Archive for the 'Money' Category


HAPPY 4/20! A fundamental analysis of Smithfield Foods Inc (SFD)

I don’t smoke weed, but I am addicted to title-spam. So happy 4/20!

The following is a very simple fundamental analysis of Smithfield Foods (NYSE:SFD) I performed for a Fundamentals of Investments course. I’m posting it because I have nothing else to post. Also, maybe this will show up on some future education searches, and I’ll be plagiarized. That’s every blog owner’s dream.

Full disclosure: None.

“Any way you slice it (pun intended), Smithfield Foods appears a firm currently in bad financial shape. In the relatively low risk Meat Products industry, it is being hammered by its competition. With a negative ROE, SFD is seriously outperforming its industry. In fact, competitors within the industry are actually doing quite well, beating the S&P in both ROE and ROA. A small consolation for SFD is it’s lower margin of financial leverage than fellow industry partners. The industry is leveraged by a factor of 4, whereas SFD is only leveraged by a factor of ~3. The competition is using this leverage very profitably at the moment, whereas SFD is at least stemming the tide of blood in its losses. This lower level of financial leverage may allow SFD to turn profitable sooner, although it would also limit the levels of profits it could achieve due to leverage.
Fundamentally speaking, there may be a silver lining on the horizon. SFD’s DuPont system ratios (aside from Profit Margin) show SFD may be ready to jockey its way to greater profitability in the future. It is turning over inventory at a much higher rate than industry norms. This reflects on a higher than average ATO, and shows efficiency in production. Coupled with much higher than industry average Interest Coverage and Current Ratios SFD appears to at least have the assets it needs to operate. Perhaps underproduction is an issue the corporation needs to address.
Finally, it appears that although SFD has weak profitability (astoundingly high P/E ratio!) it’s low Market to Book makes it an attractively priced investment, if only with the possibility of liquidation. Earnings forecasts predict the entire industry will under perform the S&P during the coming years by a factor of more than 2. Given this forecasting, it is safe to say SFD is not “safe” at all, which is reflected by a very high Beta value.
So what would I recommend to an investor looking at SFD? As always it depends on situation. Should the investor be looking for the stability the industry normally affords, I would recommend they not hold positions in SFD. It is currently spectacularly under performing its peers. However, a more risk friendly investor might find SFD an intriguing option. It appears to be a company with a sound asset base and the means to grow. With it’s low market to book, it’s a particularly attractive investment that could produce substantial growth if the company “turns it around” or is taken over and liquidated.

Return on Equity (ROE) = -5.66 [Ind: 21.59, Sec: 29.29, S&P500: 18.97]
Return on Assets (ROA) = -2.02 [Ind: 5.35, Sec: 10.87, S&P500: 8.00]
DuPont System ratios:
Profit Margin: -1.30 [Ind: 4.92, Sec: 11.10, S&P500: 10.32]
Total Asset Turnover: 1.56 [Ind: 1.24, Sec: 1.07, S&P500: 1.02]
Interest Coverage Ratio: 3.11 [Ind: 0.06, Sec: 0.59, S&P500: 32.21]
Leverage Ratio: 1.11475 [Ind: 1.05168, Sec: 1.05474, SP: 1.11493]
Inventory Turnover Ratio: 5.52 [Ind: 0.94, Sec: 0.79, S&P500: 10.95]
Liquidity Ratios:
Current Ratio:2.08 [Industry: 1.33, Sector: 1.21, S&P500: 1.76]
Quick Ratio: 0.65 [Industry: 0.65, Sector: 0.65, S&P500: 1.24]
Market Ratios:
Market-to-Book Ratio: 0.56 [Ind: 1.28, Sec: 1.64, S&P500: 2.99]
Price-Earnings Ratio: 429.40 [Ind: 15.43, Sec: 15.26, S&P500: 15.66]
Earnings Yield: -10.1071 [Ind: 2.4765, Sec: 2.1098, S&P500: 8.0134]


Asciigod update B0.09

Not a lot going on these days in the realm of “writing”, “constructive thoughts”, “healing the world” or “making babies”. Scratch that last one holmes, I’m makin’ more babies than Raelians. Blowin’ powder dust like Mugwumps out the Urethra (Justin Warfield style).

