US-Large Portfolio Transactions – June 2018



1) Verizon Communications (VZ) – SPScore. We purchased VZ to replace TMUS in the telecommunications sector.

2) J.M. Smucker (SJM) – Market Trend. Increase in the consumer staples sector as seen in the Top 100 index therefore we increased our position in the portfolio.

3) Western Digital (WDC) – Market Trend. Increase in the information technology sector as seen in the Top 100 index, we increased our position in the portfolio.

4) DTE Energy (DTE) – Market Trend. Increase in the utilities sector. We added a position in the portfolio.

5) Westlake Chemical (WLK) – Unique case. We replaced LYB with WLK because we cannot keep LYB both in the US and ADR portfolio.


1) T-Mobile US (TMUS) – SPscore. We sold TMUS because according to our fundamental data, VZ is a better stock to own in the portfolio.

2) Darden Restaurants (DRI) – Market Trend.  We decreased the number of holdings in the consumer discretionary sector following index allocation.

3) TJX Companies (TJX)– Market Trend. Reduction in the discretionary sector. We decreased our positions in the portfolio.

4) Spectra Energy Partners (SEP) – Market Trend. Decreased exposure in the energy sector. We reduced our positions in the portfolio.

5) LyondellBasell Industries (LYB) – Unique case. We replaced LYB with WLK because we cannot keep LYB both in the US and ADR portfolio.

You can find the transactions on Inovestor For Advisors, under the section Model Portfolios – StockPointer US.


The Inovestor Team

Taiwan Semiconductor (TSM)

In this week’s content analysis, we’ll be discussing Taiwan Semiconductor (NYSE: TSM) Download . The company is the largest dedicated chip producer (with around 54.5% of market share ) with a market value of $194B , in front of its main competitors such as Intel (INTC) and NVIDIA (NVDA). Its high-quality technology products allow the firm to generate solid operating margins of around 40%. The company is most commonly known for the fabrication of the Apple “A Chip” which can be found on all iPhone devices. Taiwan Semiconductor is currently manufacturing the A11 Chip, the newest model, for the iPhone 8, iPhone 8 Plus and iPhone X. The company also holds within its client roster (around 450 in total) some of the world’s most powerful semiconductor companies such as Qualcomm Inc., Nvidia Corp., Media Tek Inc., among others. Given its high level of client diversification, TSM sets itself apart from its competitors.

Recently, the CEO and founder of the company Morris Chang announced his plans to retire from his position as CEO in Jun ’18. Long time Co-CEO of TSM, C.C. Wei, is now to become the sole CEO of the company. Such news could have caused slight uncertainty within the market, however, the stock price on the day the news release increased by 1.85%. This shows how confident are Investors and Clients about the management’s capacity to remain on the strong growth path it’s been for the last couple of years. TSM’s stock has gained 22.3% YTD and has more than doubled in price since Feb ‘14.

Now, taking a deeper insight into the fundamentals, we can see the Intrinsic Value (IV) of the company has presented a bullish tendency over the last 5 years and currently sits at $39.56. Over the last 12 months, TSM’s intrinsic value grew by 32.54%. The stock is currently trading at a slight premium, the P/IV ratio being at 1.02. Even though this multiple doesn’t seem very attractive, it could represent a nice opportunity given how quickly and regularly the intrinsic value has grown in the past.

The return on capital currently stands at 24.5%, which is high. Even more impressive is the fact that it has been extremely stable over the past 5 years, hovering between 23% and 28%. And, there is no sign of slowing down: since 2013, the invested capital has grown at an average rate of 15% per year, and last year’s growth was the highest, at 16.4%. These capital investments have paid off quickly: over the same period, the NOPAT has grown at an average rate of 18% per year, which is even higher than the invested capital growth itself.

