GlobalSpeculation.com
Because it does not make sense not to

Todd,

“The $2.7-billion acquisition will establish Manitowoc among the world’s top manufacturers of commercial foodservice equipment. Manitowoc said it is also is one of the world’s leading producers of cranes and innovative lifting solutions for the global construction industry.” (referring to Edonis).

————Side note: (the point is to illustrate that a lot of construction companies are going to break trends.. and are priced to do so, but some are strong — even still)

Breaking a long-running trend, Terex posted a decidedly disappointing third quarter. Net earnings slipped by 34% to $93.8 million, even as net sales increased almost 15% to more than $2.5 billion. The total backlog of pending equipment sales, a crucial forward indicator, fell 14% just since the second quarter. Backlogs for Terex’s aerial work platforms and construction equipment fell by more than 60% and 40%, respectively. In contrast, Terex reported an 8% increase in backlogged crane orders, and only a 9% drop in pending sales of mining equipment.
Bucyrus, meanwhile, enjoyed another knockout quarter with a 124% increase in net earnings, a 380-basis point expansion of EBITDA margin to 17.9%, and a whopping 74% increase in total sales backlog to $2.5 billion. The company’s entry into the underground mining equipment business with last year’s acquisition of DBT lends limited value to year-over-year comparisons, but nonetheless this was a rock-solid quarter for Bucyrus.

—————–End Side note:

My opinion is that Analysts still need to lower expectations for MTW, but I’m concluding that they’re waiting on earnings to come out before they do it. BUCY is another one of my favorites. TEX used to be, but I took it off the table when I compared TEX and MTW and figured MTW was better… not to mention a couple on campus interviews. You’d be surprised what company reps will tell you if they think you’re looking for a job with them and you ask them for the three things that they think their company can improve on and the most because you want to know if you can help.

My opinion on MTW could change if they come out with Q3 results and I see significant weakness. Remember that investors are dumb and 1-time costs generally hurt the stock price over the next year. That said, MTW could soar. Low risk situation if you ask me. I don’t see it getting whooped much more since it already took a beating when TEX came out weak.

Glen

From: Todd.Johns
Sent: Wednesday, October 22, 2008 3:56 PM
To: gbradfo
Subject: RE: MTW

Thanks Glen,

I believe that it is being punished without cause due to the overall market sell-off and especially in the small-cap segment. I like it for 3 reasons.

1. More tied to large government/energy infrastructure projects, not residential/commercial construction.
2. Diversified internationally, especially in some of the developing, high-growth, countries.
3. Good management and cost controls.
4. oh I forgot, they started in the crane business just short of the Great Depression…if they survived that, they can certainly make it through this economy

Hey Nate,

I’ve tabled this one, cause I have no idea about how the currency exchange rates will impact the company. Here’s the Q2 transcript: http://seekingalpha.com/article/89211-central-european-distribution-corporation-q2-2008-earnings-call-transcript

A few highlights I just found:

“we continue to see in Poland and in Russia, of course with the higher GDP growth of Russia, certainly trade-up opportunities are higher that also we are seeing coming through with the pricing of value over volume which we get to a little bit later, which certainly be the aspect of bode well for a strong currency.”

Alas, you’re question: “The zloty has continued to appreciate around 5% of the second quarter, and another 2% so far year quarter to-date this third quarter. The Rubles are relatively flat this quarter, third quarter, and maybe only about a 1% appreciation in the second quarter, but relatively up flat to the dollar and the euro.”

James Archbold is the man with the answer to this question.

http://people.forbes.com/profile/james-archbold/17140

Contact:
Jim Archbold,
Investor Relations Officer
Central European Distribution Corporation
610-660-7817

I haven’t called CEDC yet, it sounds like you know more about their currency situation than I do. I look for consistent companies with growth potential on the cheap. CEDC ridiculously fits my model right now. Buffett and Lynch love cold calling. My advice is you give it a try. Let me know what you find out.

Glen

From: Nate Tabak
Sent: Sunday, October 26, 2008 2:43 AM
To: gbradfo
Subject: CEDC

Hey Glen,

How much of an effect are the collapses of the zloty/forint/ruble going to have on CEDC’s fundamentals and future earnings? I’ve been buying into the stock’s weakness, partially with the hope that the currency situation could be a boon for company since it will be able to make Eastern European investments and acquisitions at a steep discount using its USD reserves. Furthermore, do you have any idea to what extent CEDC hedged against currency declines?

