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Fair Warning

Finisar Corporation
Finisar Corporation is a provider of optical subsystems and components that are used in data communication and telecommunication applications. Their optical subsystems consist primarily of transmitters, receivers, transceivers, transponders, optical engines, and active optical cables that provide the fundamental optical-electrical, or optoelectronic, interface for interconnecting the electronic equipment used in communication networks, including the switches, routers, and servers used in wireline networks as well as the antennas and base stations used in wireless networks. Listed competitors include Avago Technologies Ltd, Viavi Solutions, and Oplink Communications.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $19.08, with an initial trailing stop set at $17.70. Upward price movement will find resistance at $19.07 and $20.40, with final resistance found at $22.01. Downward price movement will find support at $17.44 and $16.75, with final support found at $15.72.

Days to Cover
The most recent days to cover number is 9. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a company’s earnings and consequently its fair value.

In the case of Finisar Corporation, the company revalued its net deferred tax asset and recorded a reduction in its deferred tax assets and a corresponding deferred tax expense of approximately $30.3 million. For fiscal 2018, the company’s blended corporate income tax rate is 30.4%, which is based on the applicable tax rates before and after the enactment of the The Act and the number of days in each period.

The Tax Act allows 100% expensing of cost of qualified property acquired and placed in service after September 27, 2017 and before January 1, 2023. The bonus depreciation percentage is phased down from 100% beginning in 2023 through 2026. The company elected to claim the 100% bonus depreciation for the assets placed into service after September 27, 2017. The net impact of this provision is not material to the company’s financial position, results of operations and cash flows.

The Act also implements a territorial tax system. In general, under the territorial tax system, the company’s foreign earnings will no longer be subject to tax in the U.S. As part of transitioning to the territorial tax system, The Act includes a mandatory deemed repatriation of all undistributed foreign earnings that are subject to a U.S. income tax. As of December 31, 2017, the company had approximately $123.0 million of undistributed earnings for certain non-U.S. subsidiaries that have been indefinitely reinvested outside the U.S. The mandatory deemed repatriation of these undistributed earnings resulted in a one-time deferred tax expense of approximately $19.1 million. This provisional estimate may be impacted by a number of additional considerations, including, but not limited to, the issuance of final regulations and the company’s ongoing analysis of The Act.

The company has historically asserted its intent to reinvest these earnings in foreign operations indefinitely and continues to do so. The company does not intend to repatriate these earnings to fund its U.S. operations and, accordingly, it does not provide for the U.S. state income and foreign withholding tax on these earnings.

Note that for fiscal 2018, 0% of net income came from income tax benefits.

Insider Transactions
In the past 12 months, the company has reported 58 insider trades involving 1,150,688 shares of stock. Of those 58 insider trades, 18 were Buys involving 553,796 shares of stock, and 40 were Sells involving 596,892 shares of stock, creating an insider buy to sell ratio of 0.9 to 1.

Mergers/Acquisitions
There were no mergers or acquisitions during fiscal 2018.

Divestitures/Dispositions
There were no divestitures or dispositions during fiscal 2018.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Finisar Corporation, revenue decreased by 9%, earnings decreased by 115%, free cash flow decreased by 163%, total debt increased by 5%, and the stock price decreased by 47%. Year to date the stock price is up 15%.

Future Value
My future (5 year hold) target price for the stock is $28, which is an average annual return of 12%. A prior five year hold of the stock (FY2014- FY2018) would have returned an average of 4% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $11. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $(3). The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, Tangible Book Value, Price to Book, and Price to Tangible Book. For Finisar Corporation, the PE Ratio is (52), the PEG Ratio is (2.7), Book Value is $14, Tangible Book Value is $13, the Price to Book Ratio is 1 and the Price to Tangible Book Ratio is 1.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Finisar Corporation (Nasdaq: FNSR) – FYE 04/2018 – OVER VALUED The stock is currently trading at levels above my most recent $(5) close target. Please See Linked PDF Worksheet

Disclosure
I hold no shares of Finisar Corporation
Posted on 07/16/18

Aerovironment, Inc.
Aerovironment, Inc. supplies unmanned aircraft systems, or UAS, tactical missile systems and related services primarily to organizations within the U.S. Department of Defense, or DoD. The company also supplies charging systems and services for electric vehicles, or EVs, and power cycling and test systems to commercial, consumer and government customers. Industry peers include Lockheed Martin Corporation, L-3 Communications, and Aker ASA.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $63.77, with an initial trailing stop set at $72.27. Upward price movement will find no resistance. Downward price movement will find support at $60.33 and $57.03, with final support found at $54.48.

Days to Cover
The most recent days to cover number is 3. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a company’s earnings and consequently its fair value.

In the case of Aerovironment, Inc., the company remeasured its existing deferred tax assets and liabilities at the rate the company expects to be in effect when those deferred taxes will be realized (30.4% if in 2018 or 21% thereafter) and recorded a one-time deferred tax expense of approximately $3.4 million during the year ended April 30, 2018.

The $3.4 miilion expense for the one-time deferred tax remeasurement is a provisional estimate of the impact of the Tax Act. In addition, the company has estimated that it will not have an income tax payable as a result of the one-time deemed repatriation transition tax on unrepatriated foreign earnings. These amounts are considered provisional because they use estimates for which final tax computations or returns have not been completed and because estimated amounts may be impacted by future regulatory and accounting guidance if and when issued.

Note that for fiscal 2017, 27% of net income came from income tax benefits.

Insider Transactions
In the past 12 months, the company has reported 92 insider trades involving 173,530 shares of stock. Of those 92 insider trades, 18 were Buys involving 39,481 shares of stock, and 74 were Sells involving 134,049 shares of stock, creating an insider buy to sell ratio of 0.3 to 1.

Mergers/Acquisitions
There were no mergers or acquisitions during fiscal 2018.

Divestitures/Dispositions
There were no divestitures or dispositions during fiscal 2018.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Aerovironment, Inc., revenue increased by 18%, earnings increased by 62%, free cash flow increased by 62%, total debt decreased by 100%, and the stock price increased by 48%. Year to date the stock price is up 35%.

Future Value
My future (5 year hold) target price for the stock is $94, which is an average annual return of 6%. A prior five year hold of the stock (FY2014- FY2018) would have returned an average of 36% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $32. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $12. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, Tangible Book Value, Price to Book, and Price to Tangible Book. For Aerovironment, Inc., the PE Ratio is 87, the PEG Ratio is 9.2, Book Value is $17, Tangible Book Value is $17, the Price to Book Ratio is 4 and the Price to Tangible Book Ratio is 4.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Aerovironment, Inc. (Nasdaq: AVAV) – FYE 04/2018 – OVER VALUED The stock is currently trading at levels above my most recent $19 close target. Please See Linked PDF Worksheet

Disclosure
I hold no shares of Aerovironment, Inc.
Posted on 07/16/18

The J.M. Smucker Company
The J.M. Smucker Company is a manufacturer and marketer of branded food and beverage products, including Folgers®, Dunkin’ Donuts®, and Café Bustelo®, Jif®, Smucker’s®, Crisco®, PillsburyTM, Uncrustables®, Meow Mix®, Milk-Bone®, Natural Balance®, Kibbles ‘n Bits®, 9Lives®, Pup-Peroni®, and Nature’s Recipe®. Industry peers include Conagra Brands, Inc., Hormel Foods Corporation, Mondelez International, Inc.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $120.99, with an initial trailing stop set at $109.39. Upward price movement will find resistance at $115.70 and $119.30, with final resistance found at $121.70. Downward price movement will find support at $40.22 and $39.09, with final support found at $37.88.

Days to Cover
The most recent days to cover number is 7. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of The J.M. Smucker Company, their income tax provision as of April 30, 2018, reflects the current year impacts of the Act and the following provisional estimates of our adjustments resulting directly from the enactment of the Act based on information available, prepared, or analyzed to date in reasonable detail. The net impact on U.S. deferred tax assets and liabilities was $(791.9), the transition tax was $26.1, making the net impact of adjustments $(765.8)

Note that for fiscal 2017, 27% of net income came from income tax benefits.

Insider Transactions
In the past 12 months, the company has reported 40 insider trades involving 160,977 shares of stock. Of those 40 insider trades, 17 were Buys involving 113,275 shares of stock, and 23 were Sells involving 47,702 shares of stock, creating an insider buy to sell ratio of 2.4 to 1.

Mergers/Acquisitions
During the fourth quarter of 2018, the company announced a definitive agreement to acquire the stock of Ainsworth Pet Nutrition, LLC, a producer, distributor, and marketer of premium pet food and pet snacks, predominantly within the U.S. Approximately two-thirds of Ainsworth’s sales are generated by the Rachael Ray® Nutrish® brand, which is driving significant growth in the premium pet food category. Ainsworth also sells pet food and pet snacks under several additional branded and private label trademarks. In May 2018, the company completed the all-cash transaction, valued at $1.9 billion, which was funded with a new $1.5 billion bank term loan and $400.0 in borrowings under its commercial paper program.

Divestitures/Dispositions
There were no divestitures or dispositions during fiscal 2018.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For The J.M. Smucker Company, revenue decreased by 0.5%, earnings increased by 77%, free cash flow increased by 54%, total debt decreased by 10%, and the stock price decreased by 11%. Year to date the stock price is down 2%.

Future Value
My future (5 year hold) target price for the stock is $162, which is an average annual return of 9%. A prior five year hold of the stock (FY2014- FY2018) would have returned an average of 3% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $100. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $224. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, Tangible Book Value, Price to Book, and Price to Tangible Book. For The J.M. Smucker Company, the PE Ratio is 7, the PEG Ratio is 0.8, Book Value is $(35), Tangible Book Value is $(52), the Price to Book Ratio is (2) and the Price to Tangible Book Ratio is (3).

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. The J.M. Smucker Company (NYSE: SJM) – FYE 04/2018 – UNDER VALUED The stock is currently trading at levels below my most recent $134 buy target. Please See Linked PDF Worksheet

Disclosure
I hold no shares of The J.M. Smucker Company
Posted on 07/15/18

DXP Enterprises, Inc.
DXP Enterprises, Inc. is engaged in the business of distributing maintenance, repair and operating (MRO) products, equipment and service to industrial customers. Industry peers include Applied Industrial Technologies, MSC Industrial Direct Company, and Industrial Distribution Group.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $40.19, with an initial trailing stop set at $41.74. Upward price movement will find no resistance. Downward price movement will find support at $40.22 and $39.09, with final support found at $37.88.

Days to Cover
The most recent days to cover number is 7. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of DXP Enterprises, Inc., the company remeasured its net deferred income tax liabilities by a provisional $1.3 million benefit and a corresponding provisional decrease in the net deferred tax liability. They are still in the process of analyzing The Act’s impact as permitted under SAB 118. The largest impact to the company being the remeasurement of deferred taxes due to the U.S. statutory tax rate change. The mandatory repatriation and resulting toll charge on accumulated foreign earnings and profits has limited impact on the company as unremitted earnings from non-US jurisdictions is minimal. The company is provisional in its approach and assertion that there is no financial statement impact as of December 31, 2017.

Note that for fiscal 2017, 0% of net income came from income tax benefits.

Insider Transactions
In the past 12 months, the company has reported 38 insider trades involving 156,240 shares of stock. Of those 38 insider trades, 22 were Buys involving 49,910 shares of stock, and 16 were Sells involving 156,240 shares of stock, creating an insider buy to sell ratio of 0.5 to 1.

Mergers/Acquisitions
There were no mergers or acquisitions during fiscal 2017.

Divestitures/Dispositions
There were no divestitures or dispositions during fiscal 2017.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For DXP Enterprises, Inc., revenue increased by 5%, earnings increased by 291%, free cash flow increased by 42%, total debt increased by 8%, and the stock price decreased by 17%. Year to date the stock price is up 43%.

