I received an email the other week related to the intrinsic value spreadsheets which got me thinking about several things.

The user correctly pointed out that the stock spreadsheet I offer is not ideal for screening. I completely agree with this as it was designed to analyze one stock at a time.

In order to fill the gap between trying to find stock ideas and analyzing one in depth, I’m planning to create an additional spreadsheet for the premium package which will serve to filter a big list of ideas into a much smaller one which you can then run individually.

It will act very much like the competitor comparison spreadsheet except you can enter as many stocks as you want and the speed should also be 10x faster.

Additionally, I wanted to ask you for what type of spreadsheet you want the most.

What Investment Spreadsheet Do You Need?

So far, I have the following spreadsheet ideas

• Stock watch list to keep track of stocks analyzed with the intrinsic value spreadsheet
• Update and improve portfolio tracker
• Include Active Value Investing valuation model (still considering as I don’t want to overwhelm users)

Those are the top 3 ideas I have that I feel like I should be working on but I would really appreciate your input in the comments section below.

Any idea is welcome and open for discussion.

You may also be interested in:

1. Install update for Stock Analysis Tools and Spreadsheets
2. 9 Free Investing Spreadsheets
3. Data for Free Spreadsheets

JAKKS Pacific, Inc. (JAKK)

JAKK (JAKK: 15.71 0.00%)] makes and sells toys, craft and pet products. The company hasn’t been able to recover its stock price from the 2008 crash unlike most companies. JAKK like any other company has its risks.

I’m not a fan of toy companies because customers are unlikely to buy the same toy twice. I don’t recall ever having bought two power rangers or ninja turtles.

In other words, without increasing the diversity of products, sales will be affected.

Also consider that it’s main source of revenue are its big three customers, Walmart, Target and Toys R Us as well as a joint venture with THQ in the video gaming segment. The profit from this venture isn’t huge, but it is profitable.

Despite these risks, JAKK is a consistent profitable company and very much deserves to be watched.

Some good points include

• CROIC is back in the teens after dropping to 9.5% in 2008.
• 8% of sales is converted to FCF. Above 5% is considered good.
• Tangible book value has been increasing for the past 5 years.

JAKK Valuation

• Current stock price: $14.53
• DCF: $27.21, assuming a FCF growth rate of 6% and 15% discount rate
• Graham Value: $16.14, assuming EPS of $1.10 with 5.5% EPS growth
• EPV: $16.83, adjusted normalized income of $50m and 11% discount rate

You can also perform your own valuation by downloading the free spreadsheets when signing up to the mailing list or using the intrinsic value calculator.

Iteris Inc (ITI)

ITI (ITI: 1.49 0.00%) operates in the traffic management market focusing on the development and application of advanced technologies that reduce traffic congestion, minimize the environmental impact of traffic congestion and improve the safety of surface transportation systems infrastructure.

Adam from Value Uncovered has written up a good analysis on ITI in the value investing forum which I recommend you to read.

• Current stock price: $1.45
• DCF: $2.03, assuming a FCF growth rate of 0% and 15% discount rate
• Graham Value: $2.90, assuming EPS of $0.43 with 0% EPS growth
• EPV: $2.44, adjusted normalized income of $12.71m and 15% discount rate

As you can see, these are very conservative valuations based on down-cycle numbers.

Spartan Motors (SPAR)

I added SPAR (SPAR: 4.39 0.00%) to the OSV passive portfolio, which is up 10% YTD by the way, and it is the worst performer in the group of holdings. Down 33% from when I added it. I found it to be cheap back then but what about now?

Spartan Motors, Inc. is an engineer and manufacturer in the heavy-duty, custom vehicles marketplace.

FCF is hard to predict due to the cyclic nature and the big changes yoy. Net margin has also been slashed which is a very worrisome sign as there wasn’t much of a buffer to begin with. With a 2.7% net margin in 2009 and TTM net margin of 1.3% SPAR may remain in the down cycle for a while longer as costs are squeezed.

The bright side is that despite announced Q2 loss announced on Jul 23rd, the stock price dropped only 4%.

From personal experience when I invested in IGOI, when a company announces bad results or news with little effect on the stock price, it is a sign that there is 0% optimism for the company which only means a huge upside if the company surprises and provides ok results.

• Current stock price: $4.42
• DCF: $8.61, assuming a FCF growth rate of 0% and 19% discount rate
• Graham Value: $11.84, assuming EPS of $0.5 with 0% EPS growth
• EPV: $3.67, adjusted normalized income of $28m and 15% discount rate

Disclosure

None

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1. More Cheap Graham Stock Ideas
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9 Free Automatic Investing Spreadsheets

I offer many free spreadsheets to help you with your investing. These spreadsheets will save you loads of time by calculating the data automatically for you.

