Fundamentally Furloughed

Loving these write ups, any chance for RTX?

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How I Analyse and Invest

Thank you @nimrod22 for the suggestion. I figure this would be a good time to talk about the steps I take when looking for an investment, and how I analyse any stocks or ETFs which get suggested.

I have also cleaned up the first post to include quick links to each analysis piece, also to provide some timestamps against my views in aggregate!

Screening and Discovery

When I’m not getting suggestions from the kind commentators on here, I have a few go-to places to find trade ideas.

News Sources

I find Business Insider useful for a summary on the markets in a macro sense as well as anything exciting happening right now.

Additionally, I check out the daily Finimize email. I like these guys in terms of bite-sized news stories. This is more “water-cooler” talk.

Stock and Fund Screeners

If I am looking for a dividend or raw datapoint, then I like the stock screener on Wallmine. Easy enough to use if you are looking for high dividend yield companies to investigate.

When searching for new investment ideas I use Genuine Impact. I tend to look for high-quality companies with strong momentum that does not have a low-value rank.

I’ve also used Simply Wall St for investment ideas but I prefer the rankings over the checklist approach. I find these guys are a merge of Genuine Impact and Wallmine, but I like to reference them from time to time.

If I am looking for an ETF and want to slice and dice my options more I like to use JustETF and their screener. A nice way to find an ETF with a particular focus to then investigate.

Get The Summary

When I know what stock or fund I want to investigate my first check is a health check with Genuine Impact. Normally I’ve checked out the top factors (the free stuff) and I am looking into the details now.

First I checkout profitability, a poor rank here normally means they aren’t profitable yet. I then assess the expected returns, I want this rank to be as close to #1 as possible. High target share prices are very attractive to me. Expected growth of revenue and earnings is also attractive but I often find this is priced in, still a good reference point.

A quick check on dividend yield to see if there is one or not, not too influential to my process but may change when I invest (I’ll have to look for the ex-date.) The rating change is important to me, knowing if sell-side analysts are changing their view a sign of what is happening in the immediate term. Having no buy ratings, or overwhelming sell rating is a massive red flag for me.

Understand The Company

Next up is figuring out what the company does and why. Easy way to find this is a Google search for “company name investor relations” this should take you to the investor site for that company.

I am looking for a few key documents. Reports and documents (I like the powerpoints to get a nice summary of what is happening.) Events calendar which shows dividend timings and when the earnings are announced. Tools like Genuine Impact, Simply Wall St, and Wallmine are using the fundamental data from the last report. If the last report wasn’t for a while then (e.g. due soon) I will often hold off any decisions until there is more clarity.

Additionally, I like to look for the strategic vision or anything which details their longer-term plan. I want to see future investment or innovation. Situations, where they are not innovating, or assume they will keep market share, with no consideration for new disrupters, is also a red flag.

Full Year Earnings

This is a key document for me. After looking through the high-level PowerPoint (which simply paints the best possible picture) it’s time to dive into the last full-year earnings release.

Most of my time will be spent reading through this document. There is a lot of fluff, but also a lot of warnings and expectation management. Was does this document mean for the future.

You can read through the full financials if you are an account but I find them very boring. Rather this is where I move over to Wallmine to checkout the ratios and headline financial figures. You can get the same data on Yahoo Finance but I find the interface and experience way nicer on Wallmine.

I’m looking for the ratios behind the summary rankings. What is the profitability, is it growing, do they have strong cashflow, are they taking on more debt than they can handle. Is this a high revenue, high-growth investment?

Latest News and Views

At this point, I should have a feeling if this company is as good as the first few health checks and screeners said it was.

Now it’s time to understand what is happening for this company right now, and also to get more detail sell-side analyst views - in particular target price.

First I search Google News for “company name share price”. I am looking for financial pieces related to the company. By adding share price it filters out a lot of random comments and stories which don’t impact my investment. If I do make an investment and it’s a company I wouldn’t naturally be keeping up with, then I also set up a Google Alert for that search query (pro-tip, setup some email filters as the subject lines are predictable, then you have an easy reference point for your investment daily news.)