Given this very high economic performance and stability, the current Future Growth Value (FGV) premium of 35% seems reasonable: The Current Operating Value (COV) increased by 34.96% in the last 12 months. Therefore, the current premium reflects expectations of the equivalent of +/- 1 year of growth at the same growth rate.

TSM’s total Economic Value Added (EVA) is currently at an all-time high, at $7.8B, and it has grown very linearly in the past 5 years with no large and sudden increase/decrease whatsoever.

From a pure accounting performance perspective, revenues and earnings growth for TSM have also remained strong during the last 5 years. Earnings have grown 82.3% since Jun ‘13 with a yearly average growth rate of 18.58%. On the other hand, revenues increased by 20% over the last 12 months, and the average revenue growth rate has been of 14% during the last 5 years. This was partly due to the high demand of mobile devices, more specifically the iPhone 7. During the 2016 Fiscal Year, Apple sold around 211.88 million devices  from which TSM received around $10 USD per device sold.  The current dividend yield is attractive at 2.95%, and the 5-year average dividend growth rate has been of 30% per year. As a bonus, the current P/E multiple is only of 17.5, way better than the average S&P500 P/E of 25.

In Summary:

– Taiwan Semiconductor is the leader in its industry.

– Analysts project a 11.8% earnings growth in the upcoming year.

– The dividend yield is currently of 2.95%, and the company should continue to increase the dividend in the coming years.

– TSM’s revenue growth and strength is somewhat correlated to the iPhone demand. The newest device release will set the tone for the company’s short-term revenue growth. Apple as a customer for TSM, represents around 10% – 12% of the total yearly sales for the company.

The semiconductor industry is evolving with new industries such as Artificial Intelligence, driverless cars and big data taking a lot of attention. TSM seeks to adapt and penetrate these new industries, given that the smartphone industry hasn’t presented any noteworthy innovations during the last couple of years. Even though smartphone sales continue growing, the growth rates are much smaller: a total of 1.5 billion smartphone devices were sold in 2016, which represents a 5% increase compared to 2015. The growth rate was of 14% in 2015 and 28% in 2014. It is clear that there is a slowdown, and the general consensus is that the smartphone industry has matured. It now seems to be that not only TSM, but the entire industry is focusing on “the next big thing”. We believe Taiwan Semiconductor is bound to benefit from the demand of chips related to AI, which require sophisticated computing. This is what TSM does best.

Blog post written by Diego Sanchez (intern), under supervision of Jean-Didier L.

Here is a more detailed comparative analysis of Taiwan Semiconductor and its peers, where for each indicator “1” = First relative position and “6” = Last relative position.

Kroger – September ’17 update

In today’s content analysis, we are revisiting Kroger (KR), which we analyzed a little over a year ago. Since the last article, Kroger’s stock price lost about 40% of its value. Much of the market’s reaction can be explained by the deal announced earlier this year between Amazon (AMZN) and Whole Foods Market (-30% since then). The biggest fear is that Amazon and Whole Foods will put a LOT of pressure on prices which could hurt Kroger’s margins and market share. Given Kroger’s proximity with its customers thanks to its 2,800 stores across the United States, we do not see Amazon and Whole Foods replace America’s second largest grocer anytime soon. And as far as pricing fears, a recent survey notes that the average prices in Whole Foods stores are still 50% higher than those in Kroger and Wal-Mart. (Link to the article)

Kroger’s Price/Intrinsic Value ratio (0.43) has never been so low in at least 5 years. Even when adjusting the forecasts in the intrinsic value calculator to project a very pessimistic scenario, we still have an IV hovering around $25, which represents a 25% upside potential. The NOPAT has slightly decreased on a trailing 12 months basis, but the analysts’ earnings growth forecasts are generally positive or neutral, so we can expect the NOPAT to stabilize or bounce back in the coming quarters. Some help could come from Kroger’s latest initiative, Kitchen 1883, which will open a first location later this year. Kitchen 1883 will be sit-down lunch, dinner and weekend brunch restaurants to attract customers on services and experiences. 

