Nevsun Resources Ltd. (NYSEMKT:NSU) is a dirt-cheap dirt miner

Tobias CarlisleStocks4 Comments

Nevsun Resources Limited (NSU), an African gold, copper, zinc, and silver miner, trades on a sub-2 acquirer’s multiple and is the cheapest stock the All Investable Screen.  It’s got an $820 million market cap with a $530 million enterprise value and trailing twelve-month operating earnings of $269 million (AM = 1.98), which is cheap, cheap. There are a lot of reasons to like it.  likes it too. Here’s his reasoning in summary:

A clean balance sheet:

[T]he company has a top notch balance sheet. With current assets of $677 million and current liabilities of $73 million, the firm has a working capital of $604 million. Likewise, it has a huge current ratio of 9. It is also extremely interesting to calculate the net current asset value of the firm. This metric is calculated by subtracting total liabilities from current assets.

Trades at ~3x NCAV:

With total liabilities of $360 million, Nevsun has a net current asset value of $317 million. Based on a market capitalization of $900 million, it is possible to conclude that the firm is truly undervalued. I want to mention that the current assets are mainly composed of cash and cash equivalents. In fact, the corporation has $514 million in cash.

Cheap on a enterprise multiple basis:

On the other hand, the most interesting part of the company is its enterprise value to EBITDA ratio. With an enterprise value of $716 million and a trailing twelve months’ EBITDA of $355 million, Nevsun resources has a EV/EBITDA ratio of only 2.01. This is the lowest in the entire industry. Every serious investor should be interested in this great opportunity.

Acquirers are interested:

Few months ago, the firm revealed that it recently received inquiries from various parties about a potential takeover transaction. At the same time, Bloomberg reported that a Qatar equity fund called QKR Corp. was eying a US$1 billion bid. With more than $500 million in cash, the potential takeover would largely pay for itself. Due to the downtrend in the commodity prices, the industry is clearly in a consolidation process. On the other hand, absolutely no official offer came along.

And it’s about to start mining some minerals in near-term deficit.

Finally, the company has a huge upside potential with the zinc expansion project. In 2016, the flotation capacity will be expanded to produce zinc concentrates. A supply deficit in the zinc market is expected as soon as 2016. It is mainly due to the closure of large zinc mines. This factor will reduce the supply by approximately 10%.

Read more at: Why I Bought Nevsun Resources – Nevsun Resources Ltd. (NYSEMKT:NSU) | Seeking Alpha

Finding The Cheapest Stocks On The Planet Podcast: 3 Small and Micro Cap Stock Picks

Tobias CarlisleMedia, Stocks, StudyLeave a Comment

Yesterday I recorded a podcast with Fred Rockwell of The Bulldog Investor.

We discuss:

  • How to find the cheapest stocks on the planet
  • The Acquirer’s Multiple Small and Micro Cap Screener
  • Emerson Radio (MSN) and 2 other stupid cheap Small and Micro Cap Stocks

Click here to listen to Finding The Cheapest Stocks On The Planet with The Bulldog Investor

How To Maximize Shareholder Value In Natural Alternatives International, Inc. (NASDAQ:NAII)

Tobias CarlisleStocksLeave a Comment

Micro cap special situations investor  has an interesting take on Natural Alternatives International, Inc. (NASDAQ:NAII), #5 in the Small and Micro Cap Screener. It closed at $5.65 today, but it’s worth $10+.

Highlights

  • Financial strength ($17 million in cash or ~ 56% of market cap and no debt)
  • Low valuation (P/TBV of 0.81x, EV $13.4 million, EV/EBITDA of 2.09x)
  • High cash flow (EBITDA of $6.4 million, FCF yield of 22%) expected to increase due to lower capex spending on manufacturing equipment ($2.3 million FY12 and $1.7 million FY11) and lower patent litigation expense (~$1.8 million in FY12 vs ~ $1 – $1.5 million in FY13)
  • Undervalued assets (owns corporate headquarters in San Marcos, CA valued at depreciated cost on balance sheet)
  • Shareholder friendly management completed more than 75% of $2 million buyback plan from 2011
  • Strong history of margin improvement (gross margin 21.22% in FY12 vs. 12.72% in FY09, operating margin 8.51% in FY12 vs. 0.54% in FY09, EBIT 6.2% in FY12 vs. 0.96% in FY09)