Finally, I want to check out the sell-side analysts for a target and to double-check the coverage. I use Marketbeat for this. Wallmine does analyst coverage for US stocks by for UK stocks I use Marketbeat. I’m not a fan of the site interface and find it annoying but it gives me the data I need.

The Missing Bits

What I haven’t covered is portfolio construction, allocation monitoring, trading timing, and when I decide to exit an investment. For right now this is how I find and then analyse a potential investment.

The idea is to have a broad first bucket and then filter out stocks and funds as the process becomes more time-intensive.

Hopefully, you’ll see a few new tools, or suggest some tweaks or new tools for me!

Bit of a break from security analysis but I’m keen to pick up another stock/fund tomorrow. I’ll have a look through the suggestions or checkout any recent earnings for an interesting new company.

Thanks again for reading and I’m looking forward to your comments!

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Thanks so much for sharing this. It’s not just the resources that are super helpful (some of them new to me), but also showing the discipline that comes with it. Really appreciate the insights and knowledge you are bringing to this already amazing community. Keep it up! :+1:

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Thanks a lot!

I’ll look through this thread and see what would make for an interesting write up today, or maybe checkout one of the upcoming dividend companies. There is a lot of love for dividend firms on the forum and one of the members has put together a really good web page that I wanted to checkout a bit more.

If nothing else this is great for my confidence :star_struck:

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Awesome content, thank you for putting the effort into each contribution!

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Taylor Wimpey - TW (Buy)

Thanks again to @SpyrosL for the suggestion. We’ll be looking at a British classic (with some operations in Spain) today, the home builder Taylor Wimpey. They saw their share price being slashed with the COVID-19 outbreak, however, their staff have returned to work yesterday and they are optimistic for the future.

With several COVID-19 announcements, full-year results already out the way, and the next update coming on the 29th of July, we have some time to assess the company and potentially take a position.


Source: TW Corporate Information

What Does Taylor Wimpey Do?

It’s always good to have a refresh of the different business lines for each business. We’ll look at the last annual statement to see how they explain their revenue lines and work from there.

House building private sales, this is where Taylor Wimpey will build new homes on land they have purchased, and sell them directly to people like you and me. This business is half construction and half sales. TW will get a large lot of land, build some new homes and supporting local infrastructure, and then sell this “ready-made” community.

taylor homes
Source: TW 2019 Annual Report

House building partnership sales, rather than TW doing everything themselves they also partner with numerous other firms as a joint venture. In these cases, the other firm may handle sales, or provide the land, or it’s simply a joint project between the two.

taylor joint
Source: TW 2019 Annual Report

Finally, we have the land buying aspect of the business. Finding and purchasing prime lots of plan, getting building permissions, and developing the area. While this is part of the building sales, they do occasionally sell land as well. While this is a smaller part of the business they did make £37.9m in 2019 selling land.


Source: TW 2019 Annual Report

While not a business line, TW also runs a lot of their building materials and sources the supplies required efficiently. It’s worth mentioning as this is one of the factors involved with optimising your margins, controlling more of the value chain involved with home building.

taylor supply
Source: TW 2019 Annual Report

As mentioned they are expanding out into Spain as well.

taylor financial
Source: TW 2019 Annual Report

For a relatively new aspect of the business (in housebuilder terms) commanding an impressive 26.7% profit margin in a new country is worth taking note. The UK does come with higher wages and more of the businesses operational costs, it’s encouraging to see highly profitable international expansion.

What About COVID-19?

I can, and I will, go into the financial and look at the fundamentals but right now there is one question on our minds.

Will they survive through COVID-19, how have their sales looked, what happened to all the homes under development, what has happened to their cash flow? That may have been four questions but the point stands.