The Future Growth Value, currently of -18%, also tells us the company is trading at a discount, while the Current Operating Value is still increasing. Kroger’s P/E Ratio of 12.5 and P/BV Ratio of 1.6 are also very conservative compared to its peers.

Kroger’s long-term EVA trend is slightly positive, close to horizontal, which is very normal for a mature company within a defensive sector.  Dividend investors will appreciate the fact that the yield is currently at a 5-year high, around 2.5%, and the dividend growth rate is also very appealing. The average growth rate has been of 13% per year over the past 5 years, and there’s plenty of room for more increases; the payout ratio is only of 30%, and the free cash-flows are very strong. Share buybacks are also common with Kroger; the company bought back an average of 5% per year of its outstanding shares over the past 5 years. 

For value and dividend investors, Kroger could be an interesting investment opportunity at these levels. It’s market share of 9% is the second largest after Wal-Mart, and Amazon/Whole Foods still need to do a lot of work to steal Krogers’ customers. 

In summary: 

The second largest U.S. grocer is currently trading at low multiples and a forward p/e of 10.5.

The company’s fundamentals are strong and are not expected to collapse.

The 40% price drop over the past year is mainly due to the fear of Amazon and Whole Foods Market. We believe this could be an overreaction. 

The dividend yield is currently “high”, the company has been increasing its dividend and will probably continue to do so given its financial strength and free cash-flows.

Patience is required – the Amazophobia has proven difficult to overturn. 

Blog post written by Diego Sanchez (intern), under supervision of Jean-Didier L. 

US-Large Portfolio Transactions – September ’17


1) Delisted: Reynolds (RAI). Reynolds was delisted at the end of July, following its acquisition by British American Tobacco. This acquisition was finalized on July 25 when British American Tobacco officially acquired the remaining 58% of Reynolds.

2) Delisted: Whole Foods Market (WFM). At the end of August, Whole Foods was delisted following its acquisition by Amazon.

3) Sector rotation: Foot Locker (FL). We reduced our exposure to the Consumer Discretionary by one position. Despite its high SPscore of 65%, a remarkable slowdown is evident in Foot Locker’s economic performance. The intrinsic value has consecutively decreased over the past 2 quarters, something that hasn’t taken place in at least 5 years. The economic value added has also dropped down to its end of 2014 – beginning 2015 level. Foot Locker’s stock price suffered enormously following the announcement of Nike and Amazon’s partnership at the end of June. Due to the growing trend of online shopping and the increasing popularity of Amazon, Foot Locker may continue to encounter difficulties in its business model which is mainly focused on in-store sales.

4) Merger: Dow Chemical (DOW) and DuPont (DD). On August 31, the merger between Dow Chemical and DuPont was finalized, resulting in the formation of a brand-new company, DowDuPont (DWDP). Given that this new company does not possess any historical financial data, there is a lack of information needed to effectively analyze the stock.

5) Sector Rotation: C.H. Robinson Worldwide (CHRW). We reduced our exposure to the industrials sector by one position. C.H. Robinson was sold mainly due to the decrease of its EVA for 4 consecutive quarters. In addition, the return on invested capital decreased from 24.6% to 19.2% over the last 12 months, bringing it to its lowest level in at least 5 years. Free cash-flows have also diminished, falling from $415M to $121M in 12 months. C.H. Robinson may be reconsidered for our portfolio if the company can stabilize its EVA and bring back its return on capital to where it was between 2012-2016.


1) Sector Rotation: Cigna Corporation (CI). We increased our exposure to the Financials sector by one position. Cigna, a health insurance company, holds one of the top scores in its sector. Its intrinsic value has been steadily increasing with a foreseeable trend, and the EVA rebounded in the past 2 quarters, following a 3-quarter decrease between March and December 2016. Free cash-flows generated are high, which could allow the company to quickly reduce its long-term debt, or to repurchase some of its shares. It seems that there is a higher priority on the growth of the company rather than the increase of dividends, which hasn’t occurred in 10 years.