The spreadsheets have all been updated and now there is a total of 9 free stock calculating spreadsheets you can download.

The free stock spreadsheets available for download are:

• Altman Z Score: Calculate the Altman Z score to determine the probability of corporate bankruptcy.
• Ben Graham’s Valuation: This spreadsheet is based off the stock valuation model from The Intelligent Investor.
• Beneish M Score: Find out whether a company is manipulating earnings with the M score.
• Competitor Comparison: Compare competitors side by side with this automated spreadsheet.
• DCF Valuation: Automated DCF spreadsheet that calculates intrinsic value based on the previous 10 years of historical data.
• Financial Statements: Enter any US stock ticker and automatically retrieve annual financial statements.
• Net Net Asset Valuation: Ben Graham’s concept of Net Net Working Capital in spreadsheet form.
• Piotroski F Score: Use the Piotroski F Score spreadsheet to determine the health of the company by following some basic accounting fundamentals.
• Investment Portfolio Tracker: Keep track of your portfolio. Excel version + Online version.

Where to Download

Files have not been uploaded to the site yet. I’m debating whether I should as it takes a considerable amount of time to maintain.

But… to get the latest new stock spreadsheets immediately, you must subscribe with your email address in the form on the right side of the site, or when the sign up popup window appears.

You will receive a confirmation email with all the links to the spreadsheets.

No spam guaranteed and I will never sell your email address.

You may also be interested in:

1. Data for Free Spreadsheets
2. Free Altman Z Score Spreadsheet
3. Free Piotroski Score Spreadsheet

The author of Value Uncovered is a long time reader of OSV and has graciously allowed me to repost his latest article and special situation idea on FIS.

I only read blogs that offer high quality information and ideas, and Value Uncovered is a new blog that I am glad to read and would recommend to all value investors.

—————————-

Fidelity National Information Services, Inc (FIS) is a financial services company with over $3.7 billion in annual sales, focused on credit card and mortgage processing.

Background

On May 6, 2010, the Wall Street Journal reported that FIS was in talks with the Blackstone Group and THL Partners, two private equity firms, about a leveraged buyout in the $10-11 billion range.

The stock jumped on the announcement, and moved even higher after rumors surfaced that another private equity firm wanted in on the deal as well. News organizations increased their estimates to more than $15 billion, making it potentially the largest leveraged buyout since the start of the credit crisis.

However, on May 18, the deal fell through and the Company decided to pursue a leveraged recapitalization plan and substantial share repurchase instead.

Announcement

On May 25, the Company released a statement outlining the terms of the recapitalization plan:

As stated in the news release, our Board of Directors has authorized a plan under which our Company will repurchase up to $2.5 billion of its common stock at a price range of between $29.00 – $31.00 per share through a modified “Dutch auction” tender offer. In order to effect the proposed recapitalization, we intend to borrow approximately $2.5 billion of incremental debt. FIS is in a strong financial position and generates significant free cash flow, so we are very comfortable with the proposed debt levels that we will incur in repurchasing the company stock.

Odd-Lot Provision

Although the final price level and number of shares purchased will be determined by the dutch auction, the tender offer provides priority to ‘odd lot’ shareholders of less than 100 shares.

Even if the offering is oversubscribed, this provision ensures small shareholders will receive a full cash-out without any proration, a great opportunity for the average investor.

Timeline

May 25: FIS announces details about the proposed recapitalization plan and self-tender offer.

July 6:  The Company sells $1.1 billion in Notes to qualified institutional buyers, the main condition for the share repurchase

July 6: FIS commences the tender offer.

July 16: Proposed closing of $1.1 billion Note offering

August 3: Conclusion of the tender offer

Late August: Shareholders who validly tender their shares will be cashed out at the final auction price, with priority for the ‘odd lot’ shareholders defined above.

Return Scenarios

As of July 9, I’m adding FIS to my ValueUncovered portfolio using the latest closing price of $27.70.

Final Tender Price

TBD

Conclusion

The deal offers attractive annualized returns for a month long trade.  Although there is always risks with such a large transaction, FIS is very well capitalized and I don’t forsee any problems with the offer going through.

I think Frank Martire, the Company’s President & CEO, says it best:

The recapitalization plan is consistent with our commitment to doing what is in the best interests of our company, our clients and our shareholders. Our strong financial position, combined with appropriate market conditions and our excellent relationships with lenders, make this the right move at the right time.

Disclosure

Value Uncovered & Old School Value is long FIS

You may also be interested in:

1. A Tender That Was Too Good To Be True
2. Profit From Special Situations – Stock Tenders
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Lately, I’ve been focusing on trying to take advantage of the volatility by picking up shares of companies undergoing merger agreements. You may recall that I made passing mentions of purchasing EMMS. If not, it’s probably because I forgot to post my June portfolio update.