They made two key decisions on the 24th of March. Firstly they have stopped all discretionary land spend. Then they started drawing down their unutilised Revolving Credit Facility of £550m, resulting in a gross cash position of £807m and net cash of £165m. Finally, they cancelled the dividend until the situation was better understood. As a high dividend payer (even during down periods of the year) this would have been a nasty blow to many investors. Though cancelling this year’s dividend means a cash flow saving of roughly £485m.

In April we had another update. The directors took a 30% pay cut, no cash bonuses will be paid (equity is fine) and no annual pay increase.

At the end of April, a trading update was released. The key takeaways were, the order book increased in value to roughly £2.6bn which is still a £300m increase on the same period last year. The cuts and credit facility meant they had a gross cash position of almost £836m still. They had moved to virtual home viewings, were still making sales (slower than expected but still up on last year), and Spain was starting to ease up on the lockdown rules. Additionally, they started looking at land opportunities again, seeking to maximise on the discounts from fearful sellers. They even secured the UK’s first significant remote planning permission for a joint venture of around 750 homes with Waltham Forest Borough Council in East London.

Finally, on Wednesday we had another update. With the UK’s government telling employees in the construction sector to return to work, this was the moment TW was waiting for. Surprisingly housing market conditions have remained stable with signs of increased sales activity and customer interest, giving a very positive sign that TW will be returning with a bang. While it will take a few weeks, the plan is for TW construction to be underway on the majority of their sites across England and Wales this month.

Fun fact, during the lockdown period TW sold 408 homes net of cancellations, averaging a net private sales rate of 0.30 homes per outlet per week. Some people took up baking during the lockdown, others brought their dream home!

How Are The Fundamentals?

After some surprisingly positive news, while they fell short of their growth target for the year on year numbers they are still ahead of last year, we can look at the overall company.


Source: Genuine Impact Taylor Wimpey

These are some very strong ranks. Do take the quality with a pinch of salt. The last financial results did not include drawing down £500m of debt.


Source: Wallmine Taylor Wimpey

Looking in more detail about the quality, we can see a very healthy cash flow rich company, even if the profit margin is on the tighter side (15%.) Previously we can see the financing cash flow was negative, as they paid off debts in favour of more attractive terms. The next financial update will give us more flavour as to what this means. With a maturity date of just under five years, this debt was taken on as a protective measure.


Source: TW 2018 Presentation

Good thing they extended this in 2018!

In terms of the value, the massive slashes in share price has TW very attractively priced. With a 40% discount and strong activity even during the lockdown, TW is in a very strong position given the value of their assets. 1.51 price to book ratio and a 6.80 price to earnings, will raise some eyebrows. We are expecting lower results this year but all signs are pointing towards a faster than expected recovery.


Source: Google Finance Taylor Wimpey

We are expecting to miss targets, we have seen a bit slash in value, and a large amount of debt has been taken on which will need to be paid back. Does this mean everything is priced in already?

The lower momentum rank makes it seem like a slow recovery is on the books.


Source: Genuine Impact Expectations for TW

While the expected growth, the revenue and earnings, is very low we are more interested in the return. The target future share price.


Source: FT Factsheet for TW

With a medium 12-month target price increase of 26%, half-year results just over a month away, and a quick return to business as usual. This looks like a strong shorter-term play.


Source: Genuine Impact Analyst Ratings for TW

The sell-side analysts also have a generally optimistic view. With the stagnant period being much shorter than expected, and home safes not disappearing, there is a lot to love here.

The market has priced down TW very aggressively on the assumption of no more home sales, it looks like this has not been the case. Even if we enter a second wave we know that TW still can sell homes (just can’t finish them!)

In Summary

I would describe any investment in Taylor Wimpey as an investment in British recovery. If you are optimistic about exiting lockdown and the slow unwind to “normal”, this stock represents that optimism.