Future Value
My future (5 year hold) target price for the stock is $89, which is an average annual return of 22%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of (8%) per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $20. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $3. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, Tangible Book Value, Price to Book, and Price to Tangible Book. For DXP Enterprises, Inc., the PE Ratio is 50, the PEG Ratio is 2, Book Value is $15, Tangible Book Value is $0.14, the Price to Book Ratio is 3 and the Price to Tangible Book Ratio is 303.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. DXP Enterprises, Inc. (Nasdaq: DXPE) – FYE 12/2017 – OVER VALUED The stock is currently trading at levels above with my most recent $5 close target. Please See Linked PDF Worksheet

Disclosure
I hold no shares of DXP Enterprises, Inc.
Posted on 07/14/18

Lydall, Inc.
Lydall, Inc. designs and manufactures specialty engineered filtration media, industrial thermal insulating solutions, automotive thermal and acoustical barriers, medical filtration media and devices and biopharmaceutical processing components for thermal/acoustical, filtration/separation and bio/medical applications. The company also designs and manufactures non-woven felt filtration media and filter bags used primarily in industrial air filtration applications including power, cement, asphalt, incineration, food and pharmaceutical. Listed competitors include Johns Manville Corporation, Morgan Advanced Materials, and Danaher Corporation.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $47.54, with an initial trailing stop set at $44.42. Upward price movement will find resistance at $46.93 and $48.37, with final resistance at $49.63. Downward price movement will find support at $43.68 and $42.47, with final support found at $41.65.

Days to Cover
The most recent days to cover number is 1. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Lydall, Inc., the company had an estimated $12.0 million of undistributed foreign E&P subject to the one-time mandatory repatriation and recognized a provisional $0.5 million of income tax expense in the company’s consolidated statement of operations for the year ended December 31, 2017. The company’s undistributed earnings for which it had previously made an indefinite reinvestment assertion under ASC 740-30 are approximately $6.2 million. The company has not yet made a determination to remain permanently reinvested outside of the United States in response to the Tax Reform Act. As a result, the company has not included a provisional tax cost related to this balance at this time as a reasonable estimate has not been determined.

Note that for fiscal 2017, 0% of net income came from income tax benefits.

Insider Transactions
In the past 12 months, the company has reported 67 insider trades involving 234,975 shares of stock. Of those 67 insider trades, 43 were Buys involving 109,834 shares of stock, and 24 were Sells involving 125,141 shares of stock, creating an insider buy to sell ratio of 0.9 to 1.

Mergers/Acquisitions
There were no mergers or acquisitions during fiscal 2017.

Divestitures/Dispositions
There were no divestitures or dispositions during fiscal 2017.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Lydall, Inc., revenue increased by 23%, earnings increased by 40%, free cash flow increased by 68%, total debt decreased by 40%, and the stock price increased by 22%. Year to date the stock price is down 11%.

Future Value
My future (5 year hold) target price for the stock is $172, which is an average annual return of 56%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 51% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $43. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $38. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, Tangible Book Value, Price to Book, and Price to Tangible Book. For Lydall, Inc., the PE Ratio is 15, the PEG Ratio is 7.7, Book Value is $20, Tangible Book Value is $14, the Price to Book Ratio is 2 and the Price to Tangible Book Ratio is 3.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Lydall, Inc. (NYSE: LDL) – FYE 12/2017 – FAIRLY VALUED The stock is currently trading at levels in line with my most recent $38 fair value estimate. Please See Linked PDF Worksheet

Disclosure
I hold no shares of Lydall, Inc.
Posted on 07/12/18

Gentex Corporation
Gentex Corporation designs and manufactures automatic-dimming rearview mirrors and electronics for the automotive industry, dimmable aircraft windows for the aviation industry, and commercial smoke alarms and signaling devices for the fire protection industry. Industry peers include Magna Mirrors of America, Ichikon Industries, and Ficosa International.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $25.38, with an initial trailing stop set at $22.82. Upward price movement will find resistance at $23.62 and $24.33, with final resistance at $25.22. Downward price movement will find support at $22.83 and $22.39, with final support found at $21.40.

Days to Cover
The most recent days to cover number is 6. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Gentex Corporation, the company reduced the value of its net deferred tax liability by $38.4 million which was recorded as a reduction to income tax expense. The company’s revaluation of its net deferred tax liability is subject to further refinement as additional information becomes available and further analysis is completed. Additionally, the company does not anticipate the one-time transition tax, the provisional estimate of which is $1.2 million, to be material.

Note that for fiscal 2017, 0% of net income came from income tax benefits.

Insider Transactions
In the past 12 months, the company has reported 56 insider trades involving 2,718,884 shares of stock. Of those 56 insider trades, 39 were Buys involving 1,390,070 shares of stock, and 17 were Sells involving 1,328,814 shares of stock, creating an insider buy to sell ratio of 1.05 to 1.

Mergers/Acquisitions
There were no mergers or acquisitions during fiscal 2017.

Divestitures/Dispositions
There were no divestitures or dispositions during fiscal 2017.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Gentex Corporation, revenue increased by 7%, earnings increased by 20%, free cash flow increased by 30%, total debt decreased by 58%, and the stock price increased by 7%. Year to date the stock price is up 11%.

Future Value
My future (5 year hold) target price for the stock is $39, which is an average annual return of 14%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 30% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $28. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $18. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, Tangible Book Value, Price to Book, and Price to Tangible Book. For Gentex Corporation the PE Ratio is 16, the PEG Ratio is 2, Book Value is $7, Tangible Book Value is $5, the Price to Book Ratio is 3 and the Price to Tangible Book Ratio is 4.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Gentex Corporation (Nasdaq: GNTX) – FYE 12/2017 – SELL HALF The stock is currently trading at levels above my most recent $18 fair value estimate, but below my most recent $29 close target. Please See Linked PDF Worksheet

Disclosure
I hold no shares of Gentex Corporation
Posted on 07/12/18

Sealed Air Corporation
Sealed Air Corporation is engaged in the food safety and security, and the facility hygiene and product protection business, serving the end markets of food and beverage processing, food service, retail, health care and industrial, commercial and consumer applications. The company has widely recognized and inventive brands such as Bubble Wrap ® brand cushioning, Cryovac ® brand food packaging solutions and Diversey ® brand cleaning and hygiene solutions. Industry peers include Printpack, Sonoco Products, and Bemis Company.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $47.55, with an initial trailing stop at $42.19. Upward price movement will find resistance at $43.50 and $44.12, with final resistance at $44.75. Downward price movement will find support at $42.48 and $41.81.

Days to Cover
The most recent days to cover number is 7. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Sealed Air Corporation, the company revalued its ending net deferred tax assets and recognized a provisional $41.1 million tax expense. The one-time mandatory tax is based on our total post-1986 earnings and profits (E&P) deferred from U.S. income taxes, cash and cash equivalents and foreign tax pools.

The company has not recorded a deferred tax liability related to the federal and state income taxes and foreign withholding taxes on approximately $3.5 billion of undistributed earnings of certain foreign subsidiaries indefinitely reinvested. Upon repatriation of those earnings the company could be subject to both U.S. income taxes and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable due to the complexities associated with its hypothetical calculation; however, unrecognized foreign tax credits would be available to reduce a portion of the U.S. tax liability.

Note that for fiscal 2017, 0% of net income came from income tax benefits and 78% came from the sale of assets.

Insider Transactions
In the past 12 months, the company has reported 38 insider trades involving 320,283 shares of stock. Of those 38 insider trades, 22 were Buys involving 220,126 shares of stock, and 16 were Sells involving 100,157 shares of stock, creating an insider buy to sell ratio of 2.2 to 1.

Mergers/Acquisitions
In October 2017, the company acquired Fagerdala Singapore Pte Ltd. (“Fagerdala”), a manufacturer and fabricator of polyethylene foam based in Singapore, for a consideration of S$144.7 million. The company plans to leverage Fagerdala’s manufacturing footprint in Asia, expertise in foam manufacturing and fabrication, and commercial organization to grow sales in the consumer electronics, medical equipment and devices, automotive, temperature assurance, and e-commerce fulfillment sectors.

In August 2017, the company acquired Deltaplam Embalagens Indústria e Comércio Ltda (“Deltaplam”), a family owned and operated Brazilian flexible packaging manufacturer for a consideration of $25.8 million.

Divestitures/Dispositions
In September 2017, the company sold its Diversey Care division and the Food Hygiene and Cleaning business within our Food Care division for gross proceeds of USD equivalent of $3.2 billion, recording a net gain of $640.7 million, net of taxes of $197.5 million. The company intends to use the cash generated from this transaction to repay debt and maintain its credit profile, repurchase shares to minimize earnings dilution, and fund core growth initiatives, including potential complementary acquisitions. The sale of Diversey will allow the company to enhance its strategic focus its Food Care and Product Care businesses and simplify its operating structure.

In August 2017, the company sold its polystyrene food tray business in Guarulhos, Brazil for $7.2 million.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Sealed Air Corporation, revenue increased by 6%, earnings increased by 78%, free cash flow decreased by 40%, total debt decreased by 21%, and the stock price increased by 9%. Year to date the stock price is down 13%.

Future Value
My future (5 year hold) target price for the stock is $101, which is an average annual return of 27%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 41% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $24. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $73. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, Tangible Book Value, Price to Book, and Price to Tangible Book. For Sealed Air Corporation the PE Ratio is 8, the PEG Ratio is 0.6, Book Value is $1, Tangible Book Value is ($11), the Price to Book Ratio is 47 and the Price to Tangible Book Ratio is (-4).

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Sealed Air Corporation (NYSE: SEE) – FYE 12/2017 – UNDER VALUED The stock is currently trading at levels below my most recent $44 buy target. Please See Linked PDF Worksheet

Disclosure
I hold no shares of Sealed Air Corporation
Posted on 07/10/18

Seaboard Corporation
Seaboard Corporation is a diverse agribusiness and transportation company with operations in pork production, turkey operations, commodity merchandising, grain processing, sugar production, electric power generation, ocean transportation. Industry peers include Smithfield Foods, Bunge Limited, and Louis Dreyfus Holding BV.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $4350.27, with an initial trailing stop at $3900.57. Upward price movement will find resistance at $4008 and $4096, with final resistance at $4175. Downward price movement will find support at $3922 and $3776.

Days to Cover
The most recent days to cover number is 8. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Seaboard Corporation, the company has recognized the provisional tax impacts related to mandatory deemed repatriated earnings and the revaluation of deferred tax assets and liabilities in the amount of $112 million.

In addition, beginning in fiscal 2018, the 2017 Tax Act also imposes two new U.S. tax base erosion provisions, the global intangible low-taxed income (“GILTI”) provision and the base-erosion and anti-abuse tax (“BEAT”) provision. The company will account for the GILTI and BEAT taxes in the period incurred, and therefore has not provided any deferred tax impacts in its consolidated financial statements for the year ended December 31, 2017.

Note that for fiscal 2017, 0% of net income came from income tax benefits.

Insider Transactions
In the past 12 months, the company has reported 1 insider trades involving 25 shares of stock. Of that 1 insider trades, 0 were Buys involving 0 shares of stock, and 1 were Sells involving 25 shares of stock, creating an insider buy to sell ratio of 0.0 to 1.

Mergers/Acquisitions
In August 2017, Seaboard’s Pork segment acquired hog inventory and hog farms in the Central U.S. from New Fashion Pork, LLP for total cash consideration of $40 million.

Divestitures/Dispositions
There were no divestitures or dispositions during fiscal 2017.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Seaboard Corporation, revenue increased by 8%, earnings decreased by 72%, free cash flow decreased by 104%, total debt increased by 9%, and the stock price increased by 10%. Year to date the stock price is down 10%.

Future Value
My future (5 year hold) target price for the stock is $6767, which is an average annual return of 14%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 15% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $720. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $322. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, Tangible Book Value, Price to Book, and Price to Tangible Book. For Seaboard Corporation the PE Ratio is 122, the PEG Ratio is 8.4, Book Value is $2910, Tangible Book Value is $2892, the Price to Book Ratio is 1 and the Price to Tangible Book Ratio is 1.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Seaboard Corporation (NYSE: SEB) – FYE 12/2017 – OVER VALUED The stock is currently trading at levels above with my most recent $515 close target. Please See Linked PDF Worksheet

Disclosure
I hold no shares of Seaboard Corporation
Posted on 07/09/18

Kaman Corporation
Kaman Corporation produces/markets proprietary aircraft bearings and components, complex metallic and composite aerostructures for commercial, military and general aviation fixed and rotary wing aircraft. The company also produces safe and arming solutions for missile and bomb systems, and performs subcontract helicopter work. The company is also a power transmission, motion control, electrical and automation, and fluid power industrial distributor. Industry peers include Spirit AeroSystems, United Technologies Corporation, and W.W. Grainger.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $72.99, with an initial trailing stop at $66.87. Upward price movement will find resistance at $70.02 and $72.67. Downward price movement will find support at $64.06 and $62.53, with final support at $60.62.