Well, I bought a good size position at the end of June at $2.17 but sold out completely at $2.20. Break even after you include fees.

Disappointing result but it was a decision that I had to make in order to stay disciplined.

Emmis Corporation Merger Arbitrage Details

• Type: Going private acquisition via tender offer
• Acquirer: JS Acquisition & Alden Global Capital
• Target: Emmis Corporation
• Announced date: April 26, 2010
• Closing date: September 30, 2010
• Closing value: $2.40
• Last price: $2.20 at time of writing
• Profit: 9% upside excluding fees

EMMS originally announced plans to be taken private by JS Acquisition which is a company formed by the CEO of EMMS himself.

Completion Conditions

A majority of common A, B and 6.25% Series A Cumulative Convertible Preferred Stock stock must be validly tendered.

Herein lies the problem.

Merger Events

Seeing as how the CEO, Jeff Smulyan, holds most of the common shares, votes for the common isn’t a worry. The issue is the preferred stock.

One of the rules of merger investing is to make sure that opposing parties with sizable positions are not in a position where they can block the transaction.

In this merger arbitrage, there is no single preferred stock holder that can do this, but a group of holders acting together is a different story.

This group has sign a lock up agreement where each will vote against the exchage of preferred stock for a new debt issue.

The activist group in the lock up agreement hold a total of 969,858 preferred stock. Some funds could have easily bought more without the total being updated on the documents yet. This is more than a third of preferred stock, which is enough to block the transaction from being completed.

A good summary of the situation can be read from this article.

Activists

The preferred stock are  selling in the open market for just under $22 but under the deal, holders are expected to receive 60% of face value.

This current situation with the lock up agreement is a fight to get Smulyan to raise the price. Smulyan already tried to take the company private before 2006 at a higher price and the activists must believe that they have the cards to get Smulyan to up his bid.

Probabilities

You can obviously see two sides here.

• 1. Activists can force Smulyan to increase the buyout offer and reward both commons and preferred stock holders.
• 2. Smulyan could easily walk away and live to fight another day.

Number 2 is why I sold out. I’ve made plenty of mistakes before, and before the lock up agreement was formed, EMMS was looking like sweet 10% gain with very high chances of closing.

Now, the closing probability has decreased, in my opinion, considerably. Gain potential “could” increase but the downside has gone up way too high for my liking.

With the tender deadline set for August 2, there is still a couple of weeks to keep an eye on the developments in case talks are positive.

The optimist and “gambler” in me wants to hold a small position but I wont be making any bets based solely on who I think will win.

Unlike a bankruptcy situation, there is no equity committee to lay out fundamental analysis or a judge to rule objectively in favor of the winner. Smulyan can easily withdraw the bid and walk away.

But what about you? Do you think that the parties involved make a good case for the bid being increased?

Disclosure

No holdings at time of writing.

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1. Puget Energy Merger Delayed
2. New Merger Arbitrage With JAZ
3. Asset Play with ValueVision Media Inc (VVTV)

A couple of weeks ago I wrote how I wasn’t interested in BP.

Looking back, I question myself as to whether I was acting like a lemming and letting bias and fear get the better of me. So this post is to try and validate whether I was quick to judge and whether BP offers any attractiveness to Graham investors like myself.

Risks

• BP has ruined the US coastlines, killed hundreds of animals and has shut down businesses. Expect years of litigations.
• Clean up costs for years to come
• Most of the risks involved are outside of BP’s control
• Managements handling of the situation raises questions as to whether the company is being well run
• Downgrade of credit rating leading to higher interest rates

Health Models

Calculating the Piotroski, Altman Z and Beneish model to judge the health of the company I get the following.

Piotroski F Score

Based on TTM figures, the Piotroski score of 6 is only average at best.

Altman Z Score

According to both Altman Z scores, BP’s health from their most recent quarter shows a big decline in overall health of the company. The MRQ is April before the Gulf oil spill containment began in earnest. If there is such a decline before the full effects of the containment and cleanup, future results won’t be pretty.

Beneish M Score

A new model that I have recently started referring to. The Beneish M score is to detect earnings manipulation. If the value is lower than -2.2, the company is safe from manipulating earnings.

BP isn’t in the best of health but I don’t see BP going bankrupt in the short run.

DCF Valuation

Although BP, like most large caps, is able to generate huge amounts of FCF, the numbers are inconsistent. As a comparison XOM was hit extremely hard in fiscal 2009, yet prior to 2009, XOM proved its ability to increase their FCF year after year.

