Analysis of Intel 2020

Company: Intel 

ISIN US4581401001 | WKN 855681 

Business: An American hardware producer (mainly processor). They have larger units Data-Centric and PC-Centric with the segments:  Data Centric Group, Internet of Things Group, Mobileye, Memory Business, Programmable Solutions Group, Client Centric Group.

Active: Products are sold world wide. 

P/E: 12.6

To find out more concerning Intel then please go to Analysis of Intel 2018.

The P/E of Intel is very low with 12.6 but the P/B is up at 3.4 which means that the company would be a no go for Graham. The earnings to sales are excellent with 29% as is the ROE with 27%. The book to debt ratio is still good with 1.3.

In the last five years they have managed to have a yearly revenue growth rate of 5.4% which I find very good and this gives us a motivated P/E of between 115 to 19. This means that Intel is today undervalued  by the stock market today. They only paid 12.5% in taxes which is ridiculously low.

To stay on top of things they spend a lot of money on R&D to the size of 63% of their earnings which I find reasonable.

They pay a small dividend of 2.0% which correspond to 26% of their earnings and clearly there is room for improvement with yearly increases as they have been doing in the past.

Future: Chips are here to stay. Competitors have arrived and gone and they did make a business opportunity losses in the mobile and tablet market to ARM but what followed in the wake of all these low storage units was cloud servers and there Intel has been standing on very firm ground.

Conclusion: Graham says no but I would say yes to Intel. However due to my fairly significant holding in Intel which is not based on the size of my initial investment but based on the development of Intel and the share price increase that has followed I am personally no longer interested in increasing my holding but I will just watch it grow and count my blessings for stepping in at a good point in time for Intel. 

Analysis of IBM 2020

Company: IBM

ISIN US4592001014 | WKN 851399

Business: An American IT service company. They are currently standing on six pillars: Cloud & Cognitive Software, Global Business Services, Global Technology Services, Systems, Global Financing and finally Other

Active: World wide making sales in over 170 countries.

P/E: 12.0

To find out more regarding IBM then please click on Analysis of IBM 2018.

The P/E for IBM is very acceptable with 12.0 but the P/B is bad with 5.4 which gives a clear no go from Graham. Earnings to sales I find acceptable with 12% for a, mainly, service company and the ROE is excellent with almost 45% 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 -1.2% 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 around 64% 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 not to be forgotten that they are fairly aggressive in acquisitions.

They pay a very good dividend for a US company of 5.1% which is high considering that it corresponds to 61% of their earnings. They have been very aggressive in share buy-back valued at 169 billion in the books.

Future: IT service company is definitely something for the future but as I've mentioned before this is a very slow boat to change from hardware producer to service provider. It has been a long journey and it has still not finished. Their revenue keeps going down while the margin is increasing slightly which pretty much leaves them with earnings around the 10 billion mark each year. With their aggressive acquisition strategy they will hopefully catch good ideas at an early (read cheap) state which they can directly apply globally. In the long run I still believe in IBM but I am unable to say when the turning point will come for them. 

Conclusion: Graham would not go for IBM and I will not increase my holding but continue to enjoy the good dividend.

Analysis of HM 2020

Company: H&M

ISIN SE0000106270 | WKN 872318

Business: Fashion retail with H&M, H&M Home, & Other Stories, COS, Monki, Weekday, Arket, AFound. The currently have online offerings in 51 of their markets.

Active: They have over 5053 stores in 74 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: 16.0

For the previous analysis please see Analysis of HM 2018.

The P/E is fairly reasonable with 16.0 but the P/B is too high with 3.8 which gives it a no go from Graham. The earnings to sales are at 6% which should be higher but the ROE is excellent with 23% and the book to debt ratio is at 0.9.

In the last five years they have seen a yearly revenue growth rate of almost 2.1% which is not good and this leaves us with a motivated P/E between 13 to 18 which means that the market is today fairly valuing H&M at the moment. Corvid-19 will not help.

They pay an excellent dividend (paid out in two portions per year) in the size of 7.5% which on the down side corresponds to 120% of their earnings. So that's not good!

Future: They seem to follow in the vake of Inditex but are not doing as well as them. 50% of their sales goes to the manufacturers and inditex have a much better ratio. Inditex have also kept growing sales, earnings for the last five years while HM has not but then again Inditex is traded at a P/E of 20 while paying a reasonable and sustainable dividend. It is a difficult market with all the online sellers popping up and less people going to the stores. By the look of things HM is not out of the woods yet and unless they can secure better contracts with the manufacturers then as a starting point they will have to strongly reduce the dividends.

Conclusion: Graham says no and I will not invest more money into HM. If anything Inditex looks far more interesting but I am already too exposed to retail with my holdings in Primark (ABF) and TJX as it is.

Analysis of E.On. 2020

Company: E.On 

ISIN DE000ENAG999 | WKN ENAG99 

Business: A German energy provider and electricity producer. They now no longer claim any business units but are instead referring to the various countries that they are active in with lists of the companies they have in each country.

Active: They are present in several countries in Europe.

P/E: 14.7

Here you can find the previous analysis of E.On. 2017. 