Days to Cover
The most recent days to cover number is 4. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Kaman Corporation, the company’s U.S. net deferred tax assets were required to be revalued as of December 31, 2017. This resulted in a one-time charge to tax expense of $9.7 million. Other Tax Reform provisions that will impact the Company include the elimination of the deduction for manufacturing activities, changes to the deductibility of executive compensation and various international tax law changes.

One of the international tax law changes provided for with Tax Reform relates to the taxation of a corporation’s global intangible low-taxed income (“GILTI”) for tax years beginning after December 31, 2017. Due to the complexity of the new GILTI tax rules, the company is continuing to evaluate this provision of Tax Reform and the application of ASC 740.

Note that for fiscal 2017, 27% of net income came from income tax benefits.

Insider Transactions
In the past 12 months, the company has reported 29 insider trades involving 82,367 shares of stock. Of those 29 insider trades, 17 were Buys involving 37,306 shares of stock, and 12 were Sells involving 45,061 shares of stock, creating an insider buy to sell ratio of 0.8 to 1.

Mergers/Acquisitions
There were no mergers or acquisitions during fiscal 2017.

Divestitures/Dispositions
There were no divestitures or dispositions during fiscal 2017.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Kaman Corporation, revenue decreased by 0.14%, earnings decreased by 17%, free cash flow decreased by 6%, total debt decreased by 4%, and the stock price increased by 16%. Year to date the stock price is up 16%.

Future Value
My future (5 year hold) target price for the stock is $105, which is an average annual return of 11%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 12% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $36. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $21. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value, Price to Book, and Price to Tangible Book. For Kaman Corporation the PE Ratio is 37, the PEG Ratio is 2.7, Book Value is $23, Tangible Book Value is $6, the Price to Book Ratio is 3 and the Price to Tangible Book Ratio is 11.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Kaman Corporation (Nasdzq: KAMN) – FYE 12/2017 – OVER VALUED The stock is currently trading at levels above with my most recent $34 close target. Please See Linked PDF Worksheet

Disclosure
I hold no shares of Kaman Corporation
Posted on 07/08/18

Superior Industries International, Inc.
Superior Industries designs and manufactures aluminum road wheels for sale to original equipment manufacturers including Ford, General Motors, Toyota, Fiat Chrysler Automobiles N.V., BMW, Mitsubishi, Nissan, Subaru, Volkswagen and Tesla. Industry peers include Maxion Wheels, The CarlStar Group, and Meritor, Inc..

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $18.56, with an initial trailing stop at $17.43. Upward price movement will find resistance at $18.04 and $19.23. Downward price movement will find support at $16.66 and $16.01, with final support at $15.05.

Days to Cover
The most recent days to cover number is 8. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Superior Industries International, Inc., the impact primarily consists of a $7.3 million related to re-measurement of U.S. deferred tax assets due to the lowering of the corporate tax rate described above and $9.3 million of expense for the estimate of the impact of one-time transition tax on the mandatory repatriation of earnings of foreign subsidiaries. The company anticipates additional guidance and clarification regarding the implementation of the transition tax will be issued by federal and state taxing authorities and this estimate is, therefore, subject to future refinement.

Note that for fiscal 2017, 27% of net income came from income tax benefits.

Insider Transactions
In the past 12 months, the company reported 67 insider trades involving 285,687 shares of stock. Of those 67 insider trades, 41 were Buys involving 229,470 shares of stock, and 26 were Sells involving 56,217 shares of stock, creating an insider buy to sell ratio of 4.1 to 1.

Mergers/Acquisitions
During fiscal 2017 the company acquired Uniwheels AG, a European company that develops, produces, and sells alloy wheels for the automotive and accessory markets, providing its wheels under the ATS, Rial, Alutec, and Anzio brands to tire and wheel retail chains, wholesalers, retailers, and car dealers. The aggregate purchase price was $766.2 million.

Divestitures/Dispositions
There were no divestitures or dispositions during fiscal 2017.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Superior Industries International, Inc., revenue decreased by 51%, earnings decreased by 159%, free cash flow decreased by 65%, total debt was increased almost 7 times 2016 levels, and the stock price decreased by 75%. Year to date the stock price is up 19%.

Future Value
My future (5 year hold) target price for the stock is $31, which is an average annual return of 15%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of (-3%) per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $8. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is (-$8). The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Superior Industries International, Inc. the current twelve month trailing PE Ratio is (-17), the PEG Ratio is (-1.6), Book Value is $24, and Tangible Book Value is $3.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Superior Industries International, Inc. (NYSE: SUP) – FYE 12/2017 – OVER VALUED The stock is currently trading at levels aboe with my most recent (-$12) close target. Please See Linked PDF Worksheet

Disclosure
I hold no shares of Superior Industries International, Inc.
Posted on 07/07/18

Wabash National Corporation
Wabash National Corporation is an industrial manufacturer of semi-trailers and liquid transportation systems. The company designs, manufactures, and markets dry freight and refrigerated trailers, platform trailers, bulk tank trailers, dry and refrigerated truck bodies, truck-mounted tanks, intermodal equipment, aircraft refueling equipment, structural composite panels and products, trailer aerodynamic solutions, specialty food grade and pharmaceutical equipment. Industry peers include Great Dane Limited Partnership, Trinity Industries, and Utility Trailer Manufacturing Company.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $22.17, with an initial trailing stop at $19.04. Upward price movement will find resistance at $19.56 and $20.18, with final resistance found at $20.59. Downward price movement will find support at $18.89.

Days to Cover
The most recent days to cover number is 17. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Wabash National Corporation, the re-measurement of deferred tax assets and liabilities at the new tax rate resulted in a provisional tax benefit of approximately $19.7 million.

Note that for fiscal 2017, 0% of net income came from income tax benefits.

Insider Transactions
In the past 12 months, the company reported 48 insider trades involving 771,097 shares of stock. Of those 48 insider trades, 31 were Buys involving 560,995 shares of stock, and 17 were Sells involving 210,102 shares of stock, creating an insider buy to sell ratio of 2.7 to 1.

Mergers/Acquisitions
In September 2017, the company completed the acquisition of Supreme Industries, Inc. (“Supreme”), a manufacturer of specialized commercial vehicles, including cutaway and dry-freight van bodies, refrigerated units, and stake bodies with manufacturing facilities in Goshen and Ligonier, Indiana; Jonestown, Pennsylvania; Cleburne, Texas; Griffin, Georgia; and Moreno Valley, California. The aggregate purchase price of $360.4 million.

Divestitures/Dispositions
There were no divestitures or dispositions during fiscal 2018.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Wabash National Corporation, revenue decreased by 4%, earnings decreased by 5%, free cash flow decreased by 7%, total debt was increased by 132%, and the stock price increased by 27%. Year to date the stock price is down 11%.

Future Value
My future (5 year hold) target price for the stock is $31, which is an average annual return of 12%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 29% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $24. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $27. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Wabash National Corporation the current twelve month trailing PE Ratio is 9, the PEG Ratio is 0.2, Book Value is $9, and Tangible Book Value is (-$1).

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Wabash National Corporation (NYSE: WNC) – FYE 12/2017 – FAIRLY VALUED The stock is currently trading at levels in line with my most recent $27 fair value estimate. Please See Linked PDF Worksheet

Disclosure
I hold shares of Wabash National Corporation
Posted on 07/05/18

Friedman Industries, Inc.
Friedman Industries is engaged in steel processing, pipe manufacturing and processing and steel and pipe distribution. The coil products group purchases prime hot-rolled steel coils, processes the coils into flat, finished sheet and plate and sells these products on a wholesale, rapid-delivery basis in competition with steel mills, importers and steel service centers. Through its Texas Tubular Products Division the company manufactures, purchases, processes and markets tubular products to API standards. Industry peers include Synalloy Corporation, Olympic Steel, and LB Foster Company.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $8.66, with an initial trailing stop at $6.71. Upward price movement will find no resistance. Downward price movement will find support at $6.48 and at $6.19, with final support at $6.01.

Days to Cover
The most recent days to cover number is 1. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Friedman Industries, Inc., the re-measurement of deferred tax assets and liabilities at the new tax rate resulted in a provisional noncash tax benefit of approximately $77,000 due to the reduction of the company’s net deferred tax liability position.

Note that for fiscal 2017, 0% of net income came from income tax benefits.

Insider Transactions
In the past 12 months, the company reported 0 insider trades involving 0 shares of stock. Of those 0 insider trades, 0 were Buys involving 0 shares of stock, and 0 were Sells involving 0 shares of stock, creating an insider buy to sell ratio of 0.0 to 1.

Mergers/Acquisitions
There were no mergers or acquisitions during fiscal 2018.

Divestitures/Dispositions
There were no divestitures or dispositions during fiscal 2018.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Friedman Industries, Inc., revenue increased by 56%, earnings increased by 198%, free cash flow increased by 294%, total debt was unchanged, and the stock price decreased by 10%. Year to date the stock price is up 45%.

Future Value
My future (5 year hold) target price for the stock is $8, which is an average annual return of (-2%). A prior five year hold of the stock (FY2014- FY2018) would have returned an average of (-7%) per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $19. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $3. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Friedman Industries, Inc. the current twelve month trailing PE Ratio is 22, the PEG Ratio is (-3.6), Book Value is $9, and Tangible Book Value is $9.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Friedman Industries, Inc. (NYSE: FRD) – FYE 03/2018 – OVER VALUED The stock is currently trading at levels above my most recent $4 close target. Please See Linked PDF Worksheet

Disclosure
I hold no shares of Friedman Industries, Inc.
Posted on 07/05/18

DowDupont, Inc.
DowDuPont, a holding company comprised of The Dow Chemical Company and E. I. du Pont de Nemours and Company, is a diversified manufacturer and supplier of products used primarily as raw materials in the manufacture of products and services for companies in the appliance; automotive; agricultural; building and construction; chemical processing; electronics; furniture; housewares; oil and gas; packaging; paints, coatings and adhesives; personal care; pharmaceutical; processed foods; pulp and paper; textile and carpet; utilities; and water treatment industries. Industry peers include BASF, Monsanto Company, and Ashland Global Holdings.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $73.04, with an initial trailing stop at $64.17. Upward price movement will find resistance at $66.67 and $67.72, with final resistance at $70.26. Downward price movement will find support at $64.38 and at $63.24.

Days to Cover
The most recent days to cover number is 2. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of DowDupont, Inc., the provisional amount recorded related to the remeasurement of the company’s deferred tax balance was $2,666 million, recorded as a benefit to provision (credit) for income taxes on continuing operations.

The Act also requires a mandatory deemed repatriation of post-1986 undistributed foreign earnings and profits (“E&P”), which results in a one-time transition tax. As a result, the company recorded a provisional amount for the transition tax liability for its foreign subsidiaries of $1,580 million, recorded as a charge to provision (credit) for income taxes on continuing operations.

Note that for fiscal 2017, 0% of net income came from income tax benefits.

Insider Transactions
In the past 12 months, the company reported 236 insider trades involving 7,482,742 shares of stock. Of those 236 insider trades, 115 were Buys involving 2,119,296 shares of stock, and 121 were Sells involving 5,363,446 shares of stock, creating an insider buy to sell ratio of 0.4 to 1.

Acquisitions/Mergers
In March 2017, DuPont entered into a definitive agreement with FMC Corporation for FMC to acquire the assets related to DuPont’s crop protection business and research and development (“R&D”) organization that DuPont was required to divest in order to obtain European Commission (“EC”) approval for the merger with Dow. In addition, under the FMC Transaction Agreement, DuPont agreed to acquire certain assets relating to FMC’s Health and Nutrition segment, excluding its Omega-3 products (the “H&N Business”) (the sale of the Divested Ag Business and acquisition of the H&N Business referred to collectively as the “FMC Transactions”).

