September 2013, the Company acquired Longwood Industries, Inc, a manufacturer of specialty rubber products for transportation, oil and gas, and industrial markets, for a purchase price of approximately $83.9 million. 
  • In July 2013, the Company acquired Turbonetics Holdings, Inc, a manufacturer of turbochargers and related components for various industrial markets, for a purchase price of approximately $23.2 million.
  • In January 2013, the Company acquired Napier Turbochargers Ltd., a UK-based provider of turbochargers and related parts for the worldwide power generation and marine markets, for a purchase price of approximately $112.3 million. ​

​My Perspective

This company has a great history dating back over 100 years, so its the kind of company that can survive and prosper in a variety of economic scenarios. Today the company is growing its revenues, earnings and dividends at a very nice pace and by all estimates this should continue into the near future, if not for years to come. I like the fact that it has a lot more assets than liabilities and very little debt. In fact I like almost everything about this company except for they very small dividend. Management is growing the dividend at a very fast paste but I think this company could easily payout more than 8% of its earnings. They could easily triple the payout ratio and therefore triple the dividend without affecting the overall balance sheet.

I expect to start a position in this company in the near future as funds become available. This company has fallen from above $100 per share to today's price near $70. I can't find anything in the fundamentals that would support that kind of fall so I can only imagine the pullback was a result of the fall in the price of commodities which is affecting overall railroad traffic. If that's the case, rail service companies should eventually separate from the major rail companies and Wabtec Corp should not have a problem hitting its target price of $94 per share in the next 12-15 months.​
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0 Comments

WisdomTree

12/10/2015

0 Comments

 
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Sometimes when I screen for companies I'm surprised. Today that surprise came in the form of WisdomTree Investments, Inc. They operate as a sponsor of exchange traded funds (ETF) and if you don't know what those are you're missing out on some great derivative investments. In the old days most people who didn't want to invest directly in securities would choose to invest in mutual funds. Today they invest in ETFs. 

​WisdomTree Investments, Inc. operates as an exchange-traded funds (ETFs) sponsor and asset manager. It offers ETFs in equities, currency, fixed income, and alternatives asset classes. The company also licenses its indexes to third parties for proprietary products, as well as offers a platform to promote the use of WisdomTree ETFs in 401(k) plans. It develops index using its fundamentally weighted index methodology. In addition, the company provides investment advisory services. The company was founded in 1985 and is based in New York, New York.
​(Summary) (Company) (Chart)
9 December 2015
Price $18.28
1yr Target $22.11
Analysts 9
Dividend $0.32
Payout Ratio 64.00%

1yr Cap Gain 20.95%
Yield 1.75%
1yr Tot Return 22.70%
EPS (ttm) $0.50
EPS next yr $0.73
EPS next 5yr 28.50%
1yr Price Support $20.85
P/E 36.56
PEG 1.28
Beta 2.30
Market Cap $2.53 Bil
Revenues $272.10 Mil
Earnings $69.10 Mil
Profit Margin 25.39%
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1yr EarnGR 34.09%
3yr EarnGR 93.35%
5yr EarnGR ---
1yr DivGR 106.25%
3yr DivGR ---
5yr DivGR ---
Quick Ratio 6.30
Current Ratio 6.30
Debt/Equity 0.00
ROA 27.80%
ROE 33.40%
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WisdomTree Investments, Inc. is an exchange-traded fund (“ETF”) and exchange-traded product ("ETP") sponsor and asset manager. The company launched its first ETFs in June 2006, and is currently the industry’s fifth largest ETF provider in the United States. 
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​WisdomTree sponsors 84 distinct ETFs that span asset classes and countries all around the world. Categories include: U.S. and International Equity, Currency, Fixed Income and Alternatives. The company's largest ETF in terms of Assets Under Management (AUM) is the WisdomTree Europe Hedged Equity Fund, which had over $20.39 billion on December 28, 2014. The ETFs invests in European equities but hedges out currency risks due to the changing exchange rates between the US Dollar and the euro. WisdomTree was one of the pioneers for the concept of fundamentally weighted ETFs and active ETFs and is currently an industry leader in both categories. WisdomTree is the only publicly traded asset manager exclusively focused on the ETP industry. The company manages approximately $58.1 billion in ETF assets under management, as of December 8, 2015.