2) In replacement of Reynolds (RAI): Vector Group (VGR). Vector Group is one of the smaller players in the Tobacco and Real Estate industry, with a market cap of $2.8B. Its return on capital is relatively high at 16% and its EVA has been stable over the past 5 years. However, the company’s ability to maintain a high dividend is to be monitored. The earnings per share do not cover the dividend payout, but it never did in the past 10 years. That did not stop the company from continuing to increase dividends regularly. The “weak” company earnings in comparison to the dividends payout are partly due to the depreciation in real estate assets, a segment which generates approximately 40% of the revenues.

3) Sector Rotation: Tyson Foods (TSN). We increased our exposure to the Materials sector by one position. Tyson Foods operates in 4 main market segments: poultry, pork, beef, and pre-cooked meals. The company is ranked as #1 in its sector, thanks to its intrinsic value and EVA which constantly and linearly increase. The gap between the stock price and intrinsic value reflects an upside potential of approximately 50%. This gap is one of the greatest encountered in the past 5 years. The company generates high free cash-flows that allow it to aggressively increase its dividend without increasing the risk: the payout ratio is of only 18%. Tyson Foods has also done important stock repurchases over the past 3 years.

4) Sector Rotation: T-Mobile (TMUS). We increased our exposure to the Telecommunications sector by one position. T-Mobile is one of the leading American telecommunication companies experiencing strong growth. Revenues increased from $10M in 2013 to almost $40M in the last 12 months. Taking the industry average into consideration, its return on capital of 8.5% is acceptable. Since the last 2 years, the free cash-flows have turned from negative to positive and are increasing, which is a good sign. In the beginning of September, T-Mobile announced a partnership with Netflix (NFLX), which could draw new clients. T-Mobile will offer a free Netflix subscription to clients who activate 2 or more phone lines.

5) In replacement of Whole Foods Markets (WFM): Clorox (CLX). Clorox, founded in 1913, produces and sells cleaning products marketed towards the retail and professional segments. The company is in its maturity stage, the revenue growth being of only 2% per year. On the other hand, the profit margin is increasing consistently, resulting in a constant EPS growth. The free cash-flows are positive and rising, which allows the company to increase its dividend. The average dividend growth rate has been of 6% per year for the last 5 years, and the current dividend yield is 2.5%. Due to its high and stable return on capital (21.6%), the economic value added has been increasing very steadily since June 2014, which demonstrates Clorox’s stability.

US-Large Portfolio Transactions – June ’17


– William Sonoma (WSM) – Market Trend. Decrease of our number of positions (-2) in the consumer discretionary industry. William Sonoma is still considered undervalued against its intrinsic value, but the latter seems to have reached a ceiling in early 2016. The TTM NOPAT has decreased for the first time in 5 years, and the total EVA has also been slowly trending down since early 2016. We could re-initiate a position in WSM in the next quarters if we see a trend reversal, but for now we prefer not taking a chance to keep a position in a potential “value trap”.

– Scripps Networks (SNI) – Market Trend. Decrease of our number of positions (-2) in the consumer discretionary industry. Even though its SPscore is still high, we decided to sell SNI mainly because we find the intrinsic value and EVA a little too volatile and unpredictable. They both dropped a lot in the last 2 quarters and the long-term trend is stable, at best.

– Wells Fargo (WFC) – Market Trend. Decrease of our number of positions (-2) in the financials industry. Our evaluation of WFC Vs. USB was very close, and we decided to keep USB. Wells Fargo’s return on capital has slightly gone down in the past 3 years, while USB’s is a little more stable and marginally higher. Same scenario when looking at the EVA for both companies: slight decrease for WFC, stability for USB.