The P/E of E.On is looking fairly high with 14.7 and the P/B is equally not the best at 2.5 which gives a no go from Graham. The earnings to sales are at 5% and the ROE is fairly high with 17.3%. The book to debt ratio is very low with 0.11.

In the last four years, after they went green, they have had a yearly growth rate of 1.2% this gives us a motivated P/E of around 10 which means that E.On. is overvalued by the market right now. 

They pay an acceptable dividend of 5.3% which corresponds to 77% of the earnings so they better start pushing up those earnings!

Future: Mankind will for the foreseeable future require electricity. In the future it will come less from fossil (oil, coal, gas) and more from a broad portfolio of renewables up until, finger crossed, we solve fusion. There are several electricity trading companies that are pinching customers since many years and the big oil giants are stepping more and more into renewable energy. Who the winner will be I can today not say.

Conclusion: Graham says no and so do I. I will not invest any further money into E.On. at this point in time.

Analysis of DBAG 2020

Company: Deutsche Beteiligungs AG 

ISIN DE000A1TNUT7 | WKN A1TNUT 

Business: A German private equity company. Their focus lies with the management buy out of small and medium sized companies that have excellent products. To see their full company portfolio then please click here. They divested four companies and invested in four new ones during 2019.

Active: Germany, and surroundings. The companies owned are often more globally oriented. 

P/E: 9.7

Here you can find the previous Analysis of DBAG 2018.

The P/E is great with 9.7 and the P/B is also great with 1.0 which leaves us with a clear buy signal from Graham. The earnings to sales are artificial due to the nature of their business and reporting but the ROE is only so, so with 9.8%. Since they have pretty much no debt also the book to debt ratio is excellent with almost 15.

In the last five years they have had an amazing yearly growth rate of 11.6%. This then gives us a motivated P/E value of around 25.

They pay out an acceptable dividend in the size of 5.2% which however corresponds to 50% of their earnings so they need to start to be a bit careful. Clearly they are good and getting value from the companies they buy and then they should consider to give lower or no dividends.

Future: Investment companies will always have a future. Their approach of MBO have been very successful taking over mid sized family owned companies in Germany. With the retiring, innovative and hard working war baby boomers this was clearly a great strategy but that should start to come to an end and hopefully they will be able to pick up other companies which they are doing when I looked over their holdings.

Conclusion: Graham would go for this and I will seriously consider to potentially increase my holding in DBAG based on the latest dip that has occurred. 

Analysis of DB 2020

Company: Deutsche Bank

ISIN DE0005140008 | WKN 514000

Business: A German bank that now finally after 12 years have taken the decision to make cuts and changes in the organisation and have gone from ~100k to 87k employees. They have four segments: Coprporate bank, Investment bank, Private bank and DWS (asset management).

Active: in 60 countries world wide.

P/E: -15.3

Here you can find the previous analysis of DB 2018.

The P/E for DB is negative with -15.3, which seems to be the normal state for DB, while the P/B is very good with 0.2. The end result is still the same because Graham says no to this one. Earnings to sales and the ROE is negative and being a bank the book to debt ratio is low with only 0.04.

In the last five years they have had a yearly decrease in interest income by -06% and this gives us a motivated P/E of around 6 which means that DB is most likely overvalued by the market.

They pay no dividends.

Future: It is the same story for Deutche bank as it is for Commerzbank. They completely failed to be on the ball when it comes to online banking and for DB that's additionally tried so hard to play with the big asset management boys they have simply put failed miserably and in that process they started to lose their oh, so important private banking accounts. I do not see a bright future for DB and Coba.

Conclusion: Graham would not go for it and neither would I. DB is not a healthy bank and what they have done as of late should have happened back in 2008/2009 and on top of it much more should be done.

Analysis of Coba 2020

Company: Commerzbank 

ISIN DE000CBK1001 | WKN CBK100

Business: A German bank. The now claim to have only 2 business segments: Private and Small-business customers and secondly Corporate clients. They have recently taken over comDirect to expand more into internet banking and to take over the customers.

Active: Claim presence in 50 countries. Europe with Germany and Poland the biggest.

P/E: 6.2

Here you can find the previous Analysis of Coba 2018. 

The P/E for Commerzbank is low with 6.2 and the P/B is good with 0.14 which gives an ok from Graham. Earnings to sales is at 7% which means it has improved, the ROE is poor with 2.2% and the book to debt ratio is nothing to sneer at with 0.7.

In the last two years they have showed a somewhat increase in revenue but looking back five years then the result is still negative with a yearly revenue loss of -5.5%. This gives us a motivated P/E of anything between 2 and 9 which means that Commerzbank is today fairly valued by the market.

They pay no dividends.

Future: What is the future of the old banks? Honestly I do not know. Humanity keeps over consuming by using credit, they keep buying houses with credit (fully normal). There are several clever online banks that have low overheads dealing with loans, savings and stocks and the generation that wanted and needed to step into an office are becoming fewer for each passing year. What does Commerzbank have that makes them survive?

Conclusion: Grahams formula shows a positive result. I am no longer convinced and this is one of those failed investments that was made during my first year of investing... and on top of it, it is still hanging around even after the cleanout session. I clearly need to read up on Commerzbank to find out if they have a future or not and then also decide how to move forward with this money drain.