Interesting catalysts:

The sale of the company via MBO, LBO or to a strategic buyer is the best way to maximize shareholder value due to the premium received, significantly higher IRR compared to alternative shareholder friendly measures (e.g. starting a dividend, increasing buyback or leveraged recap) and elimination of high and increasing compliance and regulatory costs (mentioned below). The sale should ideally take place after the sale of the branded products and patent estate.

Source: How To Maximize Shareholder Value In Natural Alternatives International – Natural Alternatives International, Inc. (NASDAQ:NAII) | Seeking Alpha

Emerson Radio A Good Buy – Emerson Radio Corp (NYSEMKT:MSN)

Tobias CarlisleStocksLeave a Comment

A nice note from contrarian investor  on Emerson Radio (MSN), the cheapest stock in the Small and Micro Cap Screener.

The stock’s at $1.35 with cash backing of $1.45. It’s a rare stock that trades at a discount to NCAV, and cash, which, even with a terrible business, makes it a free hit.

Summary

  • Zero debt company trading below NCAV.2014’s free cash flow per share is $0.22 yet earnings per share are $0.05.
  • This suggest an undervaluation at current prices.
  • Earnings, revenue and FCF have dropped significantly due to loss of business from a huge customer.
  • I expect the company to stay profitable in the future due to the simplicity of running the business.

NCAV Valuation

Assets: 63,625,000

Liabilities: 3,766,000

Preferred Stock: 3,310,000

Common Shares Outstanding As of June 25th, 2014: 27,129,832

NCAV: (63,625,000-3,766,000-3,310,000)/27,129,832=$2.08

The current price of MSN is $1.37 and the cash per share of MSN is $1.45. Buying MSN for the price it is at now is a steal based on NCAV investing.

Read why he likes the stock here: Emerson Radio Could Be A Good Buy If Downward Pressure Continues – Emerson Radio Corp (NYSEMKT:MSN)

 

The Acquirer’s Multiple 2015 Q1 Performance and Portfolio Holdings

Tobias CarlisleStudyLeave a Comment

Chart 1. Large Cap Returns 2015 Q1

TAM Large Cap Returns 2015Q1

The Acquirer’s Multiple screeners had a mixed start to the first quarter of 2015. The Large Cap and All Investable screeners massively outperformed– the Large Cap screener was up 9.1 percent vs 1.6 percent for the Russell 1000 TR benchmark, and the All Investable up 6.9 percent vs 1.9 percent for the Russell 3000 TR benchmark–while the Small and Micro Cap Screener underperformed, down -4 percent versus up 4 percent for the Russell 2000 TR benchmark.

Chart 2. All Investable Returns 2015 Q1

TAM All Investable Returns 2015Q1

Chart 3. Small and Micro Cap Returns 2015 Q1

TAM Small and Micro Cap Returns 2015Q1

The big gainers for the Large Cap portfolio were Exelis Inc. (XLS) +40.9 percent, LyondellBasell Industries NV (LYB) +31.1 percent, and Anthem Inc. (ANTM) +29.4 percent. The big losers for the Large Cap portfolio were Alliance Resource Partners LP (ARLP) -22.4 percent, National Oilwell Varco Inc (NOV) -21.5 percent, and Copa Holdings SA (CPA) -10.2 percent.

