Fundamentally Furloughed


I didn’t know the investment trust was that one that survived. You are right it makes sense, you aren’t investing into the pool of funds.

My worry is they go too far with private unlisted/unquotes equities in the search for high return. All it takes is for a situation like the one we are in for all these high cash burn firms to struggle and need follow on rounds (Monzo’s 40% down round was a shocker to me!) They haven’t really repriced their unquoted equities and I’m guessing they want to hold off for as long as possible too!

I’m happy with it for now but I’ll be watching their private investments with a more critical eye going forward.

Sometimes you need to be honest with yourself :rofl:

I like to have a little of my portfolio for making risky very short term bets. It keeps my portfolio exciting without hurting the overall too much, and it means I’m less likely to do something impulsive with my bigger more reliable picks.

That said, Beyond Meat needs to go. I’ve made my mistake, no point waiting for a slow and painful recovery and telling all my friends to buy Beyond Meat burgers when we go out. Better off moving that money into something which is making a return and hope to recover the money that way.


Future - FUTR (Buy)

Thank you @jwt for the suggestion to dive into (the) Future!

With just two days until the 2020 interim results announcement, now is a tricky time to make any predictions about the stock. With no COVID-19 guidance been given, a chain of acquisitions in March and April, and an aggressive selloff at the start of March, there are a lot of unknowns we have to make a best guess on.

You might not know the name Future Plc, the FTSE 250 listed firm, but you will know their brands.

What Does Future Do?

Future is a true multi-platform company. Magazines, websites, video content, and event live events. They are behind many of the brands you will recognise across technology, gaming & entertainment, music, creative & photography, home interest, education and television. Targetting both end consumers like us, as well as dedicated B2B industry offerings. Think a media company that loves technology.

Source: Future Our Business Model

Broadly speaking the company breaks down its business lines into two main segments. Media, which is their digital efforts and Magazine, which covers everything relating to print. A point to remember, media contains pretty much everything non-magazine for the ease of reporting.

Source: Future 2019 Full Year Results

The growing media efforts and B2B services now mean 54% of the revenue comes from the US, with the rest mostly coming from the UK. This means currency fluctuations will impact their earnings (strong dollar means weaker pound revenue.)

The reason I bring up technology earlier, the underlying platforms which powers many of their forums, sites, and advertising solutions is all inhouse managed and developed. This gives them the ability to scale their brands, and easily acquire and merge in competitors.

With their vast knowledge of managing successful brands, they also offer consultancy and other B2B support packages, but this is dwarfed by their advertising and e-commerce revenue streams.

Source: Future Investor Day 2020

One aspect which is interesting, and unique to digital content is the long tail of the pieces they produce and the affiliate deals they create.

Source: Future Investor Day 2020

Content created back in 2017 still attracts traffic and drive revenue even now. This creates a fantastic feedback loop with their digital channels.

A large part of the strategy is finding gaps in their offering, and acquiring competitors. Since April 2016 Future has completed over 10 acquisitions and spending over £171m. With a recent acquisition taking them in the video production and distribution space.

What About The Financials?

Traditional media has been under threat for some time, and an acquisition style of business can be expensive to maintain with the risk of expensive mistakes.

Source: Genuine Impact

You might be surprised at just how profitable Future is. However, you do need to look behind the numbers as they all tell a different story. A gross margin of 48% means they can bring in revenue at only half the cost. After the operating costs, this drops down to 13.6% operating profit which is a very impressive number to see. Finally, we look at the result and the final profit margin is a meek 3.7%. While they can generate a lot of revenue and covert that into profit, they are heavily reinvesting back into the business.

Additionally, this is a dividend-paying stock. The dividend is at the start of the year around January 16th, so we have completely missed it for this year. Don’t get too excited. The dividend yield is currently 0.11%, if you are looking to live off your investment dividends this won’t scratch that itch.

Source: Wallmine Future

The profit margin is consistent, they are a relatively low debt company considering their acquisition strategy, and they are easing their reliance on financing to support cash flow.

How Does The Value Looks?

After a nasty dip and some issues with short selling, Future is making a recovery back to the pre-COVID-19 dip.

Source: Yahoo Finance

We can see the price is struggling to keep any upward momentum and seems to have hit a ceiling recently. With the next update only two days away we are seeing the market protecting it’self from the unknown.

We haven’t had too much insight into the business over the last few months so confidence is knocked. That said, looking at the value metrics the company is priced about right.

Depending on your preferred ratios this is either overpriced compared to the price to book or extremely cheap versus book to share.

What Do The Sell-Side Analysts Think?