– Discover Financial (DFS) – Market Trend. Decrease of our number of positions (-2) in the financials industry. We decided to sell DFS, one of our oldest position in the US-Large model. Its NOPAT doesn’t grow anymore like it used to and has hovered around 2.3B – 2.5B over the past 5 years. The problem is that the company had to invest a lot of money to maintain the same level of NOPAT, which means the return on capital is slowly decreasing. Both the intrinsic value and EVA are currently on a slightly negative trend.

– Skyworks Solutions (SWKS) – Market Trend. Decrease of our number of positions (-1) in the information technology sector. Our evaluation of SWKS Vs. AVGO was also very tight, and we decided to keep AVGO. Both companies show a very similar profile and are growing quickly. We gave the edge to AVGO, which should start benefiting a lot from their recent acquisitions in the next quarters.


– Lyondellbasell (LYB) – Market Trend. Increase of our number of positions (+1) in the materials industry. LYB is ranked #1 among American large caps – Materials. The intrinsic value is increasing nicely and the return on capital is high and stable. For the first time in 5 years, the future growth value (FGV) is negative, which means the stock currently trades at a discount. The free cash-flows are always positive, the company regularly increases the dividend and buys back shares.

– Whole Foods Market (WFM) – Market Trend. Increase of our number of positions (+3) in the consumer staples industry. WFM’s intrinsic value has steadily and linearly increased over the past 5 years. While the stock was considered overvalued between 2012 – 2016, it is not the case anymore. The free cash-flows are positive, EVA is now growing after a slight decrease in the end of 2015. If the economic indicators and the intrinsic value continue to improve at this rate, the stock should follow.

– Reynolds American (RAI) – Market Trend. Increase of our number of positions (+3) in the consumer staples industry. RAI is ranked #1 in its sector – American large caps. The return on capital is at its highest level in 5 years, at 16%, which contributed to the strong intrinsic value and EVA growth over the past 4 quarters. Even though the stock has had a good run over the last 6 months, we believe there is still a good upside potential.

– Kellogg Company (K) – Market Trend. Increase of our number of positions (+3) in the consumer staples industry. The company is known as a reliable dividend grower, with a strong dividend growth history dating back to 1973. The company has increased its dividend each year except between 2002-2005. The EVA has been increasing over the past 2 years, free cash-flows are always positive and the company also buys back shares.

– Johnson & Johnson (JNJ) – Market Trend. Increase of our number of positions (+1) in the health care industry. JNJ is also one of the strongest dividend growers, with a perfect dividend growth history dating back to 1972. All the indicators we analyzed are good except for the EVA, which is stable since September 2015 while we would like to see it increase in a perfect world. The company seems to be on the right path; the TTM NOPAT started to increase again after 3 years of slow decline.

The five new positions entered the portfolio with a 3.7% weight.

Exco Technologies (XTC)

In today’s content analysis, we discuss about Exco Technologies (XTC), a Canadian mid cap that operates in three main segments: Extrusion Tooling, automobile, and die-cast.  Download

Its SPscore of 73% is the second best on the Canadian market, and almost all the indicators we consider in our evaluation process are positive.  The return on capital is high, at 15.1%, and the long-term trend is positive. The NOPAT has also been growing at an impressive pace of 25% per year in the past 5 years, so is the invested capital, which shows how well management can identify the best investment opportunities for shareholders.

As for valuation, the stock is currently trading well below its intrinsic value, at a 0.53 P/IV ratio, reflecting a potential upside of close to 90%. The discount is even more interesting considering that it’s the largest observed over the past 5 years. The intrinsic value is also increasing very steadily since early 2015. The Future Growth Value (FGV) of -33% tells us the enterprise value is smaller than the current operating value, even though the latter is growing nicely. Other more traditional ratios also suggest the multiples are very conservative: the price-to-earnings is at 9.7, and the price-to-book is at 1.57.