Table 1. Large Cap Individual Portfolio Holding Returns 2015 Q1

Ticker Name Starting Price Ending Price Return
VLO Valero Energy Corp $49.07 $59.91 22.1%
ANTM Anthem Inc $125.53 $162.43 29.4%
TEO Telecom Argentina Stet-France SA, Buenos Aires $18.73 $20.88 11.5%
CNCO Cencosud SA $7.30 $8.04 10.2%
YPF Ypf Sociedad Anonima Yacimientos Petroliferos Fiscales $26.22 $29.60 12.9%
WNR Western Refining Inc $37.47 $45.82 22.3%
TOT Total $50.26 $52.66 4.8%
FLR Fluor Corp $60.27 $58.78 -2.5%
MAN ManpowerGroup $67.76 $86.46 27.6%
ARLP Alliance Resource Partners LP $41.59 $32.26 -22.4%
BWC Babcock & Wilcox Co (The) $29.87 $33.40 11.8%
NOV National Oilwell Varco Inc $64.74 $50.81 -21.5%
LYB LyondellBasell Industries NV $79.32 $104.00 31.1%
WLK Westlake Chemical Corp $61.43 $69.87 13.7%
XLS Exelis Inc $17.45 $24.58 40.9%
HUM Humana Inc. $143.72 $176.28 22.7%
HFC HollyFrontier Corp $37.65 $43.09 14.5%
MEOH Methanex Corp $45.56 $58.40 28.2%
CPA Copa Holdings SA $102.71 $92.22 -10.2%
AET Aetna Inc. $88.55 $113.02 27.6%
T AT&T Inc $32.88 $34.64 5.3%
MPC Marathon Petroleum Corp $89.83 $103.46 15.2%
LEA Lear Corp $97.62 $115.08 17.9%
EMN Eastman Chemical Co $75.72 $77.89 2.9%
KOS Kosmos Energy Ltd $8.42 $9.23 9.6%
CI Cigna Corp $103.28 $132.72 28.5%
TSO Tesoro Corp $74.45 $91.76 23.3%
ALK Alaska Air Group Inc. $59.97 $67.06 11.8%
GT Goodyear Tire & Rubber Co $28.15 $31.23 11.0%
OSK Oshkosh Corp $47.98 $54.25 13.1%

The big gainers for the All Investable portfolio were Alon USA Partners LP (ALDW) +73.0 percent, Petrobras Argentina SA (PZE) +50.2 percent, and Delek US Holdings Inc. (DK) +37.5 percent. The big losers for the All Investable portfolio were MagnaChip Semiconductor Corp (MX) -51.3 percent, Hugoton Royalty Trust (HGT) -39.2 percent, and Alliance Resource Partners LP (ARLP) -22.4 percent.

Subscribe to see the portfolio holdings of the All Investable and Small and Micro Cap Screener.

Click here to see the individual backtests for each of the Large Cap 1000, the All Investable, and Small and Micro Cap screeners.

Click here to see the underlying backtest data for each screen.

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Disclaimer: Hypothetical performance does not represent actual performance and should not be interpreted as an indication of such performance. Actual performance may be materially lower than that of the hypothetical portfolios. Hypothetical performance results have certain inherent limitations. Such results do not represent the impact that material economic and market factors might have on an investor’s decision-making process if the investor was actually managing money. Hypothetical performance also differs from actual performance because it is achieved through the retroactive application of model portfolios (in this case, The Acquirer’s Multiple®) designed with the benefit of hindsight. As a result, the models theoretically may be changed from time to time and the effect on performance results could be either favorable or unfavorable.

All Investable Stock Screen Backtest

Tobias CarlisleStudy11 Comments

Updated November 29, 2017

Since the last update in July 26, 2016, the screen had a strong finish to end the 2016 year up 29.1 percent, handily beating out the Russell 3000’s 12.2 percent by 16.9 percent.

2017 to date has been less pleasant. For the year, the All investable Screen has gone backwards, down -6.6 percent, and underperforming the Russell 3000’s strong 16.3 percent by a shocking -22.4 percent. This is the worst relative performance the screen has seen in almost 20 years.

Chart 1. Returns from January 2, 1999 to Date (Log.)

We backtested the returns to a theoretical portfolio of stocks selected by The Acquirer’s Multiple® from the All Investable stock screen. The backtest assumed the screen bought and held for a year 30 stocks selected from the All Investable universe (the largest half of stocks by market capitalization). The portfolios were rebalanced on the first day of the year using the most recent fundamental data. The backtest ran from January 2, 1999 to date.