In November 2017, DuPont completed the FMC Transactions through the acquisition of the H&N Business and the divestiture of the Divested Ag Business. The acquisition will be integrated into Nutrition & Biosciences to enhance the Company’s position as a leading provider of sustainable, bio-based food ingredients and allow for expanded capabilities in the pharma excipients space. DuPont accounted for the acquisition in accordance with ASC 805, which requires the assets acquired and liabilities assumed to be recognized on the balance sheet at their fair values as of the acquisition date.

Divestitures/Dispositions
In February 2017, Dow announced it would divest the EAA Business to SK Global Chemical Co., Ltd. The divestiture included production assets located in Freeport, Texas, and Tarragona, Spain, along with associated intellectual property and product trademarks. Under terms of the purchase agreement, SK Global Chemical Co., Ltd will honor certain customer and supplier contracts and other agreements. In September 2017, the sale was completed for $296 million, net of working capital adjustments, costs to sell and other adjustments, with proceeds subject to customary post-closing adjustments.

In July 2017, Dow announced it had entered into a definitive agreement with CITIC Agri Fund to sell the DAS Divested Ag Business, including four corn seed production sites and four research centers, a copy of Dow AgroSciences’ Brazilian corn germplasm bank, certain commercial and pipeline hybrids, the MORGAN™ trademark and a license to the DOW SEMENTES™ trademark for 12 months. In November 2017, the sale was completed for $1,093 million, net of working capital adjustments, costs to sell and other adjustments, with proceeds subject to customary post-closing adjustments.

DuPont was required to sell its Divested Ag Business, specifically DuPont’s Cereal Broadleaf Herbicides and Chewing Insecticides portfolios, including RYNAXYPYR®, CYAZYPYR®, and Indoxacarb as well as the crop protection R&D pipeline and organization, excluding seed treatment, nematicides, and late-stage R&D programs. In March 2017, DuPont and FMC entered into the FMC Transaction Agreement under which FMC agreed to acquire the Divested Ag Business; in addition, DuPont agreed to acquire the H&N Business. The sale of the Divested Ag Business meets the criteria for discontinued operations and as such, earnings are included within loss from discontinued operations, net of tax for periods subsequent to the Merger.

In November 2017, DuPont completed the FMC Transactions through the disposition of the Divested Ag Business and the acquisition of the H&N Business. The preliminary fair value as determined by DuPont of the H&N Business is $1,970 million. The FMC Transactions include a cash consideration payment to DuPont of approximately $1,200 million, which reflects the difference in value between the Divested Ag Business and the H&N Business, as well as favorable contracts with FMC of $495 million, subject to adjustments for inventory of the Divested Ag Business and net working capital of the H&N Business. Due to the proximity of the Merger and the closing of the sale, the carrying value of the Divested Ag Business approximated the fair value of the consideration received, thus no resulting gain or loss was recognized on the sale.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For DowDupont, Inc., revenue increased by 30%, earnings decreased by 1%, free cash flow increased by 20%, total debt decreased by 59%, and the stock price increased by 20%. Year to date the stock price is down 9%.

Future Value
My future (5 year hold) target price for the stock is $115, which is an average annual return of 15%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 25% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $41. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $32. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For DowDupont, Inc. the current twelve month trailing PE Ratio is 25, the PEG Ratio is 3.6, Book Value is $44, and Tangible Book Value is $4.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. DowDupont, Inc. (NYSE: DWDP) – FYE 12/2017 – OVER VALUED The stock is currently trading at levels above my most recent $51 close target. Please See Linked PDF Worksheet

Disclosure
I hold no shares of DowDupont, Inc.
Posted on 07/04/18

Dorman Products, Inc.
The company is a supplier of replacement parts and fasteners for passenger cars, light trucks, and heavy duty trucks in the automotive aftermarket many of which the company designs and engineers. The company is also a supplier of original equipment items which are available to consumers only from original equipment manufacturers.
Industry peers include Federal-Mogul Holdings Corporation, Genuine Parts Company, and General Parts International.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $73.05, with an initial trailing stop at $68.90. Upward price movement will find resistance at $72.26 and $74.48, with final resistance at $75.82. Downward price movement will find support at $68.77 and $66.95, with final support at $64.78.

Days to Cover
The most recent days to cover number is 13. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Dorman Products, Inc.,the company has recognized a provisional tax expense of $4.4 million to remeasure their net deferred tax assets. In addition, the company had $2.3 million of unrecognized tax benefits, $2.0 million of which would affect its effective tax rate if recognized.

Note that for fiscal 2017, 0% of net income came from income tax benefits.

Insider Transactions
In the past 12 months, the company reported 25 insider trades involving 44,638 shares of stock. Of those 25 insider trades, 12 were Buys involving 25,175 shares of stock, and 13 were Sells involving 19,463 shares of stock, creating an insider buy to sell ratio of 1.3 to 1.

Acquisitions/Mergers
In October 2017 the company completed its acquisition of MAS Automotive Distribution Inc., a designer and manufacturer of chassis, steering, suspension, and alignment components for the automotive aftermarket. The company paid $67.3 million net of $3.3 million of cash acquired for the acquisition.

Divestitures/Dispositions
There were no divestitures or dispositions during fiscal 2017.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Dorman Products, Inc., revenue increased by 5%, earnings increased by 3%, free cash flow increased by 2%, total debt increased by 0%, and the stock price decreased by 19%. Year to date the stock price is up 14%.

Future Value
My future (5 year hold) target price for the stock is $221, which is an average annual return of 43%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 15% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $49. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $38. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Dorman Products, Inc. the current twelve month trailing PE Ratio is 22, the PEG Ratio is 1.6, Book Value is $19, and Tangible Book Value is $16.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Dorman Products, Inc. (Nasdaq: DORM) – FYE 12/2017 – OVER VALUED The stock is currently trading at levels above my most recent $61 close target. Please See Linked PDF Worksheet

Disclosure
I hold no shares of Dorman Products, Inc.
Posted on 06/29/18

Harley-Davidson, Inc.
Harley-Davidson, Inc. is the parent company for the groups of companies doing business as Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS). The Motorcycles segment consists of HDMC which designs, manufactures and sells at wholesale on-road Harley-Davidson motorcycles as well as motorcycle parts, accessories, general merchandise and related services. The Financial Services segment consists of HDFS which provides wholesale and retail financing and insurance and insurance-related programs primarily to Harley-Davidson dealers and their retail customers. Industry peers include Triumph Motorcycles Ltd, Ultra Motorcycle Company, and Viper Motorcycle Company.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $47.40, with an initial trailing stop at $41.03. Upward price movement will find resistance at $42.37 and $43.70, with final resistance at $44.67. Downward price movement will find support at $40.30.

Days to Cover
The most recent days to cover number is 7. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Harley-Davidson, Inc.,the company has determined that the amount of unrecognized tax benefits as of December 31, 2017 that, if recognized, would affect the effective tax rate was $63.1 million.

Note that for fiscal 2017, 0% of net income came from income tax benefits.

Insider Transactions
In the past 12 months, the company reported 70 insider trades involving 274,669 shares of stock. Of those 70 insider trades, 35 were Buys involving 159,435 shares of stock, and 35 were Sells involving 115,234 shares of stock, creating an insider buy to sell ratio of 1.4 to 1.

Acquisitions/Mergers
There were no acquisitions or mergers during fiscal 2017.

Divestitures/Dispositions
There were no divestitures or dispositions during fiscal 2017.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Harley-Davidson, Inc., revenue decreased by 6%, earnings decreased by 21%, free cash flow decreased by 12%, total debt increased by 3%, and the stock price decreased by 13%. Year to date the stock price is down 18%.

Future Value
My future (5 year hold) target price for the stock is $67, which is an average annual return of 12%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 4% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $36. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $36. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Harley-Davidson, Inc. the current twelve month trailing PE Ratio is 13, the PEG Ratio is 0.8, Book Value is $11, and Tangible Book Value is $11.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Harley-Davidson, Inc. (NYSE: HOG) – FYE 12/2017 – FAIRLY VALUED The stock is currently trading at levels in line with my most recent $36 fair value estimate. Please See Linked PDF Worksheet

Disclosure
I hold no shares of Harley-Davidson, Inc.
Posted on 06/28/18

Schweitzer-Mauduit International, Inc.
Schweitzer-Mauduit International is a producer of premium specialty papers and resin-based products. The company manufactures and sells paper and reconstituted tobacco products to the tobacco industry as well as specialized paper products for use in other applications. The company also manufactures resin-based plastic netting through an extrusion process, as well as certain meltblown products and machined plastic core tubes. Industry peers include Japan Tobacco, Miquel y Costas & Miquel, and Reynolds American.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $46.52, with an initial trailing stop at $43.23. Upward price movement will find resistance at $44.58 and $45.69, with final resistance at $46.52. Downward price movement will find support at $41.95 and $40.94, with final support at $40.10.

Days to Cover
The most recent days to cover number is 1. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Schweitzer-Mauduit International, Inc.,the company has determined the provisional amount related to the remeasurement of certain deferred tax assets and liabilities, based on the rates at which they are expected to reverse in the future, was an $11.8 million of benefit. The provisional amount related to the one-time transition tax on certain accumulated foreign earnings was $51.4 million.

Note that for fiscal 2017, 0% of net income came from income tax benefits.

Insider Transactions
In the past 12 months, the company reported 39 insider trades involving 88,533 shares of stock. Of those 39 insider trades, 28 were Buys involving 77,611 shares of stock, and 11 were Sells involving 10,922 shares of stock, creating an insider buy to sell ratio of 1.4 to 1.

Acquisitions/Mergers
In January 2017, the company completed the acquisition of Conwed Plastics NV, an advanced plastics materials company, for $295 million in cash.

Divestitures/Dispositions
There were no divestitures or dispositions during fiscal 2017.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Schweitzer-Mauduit International, Inc., revenue increased by 17%, earnings decreased by 63%, free cash flow increased by 36%, total debt increased by 55%, and the stock price increased by 0.1%. Year to date the stock price is down 3%.

Future Value
My future (5 year hold) target price for the stock is $60, which is an average annual return of 8%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 4% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $26. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $13. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Schweitzer-Mauduit International, Inc. the current twelve month trailing PE Ratio is 35, the PEG Ratio is 2.5, Book Value is $18, and Tangible Book Value is (-$3).

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Schweitzer-Mauduit International, Inc. (NYSE: SWM) – FYE 12/2017 – OVER VALUED The stock is currently trading above my most recent $21 close target. Please See Linked PDF Worksheet

Disclosure
I hold no shares of Schweitzer-Mauduit International, Inc.
Posted on 06/26/18

Sonoco Products Company
Sonoco Products is a manufacturer of consumer, industrial and protective packaging products including tubes, cores and composite containers. Industry peers include WestRock Company, Deswell Industries, and Armstrong World Industries.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $55.66, with an initial trailing stop at $50.87. Upward price movement will find resistance at $52.22 and $53.33, with final resistance at $54.21. Downward price movement will find support at $50.10 and $48.89, with final support at $48.16.

Days to Cover
The most recent days to cover number is 5. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Sonoco Products Company,the company has determined the provisional amount related to the remeasurement of certain deferred tax assets and liabilities, based on the rates at which they are expected to reverse in the future, was $25.7 million of benefit. The provisional amount related to the one-time transition tax on certain accumulated foreign earnings was $77 million.

Note that for fiscal 2017, 0% of net income came from income tax benefits.

Insider Transactions
In the past 12 months, the company reported 128 insider trades involving 451,244 shares of stock. Of those 128 insider trades, 55 were Buys involving 264,063 shares of stock, and 73 were Sells involving 187,181 shares of stock, creating an insider buy to sell ratio of 1.4 to 1.

Acquisitions/Mergers
In July 2017, the company completed the acquisition of Clear Lam Packaging, Inc. for $165M. Clear Lam manufactures high barrier flexible and forming films used to package a variety of products for consumer packaged goods companies, retailers and other industrial manufacturers, with a focus on structures used for perishable foods. In March 2017, the company completed the acquisition of Packaging Holdings, Inc. and subsidiaries, including Peninsula Packaging LLC for $219M. Packaging Holdings manufactures thermoformed packaging for a wide range of whole fresh fruits, pre-cut fruits and produce, prepared salad mixes, as well as baked goods in retail supermarkets.