The economic performance is also good and getting even better. The EVA is extremely stable, its growth rate being very linear and predictable. It confirms the company can create more and more wealth for its shareholders over time thanks to wise capital deployment.

XTC’s accounting performance is also solid. The revenues have been growing at a fast pace over the past 5 years, just like the earnings per share. The company regularly increases its dividend, at an average rate of 16% per year. The dividend yield of 2.8% is also appealing, especially for a mid cap and knowing it’s not at risk. The payout is below 25%, which is very conservative, and the company generates positive free cash-flows. The balance sheet is robust, and leverage is low with a Debt/Equity ratio of 13%.

US-Large Portfolio Transactions


– Sanderson Farms (SAFM) – Market Trend. We reduced our number of positions in the consumer staples sector from 3 to 2. SAFM’s SPscore is high mainly because of the steep discount it offers against its intrinsic value, which seems unreliable considering the inexistent correlation with the stock price. SAFM’s return on capital, even though still good, has constantly decreased over the past 3 years, as did the NOPAT. Sanderson Farms and other top U.S. chicken processors were also sued in late 2016 for alleged price-fixing. Since the outcome of the lawsuit is still uncertain, we preferred to close our position while it was trading close to its 52-week high.

– Aetna (AET) and Johnson & Johnson (JNJ) – Market Trend. We reduced our number of positions in the health care sector from 3 to 1. Even though AET and JNJ are still looking good and have good scores, our 3rd health care position HCA Holdings (HCA) stands out in almost every aspect. AET or JNJ could very well re-enter our US-Large model if the sector’s weight increases in the next couple of months.

– Verizon (VZ) – Market Trend. We reduced our number of positions in the Telecommunications sector from 2 to 1. We decided to keep AT&T (T) mainly due to its slightly better long term EVA trend and higher revenue growth.

– Target (TGT) – SPscore. Target announced disappointing results on February 28. The TTM revenues dropped by almost 6%, which negatively affected the NOPAT, EVA and other important performance indicators. Given this performance decrease and the huge pressure on retailers, the discount of “only” 15% to the intrinsic value is not attractive enough to justify keeping the stock.


– Spectra Energy Partners (SEP) – Market Trend. We increased our number of positions in the energy sector from none to 1. SEP is the highest rated U.S. Energy Large Cap company available as of now with an SPscore of 66%. After a big EVA drop in 2014-2015, it is now nicely recovering and increasing steadily. SEP has regularly increased its dividend over the past 5 years, at an average pace of 8% per year.

– Williams-Sonoma (WSM) – Market Trend. We increased our number of positions in the consumer discretionary sector from 7 to 8. We sent a complete write-up on WSM on February 20, please click on the following link to access the blog post. (Link)

– Aflac (AFL) and Chubb (CB) – Market Trend. We increased our number of positions in the financials sector from 3 to 5. AFL and CB are both among the top 5 S&P500 Financials stocks from an SPscore perspective. They both offer attractive growth and quality attributes while trading at reasonable valuation multiples. Since the 3 stocks we already owned were all in the banking industry, AFL and CB will bring additional diversification being in the insurance industry.

– Darden Restaurants (DRI) – SPscore. We bought DRI to replace Target (TGT) in the consumer discretionary sector. The company’s return on capital and EVA are increasing quickly since August 2014. DRI has a low debt/equity ratio of 0.24, and their high free cash flows could allow them to increase the dividend more aggressively in the future. The company is still in growth mode, with plans to open around 25 new restaurants in 2017.

William Sonoma (WSM)

In today’s content analysis, we discuss about Williams-Sonoma (WSM), a multichannel retailer specialized in high-end products for the home.  Download

After trading at high premiums during almost five years, WSM’s stock fell under its intrinsic value at the end of 2016. The return on capital has always been very stable, around 15%, and the NOPAT is still growing along with the invested capital.