This is where analysing smaller companies can get tricky. I’ll spoil the punch line and let you know the analysts seem to love the future for Future. If you dig a little deeper, you’ll find only three or four analysts seem to be actively up to date and covering the stock, so we need to be a bit more careful with their views.

Source: Genuine Impact

The overwhelming buy rating is down to three analysts all having a buy prediction down. Depending on where you go for your data this number will be five to three. Three estimates seem to be up to date, and they are all buy’s but the target prices are very high.

Source: Genuine Impact

I had a deeper look into this and found two target price estimates both at 100%~ growth. While these feel like meaty estimates we can look at the numbers and try and backwards engineer what they are thinking.

If we look pre the price slash at the end of January after a short-seller attack, we were sitting at 1522p a share.

There was a month of recovery before COVID-19 changed the world as we know it. The analysts had set their original targets before the first dip, meaning the original change was 15-20% growth. As far as the business financials are concerned they have not changed.

Now COVID-19 has impacted the business, and we don’t know how badly. We know advertising budgets have been cut, at home spending has seen an increase, and online activity has jumped.

There is the potential that increased traffic has offset lower advertising budgets and potentially the lucrative affiliate e-commerce sales would have been boosted. Sadly with no new information, it’s pure speculation. We have to wait two days before we know for sure.

So Why A Buy?

I’ll admit, a buy rating this close to an announcement is more gambling talk than fundamentals. Even with an impacted business, this is still a cheaper business than it should be, we can see this looking back to the start of the year.

There is room for recovery and the market is padding in some extra protection against some unknown results. We could see a dip, like many, have experienced, where they have been hit by the economic slowdown. We know advertising is down and that is the main revenue driver. We also know activity is up for online forums and digital engagement, which Future also profits from.

It comes down to how much the advertising business has been affected. Events are off the table, TV and video production would have slowed, but online engagement should have skyrocketed. With no additional guidance, we are in the dark. I do think we’ll see the trading volume spike once some clarity (in either direction) is finally given.

Let’s hope it’s a return to their strong share price before, Back to The Future if you will.

I hope you enjoyed my write up and views. Please let me know what you thought, all feedback helps! Did I miss anything? Any aspects you wanted to be covered in more detail?

Thanks and stay safe.


Got a spicy one for you: Illumina and the wonderful world of biotech :upside_down_face:


Wow, I was just doing some reading and that is a lot of lawsuits :smile:

Still it would be interesting to write about. I haven’t really looked at biotech, and right now the sector is a buzz with activity the whole pharma sector in general is lively.

I’ll do some more digging but this could be a fun one to look at. Plus it’s good to look at different sectors. Does mean I need to figure out what a DNA sequencing machine is and why it’s important :thinking:


Illumina - ILMN (Buy)

Thank you @SpyrosL or the suggestion.

I don’t usually look at pharmaceutical or health-care related securities, much less now during COVID-19. But the CFO selling $461,380 worth of their stocks, and the fact the insider trading has been exclusively selling for the past two years, and the annual shareholder meeting six days away, this piqued my interest.

What Does Illumina Do?

They see themselves as a global leader in genomics, their business is offering the machines, equipment, and technology required in genome mapping and analysing.

A look at a selection of clients helps to explain the depth and range of what they offer.

illumina customers
Source: Illumina Source Book

Their business is broken into two revenue-generating halves (plus an investment side which is more R&D strictly speaking.)

illumina revenue
Source: Illumina Source Book

Sequencing relates to their larger machines, technology, and the consumable products linked to them. These are the machines used when performing detailed analysis and research. For instance, the first sequencing of COVID-19 was done on an Illumina machine. They currently offer a range of machines from just under $1m to $20k. Approved for use by different regulators (from food testing to patient testing) and with a range of prices, this is the main revenue driver for the business.

Microarrays are for more broad testing. Think of testing kits, cheaper to produce, singular focus, and mass-produced. While a smaller part of the revenue comes from this section, it’s more reliable revenue, you aren’t having to sell and install large machines to a more select range of skilled customers. An example where this is being used is non-invasive prenatal testing (NIPT), a blood test to check for any known genetic challenges for pregnant women. In the US, 97% of high-risk pregnancies and 56% of average-risk pregnancies will reimburse NIPT. In the EU, the Netherlands and Belgium cover NIPT for all pregnancies. Currently due to COVID-19, in Aetna, all pregnancies are receiving free NIPT.

illumina earnings
Source: Illumina Q1 2020 Summary

Illumina does their manufacturing (though some of the microarrays are outsourced) and also offers laboratory services, these items show up in the services and other section of their income reports, but they make up a smaller chunk of profits compared to the main sequencing machine production and sales.

illumina investments
Source: Illumina Source Book

Innovation is critical in IP heavy industries. This means Illumina has to invest into a range of startups and related companies, to keep its competitive edge and also to take advantage of any new advancements made in their field. As such Illumina does have a flow of credit it uses to help fund its investments and keep cash flow predictable. It’s very common for pharmaceutical companies to have a large portfolio of investments.