In 2014, WisdomTree acquired a majority stake (75%) in London-based Boost ETP.  The company will invest $20 million in Boost to give it working capital to build out its European business.

WisdomTree believes that its differentiated approach, employing a distinctive index-based methodology, delivers better risk adjusted returns over the long term. The company’s states its index-based funds employ a fundamental weighted investment methodology, which weights securities on the basis of factors such as dividends or earnings. Other ETF indexes will use a capitalization weighted methodology as a basis.

WisdomTree offers 14 different actively managed ETFs, which are ETFs that are not based on a particular index but rather are actively managed with complete transparency into the ETF’s portfolio on a daily basis. The company's exemptive relief enables it to use its own indexes for certain ETFs, actively manage other ETFs and incorporate the use of derivatives in certain products, thereby allowing the company to develop certain ETFs not yet offered by other sponsors.

My Perspective

When I initially came across this company I really didn't recognize all the possibilities that were staring back at me. Here's a company who's shares are relatively inexpensive so it would be fairly easy to accumulate 100/200/300 shares for option selling. The company's experiencing both growing earnings and growing dividends. It has very high quick and current ratios and zero debt on the books. The company also has other attributes like a high return on equity and a high return on assets. But most of all, it has a very high beta which means this stock is a great candidate for both options trading and swing trading. And that's where real money can be made.

From the fundamentals it's pretty clear to me that this is the type of company that almost any investor would like to own. But it's the technical aspects of the stock chart that really shine. If history is a precursor of the future, this looks like a swing traders sweet dream. And I expect to be trading that dream very soon.

As a consequence, I just don't see any way I can avoid adding this company to my portfolio. To me it just looks like a trader's playground - a company that I can buy and sell over and over again. It also distributes a nice little dividend too. And if I want, I can trade options to get into and out of this stock to increase my income. This stock appears to have all the attributes that I need to have some fun and make some money. 
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0 Comments

4 Companies Moving Higher

12/7/2015

0 Comments

 
Companies are often pushed higher by investors who believe, rightly or wrongly, that the future of the company is bright. That can often be seen in the fundamentals, but not always. That's because the fundamentals are only the historical documentation of the past. In some cases the companies may be at an inflection point and their fundamentals may be changing quickly. Anyone who is aware of this situation would naturally be a buyer and the force behind a rising stock price.

The four companies below all have stock that is becoming technically stronger over time but each one has its own reason for moving higher. Smart investors will notice this and look deeper into stories behind each one of these companies. There's a reason these companies are moving higher and that knowledge and understanding could be worth a lot of money to an astute investor. A little time further researching these companies might be a smart thing to do. Good Luck and Good Trading.
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Scripps Networks Interactive, Inc. develops lifestyle-oriented content for linear and interactive video platforms in the United States, the United Kingdom and other European markets, the Middle East and Africa, the Asia-Pacific, and Latin America. The company delivers content that focuses on specifically defined topics of interest for audiences and advertisers. It operates national television networks, including Home and Garden Television (HGTV), Food Network, Travel Channel, DIY Network, Cooking Channel, and Great American Country; and Websites comprising HGTV.com, FoodNetwork.com, TravelChannel.com, DIYNetwork.com, CookingChanneltv.com, and GACTV.com that are associated with the aforementioned television brands and other Internet-based businesses serving home, food, and travel related categories. The company also licenses its content to third parties; and brands for consumer products, such as videos, books, kitchenware, and tools. Scripps Networks Interactive, Inc. is headquartered in Knoxville, Tennessee.
​(Summary) (Company) (Chart)
6 December 2015
Price $59.02
1yr Target $64.26
Analysts 19
Dividend $0.92
Payout Ratio 21.14%