As for valuation, today’s P/IV ratio of 0.86 indicates a potential price appreciation of around 17% and is at its most attracting level in 5 years. The Future Growth Value (FGV) premium of 9% is very acceptable when considering the Current Operating Value (COV) growth over the last 5 years. The COV has been growing at an average pace of 16.5% per year, a higher number than the expected growth rate imbedded in the current FGV premium.

The EVA has also been growing at a very stable and linear pace since January 2013, demonstrating the management’s capacity in allocating intelligently its capital to increase the wealth generated for its shareholders.

The accounting performance is also solid. The revenues keep increasing, although at a lower rate than before. The free cash flows are and have always been high and positive, which allows the management to continually increase the dividends, buyback shares (around 2.7% of shares outstanding per year) and invest in its capital, all this without issuing debt.


US-Large Portfolio Transactions

Sells :

– Robert Half International (RHI) – Market Trend. Reduction of the Industrials sector weight from 17% to 12%. We had to decrease our number of positions from 4 to 3, and RHI was the one with the lowest SPscore (66%) and the highest premiums when compared to CHRW, LMT and AZO.

– Cisco Systems (CSCO) and Intel Corp (INTC) – Market Trend. Reduction of the Information Technology sector weight from 19% to 10%; we had to go from 5 to 3 positions in the portfolio. CSCO and INTC were our two holdings with the lowest SPscores, 61% and 65% respectively, and showed signs of weakness when looking at the intrinsic value and EVA trends. CSCO was also trading at a steep premium while its overall economic performance was decreasing.

– Southern Co (SO) – Market Trend. Reduction of the Utilities sector weight from 2% to 1%. We had to go down from 1 position to 0, so SO’s sale was mandatory. Southern Co is still one of the best options available within the Utilities sector, so we might buy it again if the Utilities sector weight increases above 2% next time we review the portfolio.

– Skechers (SKX) – SPscore. SKX’s SPscore decreased from 72% to 65% in the last 3 months. We replaced it by Foot Locker (FL) with an SPscore of 69%, up by 1% over the last 3 months.

– Ross Stores (ROST) – SPscore. ROST’s SPscore also decreased a lot over the past year. Even though the company’s economic performance is still very good, the risk has increased a lot due to the high premium at which the stock is currently trading. The P/IV ratio is of 1.7 and the Future Growth Value is of 54%.

– Kimberly-Clark (KMB) – SPscore. KMB’s return on capital decreased for the 3rd consecutive year. The P/IV ratio of 0.93 doesn’t reflect a very attractive upside potential, especially when considering that the intrinsic value has decreased in the past 2 quarters. The 27% FGV premium is hard to justify given that the EVA hasn’t increased at all, and revenues also fell in each of the last 4 years.

– Gilead Sciences (GILD) – SPscore. After many consecutive quarters of strong growth in the return on capital, intrinsic value, current operating value and EVA, this growth has disappeared in December 2015, date at which we can clearly see the total EVA generated for shareholders topped out. For now, the company hasn’t been able to turn this situation around and the EVA continues to decrease at a quite high pace.

Buys :

– Scripps Network Interactive (SNI) – Market Trend. Increase of the Consumer Discretionary sector from 22% to 27%. We had to go from 5 to 7 positions in the portfolio, and SNI is in 3rd position within its sector on the S&P500 with an SPscore of 71%. We already own the 2nd position, AZO. SNI shows a positive intrinsic value trend, a stable EVA, good free cash-flows and has aggressively increased its dividend over the past 5 years.

– Cracker Barrel Old Country (CBRL) – Market Trend. This is the 2nd addition in the Consumer Discretionary sector. CBRL, with an SPscore of 67%, has a growth profile. The stock is trading at a slight premium but the company offers high growth rates in its economic performance indicators since early 2014. The EVA is currently at its highest level in 5 years.