How Has COVID-19 Changed The Business?

While it was an Illumina machine in China which was used to first sequence COVID-19, and their machines are used by clients to test their patients, the outbreak has created a slowdown.

Like many companies, they have also withdrawn their fiscal 2020 full-year revenue and earnings per share guidance due to the pandemic. Which a poor previous report this has also shaken investor confidence.

We did get some insight some the prepared statements announced on the 30th of April.

The prediction by Illumina is the second quarter impact will be substantially greater than the impact we experienced in the first quarter. The expectation is for revenue to decline sequentially in every region in the second quarter, with the smallest dollar decline expected in China, and the largest in AMR.

Source: Illumina Q1 2020 Summary

The issue Illumina face is their sequencing machines are great for vaccine research and understanding COVID-19, but labs are not buying the machines in the immediate face of the pandemic, as there are more pressing issues to resolve.

As such we can expect a slowdown of the biggest revenue driver for the business. The products have made a recovery as labs reopen and people refocus on COVID-19, which Illumina has shifted their focus as well to maximise their usefulness to clients.

The business has been impacted negatively overall by over $20 million in the first quarter, which did get slightly offset by a small contribution from COVID‐19 related stocking, and sequencing consumables and services.

They have also pledged $10m in different forms of aid related to COVID-19, with an annual of $3.5bn and an annual income of $942m I wouldn’t worry about them being overly charitable and eating into profits.

We also see they have drawn down on some debt, like many companies they have reacted by protecting their cash flow and drawing any debt they can before encountering any financing issues (or higher rates if they waited.)

How Are Illumina’s Fundamentals?

Source: Genuine Impact

Illumina is a very high-quality investment. With a profit margin of 28.3%, this is a very attractive investment. 16.7% return on invested capital through a mix of share buybacks and some new issues, and a very comfortable cash position, the only downside is the lack of a dividend.

illumina cash
Source: Wallmine

In terms of consistency, they also perform very well. They have demonstrated they have a very defensible business.

illumina 6 month
Source: Yahoo Finance

In terms of share price and value, they have struggled during the year but overall they have returned to form after a rocky start.

Currently, they are overvalued by most metrics. P/E of 54.84, Price/Sales of 14.79, and even a Price/Book of 11.40. If you are a fan of Buffett’s teachings you would put this on a watch list and not touch it right now.

I mentioned the insider trading activity.

illumina insider
Source: MarketBeat

We have seen a lot of selling activity by executives but this hasn’t spooked investors.

Illumina has a strong rating when it comes to sell-side analysts.

Source: Genuine Impact

While a slightly mixed back of growing hold positions and a few sell ratings, sell-side see a bright future even at this overpriced valuation.

Digging into this a little more you might be surprised to find that the target price is negative.

The issue is, many of the price estimates have already been hit. At the start of the month, four of five analysts increased their target price, and one decreased it (still higher than the current price) however the recovery has been much quicker than expected.

In Summary - Is It A Buy or Hold?

The price has recovered far faster than the analysts expected, which is great to see for existing investors but creates a problem for anyone looking to buy this stock right now.

It’s an expensive pick but this is a defensible strong company. If you are looking for a solid 5-10 year pick and a company which will benefit from reinvestment into pandemic prevention after COVID-19 this is an interesting pick where they have a strong portfolio and balance sheet, to begin with.

If you are looking for a shorter-term, one-year turnaround I would avoid this company. We know they will have a troubled Q2 and they are not benefiting from COVID-19. They aren’t working on a vaccine and do not influence that side of the fence. Anyone who is researching a vaccine has the machines they need or will use leverage other labs with the skills and equipment required. There is a chance they will find a new short term solution which benefits from the current pandemic but that is a bigger gamble than trying to predict who will mass-produce a vaccine first.

This is an excellent high-quality purchase as a long term investment, it’s overpriced so anyone looking to derisk or seeking shorter-term gains are better off waiting or looking elsewhere. If you are looking for quality purchase then this should be interesting for you.

Thanks for taking the time to read this, and let me know what you think!

Will you be buying in at a high valuation, or waiting for another dip? I wonder how the annual meeting will go in six days, that might shake the price up a bit more.


Thanks so much for this, genuinely look forward every time I see a load of notifications on this thread.

I think Unite Students (student accommodation) could be an interesting one


Thanks for the lovely comment!