1yr Cap Gain 8.87%
Yield 1.55%
1yr Tot Return 10.42%
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EPS (ttm) $4.35
EPS next yr $4.82
EPS next 5yr 11.07%
1yr Price Support $53.35
P/E 13.57
PEG 1.23
Beta 1.36
Market Cap $7.59 Bil
Revenues $2.84 Bil
Earnings $574.00 Mil
Profit Margin 20.21%
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1yr EarnGR 12.64%
3yr EarnGR 15.26%
5yr EarnGR 16.17%
1yr DivGR 33.33%
3yr DivGR 28.40%
5yr DivGR 21.67%
Quick Ratio 3.30
Current Ratio 3.30
Debt/Equity 2.80
ROA 10.90%
ROE 42.30%
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Mattel, Inc. designs, manufactures, and markets a range of toy products worldwide. The company operates in three segments: North America, International, and American Girl. It offers dolls and accessories, vehicles and play sets, and games and puzzles under the Mattel Girls & Boys brands, including Barbie, Monster High, Disney Classics, Ever After High, Little Mommy, Polly Pocket, Hot Wheels, Matchbox, CARS, Disney Planes, BOOMco, Radica, Toy Story, Max Steel, WWE Wrestling, and Batman. The company also provides its products under the Fisher-Price brands, such as Fisher-Price, Little People, BabyGear, Laugh & Learn, Imaginext, Thomas & Friends, Dora the Explorer, Mickey Mouse Clubhouse, Disney Jake, the Never Land Pirates, and Power Wheels. In addition, it offers its products under the American Girl brands comprising My American Girl, Bitty Baby, Grace Thomas, and the 2015 Girl of the Year doll; and construction, and arts and crafts brands, such as MEGA BLOKS, RoseArt, and Board Dudes, as well as publishes Advice & Activity books and the American Girl magazine. Mattel, Inc. sells its products directly to consumers via its catalog, Website, and proprietary retail stores, as well as directly to retailers, including discount and free-standing toy stores, chain stores, department stores, and other retail outlets; to wholesalers; and through agents and distributors. The company was founded in 1945 and is headquartered in El Segundo, California.
​(Summary) (Company) (Chart)
6 December 2015
Price $25.53
1yr Target $26.55
Analysts 11
Dividend $1.52
Payout Ratio 172.27%

1yr Cap Gain 3.99%
Yield 5.95%
1yr Tot Return 9.94%
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EPS (ttm) $0.88
EPS next yr $1.39
EPS next 5yr 2.45%
1yr Price Support $3.40
P/E 29.02
PEG 11.87
Beta 0.99
Market Cap $8.67 Bil
Revenues $5.70 Bil
Earnings $300.30 Mil
Profit Margin 5.26%
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1yr EarnGR -43.80%
3yr EarnGR -12.60%
5yr EarnGR 0.00%
1yr DivGR 4.10%
3yr DivGR 18.02%
5yr DivGR 15.17%
Quick Ratio 1.60
Current Ratio 2.20
Debt/Equity 0.88
ROA 3.80%
ROE 9.00%
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Newmont Mining Corporation operates in the mining industry. It primarily acquires, develops, explores for, and produces gold, copper, and silver deposits. The company’s operations and/or assets are located in the United States, Australia, Peru, Indonesia, Ghana, and New Zealand. As of December 31, 2014, it had proven and probable gold reserves of 82.2 million ounces and an aggregate land position of approximately 20,000 square miles. The company was founded in 1916 and is headquartered in Greenwood Village, Colorado.
​(Summary) (Company) (Chart)
6 December 2015
Price $20.46
1yr Target $23.19
Analysts 19
Dividend $0.10
Payout Ratio 10.75%

1yr Cap Gain 13.34%
Yield 0.48%
1yr Tot Return 13.82%
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EPS (ttm) $0.93
EPS next yr $0.78
EPS next 5yr 13.96%
1yr Price Support $10.88
P/E 22.00
PEG 1.58
Beta 0.23
Market Cap $10.83 Bil
Revenues $7.93 Bil
Earnings $479.00 Mil
Profit Margin 6.04%
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1yr EarnGR ---
3yr EarnGR 11.67%
5yr EarnGR ---
1yr DivGR -81.64%
3yr DivGR -38.88%
5yr DivGR 2.38%
Quick Ratio 2.60
Current Ratio 3.10
Debt/Equity 0.55
ROA 1.90%
ROE 4.50%
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Skyworks Solutions, Inc. designs, develops, manufactures, and markets proprietary semiconductor products, including intellectual property worldwide. Its product portfolio includes amplifiers, attenuators, battery chargers, circulators, DC/DC converters, demodulators, detectors, diodes, directional couplers, diversity receive modules, filters, front-end modules, hybrids, LED drivers, low noise amplifiers, mixers, modulators, optocouplers/optoisolators, phase shifters, phase locked loops, power dividers/combiners, receivers, switches, synthesizers, technical ceramics, VCOS/synthesizers, and voltage regulators. The company provides its products for automotive, broadband, cellular infrastructure, connected home, industrial, medical, military, smartphone, tablet, and wearable applications. Skyworks Solutions, Inc. sells its products directly, as well as through independent manufacturers’ representatives and distribution partners. The company was founded in 1962 and is headquartered in Woburn, Massachusetts.
​(Summary) (Company) (Chart)
6 December 2015
Price $87.92
1yr Target $111.81
Analysts 21
Dividend $1.04
Payout Ratio 25.36%

