Thursday, November 10, 2005

ENR, Article, and a Screen

First thing: keeping track of what my expenses actually are is working out great. I only bought my lunch for work one time and I think I can keep it up. We'll see how it goes this weekend, which is when I normally spend the most.

ENR: Check ou the chart
I keep watching this one and I'm waiting for it to stabilize. The only thing that has interest me so far is the graph because I find it pretty interesting. Is it a good company? I have no clue. It's the company that makes batteries, energizer, so you would think it would be relatively stable. Depending on the economic environment, it could be a safer stock to own. I haven't looked any of the financials, and I don't even know if I will, but I'm watching the chart.
If you have any opinions on the fundamentals of ENR, email them my way.

Interesting article on Spin-offs. Quick article and I think it's worth a read.

I keep reading articles about another hedge fund fraud. Today was about a small one where the so called mathematical model genius manager was actually lying about performance. When investors thought he had over $40 million, the fund was actually down to around $14 million.
I'm glad I work for a good one!

I haven't had any time to look through stocks, but I went through a quick MSN screen the other day. I might not have any time, but I figured someone out there may want to check out some of these stocks.
The screen was based on: market cap between 125 and 450 million, ROE >10%, revenue growth year vs year >15%, debt/equity <1.0,>15%
I tried to set it up looking for growth stocks that are small in terms or market cap
MTLG
NARA
NVTL
ARDI
CMN
MTEX
NGPS
FARO
BRLI
VSEC

6 comments:

NO DooDahs said...

Valuation looks cheap from a PE basis, but deadly expensive from a PB standpoint.

They appear to have decent quality earnings, until the last year. I don't have numbers through 9/05, but the TTM for 6/05 show NI that almost equals OCF. This is often a sign of aggressive accrual policy in a company of this type. Also, NI increased while OCF decreased, another sign of aggressive accruals.

The reason for their high PB is the fact that, the company HAS NO EQUITY! Well, not actually. 6/05 balance sheet shows 2965.5 in assets vs 2301.2 in liabilities, net equity 364.3 million. However, the assets include 662.5 million in "intangibles" that started appearing on the balance sheet in 2003. Intangibles make up 22% of total assets. This is the kind of stuff that typically marks "shenanigans." I checked inventory and accounts rec'bl as a percent of revenue, and those trends aren't out of line.

When checking for financing cash flow, I noted that it's generally negative (good sign) except for a spike in 2003, which corresponded to a large issuance of debt. This might be an explanation for the intangibles (an acquisition)? This was also the time that free cash flow became negative, all other time periods, the free cash flow was positive.

The company is buying back shares, a good sign.

The insiders are selling, recently and a significant amount in terms of percentage holdings, possibly a bad sign.

Summary: find out what those intangibles are, why they're there, why the increased debt load, and get comfortable with it before purchase. You've got some reading to do! Whatever they did significantly changed the business, and you need to decide if it made it better, or not.

Fonzie said...

Don't want to be too pedantic - Screen looks solid, however, I would quite possibly up that ROE to at least 15%. This is just a very personal thing though, but maybe you'll find it minimally useful?

Alpha said...

thanks for the great comments into ENR!
This should help everyone out there who might want to take a look into ENR. I'm still watching it based purely on technicals and it's definitely an interesting chart/pattern.

fonzie: normally when I do screens I either do 10 or 15% and I use it for a cutoff. After putting the other factors and then using an ROE of 10% the list of stocks to look through quickly was small. If it's large (like over 200 stocks) I would first up the ROE. In this case, I think it was around 65; which isn't too bad.

NO DooDahs said...

I don't like just looking at the chart, I like to figure out "why." There was a restructuring of debt announced 8/25/05. William Stiritz announced a planned sale of 1 million shares effective 8/5/05. I would also check the mutual fund and institutional ownership changes from 6/30 to 9/30, the drop was accompanied by an increase in volume. Lastly, I would keep an eye on the short interest, it's pretty high as of 10/11, I'm betting it's higher still now.

This might make a good trade, it looks very oversold. I wouldn't make this company an investment, based on the fundamentals mentioned previously.

Alpha said...

I don't like just looking at the chart as well, but my current job revolves around this. The traders look at charts (and they also do figure out why things are happening and do fundamental analysis), but as of right now my task is to find things based purely on technicals.
Based on that, it's an interesting chart because it recently hit five year lows for their MACD and RSI. Now I'm saying it's interesting because the indicators are saying it's oversold and I'm going to see if the price reflects this in the near future and begins to bottom out and possibly start an uptrend.
Fundamentally: I don't think it's that good, even based on industry factors (rising costs, competitors are hurting as well, slower batter sales, slower razor sales in n. america, etc.) Plus these insiders like to get their options and cash them out for a huge gain.

Geoff Gannon said...

no doodahs just brought this post to my attention. He correctly noted the technicians got to this one before the value guys. I wish I'd read this post sooner.

On February 1st, 2006 I wrote a piece about Energizer from a purely fundamental viewpoint.

The 2000 spinoff from Ralston Purina (now part of Nestle, right?) and the 2003 accquistion of Schick from Pfizer are the explanation for what you see on the balance sheet. A bridge loan was used to accquire Schick, it was refinanced at mostly 5% or less due 5 - 10 years from today.

Without getting into discussing the purchase price, it is safe to say Schick's real economic assets are intangible (as are Energizer's). So, I'm not worried about the book value (the cash flow's there).

By the way, the Schick deal was huge. Energizer Holdings could rightfully be called Energizer - Schick. You can't just think of the company as being a battery business anymore.