Divestitures/Dispositions
There were no divestitures or dispositions during fiscal 2017.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Sonoco Products Company, revenue increased by 5%, earnings decreased by 5%, free cash flow increased by 1%, total debt increased by 37%, and the stock price increased by 1%. Year to date the stock price is down 3%.

Future Value
My future (5 year hold) target price for the stock is $80, which is an average annual return of 11%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 17% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $30. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $5. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Sonoco Products Company the current twelve month trailing PE Ratio is 24, the PEG Ratio is 3.4, Book Value is $17, and Tangible Book Value is $2.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Sonoco Products Company (NYSE: SON) – FYE 12/2017 – OVER VALUED The stock is currently trading above my most recent $41 close target. Please See Linked PDF Worksheet

Disclosure
I hold no shares of Sonoco Products Company
Posted on 06/26/18

Wal-Mart Stores, Inc.
Walmart, Inc. is engaged in retail and wholesale operations with three reportable segments, Walmart U.S., Walmart International, and Sam’s Club. Industry peers include Target Corporation, The Kroger Company, and Amazon.com, Inc.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $94.56, with an initial trailing stop at $83.55. Upward price movement will find resistance at $87.27 and $92.94, with final resistance at $97.46. Downward price movement will find support at $82.56.

Days to Cover
The most recent days to cover number is 3. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Wal-Mart Stores, Inc.,the net tax benefit recognized in fiscal 2018 related to the Tax Act was $0.2 billion. As the company completes its analysis of the Tax Act and incorporates additional guidance that may be issued by the U.S. Treasury Department, the IRS or other standard-setting bodies, the company may identify additional effects not reflected as of January 31, 2018.

The Act requires the company to pay U.S. income taxes on accumulated foreign subsidiary earnings not previously subject to U.S. income tax at a rate of 15.5% to the extent of foreign cash and certain other net current assets, as defined by the Tax Act, and 8.0% on the remaining earnings. The company recorded a provisional amount of $1.9 billion of additional income tax expense for its one-time transitional tax liability. The company recorded a provisional amount based on estimates as it completes its analysis of the application of the effects of the Tax Act as well as finalize its calculations surrounding the components of its foreign subsidiaries subject to the transition tax including the potential of any correlative adjustments.

The Tax Act reduces the U.S. statutory tax rate from 35% to 21% for years after 2017. Accordingly, the company re-measured its deferred taxes as of January 31, 2018, to reflect the reduced rate that will apply in future periods when these deferred taxes are settled or realized. The company recognized a deferred tax benefit of $2.1 billion to reflect the reduced U.S. tax rate and other effects of the Tax Act. The benefit associated with the remeasurement of the deferred taxes is provisional as of January 31, 2018, as the company continues gathering the necessary information to complete the calculations.

Note that for fiscal 2017, 0% of net income came from income tax benefits.

Insider Transactions
In the past 12 months, the company reported 255 insider trades involving 110,318,403 shares of stock. Of those 255 insider trades, 64 were Buys involving 1,215,163 shares of stock, and 191 were Sells involving 109,103,240 shares of stock, creating an insider buy to sell ratio of 0.01 to 1.

Acquisitions/Mergers
The company completed certain eCommerce acquisitions during fiscal 2018 and 2017, which were immaterial, individually and in the aggregate.

Divestitures and Dispositions
In April 2017, one of the company sold Suburbia, the apparel retail division in Mexico, for $1.0 billion.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Wal-Mart Stores, Inc., revenue increased by 3%, earnings decreased by 2%, free cash flow increased by 5%, total debt increased by 1%, and the stock price increased by 7%. Year to date the stock price is down 20%.

Future Value
My future (5 year hold) target price for the stock is $124, which is an average annual return of 9%. A prior five year hold of the stock (FY2014- FY2018) would have returned an average of 8% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $51. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $53. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Wal-Mart Stores, Inc. the current twelve month trailing PE Ratio is 19, the PEG Ratio is 2.1, Book Value is $27, and Tangible Book Value is $21.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Wal-Mart Stores, Inc. (NYSE: WMT) – FYE 01/2018 – OVER VALUED The stock is currently trading above my most recent $84 close target. Please See Linked PDF Worksheet

Disclosure
I hold no shares of Wal-Mart Stores, Inc.
Posted on 06/25/18

Under Armour, Inc.
Under Armour’s principal business activities are the development, marketing and distribution of branded performance apparel, footwear and accessories for men, women and youth. The brand’s moisture-wicking fabrications are engineered in many designs and styles for wear in nearly every climate to provide a performance alternative to traditional products. Industry peers include NIKE, Columbia Sportswear, and Adidas AG

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $20.53, with an initial trailing stop at $22.42. Upward price movement will find resistance at $24.07, while downward price movement will find support at $21.15 and $20.26, with final support at $18.46.

Days to Cover
The most recent days to cover number is 12. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Under Armour, Inc.,the company’s deferred tax assets and liabilities were adjusted to reflect the reduction in the U.S. corporate income tax rate from 35 percent to 21 percent, resulting in a $24.9 million increase in income tax expense, and a corresponding $24.9 million decrease in net deferred tax assets.

The company also recognized a provisional income tax expense of $13.9 million for the year related to the one-time transition tax on indefinitely reinvested foreign earnings. The determination of the transition tax requires further analysis regarding the amount and composition of the company’s historical foreign earnings, the amount of foreign tax credits available, and the ability to utilize certain foreign tax credits, which is expected to be completed in 2018.

Note that for fiscal 2017, 0% of net income came from income tax benefits.

Insider Transactions
In the past 12 months, the company reported 24 insider trades involving 145,876 shares of stock. Of those 24 insider trades, 6 were Buys involving 78,246 shares of stock, and 18 were Sells involving 67,630 shares of stock, creating an insider buy to sell ratio of 1.2 to 1.

Acquisitions/Mergers
The company recorded no acquisitions or mergers during fiscal 2017.

Divestitures and Dispositions
The company recorded no divestitures or dispositions during fiscal 2017.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Under Armour, Inc., revenue increased by 3%, earnings decreased by 67%, free cash flow decreased by 85%, total debt increased by 12%, and the stock price decreased by 50%. Year to date the stock price is up 58%.

Future Value
My future (5 year hold) target price for the stock is $57, which is an average annual return of 30%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 4% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $13. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $2. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Under Armour, Inc. the current twelve month trailing PE Ratio is 117, the PEG Ratio is 9.7, Book Value is $5, and Tangible Book Value is $3.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Under Armour, Inc. (NYSE: UAA) – FYE 12/2017 – OVER VALUED The stock is currently trading above my most recent $3 close target. Please See Linked PDF Worksheet

Disclosure
I hold no shares of Under Armour, Inc.
Posted on 06/22/18

Oceaneering International
Oceaneering International is a provider of engineered services and products, primarily to the offshore oil and gas industry, with a focus on deepwater applications. The services and products provided to the oil and gas industry include remotely operated vehicles, specialty subsea hardware, engineering and project anagement, subsea intervention services, including manned diving, and asset integrity and nondestructive testing services. The company also serves the defense, aerospace and commercial theme park industries. Listed competitors include Technip, Ensco plc, and Sub Sea 7MS Ltd.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $23.77, with an initial trailing stop at $23.38. Upward price movement will find resistance at $24.42. Downward price movement will find support at $23.24 and $22.26, with final support at $20.84.

Days to Cover
The most recent days to cover number is 7. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Oceaneering International,the company estimated and recorded a $189.1 million non-cash benefit in the fourth quarter of 2017. Various components of the Tax Act contributed to the $189.1 million non-cash benefit. At December 31, 2017, the company remeasured its deferred tax assets and liabilities to reflect the reduction in the U.S. corporate income tax rate from 35% to 21%, resulting in a provisional $23.1 million decrease in income tax expense for the year ended December 31, 2017.

Prior to enactment, the company provided deferred taxes liabilities associated with certain unrepatriated earnings that will now be subject to tax-free repatriation, resulting in a provisional $222.0 million decrease in income tax expense for the year ended December 31, 2017. The transition tax and resulting territorial type tax regime impacts the utilization of the company’s remaining foreign tax credits, resulting in a provisional valuation allowance of $56.0 million against such deferred tax assets and a corresponding increase to income tax expense for the year ended December 31, 2017.

Note that for fiscal 2017, 106% of net income came from income tax benefits.

Insider Transactions
In the past 12 months, the company reported 36 insider trades involving 265,165 shares of stock. Of those 36 insider trades, 18 were Buys involving 230,550 shares of stock, and 18 were Sells involving 34,613 shares of stock, creating an insider buy to sell ratio of 6.7 to 1.

Acquisitions/Mergers
In August 2017, the company acquired a 60% controlling ownership interest in Dalgidj LLC (“Dalgidj”) for approximately $12.4 million to be paid in 2017 and 2018. Dalgidj is an Azerbaijan company that provides office and yard facilities for warehousing, logistics and administration to foreign and local companies in the Caspian Sea basin. Dalgidj also owns a 49% interest in a joint venture, which provides remotely operated vehicle solutions, air diving services, and engineering and project management services.

Divestitures and Dispositions
The company recorded no divestitures or dispositions during fiscal 2017.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Oceaneering International, revenue declined by 15%, earnings increased by 467%, free cash flow increased by 65%, total debt decreased by 0.1%, and the stock price decreased by 33%. Year to date the stock price is up 12%.

Future Value
My future (5 year hold) target price for the stock is $22, which is an average annual return of (-2%). A prior five year hold of the stock (FY2013- FY2017) would have returned an average of (-12%) per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $30. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $45. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Oceaneering International the current twelve month trailing PE Ratio is 13, the PEG Ratio is 1.1, Book Value is $17, and Tangible Book Value is $15.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Oceaneering International (NYSE: OII) – FYE 12/2017 – UNDER VALUED The stock is currently trading below my most recent $27 buy target. Please See Linked PDF Worksheet

Disclosure
I hold no shares of Oceaneering International
Posted on 06/20/18

Schlumberger Limited/NV
Schlumberger Limited is a provider of technology for reservoir characterization, drilling, production and processing to the oil and gas industry. Industry peers include General Electric/Baker Hughes, Halliburton, and Weatherford International.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $74.61, with an initial trailing stop at $66.03. Upward price movement will find resistance at $68.33 and $69.73, with final resistance at $71.40. Downward price movement will find support at $64.44, with final support at $61.75.

Days to Cover
The most recent days to cover number is 3. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Schlumberger Limited/NV, the company recorded a $410 million charge relating to the one-time mandatory tax on previously deferred foreign earnings. After considering the impact of foreign tax credits and tax losses, the resulting cash tax payable as a result of the one-time mandatory tax on previously deferred foreign earnings will not be significant.

Note that for fiscal 2017, 16% of net income came from income tax benefits.

Insider Transactions
In the past 12 months, the company reported 27 insider trades involving 213,851 shares of stock. Of those 27 insider trades, 20 were Buys involving 99,739 shares of stock, and 7 were Sells involving 114,112 shares of stock, creating an insider buy to sell ratio of 0.9 to 1.

Acquisitions/Mergers
In April 2016, pursuant to a merger agreement, the company acquired all of the outstanding shares of Cameron International, a provider of flow equipment products, systems and services to the oil and gas industry worldwide for $2 billion in cash and $10 billion in company stock. The company continued to integrate Cameron during fiscal 2017.

Divestitures and Dispositions
The company recorded no divestitures or dispositions during fiscal 2017.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Schlumberger Limited/NV, revenue grew by 9%, earnings grew by 10%, free cash flow declined by 4%, total debt decreased by 7%, and the stock price decreased by 25%. Year to date the stock price is down 1%.

