Investment Opportunity in Current Scenario

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Value Investment opportunity
  Highest Return Scenario

Temporary bargain price
           +
     Fixable Error
           +
    Solid Fundamental value
           +
   Able Management

    = Highest return
                            www.gjfunds.com
     High Return Opportunities – AMEX & GEICO




 1960 American Express Salad Oil crises, AMEX shares dropped $65/share to $35/share.
  Warren Buffett partnership invested $13 Million (40% of his partnership fund). In 2 years,
  Price tripled and partnership earned $20 Million profit.


 GEICO (1976) – Stock dropped from $61/share to $2/share.
  Over next 5 years until 198, Berkshire invested $45.7 Million.
  1996 – Berkshire owned 51% of the company and agreed to pay $2.3 Billion for 49% of the
  company, paid close to $70/share
  Compound Annual return for 20 years = 19.45% for 20 years.




                                                                        www.gjfunds.com
Recent High Return Opportunities – GS,BAC and CITI

     Citigroup (08 to 09) - $30 to $0.97/share,
     March 09 touched $0.97/share, bounced back to $5.23 on August 09..
     530% return in 5 months




 Goldman Sachs(Jan08-09)- From $195/share to $59/share
  in Nov 08. Then Bounced back to $165/share in Dec 09. 270% return in
  one year

 Bank of America (Jan 08-09) – From $40/share to $2.53(Mar 09),
  Bounced back to $15.28(Dec 09). That is 600% return in 9 months




                                                                     www.gjfunds.com
                          Warren Buffett - Pessimism
 The most common cause of low prices is pessimism - some times pervasive,
  some times specific to a company or industry. We want to do business in such an
  environment, not because we like pessimism but because we like the prices
  it produces. It's optimism that is the enemy of the rational buyer

                                                                   -Warren Buffett



 The future is never clear, and you pay a very high price in the stock market
  for a cheery consensus. Uncertainty is the friend of the buyer of long-term values

                                                                   - Warren Buffett



 Price is what you pay. Value is what you get
                                                                   - Warren Buffett



                                                              www.gjfunds.com
      TEREX Corporation – Present opportunity
Terex Corporation operates as a diversified global manufacturer. The company operates in four business
segments: Terex Aerial Work Platforms, Terex Construction, Terex Cranes, and Terex Materials Processing
& Mining. Terex Aerial Work Platforms segment offers material lifts, portable aerial work platforms, trailer-
mounted articulating booms, self-propelled articulating and telescopic booms, scissor lifts, telehandlers,
construction trailers, trailer-mounted light towers, power buggies, portable generators, and related
components and replacement parts




                                                                                    www.gjfunds.com
        Temporary Bargain Price -Terex Corporation(2007-2009)
 TEX trading around $74/share in October 2007,

 2007 yearly revenue : $9.1 Billion, Net income : $613 Million

 2007 Diluted shares = 104.9 million shares

 Market cap in October 2007 = $7.76 Billion.

 2007 EPS = $5.85/share

 2007- P/E trading ranges 9 and 17, stock trading $56 to $65/share

 Recession started in 2008, revenue started coming down, financial crisis happened,

 Price came down, lowest point reached February 2009 $8.92/share

 Kendall Law Group filed lawsuit for possible securities violations related to public
  statements made Dec 31 st, 2009 price : $19.81/share


                                                                        www.gjfunds.com
                              Fixable Error

 Terex lower revenue because of Industry down turn started in 2008 and
   continue in 2009.
 Terex started managing the business for cash conversion in 2009
 2009 Long term Debt $1.9 Billion
 Over $1.5 Billion Liquidity and no near term debt maturities until 2012
 Improved prospects for 2010
 Networking capital reduction $199 Million
 Cash from inventory reduction $497 Million YTD
 Current administration infrastructure spent and Emerging market demand




                                                          www.gjfunds.com
                      Solid Fundamental Value
 2009 last 3 Quarters revenue : $3.82 Billion compared to $7.7 Billion in 2008
 2004 to 2008 EPS growth = 16.5%
 Retained earnings are great. Each dollar retained created $2.48/share from
  2004 to 2008
 2004 to 2008, Average ROE = 22.58%
 Owner income increased 12.41% from 2004 to 2007




                                                             www.gjfunds.com
     Solid Fundamental value- Intrinsic value
 Owner income increased 12.41% from 2004 to 2007.