1yr Cap Gain 27.17%
Yield 1.18%
1yr Tot Return 28.35%
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EPS (ttm) $4.10
EPS next yr $7.28
EPS next 5yr 21.13%
1yr Price Support $153.82
P/E 21.44
PEG 1.02
Beta 1.21
Market Cap $16.81 Bil
Revenues $3.26 Bil
Earnings $798.30 Mil
Profit Margin 24.47%
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1yr EarnGR 72.26%
3yr EarnGR 56.75%
5yr EarnGR 39.76%
1yr DivGR 122.85%
3yr DivGR ---
5yr DivGR ---
Quick Ratio 3.50
Current Ratio 4.10
Debt/Equity 0.00
ROA 23.20%
ROE 27.10%
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0 Comments

Sonic

12/4/2015

0 Comments

 
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Sonic Drive-Ins will forever be Oklahoma's gift to the rest of the United States. They weren't the first to discover America's love of the automobile and then cater to those drivers and families who wanted to dine in their cars. But they've managed to win this space.

Today they continue to push the concept. Today, as the company has moved out of the sunny south and expanded farther north, the company is building more restaurants with in store seating. 

This idea of curbside service initially was once a novelty but the company couldn't have survived if their products weren't in demand. And that demand, as well as their quality standards, continue today. Today, SONIC is the largest chain of drive-in restaurants in America and they continue to thrive, maintain strong sales and earnings growth, industry-leading customer frequency and high returns for their stockholders.

I look forward to adding this company to the list of companies in my portfolio as funds become available. I'm also looking forward to my next visit to my local Sonic Drive-In!
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The Menu hasn't changed much over the years but the prices sure have. Menu from the 1970s.

​Sonic Corp. operates and franchises a chain of quick-service drive-in restaurants in the United States. As of August 31, 2015, the company operated 3,526 Sonic Drive-Ins in 44 states, which included 387 company drive-ins and 3,139 franchise drive-ins. It also leases real estate properties. The company was founded in 1953 and is headquartered in Oklahoma City, Oklahoma.
(Summary) (Company) (Chart)
3 December 2015
Price $28.36
1yr Target $33.23
Analysts 13
Dividend $0.44
Payout Ratio 36.66%

1yr Cap Gain 17.17%
Yield 1.55%
1yr Tot Return 18.72%
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EPS (ttm) $1.20
EPS next yr $1.50
EPS next 5yr 19.88%
1yr Potential $29.82
P/E 23.63
PEG 1.19
Beta 1.39
Market Cap $1.41 Bil
Revenues $606.10 Mil
Earnings $64.50 Mil
Profit Margin 10.64%
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1yr EarnGR 41.17%
3yr EarnGR 25.70%
5yr EarnGR 28.68%
1yr DivGR (first year)
3yr DivGR ---
5yr DivGR ---
Quick Ratio 0.90
Current Ratio 1.00
Debt/Equity 26.58
ROA 10.30%
ROE 265.40%
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As of August 31, 2015 there were 3,526 Sonic Drive-Ins in operation from coast to coast in 44 states, consisting of 387 Company Drive-Ins and 3,139 Franchise Drive-Ins.
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0 Comments

L Brands Revisited

12/1/2015

0 Comments

 
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​L Brands has exceeded most analysts' estimates in the past and very likely will do it again in. This time of the year (the Christmas Season) men, as well as women, will be attracted to the products this company sells. Add in the upcoming Valentine's Day in February, birthdays, and anniversaries, and you have a lot of repeat business. 