Over the full period, the screen generated a total return of 6,765 percent, or a compound growth rate (CAGR) of 25.0 percent per year. This compared favorably with the Russell 3000 TR, which returned a cumulative total of 321 percent, or 6.4 percent compound.

Chart 2. Yearly Returns from January 2, 1999 to Date

On an yearly basis, the model portfolios selected by The Acquirer’s Multiple® have generally outperformed, although underperformed in 1999 (-1.6 percent), 2012 (-5.5 percent), 2014 (-11.1 percent), 2015 (-19.2 percent), and 2017 to date (-22.4 percent).

Chart 3. Rolling Yearly Returns from January 2, 1999 to Date

The average twelve-month return for any stock selected by The Acquirer’s Multiple® All Investable screen was 22.6 percent, beating out the Russell 3000 TR’s average stock at 7.4 percent by 15.2 percent. Through The Acquirer’s Multiple® portfolios underperformed from mid-2011 through to mid-2012, then mid-2013 through to early 2016, and again since early 2017, they still slightly outperformed over the full period.

Chart 4. Drawdowns from January 2, 1999 to Date

The worst drawdown for The Acquirer’s Multiple® All Investable screen was -45 percent, which occurred between July 2007 and March 2009. Over the same period, the Russell 3000 TR drew down -56 percent.

The 30-stock portfolios selected by The Acquirer’s Multiple® from the All Investable universe consistently outperformed the broader Russell 3000 TR. The trade off is periodic underperformance–approximately one in four years–and deeper and more frequent drawdowns.

Disclaimer: Backtested performance does not represent actual performance and should not be interpreted as an indication of such performance. Actual performance may be materially lower than that of the backtested portfolios. Backtested performance results have certain inherent limitations. Such results do not represent the impact that material economic and market factors might have on an investor’s decision-making process if the investor was actually managing money. Backtested performance also differs from actual performance because it is achieved through the retroactive application of model portfolios (in this case, The Acquirer’s Multiple®) designed with the benefit of hindsight. As a result, the models theoretically may be changed from time to time and the effect on performance results could be either favorable or unfavorable.

Large Cap 1000 Stock Screen Backtest

Tobias CarlisleStudy16 Comments

Updated November 29, 2017

Since the last update in July 26, 2016, the screen had a strong finish to end the 2016 year up 27.4 percent, handily beating out the Russell 1000’s 15.1 percent by 12.3 percent.

2017 to date has seen continued large cap strength. For the year, the Large Cap Screen’s 18.8 percent has outperformed the Russell 1000’s 16.9 percent by 1.9 percent.

Chart 1. Returns from January 2, 1999 to Date (Log.)

We backtested the returns to a theoretical portfolio of stocks selected by The Acquirer’s Multiple® from the Large Cap 1000 screen. The backtest assumed the screen bought and held for a year 30 stocks selected from the large cap universe (the largest 1,000 stocks by market capitalization). The screens were rebalanced on the first day of the year using the most recent fundamental data. The backtest ran from January 2, 1999 to date.

Over the full period, the screen generated a total return of 2,797 percent, or a compound growth rate (CAGR) of 19.3 percent per year. This compared favorably with the Russell 1000 Total Return, which returned a cumulative total of 320 percent, or 6.3 percent compound, over the full period.

Chart 2. Yearly Returns from January 2, 1999 to Date

On an yearly basis, the portfolios selected by The Acquirer’s Multiple® have generally outperformed, although underperformed in 1999 (-6 percent), 2008 (-10 percent), 2014 (-3.6 percent), and 2015 (-12.8 percent).

Chart 3. Rolling Yearly Returns from January 2, 1999 to Date

The average rolling twelve-month return for any stock selected by The Acquirer’s Multiple® during any week in any year was 20.1 percent, beating out the Russell 1000 TR’s average stock at 7.4 percent by 12.7 percent.