Thanks,
Nate Tabak

Greg,

That’s hard. I hate picking just one. For the sake of using macroeconomics, China’s my favorite country and they aren’t hurting fundamentally as bad as we are. My favorite “ultra-high” risk play is GHII. It’s a penny stock that is trading at 11 cents and in my opinion is worth about $2 or more. Please give it a PE of at least 10.

If you like options, buy 2010 January Calls on CEDC.

Those are my two favorite ideas right now. CEDC is way too cheap, I sold my stock and bought the options @ $30. I could be an idiot, who knows… but at least I’m basing it on the fundamentals and probabilities.

Glen

From: tubertini
Sent: Sunday, October 26, 2008 10:30 PM
To: gbradfo
Subject: one stock

Glen,

I have a discretionary account in which I have set aside for risky but potentially lucrative investments. If you had to pick one stock that has been beaten down but has the most potential to sky rocket once the bank failures and poor economy is behind us what would it be? By the way, great articles on Stockpkr.

Greg Tubertini

Dario,

It has to do with rules of thumb applied to discounted cash flows of future earnings. The stock is CEDC.

A few “calculators”

http://www.moneychimp.com/articles/valuation/dcf.htm

http://www.creativeacademics.com/finance/dcf.html#what

Basically, when the PEG ratio < 1; the Price that you pay for current earnings is less than the anticipated growth rate of the company. It took me a long time to wrap my brain around this one. A book titled Buffettology by Mary Buffett is a good book to get your feet wet.

Present value = SUM[ (Future cash flows) / (1 + interest rate) ^ (Future year) ]

My friends are always getting caught up in multi-linear regression and covariance and neural-networking logic. Most of the time in real business, it’s just being able to see the easy way to make money; few can do it. I try to keep it simple. I find companies with consistent track records and use their track record to project their future and then discount their expected future to price the company. Then, I try and find reasons not to invest (high debt, slowing cash flows, higher delinquency rates {see accounts receivable and days outstanding}, bad analyst news, anything).

Glen

From: Dario Visnjic
Sent: Saturday, October 25, 2008 5:30 PM
To: Bradford, Glen
Subject: RE: Stocks

Alright
thanks

If CEDE should be $175, why would you sell it at $75?

And could you explain when you said “annual growth rate (5 year projected) gets close to the PE ratio OR PEG ratio > 1,”

Dario,

PCP and MTW are the two of those that I trust the least. I’m waiting on earnings on MTW, but PCP is pretty much hoping that the Boeing strike will end soon. I’ve got a pretty long time horizon and history is telling me to be optimistic. When the market bottoms (if it hasn’t already) it could either surge up, or just meander around and not go anywhere. There’s a lot of fear in the market, more than most market commentators “have ever seen.” According to Ben Graham, the market price of a stock can be broken down into three factors:

1. Intrinsic value (fundamentals on balance sheet)
2. Future growth expectations (income statement projections)
3. Market factors (fear, technical analysis, etc) — Hugely over weighted in times of widespread panic and fear — like now.

I try to find companies that have very strong 1 and 2’s and very negative 3’s. I figure companies that make a lot of money and should only be helped by the changing socioeconomic tides should eventually reflect that in their share price; but I don’t expect them to reflect this in their price very soon. Am I selling? No; but it may appear so. I’m assuming that the fear will have dissipated 1 year from now. I’m slowly leveraging my portfolio for a bull run by slowly shifting from stock to long calls (January 2010) on a select few companies in my portfolio.

There’s still a lot of overpriced companies out there; just try not to own any of those.

CEDC should be worth $175, but I’d consider selling at $75
AOB should be worth $20, but the asian stocks are all tracking around ¼ of the value of the rest of the stocks (why, I don’t know, so I’m overweighted now in asian stocks)

For the rest, a good rule of thumb is when the annual growth rate (5 year projected) gets close to the PE ratio OR PEG ratio > 1, sell. But make sure to watch the financial statements for signs of weakness.

Hope this helps?

Glen

From: Dario Visnjic
Sent: Friday, October 24, 2008 6:15 PM
To: gbradfo
Subject: Stocks

Hey Glen

Just read all your article on your website and Stockpickr. Thanks for all the recommendations. I read about the Buy Google and Apple and you said sell Google at $500 and Apple at $160, if am not mistaking. I own some stock that you had in your articles and when do you recommend that I sell AOB, VDSI, PCP, KCI, MTW, and CEDC. I got those from your articles. Also I own JPM, JpMorgan & Chase. When od you think I should let it go.

If you coudl please write back and let me know what you think.