Future Value
My future (5 year hold) target price for the stock is $84, which is an average annual return of 5%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of (-0.05%) per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $30. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $18. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Schlumberger Limited/NV the current twelve month trailing PE Ratio is 46, the PEG Ratio is 3.1, Book Value is $27, and Tangible Book Value is $2.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Schlumberger Limited/NV (NYSE: SLB) – FYE 12/2017 – OVER VALUED The stock is currently trading above my most recent $29 close target. Please See Linked PDF Worksheet

Disclosure
I hold no shares of Schlumberger Limited/NV
Posted on 06/15/18

Union Pacific Corporation
Union Pacific Corporation operates a Class I railroad with 32,000 route miles. The company’s freight traffic consists of coal, grain, rock, or soda ash, lumber, steel, paper, food, chemicals, finished vehicles, intermodal containers and truck trailers. Industry peers include Burlington Northern Santa Fe, LLC, CSX Corporation, and Norfolk Southern Corporation.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $148.83, with an initial trailing stop at $144.81. Upward price movement will find no resistance. Downward price movement will find support at $141.90 and $137.40, with final support at $134.

Days to Cover
The most recent days to cover number is 5. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Union Pacific Corporation, as a result of its initial analysis of the Tax Act and existing implementation guidance, the company remeasured its deferred tax assets and liabilities and computed its transition tax liability net of offsetting foreign tax credits. This resulted in a $5.9 billion reduction in its income tax expense in 2017. The company also recorded a $212 million reduction to its operating expense related to income tax adjustments at equity-method affiliates.

Note that for fiscal 2017, 25% of net income came from taxes.

Insider Transactions
In the past 12 months, the company reported 79 insider trades involving 888,086 shares of stock. Of those 79 insider trades, 31 were Buys involving 495,404 shares of stock, and 48 were Sells involving 392,682 shares of stock, creating an insider buy to sell ratio of 1.3 to 1.

Acquisitions
The company recorded no acquisitions during fiscal 2017.

Divestitures and Dispositions
The company recorded no divestitures or dispositions during fiscal 2017.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Union Pacific Corporation, revenue grew by 7%, earnings grew by 115%, free cash flow grew by 138%, total debt increased by 13%, and the stock price increased by 23%. Year to date the stock price is up 10%.

Future Value
My future (5 year hold) target price for the stock is $276, which is an average annual return of 18%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 23% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $92. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $248. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Union Pacific Corporation the current twelve month trailing PE Ratio is 9, the PEG Ratio is 0.8, Book Value is $32, and Tangible Book Value is $32.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Union Pacific Corporation (NYSE: UNP) – FYE 12/2017 – UNDER VALUED The stock is currently trading below my most recent $149 buy target. Please See Linked PDF Worksheet

Disclosure
I hold shares of Union Pacific Corporation
Posted on 06/15/18

Newell Brands, Inc.
Newell Rubbermaid is a marketer of consumer and commercial products marketed under a portfolio of brands, including Sharpie®, Paper Mate®, Parker®, Waterman®, Dymo®, Rubbermaid®, Contigo®, Levolor®, Goody®, Calphalon®, Irwin®, Lenox®, Rubbermaid Commercial Products®, Graco®, Aprica®, Baby Jogger®, Yankee Candle®, Crock-Pot®, FoodSaver®, Mr. Coffee®, Oster®, Coleman®, First Alert®, Rawlings®, Jostens®, K2®, Marker®, Marmot®, and Völkl®. Listed competitors include ACCO Brands, Avery Dennison, and Tupperware Brands

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $28.95, with an initial trailing stop at $25.99. Upward price movement will find resistance at $27.57 and $28.86, with final resistance at $30.67. Downward price movement will find support at $25.11, with final support at $23.31.

Days to Cover
The most recent days to cover number is 7. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Newell Brands, Inc., the company recorded a deferred tax benefit of $1.5 billion due to statutory tax rate changes in the United States and an $87.2 million tax benefit to reverse the company’s deferred tax liability on historical Jarden earnings, partially offset by a $195 million tax expense relating to a mandatory repatriation tax. The company accounted for the tax rate change in the valuation of deferred taxes. As a result, the company recorded a tax benefit of $1.5 billion for FY1207.

Insider Transactions
In the past 12 months, the company reported 41 insider trades involving 3,117,317 shares of stock. Of those 41 insider trades, 25 were Buys involving 397,297 shares of stock, and 16 were Sells involving 2,719,588 shares of stock, creating an insider buy to sell ratio of 0.1 to 1.

Acquisitions
In September 2017, the company acquired Chesapeake Bay Candle, a manufacturer and marketer of premium candles and other home fragrance products, focused on consumer wellness and natural fragrance, for $75 million. In April 2017, the company acquired Sistema Plastics, a New Zealand based manufacturer and marketer of innovative food storage containers with strong market shares and presence in Australia, New Zealand, U.K. and parts of continental Europe for a purchase price of $472 million. In January 2017, the company acquired Smith Mountain Industries (“Smith Mountain”), a provider of premium home fragrance products, sold primarily under the WoodWick® Candle brand, for a purchase price of approximately $100 million.

Divestitures
In July 2017, the company sold its Winter Sports business for a selling price of approximately $240 million. During 2017, the company sold its Rubbermaid® consumer storage totes business, its stroller business under the Teutonia® brand, its Lehigh business, its firebuilding business and its triathlon apparel business under the Zoot® and Squadra® brands. The selling prices for these businesses were not material. The company sold the firebuilding business to Royal Oak Enterprises, LLC (“Royal Oak”). In March 2017, the company completed the sale of its Tools business, including the Irwin®, Lenox® and Hilmor® brands. The selling price was $1.95 billion.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Newell Brands, Inc., revenue grew by 11%, free cash flow grew by 233%, earnings grew by 364%, total debt declined by 11%, and the stock price declined by 44%. Year to date the stock price is down 15%.

Future Value
My future (5 year hold) target price for the stock is $55, which is an average annual return of 22%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 8% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $42. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $163. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Mueller Industries, Inc. the current twelve month trailing PE Ratio is 6, the PEG Ratio is 0.4, Book Value is $29, and Tangible Book Value is (-$22).

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Newell Brands, Inc. (NYSE: NWL) – FYE 12/2017 – UNDER VALUED The stock is currently trading below my most recent $163 fair value estimate. Please See Linked PDF Worksheet

Disclosure
I hold shares of Newell Brands, Inc.
Posted on 06/15/18

Reliance Steel and Aluminum
Reliance Steel and Aluminum operates 300 metals service centers providing metals processing services, and distributes approximately 100,000 metal products including alloy, aluminum, brass, copper, carbon steel, stainless steel, titanium and specialty steel products. Metals service centers acquire carbon steel, aluminum, stainless and alloy steel and other metal products from primary metals producers and then process these materials to meet customer specifications. Industry peers include AM Castle and Company, Ryerson Holding Corporation, and Worthington Industries.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $97.56, with an initial trailing stop at $93.35. Upward price movement will find resistance at $95.99. Downward price movement will find support at $93.54 and $91.77, with final support at $89.15.

Days to Cover
The most recent days to cover number is 2. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Reliance Steel and Aluminum, the company recognized a provisional net tax benefit in 2017 relating to Tax Reform of $207.3 million.

Insider Transactions
In the past 12 months, the company reported 56 insider trades involving 370,411 shares of stock. Of those 56 insider trades, 27 were Buys involving 198,350 shares of stock, and 172,061 were Sells involving 172,061 shares of stock, creating an insider buy to sell ratio of 1.2 to 1.

Acquisitions
In October 2017 the company acquired Ferguson Perforating Company (“Ferguson”). Ferguson, headquartered in Providence, Rhode Island, specializes in manufacturing highly engineered and complex perforated metal parts that have application in diverse end markets including industrial machinery, automotive, aerospace, sugar products and consumer electronics manufacturers.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Reliance Steel and Aluminum, revenue grew by 13%, free cash flow grew by 32%, earnings grew by 44%, total debt declined by 1%, and the stock price increased by 32%. Year to date the stock price is up 10%.

Future Value
My future (5 year hold) target price for the stock is $117, which is an average annual return of 5%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 8% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $83. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $140. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Mueller Industries, Inc. the current twelve month trailing PE Ratio is 8, the PEG Ratio is 0.6, Book Value is $65, and Tangible Book Value is $24.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Reliance Steel and Aluminum (NYSE: RS) – FYE 12/2017 – FAIRLY VALUED The stock is currently trading in line with my most recent $140 fair value estimate. Please See Linked PDF Worksheet

Disclosure
I hold shares of Reliance Steel and Aluminum
Posted on 06/14/18

Olympic Steel, Inc.
Olympic Steel is a metals service center that provides metals processing and distribution services. Their primary flat products focus is on the direct sale and distribution of large volumes of processed carbon, coated, aluminum and stainless flat-rolled sheet, coil and plate products. Through their Chicago Tube and Iron (CTI) subsidiary they distribute metal tubing, pipe, bar, valves and fittings and fabricate pressure parts supplied to various industrial markets. Industry peers include Reliance Steel and Aluminum Company, Ryerson Holding Corporation, and Steel Technologies LLC

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $24.33, with an initial trailing stop at $22.42. Upward price movement will find resistance at $23.59 and $24.24, with final resistance at $24.93. Downward price movement will find support at $22.14 and $21.38, with final support at $24.93.

Days to Cover
The most recent days to cover number is 2. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Olympic Steel, Inc., the company decreased its net deferred tax liability by $6.2 million resulting in an income tax benefit to reflect the estimated impact of the Tax Act. Based on the company’s predominantly U.S. based operational footprint, additional international and minimum tax provisions under the Tax Act, including the one-time transition tax for the transition from the worldwide system to the territorial system, are not applicable, or would not be material to the company.

Insider Transactions
In the past 12 months, the company reported 3 insider trades involving 17,500 shares of stock. Of those 3 insider trades, 2 were Buys involving 5,500 shares of stock, and 1 was a Sell involving 12,000 shares of stock, creating an insider buy to sell ratio of 0.5 to 1.

Acquisitions
The company recorded no business acquisitions during fiscal 2017.

Dispositions
The company recorded no business dispositions during fiscal 2017.

Year-Over-Year
Several year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Olympic Steel, Inc., revenue grew by 26%, free cash flow grew by 39%, earnings grew by 72%, total debt increased by 18%, and the stock price decreased by 13%. Year to date the stock price is up 6%.

Future Value
My future (5 year hold) target price for the stock is $34, which is an average annual return of 9%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of (-0.15%) per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $55. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $53. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
Other value considerations include the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Olympic Steel, Inc. the current twelve month trailing PE Ratio is 6, the PEG Ratio is 2.2, Book Value is $25, and Tangible Book Value is $23.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Olympic Steel, Inc. (Nasdaq: ZEUS) – FYE 12/2017 – UNDER VALUED The stock is currently trading at levels below my most recent $32 buy target. Please See Linked PDF Worksheet

Disclosure
I hold shares of Olympic Steel, Inc.
Posted on 06/13/18

Mueller Industries, Inc.
Mueller Industries is a of copper, brass, aluminum, and plastic products such as copper tube and fittings; line sets; brass and copper alloy rod, bar, and shapes; aluminum and brass forgings; aluminum impact extrusions; plastic fittings and valves; refrigeration valves and fittings; fabricated tubular products; and steel nipples. The company also resells imported brass and plastic plumbing valves, malleable iron fittings, faucets, and plumbing specialty products. Listed competitors are Cerro Flow Products, Cambridge-Lee Industries LLC, and Charlotte Pipe and Foundry Company.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $32.24, with an initial trailing stop at $30.94. Upward price movement will find resistance at $33.34 and $34.58, with final resistance at $35.56. Downward price movement will find support at $30.5 and $29.87, with final support at $29.20.

Days to Cover
The most recent days to cover number is 5. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for the stock.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Mueller Industries, Inc., the Company recorded a provisional amount for its one-time transition tax liability, resulting in an increase in income tax expense of $12.9 million.

Additionally, the company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21 percent. However, the company is still analyzing certain aspects of the Act and refining its calculations, which could potentially affect the measurement of these balances. The provisional amount recorded related to the remeasurement of the deferred tax balance was an income tax benefit of $12.1 million.

Insider Transactions
In the past 12 months, the company reported 45 insider trades involving 237,516 shares of stock. Of those 45 insider trades, 34 were Buys involving 205,024 shares of stock, and 11 were Sells involving 32,492 shares of stock, creating an insider buy to sell ratio of 6.3 to 1.