Shit’s just been super busy, but I felt the need to bless the mic with some K.N.O.W.L.E.D.G.E.

Work, school, baby mama, health. It’s the cycle, but it’s OK. My awesome financial strategies have turned out to be failures. But hey, there’s still 40 odd years, am I right?

Just got done with some homework for an Investment class at school. Since content’s not exactly quantity nor quality here, I figured I’d cut and paste my “mini-essay” in here, get my word count for the year above 300, and call it a night. I gotta head to work, so see ya’ll on the dark side!

“ESSAY” (LOLRIGHT ASCIIGOD 2009) RE: Aggressive Investing?

“Due to my relative youth, and long time horizon for retirement I feel I can currently invest aggressively to meet my retirement needs. I am in a situation with more than 30 years to save for retirement. This puts me in a position that, historically, indicates the “numbers” of the markets are in my favor for long-term growth. Despite any 5, 10 or even 15 year periods of negative performance, it behooves me to invest aggressively now. Of course this aggressive position needs to be tailored as the years pass, with investments moved from aggressive to more stable and income producing positions.
For instance, assume I would like to retire with $2,000,000 in stable and/or income producing securities in 30 years time. Assuming I start with a relatively modest $20,000 base, and contribute only $5,000 a year, given a relatively conservative assumed return of 10% on these investments, the total saved for retirement would be $1,434,648.60.
But that isn’t quite enough!
Actually, to equal that sum in “today’s dollars”, adjusting for a 3% inflation, I’d need to raise $3,482,267. To meet my $2,000,000 goal in “today’s dollars”, I’d need even more: the princely end balance of $4,854,525. A daunting task! In fact this exercise has made me realize just how much more “aggressive” I need to be.
And that isn’t just aggressive in terms of investing. The 10% expected return is solid, and is as much as I can legitimately use to “crunch” these numbers. So the difference will definitely have to be made up of with more aggressive saving. That’s right! Additional funds are needed. Let’s recalculate assuming my wife’s income contribution matches my own $5,000 yearly deposits, and that we both up the ante an additional $2,000 for a total of $14,000 per year addition to our nest egg.
This results in a balance of $2,882,195.99 at the end of 30 years. Not quite good enough, but honestly, at some point this exercise has to become an issue of quality of life and financial management. Not considering other sources of income, dividends, and property I feel safe to say this sum would certainly get us by “OK”. And if not, we could always trade in our hover car for a less expensive model.”



Get rich quickly: Freddie Mac

A decade or so ago, Philip Morris got sued by people who claimed to not know smoking was bad for one’s health. In the aftermath, the stock plummeted. Back then, I wasn’t too financially responsible (nor responsible in general), but I knew in the dark recesses of my heart that that was a fabulous time to purchase some Philip Morris stock. Unfortunately, I didn’t have the money and all these years later I harbor a deep loathing for “Asciigod The Younger – Financial Weakling”. Had I had money, and mad that move, I’d be a substantially richer Asciigod today.

Situations like that don’t come around all that often; huge corporations in insanely profitable sectors don’t usually take ginormous stock hits. However, I smelled Blood with this Freddie Mac/Fannie Mae fiasco that’s currently occurring.

I’m not too sure how all of this will pan out, and this Wall Street Journal article on the matter predictably ventures no guesses. Honestly, I’m not following it enough, nor am I yet savvy enough to offer too much of a prediction of my own. Let’s just say I feel comfortable with the risk of losing a small investment versus the reward of huge returns should things get back to normal. My money’s on black.

At the worst, Young Asciigod was a better stock picker than me. I can still kick his ass though.


Advanced patience

Growing up is a lot about patience and routine. Sure, the acrobatic moments of impulse decisions, spur of the moment road trips, romantic weekend getaways, and lottery winnings tend to get all the gloss, but normally success comes down to sweat and grind. This has all been said before. One percent inspiration, ninety nine, etc. But still, sometimes you have to reflect on, and observe, the effects of patience in your life. Without learning how to deal with the rigorous ennui of life, we’d all be street people. And street people don’t have careers, investments, great works of sculpture or blogs. Or do they? I hope not, that’d totally blow my hypothesis.