Chart 4. Drawdowns from January 2, 1999 to Date

The worst drawdown for The Acquirer’s Multiple® screen was -66 percent, which occurred between July 2007 and March 2009. Over the same period the Russell 1000 TR drew down -55 percent.

The 30-stock screen selected by The Acquirer’s Multiple® from the Large Cap 1000 universe consistently outperformed the broader Russell 1000 TR. The trade off is periodic underperformance–approximately one in four years–and deeper and more frequent drawdowns.

Disclaimer: Backtested performance does not represent actual performance and should not be interpreted as an indication of such performance. Actual performance may be materially lower than that of the backtested portfolios. Backtested performance results have certain inherent limitations. Such results do not represent the impact that material economic and market factors might have on an investor’s decision-making process if the investor was actually managing money. Backtested performance also differs from actual performance because it is achieved through the retroactive application of model portfolios (in this case, The Acquirer’s Multiple®) designed with the benefit of hindsight. As a result, the models theoretically may be changed from time to time and the effect on performance results could be either favorable or unfavorable.

Small and Micro Cap Stock Screen Backtest

Tobias CarlisleStudy10 Comments

Updated November 29, 2017

Since the last update in July 26, 2016, the screen had a strong finish to end the 2016 year up 35.5 percent, handily beating out the Russell 3000’s 12.2 percent by 20.4 percent.

2017 to date has been weaker. For the year, the Small and Micro Screen gained 12.0 percent, underperforming the Russell 3000’s strong 16.9 percent by a -4.9 percent.

Chart 1. Returns from January 2, 1999 to Date (Log.)

We backtested the returns to a theoretical portfolio of stocks selected by The Acquirer’s Multiple® from the Small and Micro Cap screen. The backtest assumed the portfolio bought and held for a year 30 stocks selected from the small and micro cap universe (the smallest half of stocks by market capitalization). The model portfolios were rebalanced on the first day of the year using the most recent fundamental data. The screen excluded stocks traded over-the-counter (OTC). The backtest ran from January 2, 1999 to date.

Over the full period, the screens generated a total return of 3,948 percent, or a compound growth rate (CAGR) of 21.5 percent per year. This compared favorably with the Russell 3000 TR, which returned a cumulative total of 321 percent, or 6.4 percent compound.

Chart 2. Yearly Returns from January 2, 1999 to Date

On an yearly basis, the model portfolios selected by The Acquirer’s Multiple® generally outperformed, although underperformed in 2008 (-6.5 percent), 2012 (-0.3 percent), 2014 (-1.0 percent), 2015 (-12.3 percent) and 2017 to date (-4.9 percent).

Chart 3. Rolling Yearly Returns from January 2, 1999 to Date

The average twelve-month return for any stock selected by The Acquirer’s Multiple® Small and Micro Cap screen was 25.8 percent, beating out the Russell 3000’s average stock at 7.6 percent by 19.2 percent.

Chart 4. Drawdowns from January 2, 1999 to Date

The worst drawdown for The Acquirer’s Multiple® screens was -64 percent, which occurred between July 2007 and March 2009. Over the same period, the Russell 3000 TR drew down -56 percent.

The 30-stock model portfolios selected by The Acquirer’s Multiple® from the Small and Micro Cap universe consistently outperformed the broader, and larger capitalization Russell 3000 TR. The trade off is periodic underperformance–approximately one in five years–and deeper drawdowns.

Disclaimer: Backtested performance does not represent actual performance and should not be interpreted as an indication of such performance. Actual performance may be materially lower than that of the backtested portfolios. Backtested performance results have certain inherent limitations. Such results do not represent the impact that material economic and market factors might have on an investor’s decision-making process if the investor was actually managing money. Backtested performance also differs from actual performance because it is achieved through the retroactive application of model portfolios (in this case, The Acquirer’s Multiple®) designed with the benefit of hindsight. As a result, the models theoretically may be changed from time to time and the effect on performance results could be either favorable or unfavorable.