Acquisitions
In May 2017, the company acquired all of the outstanding shares of Pexcor Manufacturing Company Inc. and Heatlink Group Inc. for approximately $16.3 million in cash. The purchased company based out of Calgary, Alberta, Canada, produces and sells a complete line of products for PEX plumbing and radiant systems. In April 2016, the company purchased a 60% equity interest in Jungwoo-Mueller for approximately $20.5 million in cash. Jungwoo-Mueller, manufactures copper-based pipe joining products, and is headquartered in Seoul, South Korea.

In July 2015, the company purchased of all of the outstanding shares of Great Lakes Copper Ltd. (Great Lakes) for $70.0 million in cash. Great Lakes manufactures copper tube products in Canada. In June 2015, the company purchased of all of the outstanding equity interests of Sherwood Valve LLC (Sherwood) for $21.8 million in cash. Sherwood manufactures valves and fluid control solutions for the HVAC, refrigeration, and compressed gas markets.

In March 2015, the company purchased of all of the outstanding capital stock of Turbotec Products, Inc. (Turbotec) for approximately $14.1 million in cash. Turbotec manufactures coaxial heat exchangers and twisted tubes for the heating, ventilation, and air-conditioning (HVAC), geothermal, refrigeration, swimming pool heat pump, marine, ice machine, commercial boiler, and heat reclamation markets.

Dispositions
In June 2017, the company entered into a definitive equity transfer agreement with Jiangsu Xingrong Hi-Tech Co. Ltd. and Jiangsu Baiyang Industries Co. Ltd. (Baiyang), together, the minority partners in Mueller-Xingrong (the Company’s Chinese joint venture), pursuant to which the company sold its 50.5 percent equity interest in Mueller-Xingrong to Baiyang for approximately $18.3 million. Mueller-Xingrong manufactured engineered copper tube primarily for air-conditioning applications in China.

Year-Over-Year
There are several year over year metrics of interest; revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and finally year to date price growth. For Mueller Industries, Inc., revenue increased by 10%, free cash flow declined by5%, earnings declined by 11%, total debt increased by 105%, and the stock price decreased by 13%. Year to date the stock price is down 11%.

Future Value
My future (5 year hold) target price for the stock is $56, which is an average annual return of 15%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 9% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $32. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $23. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
There are several metrics I like to review when considering a stock for portfolio inclusion, namely the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Mueller Industries, Inc. the current twelve month trailing PE Ratio is 14, the PEG Ratio is 0.8, Book Value is $9, and Tangible Book Value is $6.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Mueller Industries, Inc. (NYSE: MLI) – FYE 12/2017 – SELL HALF The stock is currently trading at levels above my most recent $23 fair value estimate, but below my most recent $37 close target. Please See Linked PDF Worksheet

Disclosure
I hold shares of Mueller Industries, Inc.
Posted on 06/12/18

Post Holdings, Inc.
Post Holdings, Inc. is manufacturer, marketer and distributor of branded ready-to-eat cereals in the United States, Canada and Europe, marketing products under the brand names, Honey Bunches of Oats®, Pebbles™, Post Selects®, Great Grains®, Spoon Size® Shredded Wheat, Post® Raisin Bran, Grape-Nuts®, Good Morenings® and Honeycomb®. Industry peers include General Mills, Inc, Kellogg Company, and Pepsico, Inc.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $83.61, with an initial trailing stop at $80.77. Upward price movement will find no resistance. Downward price movement will find support at $80.88 and $79.69, with final support at $77.63.

Days to Cover
The most recent days to cover number is 5. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Post Holdings, Inc., the company had yet to work through any issues related to the Tax Act since their fiscal year does not end until September 2018. However, no provision has been made for income taxes on undistributed earnings of consolidated foreign subsidiaries of $56.4 at September 30, 2017 since it is the company’s intention to indefinitely reinvest undistributed earnings of our foreign subsidiaries. It is not practicable to estimate the additional income taxes and applicable foreign withholding taxes that would be payable on the remittance of such undistributed earnings.

Insider Transactions
In the past 12 months, the company reported 38 insider trades involving 277,071 shares of stock. Of those 38 insider trades, 15 were Buys involving 135,707 shares of stock, and 23 were Sells involving 141,364 shares of stock, creating an insider buy to sell ratio of 1 to 1.

Acquisitions
Since 2013 the company has spent $7.166 billion on acquisitions, of which $1.915 billion was spent in fiscal 2017. These acquisitions have increased goodwill to $4.032 billion, and created a tangible book value for the company of (-$70) per share.

Year-Over-Year
There are several year over year metrics of interest; revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and finally year to date price growth. For Post Holdings, Inc., revenue increased by 4%, free cash flow declined by 12%, earnings declined by 12%, total debt increased by 57%, and the stock price increased by 13%. Year to date the stock price is down 7%.

Future Value
My future (5 year hold) target price for the stock is $169, which is an average annual return of 21%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 39% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $40. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $57. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
There are several metrics I like to review when considering a stock for portfolio inclusion, namely the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Post Holdings, Inc. the current twelve month trailing PE Ratio is 15, the PEG Ratio is 3.1, Book Value is $42, and Tangible Book Value is (-$70).

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Post Holdings, Inc. (NYSE: POST) – FYE 12/2017 – SELL HALF The stock is currently trading at levels above my most recent $57 fair value estimate, but below my most recent $91 close target. Please See Linked PDF Worksheet

Disclosure
I hold shares of Post Holdings, Inc.
Posted on 06/11/18

McDermott International
McDermott International provides integrated engineering, procurement, construction and installation (“EPCI”) and module fabrication services for upstream oil and gas field development worldwide. The company delivers fixed and floating production facilities, pipeline installations and subsea systems from concept to commissioning for complex offshore and subsea oil and gas projects. Industry peers include Superior Energy Services, Gulf Island Fabrication, and Oceaneering International.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $22.99, with an initial trailing stop at $20.59. Upward price movement will find resistance at $21.61 and $22.30, with final resistance at $22.98. Downward price movement will find support at $20.26 and $18.86, with final support at $18.08.

Days to Cover
The most recent days to cover number is 5. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of McDermott International, the company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. However, management is still analyzing certain aspects of the Act and refining their calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. The provisional amount recorded related to the re-measurement of the company’s deferred tax balance was an $86 million decrease, which was offset by a change for the re-measurement of the valuation allowance. The one-time transition tax based on total post-1986 earnings and profits (E&P), which were previously deferred from U.S. income taxes, was insignificant.

Insider Transactions
In the past 12 months, the company reported 0 insider trades involving 0 shares of stock. Of those 0 insider trades, 0 were Buys involving 0 shares of stock, and 0 were Sells involving 0 shares of stock, creating an insider buy to sell ratio of 0 to 1.

Acquisitions
The company made no acquisitions during FY2017.

Year-Over-Year
There are several year over year metrics of interest; revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and finally year to date price growth. For McDermott International, revenue increased by 13%, free cash flow declined by 905%, earnings increased by 305%, total debt declinec by 29%, and the stock price decreased by 12%. Year to date the stock price is up 218%.

Future Value
My future (5 year hold) target price for the stock is $28, which is an average annual return of 6%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of (-8%) per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $19. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $12. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
There are several metrics I like to review when considering a stock for portfolio inclusion, namely the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Valmont Industries, Inc. the current twelve month trailing PE Ratio is 33, the PEG Ratio is 2.6, Book Value is $6, and Tangible Book Value is $6.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. McDermott International (NYSE: MDR) – FYE 12/2017 – OVER VALUED The stock is currently trading at levels above my most recent $93 close target. Please See Linked PDF Worksheet

Disclosure
I hold shares of McDermott International
Posted on 06/09/18


Valmont Industries, Inc.
Valmont is a producer of fabricated metal products, steel and aluminum poles, towers and structures, concrete pole structures, outdoor lighting and traffic control structures, wireless communication structures and components, and mechanized irrigation systems. The company also provides metal coating services, including galvanizing, painting and anodizing and roadway safety and industrial access systems. Industry peers include Ajax Metal Processing, Lindsay Corporation, and Thomas and Betts Corporation.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $160.97, with an initial trailing stop at $148.39. Upward price movement will find resistance at $158.60 and at $161.80, with final resistance at $166.50. Downward price movement will find support at $148.40 and at $146.10, with final support at $144.10.

Days to Cover
The most recent days to cover number is 4. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all of the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Valmont Industries, Inc., the company recorded a one-time charge of approximately $42 million for the fourth quarter of 2017 related to the transition effects of the Act. The $42 million charge is comprised of (a) approximately $9.9 million of expense related to the taxation of unremitted foreign earnings, the federal portion of which is payable over eight (8) years beginning in 2018, (b) approximately $20.4 million of expense related to the remeasurement of U.S. deferred tax balances to reflect the new U.S. corporate income tax rate, using a federal and state tax rate of 25.0%, and (c) approximately $11.7 million of deferred expenses related to foreign withholding taxes and U.S. state income taxes.

Insider Transactions
In the past 12 months, the company recorded 36 insider trades involving 299,801 shares of stock. Of those 36 insider trades, 22 were Buys involving 161,570 shares of stock, and 14 were Sells involving 138,231 shares of stock, creating an insider buy to sell ratio of 1.2 to 1.

Acquisitions
In July 2017, the company purchased Aircon Guardrails Private Limited for $5.4 million in cash. Aircon produced highway safety systems including guardrails, structural metal products, and solar structural products in India with annual sales of approximately $10 million. In April 2016, the company acquired the remaining 30% of IGC Galvanizing Industries (M) Sdn Bhd that it did not own for $5.8 million and in June 2016, the company acquired 5.2% of the remaining 10% of Valmont SM that it did not own for $5.2 million. In September 2015, the company purchased American Galvanizing for $12.8 million in cash. American Galvanizing operated a custom galvanizing operation in New Jersey with annual sales of approximately $8.0 million.

Year-Over-Year
There are several year over year metrics of interest; revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and finally year to date price growth. For Valmont Industries, Inc., revenue increased by 9%, free cash flow declined by 17%, earnings decreased by 27%, total debt was unchanged, and the stock price increased by 15%. Year to date the stock price is down 9%.

Future Value
My future (5 year hold) target price for the stock is $222, which is an average annual return of 10%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 4% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $70. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $58. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
There are several metrics I like to review when considering a stock for portfolio inclusion, namely the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Valmont Industries, Inc. the current twelve month trailing PE Ratio is 30, the PEG Ratio is 3.0, Book Value is $52, and Tangible Book Value is $31.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Valmont Industries, Inc. (NYSE: VMI) – FYE 12/2017 – OVER VALUED The stock is currently trading at levels above my most recent $93 close target. Please See Linked PDF Worksheet

Disclosure
I hold no shares of Valmont Industries, Inc.
Posted on 06/06/18

Graham Corporation
Graham Corporation designs, manufactures and sells critical equipment for the energy, defense and chemical/petrochemical industries. Energy markets include oil refining, cogeneration, nuclear and alternative power. For the defense industry, the company’s equipment is used in nuclear propulsion power systems for the U.S. Navy. The company also designs and manufactures custom engineered ejectors, vacuum pumping systems, surface condensers and vacuum systems, and is a nuclear code accredited fabrication and specialty machining company, supplying the components used inside reactor vessels and outside containment vessels of nuclear power facilities. Industry peers include Alfa Laval AB, Gardner Denver, and Kemco Systems.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $24.69, with an initial trailing stop at $25.45. Upward price movement will find no resistance. Downward price movement will find support at $25.46 and $23.89, with final support at $22.51.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Graham Corporation, the company remeasured certain U.S. deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%, and recorded an income tax benefit of $971 related to such re-measurement. The one-time transition tax is based on the total post-1986 earnings and profits (“E&P”) of the company’s foreign subsidiary that has previously been deferred from U.S. income taxes. The company recorded its one-time transition liability of its foreign subsidiary resulting in additional income tax expense of $185.

Insider Transactions
In the past 12 months, the company recorded 31 insider trades involving 53,240 shares of stock. Of those 31 insider trades, 16 were Buys involving 46,374 shares of stock, and 15 were Sells involving 6,866 shares of stock, creating an insider buy to sell ratio of 6.8 to 1.

Acquisitions
The company had no acquisitions during fiscal 2018.