My girlfriend is back to work so I have some free time again. Unite Students might be an interesting one, property and rental is struggling right now so that might have an interesting discount.

I’ll have a look through the news and the other suggestions and see what is the most appealing!

Thank you everyone for your great support! My girlfriend was pretty upset I told her I missed writing analysis during our day in the park.


Hello Jack,

Keep up the excellent work your doing.

Can you please have a look at Home Depot when you have time.


Hi @jcksmith850,

Firstly, I’m grateful to you for sharing such insights and giving us all a peek into how you analyse your picks, fantastic piece of work! Keep it up. :+1:

Given the COVID-19 scenario and all the e-Commerce retailers like Amazon raking in the revenues. Could I please suggest you do a review of eBay? Thanks again, keep up the amazing work! :slight_smile:

P.S. There are rumours(!) of their classified portfolio on sale

1 Like

Welcome to the forum! Hope you find lots of useful and insightful discussions here!

eBay sounds an interesting one, I haven’t given them a proper look since the PayPal split.

I’ve got a stock I’m writting up at the momentum but I’ll add it onto my list :slightly_smiling_face:

Excited to have you joining the readership :muscle:


Home Depot - DH (Buy)

Thank you @Mateinfour for the interesting suggestion!

This isn’t a company I had considered looking at before. I was surprised at the high levels of commitment to shareholders and employees, along with a robust crisis response setup. A predominantly American company, with some expansion into Mexico and Canada, what can they offer us as investors?


What Does Home Depot Do?

With the tagline of “How doers get more done” it couldn’t be clearer. They help people who do things, do them more, I guess?

Home Depot is in the home DIY and building materials business. Think B&Q in the UK, but much much bigger. They are the world’s largest home improvement speciality retailer, with 2,293 retail stores, and employing over 400,000 staff.

Their business is split by the type of customer and the products they sell. You’ll find in their reports they mention different channels and customer types, but in terms of financial reports, they drop all of these mentions. This does make it a bit trickier to describe their business to an investor.

home retail
Source: Home Depot Q1 2020 Infographic

Home Depot thinks about its customers in three groups. Typically DIYers, this is the volume business. Regular folks like you and me doing some improvements around the house, or in some cases tackling larger projects ourselves.

The “Pro” side of the business is services and special agents who look after builders/companies that work with multiple customers. This is classified internally as B2B sales and managed as such. Expect bulk purchases, complex requirements, extended use of Home Depots logistic abilities, but loyal reliable customers.

Finally, they talk about the DIFM customers. Do-it-for-me customers know what they want (so they don’t need to use a Pro) but they are either unable or don’t know how to execute on their vision. They will come into the store and purchase what is required or want some consultation before hiring some labour to complete the work.

Source: Home Depot 2019 Full Year Report

The focus for Home Depot since 2017 has been a seamless experience from planning a project or DIY idea, to finding the materials or experts, credit options to make the project achievable, to purchasing and delivering the goods, to construction and a finished project. There is a large amount of scope to what Home Depot can focus on, and they have largely avoided being a service provider, to DIYers or DIFM customers, to avoid annoying their Pro customer base. This does mean they are leaving money on the table in terms of a complete offering, but it gives them a greater focus on logistics and operational excellence.

Risks and COVID-19

If there is anything I know about America is natural disasters appear to be a way of life. As a large multi-national retailer who has existed for over 40 years, they have coped with countless crisis.

That is a long-winded way of saying if Home Depot can manage their stores in a post-hurricane devastated land, they can adjust their business to a pandemic.

Unlike some companies, Home Depot has not drawn down on their revolving credit facility.

Rather they have put together $850m in support for their staff. Changed opening hours, limited customers access, and cancelled high footfall events. From expanded paid time off, additional time off for any staff considered at risk, weekly bonuses and doubled over time, and extended care benefits, few companies have been considered “essential businesses” can claim this kind of response.

While Home Depot does consider their services essential, and anyone who has had home trouble while in lockdown would agree, it has harmed their business. The Pro’s are no longer working on projects, larger home DIY plans scrapped, and any DIFM customers would be in lockdown and waiting.

As you would expect, the 2020 guidance has been pulled. What you might not expect is a first-quarter cash dividend of $1.50 per share, which is a 10% increase. The ex-div date is the 4th of June and paid out on the 18th. Meaning this is the 133rd consecutive quarter Home Depot has paid a cash dividend.

What About The Fundamentals?

Home Depot boasts some very strong fundamental figures. Even in the middle of a pandemic, and without drawing additional debt, they are operating from a very strong position.