 Company in the cost conservation strategy to survive the recession,
  After the recession, probably next year revenue will start grow.

 Calculating conservative owner income increases, 5% for next two
  years and 4% for another three years.
  Discount rate : 20%
  Calculated intrinsic value = $45/share

  12/24/09 trading price = $21.24/share

  Which is 52.8% discount to intrinsic value.


                                                    www.gjfunds.com
  Able Management - Divestiture of Mining Business
 Divestiture of mining business to Bucyrus international for $1.3 Billion cash.
 Through 2004-2008, mining has accounted for 12% and 14% of consolidated net sales
  and operating profit respectively.

  2008 Net sales with Mining = $9.9 Billion
  2008 Net sales without mining = $8.4 Billion

  Company planning to concentrate on machinery
  and industrial production.
                                                         Ron DeFeo, Chairman and CEO

  Company projecting to earn EPS = $8.5/share in 2013 that is double the business in 2013
  Use of proceeds to pay down debt.
          14% of the profit = $1.3 B cash offer
          100% of the company should be valued at $9.2 Billion.
          12/24/09 market cap = $2.3 B, which is 75% discount to intrinsic value.


                                                                 www.gjfunds.com
     Terex return projection – Owner earnings

   2013 projected Cash flow $694 Million as per the owner earnings
    projection, that is around $6/share.

   This stock historically traded between 9 and 17 ratio. Dec 31
    st,2009 TEX price : $19.81

   Lowest P/E calculation - $54/share,
    Compound annual return = 28.4%

   High P/E Calculation = $102/share
    Compound annual return = 50.63%




                                                      www.gjfunds.com
    Long term Approach –Southwestern Energy
   Invest in Business and behave like Private Business owner. Long term
    holdings will yield great results over time.

   As per the new Wall street jargon, Buy and hold strategy is dead.
    Present portfolio managers, turn their portfolios 200 to 300% normally.

   Last Decade example – South western Energy company(2000 to 2010)
    Dec 31 st, 1999 - $0.80/share, Dec 31 st,2009- $48.20/share
    Total return – 6025%, Compound Return – 50.65%




                                                        www.gjfunds.com
     Long term Approach – Amazon, Priceline

   Amazon
    May 1997- $1.50/share, Dec 31 st,2009- $134.52/share
    Total return –8968%, Compound Return – 45.25%


   Priceline
    Dec 29, 2000- $7.88/share, Dec 31 st,2009- $218.41/share
    Total return – 2771%, Compound Return – 44.64%



   Above stocks are purchased, when temporary bargain price and kept
    long term. These stocks are not present day recommendations. Do your
    own research.



                                                               www.gjfunds.com
                     Investment Framework
   Invest in Business, Behave like owners.
   Invest in circle of competence business, needs to know analyze the
    business as business owner.
   Invest in simple and high return on Equity type business.
   Look for temporary down turn, depressed prices in great business.
   Invest in Moat based business.
   Invest in great management team
   Look for low debt business.
   Never use leverage
   Invest for long term
   Entry price should have minimum 25% discount to intrinsic
    value(Margin of safety)
   Maintain concentrated portfolio, not more than 20 to 25 names




                                                           www.gjfunds.com
                             Thank You

Jeeva Ramaswamy
GJ Investment Funds I LP,
4 Walter E Foran Blvd, Suite 206
Flemington, NJ-08822
Email: jeeva@gjfunds.com
Ph: 908-782-0009 Ext 225
Mobile: 908-240-6368
Fax: 908-782-2765
www.gjfunds.com

We have experienced loss in the past. Do your own research




                                                     www.gjfunds.com

				
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