Year-Over-Year
There are several year over year metrics of interest; revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and finally year to date price growth. For Graham Corporation, revenue decreased by 15%, free cash flow declined by 34%, earnings decreased by 5%, debt decreased by 33%, and the stock price fell by 7%. Year to date the stock price has increased 21%.

Future Value
My future (5 year hold) target price for the stock is $30, which is an average annual return of 3%. A prior five year hold of the stock (FY2014- FY2018) would have returned an average of (-2%) per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $23. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $7. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considerations
There are several metrics I like to review when considering a stock for portfolio inclusion, namely the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Graham Corporation the PE Ratio is 48, the PEG Ratio is 2.7, Book Value is $11, and Tangible Book Value is $10.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Graham Corporation (NYSE: GHM) – FYE 03/2018 – OVER VALUED The stock is currently trading at levels above my most recent $11 close target. Please See Linked PDF Worksheet

Disclosure
I hold shares of Graham Corporation
Posted on 06/06/18


ExxonMobil Corporation
The principal business of Exxon Mobil Corporation is energy, involving exploration for, and production of, crude oil and natural gas, manufacture of petroleum products and transportation and sale of crude oil, natural gas and petroleum products. The company is also a manufacturer and marketer of commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics and a wide variety of specialty products. Industry peers include BP plc, Chevron Corporation, and Royal Dutch Shell.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $85.95, with an initial trailing stop at $80.60. Upward price movement will find resistance at $83.79 and $87.17, with final resistance at $88.61. Downward price movement will find support at $79.26 and $77.25, with final support at $75.97.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of ExxonMobil Corporation, The company has paid taxes on earnings outside the United States at tax rates on average above the historical U.S. rate of 35 percent. As a result, the deemed repatriation tax does not create a significant tax impact for the company.
Deferred taxes include a net credit of $5,920 million in 2017, reflecting a $5,942 million credit related to U.S. tax reform and $22 million of other changes in tax laws and rates outside of the United States.

Insider Transactions
In the past 12 months, the company recorded 101 insider trades involving 1,445,476 shares of stock. Of those 101 insider trades, 33 were Buys involving 1,129,419 shares of stock, and 68 were Sells involving 316,057 shares of stock, creating an insider buy to sell ratio of 3.6 to 1.

Acquisitions
In February 2017, the company completed the acquisition of InterOil Corporation (IOC) for $2.7 billion. The IOC acquisition was mostly unproved properties in Papua New Guinea. Also in February 2017, the company completed the acquisition for $6.2 billion of a number of companies from the Bass family in Fort Worth, Texas, that indirectly own mostly unproved oil and gas properties in the Permian Basin.

Growth and Not
There are several year over year growth metrics of interest; revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and finally year to date price growth. For ExxonMobil Corporation, revenue increased by 17%, free cash flow decline by 37%, earnings increased by 29%, debt decreased by 2%, and the stock price fell by 8%. Year to date the stock price has declined 2%.

Future Value
My future (5 year hold) target price for the stock is $95, which is an average annual return of 3%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 0.1% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $83. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $123. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considertaions
There are several metrics I like to review when considering a stock for portfolio inclusion, namely the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For ExxonMobil Corporation the PE Ratio is 9, the PEG Ratio is 0.6, the Book Value is $45.90, and the Tangible Book Value is $45.90.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. ExxonMobil Corporation (NYSE: XOM) – FYE 12/2017 – FAIRLY VALUED The stock is currently trading at levels in line with my most recent $123 fair value estimate. Please See Linked PDF Worksheet

Disclosure
I hold shares of ExxonMobil Corporation
Posted on 06/03/18


Abaxis, Inc.
Abaxis is a developer, manufacturer and marketer of portable blood analysis systems that are used in a broad range of medical specialties in human or veterinary patient care to provide clinicians with rapid blood constituent measurements. The company’s principal competitors in the point-of-care human medical diagnostic market are Alere Inc., Alfa Wassermann S.P.A., Ortho Clinical Diagnostics, Inc. and F. Hoffmann-La Roche Ltd and Abbott’s i-STAT division. The company’s principal competitors in the veterinary diagnostic market are Idexx Laboratories, Inc. and Heska Corporation.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $75.26, with an initial trailing stop at $81.50. Upward price movement will find no resistance. Downward price movement will find support at $74.96 and $72.10, with final support at $69.79.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Abaxis, Inc., the company’s provisions for income taxes during fiscal 2018 are based on a reasonable estimate of the effects on its transition tax and existing deferred tax balances. The company estimates it will incur no transition tax and has recorded a one-time non-cash charge of $3.4 million due to an estimated reduction in deferred tax assets as a result of the reduction of the federal rate from 35% to 21%.

Insider Transactions
In the past 12 months, the company recorded 159 insider trades involving 380,265 shares of stock. Of those 159 insider trades, 54 were Buys involving 230,505 shares of stock, and 105 were Sells involving 149,760 shares of stock, creating an insider buy to sell ratio of 1.5 to 1.

Acquisitions
In May 2018, the company entered into a definitive merger agreement for the purchase of Zoetis, Inc. The completion of the proposed merger is subject to the satisfaction of various closing conditions, including the approval by the company’s shareholders. The merger is expected to be completed in the second half of calendar year 2018 at a price of $83.00 in cash per share of common stock, or approximately $2.0 billion in aggregate, with Abaxis the surviving entity.

Growth and Not
There are several year over year growth metrics of interest; revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and finally year to date price growth. For Abaxis, Inc., revenue increased by 8%, free cash flow grew by 6%, earnings fell by 18%, debt decreased by 36%, and the stock price increased by 32%. Year to date the stock price has increased 17%.

Future Value
My future (5 year hold) target price for the stock is $149, which is an average annual return of 16%. A prior five year hold of the stock (FY2014- FY2018) would have returned an average of 11% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $34. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $14. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5 year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value Considertaions
There are several metrics I like to review when considering a stock for portfolio inclusion, namely the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Abraxis Inc. the PE Ratio is 70, the PEG Ratio is 6.3, the Book Value is $12.71, the Tangible Book Value is $12.74.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Abaxis, Inc. (Nasdaq: ABAX) – FYE 03/2018 – OVER VALUED The stock is currently trading at levels above my most recent $22 close target. Please See Linked PDF Worksheet

Disclosure
I hold no shares of Abaxis, Inc.
Posted on 06/03/18


Hawkins, Inc. operated under three reportable segments; Industrial, Water Treatment and Health and Nutrition. The Industrial Group specializes in providing industrial chemicals, products and services to industries such as agriculture, chemical processing, electronics, energy, food, pharmaceutical, plating and power generation. The Water Treatment Group specializes in providing chemicals, equipment and solutions for potable water, municipal and industrial wastewater, industrial process water and non-residential swimming pool water. The Health and Nutrition Group specializes in providing ingredient distribution, processing and formulation solutions to manufacturers of nutraceutical, functional food and beverage, personal care, dietary supplement and other nutritional food and health and wellness products. Industry peers include Brenntag North America, Harcros Chemicals, and JCI Jones Chemicals.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $36.27, with an initial trailing stop at $30.63. Upward price movement will find resistance at $32.82 and $33.87, with final resistance at $35.07. Downward price movement will find no support.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Hawkins, Inc., because their fiscal 2018 ended April 1, 2018, their tax provision for the current year was calculated utilizing a blended statutory federal rate of 31.5%. In future years, they expect their statutory federal rate to be 21%.

Under GAAP, deferred tax assets and liabilities are required to be revalued during the period in which the new tax legislation is enacted. As such, during the fiscal year-end ended April 1, 2018 management revalued the company’s net deferred tax liabilities to reflect the impact of the Tax Act and recorded a one-time benefit of $13.9 million.

Pursuant to SAB 118 (regarding the application of ASC 740 associated with the enactment of the Tax Act), the tax benefit we recorded in the current fiscal year is provisional. The final impact of the Tax Act may differ due to and among other things, changes in interpretations, assumptions made by the company and the issuance of additional guidance that may be provided.

Insider Transactions
In the past 12 months, the company recorded 12 insider trades involving 16,807 shares of stock. Of those 12 insider trades, 9 were Buys involving 12,884 shares of stock, and 3 were Sells involving 3,923 shares of stock, creating an insider buy to sell ratio of 3.3 to 1.

Acquisitions
In December 2015, the company acquired Stauber Performance Ingredients for $157.0 million on a cash-free, debt-free basis subject to a customary working capital adjustment. The total consideration for the acquisition was $158.2 million.

Growth and Not
There are several year over year growth metrics of interest; revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and finally year to date price growth. For Hawkins, Inc., revenue increased by 40%, free cash flow grew by 95%, earnings grew by 59%, debt decreased by 6%, and the stock price increased by 42%. Year to date the stock price has declined 15%.

Future Value
My future (5 year hold) target price for the stock is $43, which is an average annual return of 8%. A prior five year hold of the stock (FY2014- FY2018) would have returned an average of (-0.5%) per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $34. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $37. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5 year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Hawkins, Inc. (Nasdaq: HWKN) – FYE 03/2018 – FAIRLY VALUED The stock is currently trading at levels in line with my most recent $37 fair value estimate. Please See Linked PDF Worksheet

Disclosure
I hold no shares of Hawkins, Inc.
Posted on 06/02/18


Modine Manufaturing Company, Inc.
Modine Manufacturing developers, manufacturers and markets heat exchangers and systems for use in on-highway and off-highway original equipment manufacturer vehicular applications, and to a wide array of building, industrial and refrigeration markets. Products include radiators and radiator cores, condensers, oil coolers, charge air coolers, heat-transfer modules and assemblies, exhaust gas recirculation coolers, and building heating, ventilating and air conditioning equipment. Industry peers include Dana Holding Corporation, Delphi Automotive Systems, and Denso Corporation.

Short-Term Value
My short-term (3-6 week hold) target price for the stock is $21.36, with an initial trailing stop at $17.73. Upward price movement will find resistance at $18.38 and $20.31, with final resistance at $21.02. Downward price movement will find support at $17.06.

The Tax Act
The Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Modine Manufaturing Company, Inc., the company recorded provisional discrete tax charges of $38.0 million related to the Tax Act. The company adjusted its U.S. deferred tax assets by $19.0 million due to the reduction in the U.S. federal corporate tax rate. This net reduction in deferred tax assets also included the estimated impact on the company’s net state deferred tax assets.

In addition, the company recorded a $19.0 million charge for the transition tax. The company is in process of evaluating whether to utilize its deferred tax attributes for the transition tax. If the company does not utilize its deferred tax attributes for the transition tax, it expects to pay the estimated $19.0 million tax liability over the next eight years, beginning with an estimated payment of $1.5 million in fiscal 2019. The company is also awaiting additional technical guidance on the treatment of the deemed inclusion and its impact on fiscal year taxpayers.

Insider Transactions
In the past 12 months, the company recorded 101 insider trades involving 571,836 shares of stock. Of those 101 insider trades, 40 were Buys involving 339,369 shares of stock, and 61 were Sells involving 232,467 shares of stock, creating an insider buy to sell ratio of 1.5 to 1.

Acquisitions
In November 2016, the company completed its acquisition of Luvata HTS, a global supplier of coils, coolers and coatings to the heating, ventilation, air conditioning, and refrigeration industry. The acquisition price was $415.6 million.

Growth and Not
There are several year over year growth metrics of interest; revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and finally year to date price growth. For Modine Manufaturing Company, Inc., revenue increased by 40%, free cash flow grew by 95%, earnings grew by 59%, debt decreased by 6%, and the stock price increased by 42%. Year to date the stock price has declined 15%.

Future Value
My future (5 year hold) target price for the stock is $24, which is an average annual return of 7%. A prior five year hold of the stock (FY2014- FY2018) would have returned an average of 26% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair Value
As an on-going concern, my baseline valuation for the company is $18. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $12. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5 year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Fair Warning
Fair warning means that the time for bidding has ended and an exchange is about to be concluded. Modine Manufaturing Company, Inc. (NYSE: MOD) – FYE 03/2018 – SELL HALF The stock is currently trading at levels above my most recent $12 fair value estimate, but below my most recent $20 close target. Please See Linked PDF Worksheet

Disclosure
I hold no shares of Modine Manufaturing Company, Inc.
Posted on 06/01/18