– Wal-Mart Stores (WMT) – Market Trend. Increase of the Consumer Staples sector weight from 7% to 10%. We had to go from 2 to 3 positions in the portfolio and WMT is ranked #1 within its sector in the U.S., with an SPscore of 71%. Even though WMT doesn’t show high growth rates, the indicators are extremely stable and the stock, which is undervalued, could benefit from the holiday season.

– HCA Holdings (HCA) – Market Trend. Increase in the Health Care sector weight from 9% to 12%. We had to go from 2 to 3 positions in the portfolio, and HCA is ranked #1 within its sector on the S&P500 with an SPscore of 70%. HCA offers a growing return on capital, intrinsic value and EVA while trading at a discount both when compared to its intrinsic value and future growth value (FGV).

– Foot Locker (FL) – SPscore. Replacement for Skechers (SKX). For more details on FL, please refer to the November 24th blog post.

– Kroger (KR) – SPscore. Replacement for Kimberly-Clark (KMB). Kroger has a higher SPscore than KMB, but more importantly, it trades at a discount to its intrinsic value, which continually increases, and to its future growth value. KR’s return on capital and EVA also continually increase very linearly, especially since last year. Kroger does share buybacks and regularly increases its dividend while generating positive free cash-flows.

– Johnson & Johnson (JNJ) – SPscore. Replacement for Gilead Sciences (GILD). Just like WMT, JNJ has a stability profile. The intrinsic value, EVA, return on capital and free cash-flows have been very stable over the past 5 years while being at very acceptable levels.

– Target (TGT) – SPscore. Replacement for Ross Stores (ROST). TGT’s SPscore (66%) is slightly better than ROST’s (63%) and it also offers as-high intrinsic value and EVA growth rates. More importantly, by switching from ROST to TGT, we go from owning an overvalued stock with a P/IV ratio of 1.7 and a FGV of 54% to a fairly valued stock, with a P/IV ratio of 1.0 and a FGV premium of only 5%.

* All new positions entered the portfolio with a 4.1% weight.

Foot Locker (FL)

Dans l’analyse de contenu d’aujourd’hui, nous discutons de la compagnie Foot Locker (FL), qui a annoncé ses résultats du 3e trimestre vendredi dernier. FL se retrouve présentement parmi les meilleures opportunités d’achat aux États-Unis dans le secteur de la consommation discrétionnaire.  Download

Grâce aux derniers résultats, la valeur intrinsèque est passée de 89.50$ à 97$, soit une hausse d’environ 8.5%. Ceci a été causé par une amélioration de la performance économique, le rendement sur capital étant aujourd’hui à son niveau le plus élevé en 5 ans. Au cours des 5 dernières années, Foot Locker n’a jamais cessé d’investir dans son capital, et ces investissements ont toujours eu un effet bénéfique sur le NOPAT. L’EVA total généré par l’entreprise ne cesse également de monter depuis janvier 2015.

Les multiples auxquels se négocient les actions de FL sont également attrayants. Le ratio P/VI est de 0.75, reflétant un potentiel d’appréciation de plus de 30%. Cet écart entre le prix et la valeur intrinsèque est le plus élevé observé pour ce titre lors des 5 dernières années. La valeur de croissance future (FGV) de 7% nous indique elle aussi que le prix actuel de l’action est plus-que-raisonnable. Cette prime de 7% est faible lorsque l’on considère que la valeur des opérations courantes (COV) a augmenté à des taux beaucoup plus élevés (15% lors des 12 derniers mois) lors des 3 dernières années.

La performance comptable présente aussi tous les attributs que nous recherchons. Les revenus, les profits d’opération et le bénéfice par action augmentent constamment à chaque année. En plus, la compagnie augmente régulièrement son dividende. Le taux de croissance annuel moyen a été de 11% par année lors des 5 dernières années. Foot Locker dégage des free cash-flow positifs, et c’est d’ailleurs ce qui lui a permis de racheter environ 3% par année de ses actions en circulation tout en réduisant sa dette long terme.