Ultimately it is in the British mind that we must become homeowners. With over 1.2m homes needing to be built, Taylor Wimpey will always have a place and purpose. This year will be a more challenging one which will focus on share price recovery. I’d expect from 2021 we will be returning to our increasing dividend and hopefully the continued profitable expansion into Spain.

Let me know what you think, is this a company you are interested in or trying to avoid?

I know this isn’t a comparison but hopefully, a deep dive into one homebuilder helps shine some light on what COVID-19 is doing to them.

As always, thanks for reading!

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Great write up - cheers Jack

I already have a medium size position on TW. It was doing really well until the lockdown!

But I see them coming out the other side relatively unscathed and business will boom, so I’m still buying more shares while they are cheap.

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If you have a position already then now is a really good time to get some extra shares cheap.

In July we’ll get an update on the first half of the year and their plan going forward. I’m expecting/hoping that is when we’ll get a solid all clear or what to look out for.

Hopefully if they keep up their trading updates with such positive messages we’ll see little share price spikes along the way too.

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I agree, and just used the last cash in my account to buy more.

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Great write up. Have held tw for a few years and have been adding more lately. I think there are plenty more swings to this share price given ok going uncertainty so I’ll be focusing on managing our own household expenses and trying to pick up some more tw.

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I have a few more UK stocks you might like analysing (super hope you do). These are my picks - focussed on growth & scalability.

GB Group plc
Future plc
Keywords Studios

Some what worrying news on Future plc

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Jack, would you share with us what are your current holdings, and why? thanks in advance!

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Thanks again for all the great feedback and suggestions!

I’ll have a look at my holdings and give you guys a look at what I like to hold and my reasons behind it.

Plus I can have a look at some companies to analyse. My girlfriend has a busy day of meetings so I’ll have some free time in the sun to read some reports!

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Seems today has been busier than I expected!

I cleaned up my current holdings sheet a little. Figured this was a good excuse to give it some TLC.

Accenture
Highly profitable, stable business, currently experiencing high growth. Jumped on this with the recent rally.

Activision Blizzard
Still holding it, had it a while. Likely will sell this once it’s back in profit and consolidate the holding with EA.

Smith & Wesson
From the days where the US was always facing calls to ban guns, this would cause a surge in pricing. Old legacy holding I need to cleanup. I think I’ll see at a lose and just move on.

Altassian
Very strong fundamentals (weak value) and a recent rally. Jumped onto the hype train. Also they have just brought another company as well to expand their service desk offering.

Beyond Meat
Waste of my time. Brought into the hype. Just need to pull the plaster off and sell this. Not worth waiting on any longer in my mind.

Domino’s Pizza
Brought off the back of my analysis. Brought into my own hype!

Electronic Arts
Held for a long time, another high quality and momentum investment. Solid historic and future growth.

Cloud Computing ETF
Invests in a range of companies based on how “cloud” they are. Very sensitive but covers a lot of securities I wouldn’t normally directly invest in. I see this as a growth industry.

Frontier
Really like their games. I brought these guys for the new IPs they were developing and working on. Decent quality and momentum. Just won the rights to a new game with my next holding.

Games Workshop
Brought too late but I still like this holding. Reliable growth, good management, lots of innovation and they historically perform very well. Still recovering from COVID-19.

Greencoat UK Wind
Investment trust that focuses on wind farms in the UK. This is both my eco play and my dividend play. A strong performer historically and pays a reliable dividend as well. The dividend keeps me happy enough that I don’t worry about the value.

20+ Year Treasury Bond
Given the low rates of inflation, and also adding some protection, this felt like a smart move. Stable but in recent months has given me some excitement.

UK Gilts
My other bond fund. This one focusing on the UK rather than US. Really these are just to anchor my ISA. Try and do a little derisking.

Legal & General
Had for a while and it’s still recovering from when I brought at a high. Poor timing of the buy but happy to keep it as is.

Lyft
Brought into my own hype.

Mastercard
A very stable and reliable company. A long term position in my ISA where it happily ticks over. Solid high quality company.