I’ve finally gotten around to arranging my investments into a purpose driven format. Instead of just throwing all our savings into one giant pile at the end of the bed, I’ve now got a neat system figured out with percentages, pie charts and email notifications. What happens is I’ve got six short term savings goals to accomplish. Money gets placed in one account, but instead of being viewed as one balance, it’s hypothetically divided into several sub-accounts. The original article from which I drew inspiration for this tactic suggested it was a way to satisfy a person’s need for impulse gratification. Oddly, I’m finding the exact opposite to be true.

Until recently, my wife and I only had one accomplishment to aim for: moving to our new place. This worked out okat the time, as we were fairly novice at saving and investing (and I guess we still are). I had just come out of a pretty severe, several year illness, and she was just starting to work her way up in her career. Just paying bills was ok, saving towards a move was a nice, simple icing on the cake. In a way, any amount of savings thrown towards this goal was good. So if we had, for instance, one hundred dollars to save, putting fifty away and spending fifty on entertainment seemed ok. It was a stepping stone on learning the patience of savings. At the same time, I could pretty frivolously spend small amounts of money at will, which I found very satisfying. My wife, God bless her, is content to just read and put together jigsaw puzzles in her spare time. This onus is all me…

Now that the money’s divided into six chunks, with some fairly large end goals each (two, six, ten thousand dollars, etc) that hypothetical one hundred dollars earlier doesn’t really gratify at all. Even a larger sum, say a thousand dollars, only bumps up the balances in small, very unrewarding increments. And I think that’s the lesson that I am learning here. I feel like an addict when I give up significant portions of discretionary income. But if I don’t, the amount being saved feels almost negligible. I’m left needing to save more. I question “Do I really need this XXXXX?”, or “How much would foregoing XXXXX raise the balance in X account”.

It’s totally baffling to me that an exercise designed to satisfy an impulse should instead be making me slowly, and psychologically painfully, learn to adapt a new, more mature form of patience.

I have mixed feelings right now, but I’m sure in a month or two, the rewards will be worth it.




Sudo grep “deez nutz” | Yourchin.txt

In regards to earlier posts, here and here. I submit the following information.




Score. Me: 685. Suckas that play me: 0


Sue Part Deux


Grip it! On another level

A recent post on Get Rich Slowly (GRS) about “Purpose Driven Investing” is making me re-evaluate how I manage my savings. The meat of the article is this: Yield to the natural human urge for instant gratification and divide your savings goals into small, fun to manage chunks. So instead of one (hopefully) large savings fund sitting in the United High Interest Credit Union, you have a few smaller accounts each based on the asset’s needed liquidity and the interest rate that liquidity, and possibly risk, bears. Thus divided, one can view his goals piecemeal, and meet them “faster”.

In fact, I already have, to some degree, done this by setting aside my emergency savings in a high yield savings account. But as I’m trying to get all my finances set up in Quicken, and generally just become more efficient with the whole process of saving and investing, an article like this has given me some ideas.

While GRS has taken this plan to a pretty elaborate level with multiple accounts and such, I don’t believe that will necessarily be optimal for me. However, I think I’m going to start utilizing a series of virtual “liability” accounts to represent the specific savings goals I have (For the curious: Emergency savings, end of year IRA contributions, vehicle maintenance, vacation fund, and furniture purchases). Actually juggling a bunch of bank accounts is too much effort. But creating seperate, fake liabilities in Quicken which I can allocate from one real account will work in much the same way, just easier.

And even though I know this kind of thing on GRS is preaching to the choir, a lot of informative writing usually is. As someone who reads the GRS blog, I’m naturally going to be interested (ha!) in applying this strategy. I’m not even in the financial services field yet, but I’m constantly faced with situations where friends and family need advice that appears simple to me, but elusive to them. That’s, hopefully, one of the beautiful things about this whole “blogging” phenomena. You have your completely insular blogs like GSR dedicated to one topic or another. But then again, there’s some general interest content out there to expose you to completely random subjects. I guess right now, this blog leans towards that.

Or, I could specialize in cracked XXX web password trading. SHOW ME THE MONEY!