In almost any mall in the US and in many malls overseas, the typical shopper will walk into two of the busiest stores in every mall - Victoria's Secret and Bath & Body Works. And those who have never entered a Victoria's Secret store, many have ordered from its offline and online catalogs. Many others have at least seen the annualized televised Victoria's Secret Fashion Show. Between Victoria's Secret and Bath & Body Works, the company is the premiere provider of bras, panties, loungewear, sleepwear, swimwear, athletic attire, fragrances, shower gels and lotions, aromatherapy, soaps and sanitizers, home fragrances, and personal care accessories for women.
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​L Brands, Inc. operates as a specialty retailer of women’s intimate and other apparel, beauty and personal care products, and accessories. The company operates in two segments, Victoria’s Secret and Bath & Body Works. Its products include loungewear, bras, panties, sleepwear, swimwear, athletic attire, fragrances, shower gels and lotions, aromatherapy, soaps and sanitizers, home fragrances, and personal care accessories. The company offers its products under the Victoria’s Secret, Pink, Bath & Body Works, La Senza, Henri Bendel, C.O. Bigelow, White Barn Candle Company, and other brand names. L Brands, Inc. sells its merchandise through company-owned specialty retail stores in the United States, Canada, and the United Kingdom, which are primarily mall-based; through its Websites and catalogues; and through franchises, licenses, and wholesale partners. As of February 1, 2014, the company operated 2,648 retail stores in the United States; 270 retail stores in Canada; and 5 retail stores in the United Kingdom. It also operated 331 La Senza stores in 30 countries; 55 Bath & Body Works stores in 14 countries; 4 Victoria's Secret stores in 2 Middle Eastern countries; and 198 Victoria’s Secret Beauty and Accessories stores, and various small-format locations in approximately 60 countries. The company was formerly known as Limited Brands, Inc. and changed its name to L Brands, Inc. in March 2013. L Brands, Inc. was founded in 1963 and is headquartered in Columbus, Ohio.
(Summary) (Company) (Chart)

​By The Numbers
13 August 2014
Price $62.26
1yr Target $62.38
Analysts 25
Dividend $1.36
Payout Ratio 43.87%

1yr Cap Gain 0.19%
Yield 2.18%
1yr Tot Return 2.37%

EPS (ttm) $3.10
EPS next yr $3.58


P/E 20.08
PEG 1.80
Beta 1.07









3yr DGR 34.94%


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ROA 13.80%
ROE -137.90%
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29 November 2015
Price $96.68
1yr Target $101.20
Analysts 30
Dividend $2.00
Payout Ratio 51.81%

1yr Cap Gain 4.67%
Yield 2.06%
1yr Tot Return 6.73%

EPS (ttm) $3.86
EPS next yr $4.17
EPS next 5yr 10.28%
1yr Potential $42.86
P/E 25.08
PEG 2.44
Beta 0.74
Market Cap $28.11 Bil
Revenues $11.67 Bil
Earnings $1.15 Bil
Profit Margin 9.85%

1yr EarnGR 14.75%
3yr EarnGR 8.94%
5yr EarnGR 20.63%
1yr DivGR 56.44%
3yr DivGR ---
5yr DivGR ---
Quick Ratio 0.90
Current Ratio 1.60
Debt/Equity ---
ROA 16.30%
ROE -275.00%
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How I See Things

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I've owned this company for a few years now. I had been in and out of it several times since I first discovered it in the 1980s but a few years back I decided to own these shares on a more permanent basis. I like the benefit and surprise of receiving those special dividends at different times of the year that this company seems to routinely dispense. It's just a nice little kicker on top of a very nice dividend that's in excess of 2%. Some years that special dividend that they give out can double or even triple the regular dividend. 

I also like how they continue to beat their earnings estimates which pushes their stock price even higher than expected. Fifteen months ago the stock was sitting near $62 with with not growth expected. Today it sits at $96 per share and no one seems surprised. I think this company may just continue to out perform its estimates once again. 

This company has become a permanent fixture in my accounts because of this fact that they always seem to come in with positive surprises. I believe this company has cornered the market in this unique  segment of the industry and it has maintained this first place position for decades. And I think this could continue for decades more. 

I intend to continue to accumulate shares of this company through the reinvestment of dividends and the selling of options. While L Brands may never make up a large portion of my portfolio, I think this investment will provide a nice niche holding that produces a nice supplemental income for years to come.
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    I am an Individual Investor with specific interest in long term growth and then enhancing my returns with income from dividends and derivatives. I don't recommend stocks to anyone (it's a good way to lose friends) and no one reading this should misinterpret my blog as a recommendation for any type of investment. I am writing this solely for myself and my kids.

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