Microsoft
Same as Mastercard. A solid long term slow moving quality company. Big enough I am not worried they are going to vanish, but agile enough to keep themselves innovating.

NVIDIA
High momentum, excitement driven buy. I think there are better plays out there in the world when it comes to chip manufacturers, but Nvidia is just one of those holdings you always see. Picked up a few shares with dividend build up from other stocks to lock in some short term gains.

Sainsbury’s
Brought in on my own hype. Earnings didn’t look good. Going to hold for now but a disappointing outcome so far.

Scottish Mortgage
Always been a fan. High growth, high momentum investment trust. Right now is doing extremely well. I am not looking forward to them really looking under the hood at the private investments (which they have voted to increase the overall holdings which are private.) This could be another Woodford if we aren’t careful.

Take-Two Interactive
Another gaming company. Really need to wrap all of these up. I’ll likely put it all into EA.

Taylor Wimpey
I was looking for another investment and as we start to ease out of lockdown this looked an interesting investment. Brought into my own hype again.

I recently took my ISA back into my full control, after looking after it, then moving most of the ISA to a managed solution and then back out.

The formulas I use in Google Sheets if anyone wants them.

Current value is =GOOGLEFINANCE($C3,"price"), $C3 being the symbol (make sure you add the exchange if you see strange results.)

Today change is =GOOGLEFINANCE($C3,"changepct")/100 I had to add the divide (it is a percentage already) as the percentage format kept messing with it.

All time change is the current value minus the average book cost then divided against the average book cost. =(G6-F6)/F6 it’s new number minus old new number divided by new number.

Holding percentage is the sum of all the pound values which has been divided using the pound value of this holding. =M7/sum($M$3:$M$24)

Both the pound average book cost and pound value use this formula (adjusted to look at the book or value respectively.) =($D6*F6)*IF($E6="USD",$C$29, IF($E6="GBX", 0.01,1))

It’s the number of shares multiplied by either the book or the value number. Then we multiple this by the FX. If it’s USD in the FX field then I have the latest FX rate used (0.83) in this sheet. If you find GBX in the FX rate then multiple by 0.01 to shift the numbers by two decimal places. Otherwise just multiply by 1 so there is no change (assume the FX is GBP.)

Link to sheet

I got a few requests to copy the sheet so here is a version for duplicating if you want. I’ve split it out from my normal sheet so I don’t break anything. It’s extremely basic at just tracking open positions but hopefully it helps some of you!

Not a super in depth analysis of my holding but hopefully it shines some light on what type of investments I like to make!

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Considering initiating a position in either Activision Blizzard or EA, what’s your rationale on selling AB and consolidating the position with EA and not the other way around?

Not investment advice, interested in just your view :innocent:

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Because I played World of Warcraft once and someone stole all my gold. :rage:

I’m joking, it actually comes down to the diversification of their businesses and how they optimise cash flow.

Activision has a lot more going on in terms of product diversity but they are all large single projects. They are also heavily leaning on their subscription business.

EA has a laser focus on what they do and how they go about it. The scope of their business is much narrower but that actually plays to their advantage.

EA has almost have the market cap of ATVI, but EA brings in $5.3bn to ATVI’s $6.4bn.

EA has a profit margin of 20.59% compared to ATVI 23.16% but gross margin EA is 73.29% versus 67.73%.

ACTI has paid an Irregular dividend and EA has never paid any kind of dividend.

ACTI has a buy rating of 1.43 versus the more mixed 1.88 of EA (closer to 1 is better in this case.)

So why EA?

Because it has the better momentum and share price growth.

ATVI average target price is $77.06 (current price $73.92) compared to EA’s $125.75 (current price $117.32)

This might not seem like much but the sell-side analysts are way more punchy for EA’s growth compare to ATVI. ATVI is a slower beast which does well but isn’t blowing the doors off. EA is more volialite but has a stronger upside.