Source: Genuine Impact

With an annual revenue (which keeps growing) of $110.2bn and a profit margin of 10.20%, this is a cash generation machine. With a lower than expected gross margin of 34.09%, you can see how much they squeeze the operational aspects of the business. A bigger effort to own brand and cheaper wholesale products would improve the gross margin but it’s currently not the focus.

A 54.23% payout ratio, and 33.27% return on invested capital are both attractive figures. An overwhelming focus on keeping shareholders happy, and turning the staff into shareholders is a common practice but one Home Depot executes on extremely well.

I was surprised to see 106% debt to assets ratio.

Source: Home Depot 2019 Full Year Report

Even for a profit-generating business like Home Depot, they do have a lot of short term debt which needs paying off. I wouldn’t be surprised if they refinance some of their debt and restructure it is slightly.

As a value investment, Home Depot is relatively cheap compared to its assets and inventory. As they own the land and buildings for the majority of their stores (only the buildings for the warehouses, not the land) they have a lot of assets to compare their share price against.

Source: Google Finance Home Depot

Despite being at an all-time high, Home Depot still comes in with a 23.51 P/E ratio and even an impressive -82.11 Price to Book. It’s worth taking into account a large number of retail stores, and the risk of changing consumer tastes, Home Depot could easily end up with a lot of dead inventory taking up space and slowing their business down.

While they claim this is a USP to their business, their ability to manage their inventory and stay on the pulse with consumer habits, it worth considering when we assess their assets.

In terms of the analyst predictions, we have a very strong outlook for the future of Home Depot.

Source: Genuine Impact

Even with the 2020 guidance removed, and parts of the core business being hit hard, the sell-side analysts are still bullish on their outlook.

Source: MarketBeat Home Depot

The good news is most the analysts have refreshed their ratings last week, meaning we are up to date with their views. The downside is a very low target price increase from where we currently are.

This makes it unlikely we will see any aggressive price growth, however, given the quarterly dividend payouts, and the strong financial position they have created, this is a very attractive dividend option even in trying times.

A Buy For A Dividend?

I am definitely on the buy train for this stock. Home Depot has a great dividend track record, and they see it as the main method of returning capital to shareholders.

While the percentage increase in your portfolio is going to move slowly, the payouts won’t. A 2.48% dividend yield isn’t going to change anyone’s life and there are bigger yields to be found. However, few firms have the stability, scale, and track record of Home Depot.

If you are looking for an all-weather deck or a defensive regular dividend payout, Home Depot might be the one for you.

Let me know what you think, is this a stock you are interested in? Any other stocks or funds you would like me to assess?

Thanks for reading and stay safe!


Thank you jack a most excellent read.

I do like the look of Home Depot and think it might be a good addition to my existing stock.


Amazing stuff.

If you’re short on ideas for future analysis - would be interested in your thoughts on:

  • Atlassian
  • Slack

Both are really interesting to me as they both compete with Microsoft via GitHub (recent acquisition) and Teams respectively.

1 Like

I like both of these firms, my gut feeling on Atlassian is they have seen their COVID-19 spike, which might make the fundamentals easier to judge now.

I’ll add them both to the list and see what I fancy doing a write up on today.

Thanks everyone for reading and your comments!


Broadridge Financial Solutions - BR (Hold)

Broadridge is a financial services solutions provider, you wouldn’t approach them directly as a retail investor, but a company you use, or product you invest through might be leveraging their solutions. I like financial companies and analysing them but we’ll see if this one makes for a good investment too!


What Does Broadridge Do?

This company is selling the picks and wheelbarrows during a gold rush. Rather than being directly involved in financial services, they facilitate the industry by managing the admin and process side of things. For instance, being able to process all your client trading activity for marketing reports doesn’t make the customers’ lives better, but it helps your business. They want to take on the non-IP aspects of your business which might be better served by being outsourced or by buying off the shelve solutions.

If you work in the industry you might have heard of Broadridge, they brought FundsLibrary this year, which was the Hargreaves Lansdown spin-off because they couldn’t get reliable fund information.

If you go through Broadridge’s existing solutions they pretty much do anything you can think of when serving banks, broker-dealers,

asset management firms, mutual funds, corporate issuers, or wealth management firms. To help explain things, they group their business into two main segments.

Source: Q3 2020 Report

Investor Communication Solutions, this aspect of the business focuses on proxy voting and corporate actions with securities. Every time there is a vote on one of your stocks, they pay out a dividend, or a new announcement needs to be communicated, you need a system to manage this all. Think of this as a CRM (customer relation management) tool or a customer portal but on steroids. As such they have a few non-financial clients with these solutions where they need to manage official communications with a full audit. If the words blockchain just flashed into your head then you might like this company. Anything and everything to do with communication with customers or shareholders fall into this segment.