Thanks
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This company looks really good, priced to grow at 2.8% and has been crushing around 30%. Everyone agrees with me. I haven’t researched it enough to write about it or buy it… yet

How’s it going,

I looked into it. You were probably advertised this company because:

Peabody Energy Corp. Raises FY 2008 Earnings Outlook
Thursday, 16 Oct 2008 08:02am EDT

Peabody Energy Corp. announced that for fiscal 2008, it has raised EBITDA guidance to be in the range of $1.75 to $1.85 billion and earnings per share (EPS) from continuing operations is targeted at $3.00 to $3.25. According to Reuters Estimates, analysts on an average were expecting the Company to report EBITDA of $1.70 billion and EPS of $2.86 for fiscal 2008.

I looked into the past few years of data. It pays a quarterly dividend of 6 cents. That’s less than 1%

The prices of commodities have fallen recently. This hurts their earnings.

I’m not willing to bet on any commodity companies until their underlying demand rally’s again. There are cheaper companies out there.

http://www.forbes.com/feeds/ap/2008/10/21/ap5583990.html

Glen

—–Original Message—–
From: Lyn
Sent: Tuesday, October 21, 2008 6:11 PM
To: Bradford, Glen Richard
Subject: Hello

Hi, Glen – You asked if anyone had a stock for you to look up – and I do.
It comes from the
“Bottom Line” flyer which I get every week. BTU – Peabody Energy
Corporation. It is
a coal company – and I don’t even know if it pays dividend??? Thanks for
checking this out
for me – and I surely wish you and all buyers a good week.

Todd,

It is definitely priced below the current forecast and what’s reasonable. There are a lot of companies priced like this right now. There are also a lot of companies that are overpriced in my opinion. My objective is to only own the companies that have little if any debt, consistent revenues and earnings, and are still expected to outperform what they are priced to do, with a good margin.

Out of these companies, I find the ones with the most upside. MTW is just one of them. I think that there’s a lot of money being thrown around out there right now and the PE of the S&P 500 might still be too high. But, I’m all in (on the really cheap companies that meet my requirements). I just wish my time outlook was a bit longer.

Glen

From: Todd.Johnson
Sent: Monday, October 20, 2008 4:14 PM
To: gbradfo
Subject: RE: MTW

Thanks Glen,

So based on your information below, ‘MTW is priced to grow at -1.2% over the next 5 years./ Analysts have it growing anywhere from 7% to 26%’, the current price is well below the current forecast, correct? I see they declared the .02 quarterly dividend today, so that’s good news.

Todd A. Johnson

Todd,

MTW is priced to grow at -1.2% over the next 5 years. Their Crane group does about 80% of their revenues.

From their last quarterly transcript: “This trend was reflected in our crane backlog, which stood at $3.5 billion at June 30, an increase of 70% over the same period in 2007.”

“The solid backlog also reflects the pay back of our innovation strategy as well as the success of our new products in the marketplace. Our outlook for the Crane segment remains strong through at least the end of 2010, despite the recent decline in U.S. housing market, the softening of commercial in some mature markets and slowing residential construction in Western Europe. We expect to offset these trends as demands for our higher capacity cranes particularly those serving infrastructure and energy application continues to grow in both developed and emerging economy.”

It’s trading way below where it usually does as far as historical price and growth trends are concerned. (As you’re probably aware).

I measure leverage as the ratio of ROA to ROE and then I look at historical debt. By those metrics, they are 31/13, and in the same neighborhood as their competitors.

Fuel prices are lower, commodity prices are lower, demand is probably going to be lower in the near term.

Analysts have it growing anywhere from 7% to 26%. As far as being relatively liquid, in the short term, they can pay current liabilities and really have been paying off long term debt over the past few years.

http://www.forbes.com/finance/2008/08/07/manitowoc-bucyrus-terex-pf-ii-in_ja_0807soapbox_inl.html

http://seekingalpha.com/article/87831-manitowoc-co-inc-q2-2008-earnings-call?page=2

You’re asking the right questions,
Glen

From: Todd.Johnson
Sent: Friday, October 17, 2008 4:37 PM
To: gbradfo
Subject: MTW

Glen,
I saw your article today, “How to take advantage of bad times” and your thoughts on MTW. Closing @ 11.89 today with a P/E multiple of 3.77, it looks really cheap. I was not aware that they typically are conservative on their earnings forecasts, so thank you. What are your thoughts when they report Q3 at the end of the month? Does their sales pipeline look pretty good right now, even with the slowing global economy? Do they depend on very much leverage, or are they relatively liquid? Thanks and have a great weekend.
Todd A. Johnson