Monday, April 23, 2018

Intel annual report 2017

Front page of Intel annual 2017 report

To view the report in full please click here and for my previous summary please see the Intel annual report 2016 and to find out more concerning Intel then please go to analysis of Intel 2017.

In the financial statement below we see that Intel had an excellent year that was held back by a significant tax payment. They increased the revenue from 59 billions to almost 63 billion USD which is excellent. However the bottom line is not looking so good since they ended up with a 52% tax rate which left in the end of the year 9.6 billion in earnings compared to 10.3 billion last year. They claim in the report that this was a one-off payment and that the tax rate moving forward in 2018 will be lower compared to what they have been paying. This means that 2018 has truly the potential to become an excellent year for Intel!

Income statement of Intel 2017

Conclusion: Without the massive tax Intel would have had an excellent year already in 2017 but now that will be pushed forward until 2018, if they continue in the same fashion, which I hope that they will. Intel has been and still are a good investment and I will remain as a shareholder.

Sunday, April 22, 2018

Analysis of IBM 2018

Logo of IBM 2018

Company: IBM

ISIN US4592001014 | WKN 851399

Business: An American IT service company. They are currently standing on six pillars and each year they are shifting things around and start reporting new areas. 

Active: World wide making sales in over 170 countries.

P/E: 25.5

To find out more regarding IBM then please click on analysis of IBM 2017.

Contrarian analysis of IBM 2018 with P/E, P/B, ROE as well as dividend.

The P/E for IBM is far too high with 25.5 and the P/B is equally bad with 8.4 which gives a clear no go from Graham. Earnings to sales I find very low with 7% for a, mainly, service company and the ROE is excellent with almost 33% but that is more due to large debt than anything else. The book to debt ratio is at 0.16 which is also very low.
In the last five years they have had a decreasing yearly revenue of -4.5% which gives us a motivated P/E of around 8 which means that they are overvalued by the market.
They spend a lot of money on R&D especially considering that over 100% of their earnings went into it which one at some point would hope would lead to something but they have done this for years without, by the look of it, anything much coming out of it.
They pay a good dividend of 3.8% which is not so great considering that it corresponds to 96% of their earnings. Should it really have been increased this year?

Conclusion: Graham says no and so do I. Last year I thought the turning point was there but obviously that was not the case. The P/E is one step worse, due to tax, while the P/B has improved slightly but it is still far from reasonable levels. Dividends are good but not sustainable in the long run unless there will actually be some form of increase in earnings. I will remain as a grumpy shareholder.

Saturday, April 21, 2018

IBM annual report 2017

Front page of IBM 2017

For the report in full please go here, for the previous summary please see IBM annual report 2016 and to find out more regarding IBM then please click on analysis of IBM 2017.

Looking at the financial statement below then the drought continues with an added on tax effect on top of that. So once again they had almost 80 billion USD in revenue but instead of getting around 10 billion USD out in profit they ended up with only 5.7 billion USD. Rometty, Rometty, Rometty when shall you manage to show a year of growth with increasing margins and not only shrinkage of everything as you have as of yet provided us shareholders with?

Income statement of IBM 2017

Conclusion: I have now been a shareholder in IBM for four years. It would be a considered as a long time for many but for me it is not. More than half of my investments were made in 2014 or before. I still believe that IBM can turn this around but it is also very clear that the more years that passes the higher the increase they must show for me to reach an acceptable ROI. I have now, unfortunately, turned into a grumpy shareholder in IBM.

Friday, April 20, 2018

Analysis of HM 2018

Logo of H&M 2018

Company: H&M

ISIN SE0000106270 | WKN 872318

Business: Fashion retail with H&M, & Other Stories, Cheap Monday, COS, Monki, Weekday and Arket. The currently have online offerings in 43 of their markets.

Active: They have over 4700 stores in 69 markets. They are pretty much half the size of Inditex which shows us how large they can become. The main markets are in Europe where they are well established but also in North America. They have few stores in South America, Asia, Middle East and Africa.

P/E: 13.8

For the previous analysis please see Analysis of HM 2017.

Contrarian analysis of H&M 2018 with P/E, P/B, ROE as well as dividend.

The P/E is very reasonable with 13.8 but the P/B is too high with 3.8 which gives it a no go from Graham. The earnings to sales are at 7% which should be higher but the ROE is excellent with 27% and so is the book to debt ratio with 1.3.
In the last five years they have seen a yearly revenue growth rate of almost 9.1% which is excellent and this leaves us with a motivated P/E between 19 to 24 which means that the market is undervaluing H&M at the moment.
They pay an excellent dividend (paid out in two portions per year) in the size of 7.2% which on the down side corresponds to pretty much 100% of their earnings. So they better increase the earnings or soon decrease their dividend payments.

Conclusion: Graham says no but I say yes. H&M is making money, the P/E, ROE and dividend is excellent but large risk for decreased dividend in the future. I will remain as a shareholder that have not yet allowed my self to go grumpy due to the short holding period even though I do regret stepping in too early in H&M.

Thursday, April 19, 2018

HM annual report 2017

Front page HM annual 2017 report

For the report in full please go here no previous summary has been made due to it being an new investment and to find out more about H&M then please go to analysis of HM 2017.

As most of you already know 2017 was not a spectacular year for H&M. For a long time they have been considered to be one of the crown jewels in Sweden and that shine have decreased lately. I see the fears and worries for the future due to online, increased inventory, is the CEO skilled enough, over exploitation etc. For me H&M have indeed issues but, and to me this is a big but, they are still making money. Sometimes it sounds as if online sales such as Zalando is some "new" threat to H&M. Germany is H&Ms largest market. Zalando was started in Germany and have been around for many years now. This threat is not new I would even stretch myself to state that H&M getting their online business up and running is more of a threat to Zalando. They had that market pretty much to themselves for a long time and from now on H&M will start to take market shares back. I know for a fact that they had over exploitation in Germany that I hope will get sorted out now that focus is slightly removed from growth to actually looking over their costs.

That said 2017 was not a great year. They grew their revenue to 232 billion SEK and the earnings coming out in the end of that funnel was 16.2 billion SEK which was almost 2.5 billion less than last year. Yeah, that is not good.

Income statement of HM 2017

Conclusion: As the stupid contrarian investor that I am I decided to invest in H&M last December which turned out to be too early and then I pushed in more money during February after I had received my bonus. As with every investment I make I of course hope it will be successful. In this case I want to see that due to an additional two reasons: I want it to regain the crown jewel status of Sweden and I love their sustainability initiatives.