Global Technology and Operations, if you have ever heard of the phrase trade lifecycle you’ll know there is a lot of legwork that happens whenever you press that execute trade button. This business line focuses on the technology in the back and middle office, either SaaS solutions for processing trades and managing them or websites that a brokers’ operational staff would use to make sure everything is processing correctly. Additionally, this segment also does white labelling of wealth management services. If you want to run a wealth management firm but wanted to just focus on bringing in the clients you could do that with Broadridge and give everything else to them.

Broadridge pitch themselves as a software business, and a fintech. They don’t see themselves as a financial firm, and their financial statements reflect that. This is a business like SAP or Slack, a technology firm with a specialism. In Broadridge’s case that specialism processed on average over $7 trillion in equity and fixed income trades per day of U.S. and Canadian securities, not bad for a fintech.

How Are The Finances?

Let’s take a look at the financial aspects of Broadridge and start looking at their fundamentals.

Source: Genuine Impact

For a technology company, Broadridge has a strong quality score. I wanted to dive into this number a bit more as I know financial companies do have padded balance sheets (for regulatory purposes) but that shouldn’t be the case here.

Source: Wallmine Broadridge

Through a combination of a very strong sticky core product, a targetted annual 8-10% increase in recurring revenue, multiple business acquisitions, and a punchy $4.38bn in revenue a year, Broadridge have some solid foundations to build upon.

I was, however, very disappointed in a 28.2% gross margin. This number does bounce around a lot as well which isn’t a good sign. If your business is spending 70%~ of the revenue you make to make those sales, that doesn’t leave a lot left over.

Flipping this on its head is the profit margin. A very comfortable 11.05%. This means outside of the core spending to generate revenue, the business is fairly lean. Depending on your view of tech stocks you either want an ungodly amount of R&D spending (which is not present) or aggressive acquisitions. In 2019 Broadridge picked up Rockall, a provider of SBL and collateral management solutions for wealth management firms and commercial banks, RPM, a leading Canadian provider of enterprise wealth management software solutions and services, and the retirement plan custody and trust assets from TD Ameritrade.

Seems their growth strategy is to get a big enough war chest to simply buy any disruption or new business operation rather than incur heavy R&D expenses.

Is This A Value Purchase?

While I wouldn’t go running for the hills in terms of valuation, it’s not particularly attractive either. Think of an unkept ageing dog, not offputting but you wouldn’t get too close either.

Source: TradingView Broadridge

Skipping to a bit of technical analysis we can see the price has stalled somewhat, and the trend has been creeping downward. Looking at the fundamentals this is slightly overvalued still. With a P/E of 32.26, and a Price to Book of 11.99, these are high for any value hunter.

It’s worth saying it’s not as aggressive as a “typical” tech company but Broadridge walks the line of SaaS vendor and financial operator.

What Do The Analysts Think?

Given how muted I have been and for every strong aspect of the fundamentals, we see something just as offputting. It’s only fitting that we have an even split when it comes to the analyst views.

Source: Genuine Impact

Digging into this some more the rating is overweight, not quiet at a buy yet but better than a hold. No one is advising a sell at least.

While the revenue and EPS growth look attractive, they are very much expected at this point. The business is very reliable and stable. The acquisitions are signposted and clear fits and the business deals with slow-moving large financial institutions are also as predictable.

Source: Wallmine Broadridge

The target price is also on the lower end of things in percentage terms. With a large spread (a few negative predictions even at a hold rating) and no strong conviction, I don’t see too much hope in the target prices.

It’s not an exciting company that is going to come out with the proxy voter 3,000 and change financial services as we know it. This is the charm but also the negative mark. They have the balance sheet of a tech company but move like a financial one.

Will I Get Paid?

What might sway you is the dividend. Not only is this a dividend-paying darling but it’s an extremely reliable one. 12 non-stop years of dividend growth, which is paid quarterly, and has increased by 17.61% in the last three years.

Source: Genuine Impact

Like all things with Broadridge the dividend is on the lower end of what it could be. Even with an incredible 57.99% of earnings being paid out as dividends, we are left with a weak 1.80% dividend yield.

Any dividend hunters will likely find Broadridge but move onto a higher-yielding prospect.

Why A Hold?

If you already hold Broadridge I wouldn’t sell them just yet. You have a growing dividend and the potential at some more price recovery as well as some more future acquisitions to look forward to.

Some financial service firms have done very well during the lockdown, and with trading volatility up this will be a benefit to some of their clients. Broadridge is one of the few companies who have kept their 2021 targets regardless of COVID-19.