To me I see EA being a bit more in touch with what the boarder market wants and better at responding to that.

Even looking at the value metrics. P/E, EV/EBITDA, P/S, and P/FCF are all more attractive for EA (P/B less attractive.)

Generally I see EA as having more potential and better at execution than ATVI. Both are strong good picks, but I don’t need so much cross industry exposure, if I am going to consolidate I’m going to go for the one with better growth prospects right now.

My portfolio has other more defensive safer holdings, I don’t need another :smiley:

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After doing the portfolio holdings write up I figured it would be nice to double check on each of the articles I’ve written. Nothing like some harsh facts to put me in my place! Plus we have had a few more quarterly reports as well.

I’ll check each article, go off the close price and see what’s changed.

J Sainsbury’s - SBRY (Buy) 27th April 2020

If you had brought on the 27th at 201.10p it’s currently worth 186.50p, meaning a 7.26% loss! :scream:

BooHoo - BOO (Hold) 28th April 2020

Valued at 338p and currently 339.9p. The price is still bouncing around and not really doing anything too exciting. 0.56% gain. :sleeping:

Scottish Mortgage Investment Trust - SMT (Buy) 29th April 2020

Looking at a change from 667.50p to 723.82p, a strong 8.44% increase. :exploding_head:

Domino’s Pizza - DPZ (Buy) 30th April 2020

Time scales are getting mighty tight now but it’s fun to check. $361.93 to $364.5, a small bump of 0.71%. :sleeping:

Royal Dutch Shell - RDSB (Hold) 1st May 2020

The future might be uncertain, and we will need oil for a long time, the share price has kept ticking up, great for anyone looking to exit. £12 to £12.67, a strong 5.65% increase. :exploding_head:

Activision Blizzard - ATVI (Buy) 4th May 2020

A fantastic growth from $66.70 to $72.88. Earnings were as solid as expected. A very strong 9.27% increase. :exploding_head:

Imperial Brands - IMB (Buy) 5th May 2020

The dividend cut has been poorly received. A nasty lose of £16.49 down to £15.39, a 6.7% decrease. :scream:

Qualcomm - QCOM (Hold) 6th May 2020

This has been another bouncy wild stock. Glad I went with hold for this one right now! $78.87 to $79.93, a 1.34% increase. :sleeping:

Lyft - LYFT (Buy) 7th May 2020

Sadly brought right at the peak on this one! Rebounding now but having to make a recovery. $31.78 down to $30.34, a 4.53% loss. :scream:

Aston Martin Lagonda Global - AML (Sell) 11th May 2020

The biggest change so far. 43.1p down to 38.63p, if you had shorted this would have been a 10.37% gain! :exploding_head:

Legal & General - LGEN (Buy) 12th May 2020

Another dip which is recovering. £2.00 down to £1.93, meaning a 3.18% decrease. :scream:

Ocado - OCDO (Hold) 13th May 2020

Still struggling in the short term. We are still losing value here. £21 down to £19.16, a nasty 8.83% decrease. :scream:

Taylor Wimpey - TW (Buy) 15th May 2020

Finally the latest piece I’ve written. £1.40 up to £1.45, an encouraging 3.27% increase :exploding_head:

Naturally these are all longer term positions but when you check your portfolio every day it’s important to understand the shorter term emotions and changes!

I’ll get some analysis done this afternoon, I’ve been seeing some great suggestions.

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Thank you so much for sharing your sheet - I have used it to create my own, albeit with a greater proportion of red boxes on the far right :grimacing:

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It’s tough times for the market and investors. Lots of unknown, FOMO, and doom. If you want to enhance the sheet and do more with it, e.g. upcoming dividends, then have a look at what @finki has been doing. You can hook his APIs into your sheet and get even more data.

Good if you want to expand the sheet from just current holdings P&L, to actually recording your track record and past trades!

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thanks @jcksmith850 for the shout out :+1:

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