BP’s inability to increase FCF is confirmed when you take the rolling medians over 5 years. The median comes out to 1.4% for 5 years compared to 14.4% for a 10 year period. It’s easy to see that BP’s performance hasn’t been great even before the oil spill.

This trend is the same with other stats.

• Revenue growth of 5 years compared to 10 years is 0.5% vs 9.7%.
• EPS growth of 5 years compred to 10 years is -7.5% vs 18.6%

Here are my conservative assumptions for BP. Note that I am not valuing BP based on recent 2-3 month happenings.

• FCF Growth rate: 5% looks good seeing as how FCF of $7m is a value that Im sure BP can exceed in the coming years.
• Discount rate: 9% – 12%. WACC comes out to 9.5% for die hard financial students.D

Benjamin Graham Valuation

As mentioned above, the EPS growth rate has been negative in most cases throughout the past 5 years.

Here are my assumptions to calculate the value of the company based on Ben Graham’s formula.

• EPS Growth rate: 1.9% is a very low ball yet realistic value looking at how the company has done. No big growth spurts expected in the foreseeable future.
• Full year EPS: $6.70

Earnings Power Value

Assumption that normalized net income is $25b along with a 9% discount rate yields the following results.

Seeing as how EPV and Net Reproduction Value are similar, BP does not operate with any competitive advantages. This is a case where I would sell at intrinsic value. Not a long term keeper. Either way, both the EPV and reproduction value shows that BP is currently undervalued as long as the company can continue to operate at close to normal levels.

However, this is a big “IF”.

Valuation wise, BP would be a buy. At $27 it was a great price and offered plenty of margin of safety despite all the issues.

Knowing that $27 was cheap is the easy part, the intrinsic value is a tricky number though. There are too many things that could impact the value of the company and the value could change very easily.

There are a couple of ways where price meets value.

1. Price increases to meet the target intrinsic value

2. Intrinsic value decreases to meet the price

The ideal scenario is no. 1, but no. 2 is a real possibility here, which is why a big margin of safety is required.

Sub $30, BP offers that margin of safety.

Supplementary Material

Funamental stock charts

Competitor Comparison

BP Stock Valuation Dashboard

Stock Valuation Spreadsheet – Get a Copy Today

I have a made a stock valuation calculator, just as you see in the above images and pdf’s. The automated stock calculator will save you hours of your time when analyzing stocks, letting you concentrate on analysis rather than punching your calculator.

View the free sample today and if you like what you see, get the ultimate intrinsic value calculator right now.

Disclosure

No holdings

You may also be interested in:

1. Insider Stock Buying and VVTV
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Wanted to pass on this fantastic interview by Ankit Gupta of Selected Financials.

Ankit continues to blow me away with his investing passion, thirst for knowledge, entrepreneurial spirit and business acumen. All while completing his studies in university. I found the content of this interview absolutely bloody brilliant due to the caliber of the questions.

What is your fund’s underlying approach? What wrong do you right in the markets?

I want to find companies going through a transition. Eventually, that transition will translate into others seeing that the company will be worth more than they originally thought. It might be divesting a cash burning division, or new credit facility, or maybe the company just did a merger or acquisition allowing the business model to be leveraged, etc. The objective is to NOT be an activist in these situations…  Read more

You may also be interested in:

1. Interview with Complete Growth Investor
2. The Value of Not Being Sure: Seth Klarman
3. Margin Of Safety – Seth Klarman

Will be away from Friday to Monday.

I’ll be visiting beautiful Crater Lake in Oregon and hopefully get some rest after the frantic past couple of days updating spreadsheets.

Sorry for the lack of responses to forum and email questions. Working on the spreadsheets was number 1 priority and now that it is complete, you really should check it out.

Here is what it looks like in PDF form: Stock Valuation Spreadsheet.

You may also be interested in:

1. What’s going on at OSV
2. Data for Free Spreadsheets
3. 9 Free Investing Spreadsheets

This is a guest post by Andrei from AQ Value. Andrei and I have invested in many of the same companies but he has had far more success with bankrupt investments. I turn it over to Andrei for his latest distressed investment idea – MMPIQ. Let’s get the discussion under way.

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1. EMMS Merger Investing Play
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3. All Intelligent Investing IS Value Investing

Quick Update. I’ve been informed that data retrieval for the various free stock spreadsheets on this site is not working.

Until now, I have been using Morningstar as the main data source, but as of yesterday, Morningstar has completely redesigned their website and the data is no longer available.

I will be fixing the free spreadsheets in the coming days and weeks, but the premium spreadsheet buyers have first priority with updates and support.

In the meantime, I appreciate your patience.

You may also be interested in:

1. 9 Free Investing Spreadsheets
2. Business Valuation: Basic and Premium Spreadsheets
3. Install update for Stock Analysis Tools and Spreadsheets