If you haven’t heard of, or invested in Broadridge, your capital can be deployed elsewhere to have a more meaningful impact. If this was a service provider to the financial industry whos’ price was showing an upward trend with the growing dividend, that would be a far more exciting prospect.

Right now this is one to watch but I wouldn’t be in a rush to enter into a trade just yet.

Thanks for reading! Let me know what you thought, is Broadridge a company you had heard of, or one you are currently holding?

If you have any more great suggestions of companies or funds to look at, don’t keep them to yourself.


Hello Jack,

Whenever you get the time please look at another stock, this time I’m interested in Abbvie.


I had a quick look and I was pretty impressed. A pharma company paying a dividend with a yield of 4.96% and a profit margin of 23.69% (34.92% if you look at the last quarter) :exploding_head: that is pretty amazing.

They seem to be carrying a lot of debt right now, but by and large it looks interesting.

I’ll definitely add it to the list!

Thanks everyone for reading and all your feedback!

Slack - WORK (Sell)

Thanks to @jwt for the suggestion!

Slack is a company I’ve wanted to take a look at for a while and after the short COVID-19 related rally it’s worth seeing what all the fuss has been about. With more people working at home, and with some mounting pressure from Microsoft with their Teams competitor product, what does this all mean for investors like us?

What Does Slack Do?

Depending who you ask, Slack has either saved your business from endless emails and made communication and transparency easy, or it’s where employees waste their time and post funny pictures.

Slack is a communication tool which works on desktop, mobiles, and browser, that lets you easily share ideas, comments, and files with one another. Recently they have even added in video calls and joining different companies together to share a chat, think a business partnership where you need open communication with one another without emailing back and forward and integrating different tools.

Where Slack shines compared to competitors and similar products like Skype, Microsoft Teams, Discord, and Facebook Workspace, is the depth and ease of integration. Slack goes beyond a chat application to be fully integrated with your existing systems and processes. With a free tier and huge amounts of developer support, Slack has transformed business communication.

Source: Slack Features

Originally the team behind Slack were building an online game, a business which after $15m of investment and two years didn’t get anywhere. However, while building this they needed a way to community easily across their teams and to keep information accessible and transparent. Slack was originally an internally developed tool which turned out to be the real gem they had all along.

Technically Slack originally stood for Searchable Log of All Communication and Knowledge but deep down we all know that isn’t true.

You can read their full story below, for now, I’ll move onto how they make money.

Slack is a SaaS solution, which prices per user in a team or organisation. This means Slack needs to get into large established businesses and convert the whole company to use their system. This means ease of integration, administration, and watertight security are critical to mass adoption.

Source: Slack Q4 2020 Presentation

I mentioned that Slack has a free tier, this is part of their adoption strategy. A grassroots effort to get individuals and smaller businesses involved and developing plugins and using the product, hoping they expand into the paid tiers with more plugin capacity and full history.

Source: Slack About Us

In terms of pricing, Slack goes from a free limited version to paid versions ranging from $6.50 upwards per team member. This goes back to the scale aspect, you want large corporations to bring on their whole organisation.

Slack also runs an $80m fund which focuses on funding teams with a proven track record to build extensions and plugins (or whole businesses) which have Slack at their core.

The Competition

I don’t always go super deep with companies competitors and rather look at the fundamentals to get a gauge as to how defensible the business is. In this case, and when we look at the fundamentals you’ll see some of my concerns, we do have one direct competitor who is getting a lot of attention.

Microsoft Teams is a like for like competitor who use their existing Microsoft ecosystem to encourage businesses to move onto their system. Microsoft doesn’t have a great track record of keeping some of its business lines alive even with heavy backing, something Microsoft and Google both share.

That doesn’t stop this from being a thorn in Slack’s side, and the biggest threat to the moat they had otherwise created. While there are many other solutions out there, few have the penetration and retention of Slack, the exception being Microsoft Teams.

An investment in Slack is going to be influenced by how much of a threat you feel Microsoft presents. I believe this is something you must seriously consider.

What About Slack’s Fundamentals?

I mentioned I was interested in looking at Slack, having now finally had a dive into the numbers and reports, I’m shocked at how the business has been run recently.

Source: Genuine Impact

A first pass looking at Slack relative to the rest of the market already paints a bleak picture. As such I wanted to look into each aspect in more detail to make sense of these ranks and to see if there was anything worth being mindful of.

Starting with the quality aspects, we can quickly discard anything to do with dividends as none have been paid. This leaves us to focus on profitability and how they manage their cash.

Source: Slack Q4 2020 Presentation

In terms of revenue, Slack brought in a respectable $630.4m last year which is growing quarter by quarter. They have also slightly diversified their income by growing their >$1m a year customers and >$100k customers. 47% of their revenue comes from the >$100k a year customers, which is made up of 893 different companies. 70 customers are in the >$1m a year bracket which is a big improvement from 39 a year ago.

Source: Slack Q4 2020 Presentation

Looking at the cost of revenue we can get a better understanding of how Slack is spending its money, and how efficient their business truly is. Slack has a brilliant gross margin of 84.58%, in terms of serving their reoccurring revenue that is an excellent and scalable figure to see.

If we shift slightly to the profit margin we can see -90. 58%. Somewhere something is going wrong. High expenses are happening which they claim is not involved in serving the basic needs of the existing customers.

Source: Slack Year-End Results

We are focusing on the second to last columns, the full year ending 2020. $457.3k on research and development, $402.7k on sales and marketing, and $261.3k on general and admin?

The General and admin are very high considering they believe the cost of revenue is only $97.1k, it’s almost three times higher. Without going through every line is too much detail, this feels unfairly high and suspicious.

The R&D and sales and marketing figures are painfully high also. 72.5% of all revenue goes towards research and development. You do not have a strong defensive moat if you are spending so aggressively to stay ahead. All it takes is for technologies to move forward or for a few missed opportunities to fall behind. Keep in mind the beast breathing down their backs is the bottomless pockets and endless R&D of Microsoft.

The sales and marketing are also aggressively high as mentioned. While they have done an excellent job of expanding their customer base, the cost per acquisition is very high. If the cost of revenue is to believed they can make back the money with the lifetime value of the customers, but how long will that take, and will they be passed in terms of technological ability before then?

Source: Slack Q4 2020 Presentation

Before you double-check if Slack is expecting a turn around next year, they aren’t. The guidance stands at another full year 2021 $125k loss.

Looking back at the Genuine Impact relative rankings, we know the value is going to be a tough assessment also.

Source: Wallmine Slack

Technically speaking we can’t do many trailing ratios as Slack has got over a year’s worth of reports for us to assess. That is next month. With the data we have, we can judge the price to sales which are 28.26x, and the price to book of 25.14x. Neither inspires any confidence, as a value investor, there are a lot of red flags to be found.

A company with few assets, lots of digital IP, and expensive R&D spending to try and stay ahead. This is extremely far from a value investor’s dream of unrealised potential and assets waiting to be sold.

To cheer ourselves up I will look at the momentum and future projections, which appear to be fairly bullish on the surface.

Source: Genuine Impact

The future projects of revenue and EPS are both extremely high, this is easily explained by the ridiculously high marketing budget, and the fact they have a negative EPS, to begin with. When you are at the bottom the only way is up, right? Unless you somehow get worse which in the world of investments, is always possible.

I was surprised at the bullish analyst outlook. The weak financials and heavy spending are not sustainable. There is a lot of insider selling, more debt being raised (49.79% debt to assets, this is due to recurring revenue commitments), and they face extremely tough competition.

Looking at the analyst ratings they are slightly better than a hold but not a strong buy either. I was extremely shocked to see the target price for many of the analysts is lower than the current price. A few analysts are out of date now and their target has been hit, while others are in a firm hold camp and forecasting weak share price growth (in some cases retraction!)

So Why A Sell?

I love Slack as a product. I love their vision and I have grown to depend on their solutions. They have a great ecosystem and engagement when it comes to their customers too.

Source: Slack Q4 2020 Presentation

They have even expanded internationally with 37% of their revenue coming from overseas now, slight currency exposures but they are still primarily as USD based firm when it comes to revenue.

But, it just doesn’t add up to me as a long term investment.

The product can be replicated, and we can see dozens of new entries into the market following their best practice. We have multiple companies looking to enter (or who have) the space with bigger budgets, existing ecosystems and clients, that can play the long game.

R&D spending is too high. How many years can you get it right before you are dethroned? This seems like old school Intel. A great company but they were dependant on their R&D spending to stay ahead and ultimately ended up having to change up the business to be what they are today.

I don’t believe Slack is going to crash, or it’s going to disappear tomorrow. The current rally will likely continue, but I believe my capital can be better invested elsewhere for the long term. There are a lot of exciting tech companies with better long term prospects and who have a more defensible business.

As much as I love Slack as a product. It’s not a long term investment for me. You might some joy in taking short term positions and following the trends, but I’d rather focus on more interesting momentum investments.

Let me know what you think of my thoughts and write up. This is my longest article yet and hopefully the most engaging.

All your feedback has been extremely useful to make me a better analyst and writer!

Thanks for reading and stay safe.


Did you end up selling Beyond meat?

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