Tag Archives: Cash flow

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Invest in businesses with net cash or net debt?

During the last one and a half decades, it nearly didn’t matter to look at a company’s balance sheet. The reason was quasi non-existent interest rates – a historically unprecedented scenario, not only for the younger generation. Hence, it is no wonder that those who held too much cash in their books even got punished by not receiving any income on their deposits. On the other hand, debt-hungry entities got subsidized. However, the winds have changed. Interest rates are up dramatically. What are the consequences?

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Why you should prefer low-cost commodity producers + new research report

While my statement from the headline might sound as obvious as brushing teeth each day, there are indeed also proponents of buying shares of companies that have among the worst economics – not the best. This is then justified by a higher operating leverage, should commodity prices rise, due to then disproportionately higher improvements in the financial statements. Here’s what you should know.

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Turnaround-bet: Is Vodafone’s 10% dividend yield a no-brainer?

The British red telecom giant announced not only a CEO-change, but also a strategic shift (both often come as one). Meanwhile, the share price is advancing its year-long decline, reaching even a fresh quarter-century low (!), as investors seem totally unimpressed. In the past, Vodafone has been a reliable dividend payer, although the payout was cut in 2019 and not raised again since then. The 10.7% yield seems tempting. Can it get worse or is it worth a shot?

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Earnings quality the worst in three decades – look at free cash flow!

Operating or net income, adjusted operating or net income, earnings per share (EPS), adjusted EPS and the price to earnings (PE) ratio are commonly used to assess a company’s business results and to value it. They are also often used as headline numbers and proof of performance by the companies themselves. However, there is a rising trend of decreasing “earnings quality” – an indicator that neither the economy is doing pretty well, nor many companies.

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US shale production is peaking – what it means for oil and gas prices

You can read everywhere that due to the “coming recession” in Western countries, energy demand is going to take a hit and push prices down. Likewise, you also find headlines that Chinese recovery demand might come in below expectations. It is a foregone conclusion that prices of energy will go down – everything circles around demand. But is this the big picture? What would happen if a massive supply shock took market participants by surprise? You won’t be surprised, but prepared, with this latest Weekly.

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Commodity stocks and recessions – clearing up a common misconception

As many commodity prices – being economically sensitive resources – have dropped massively over the last months (and even more so over the last weeks) as well as a recession being expected by the consensus, the question is whether equities of commodity producers in general are about to crash. At least this was the procedure during the last Great Recession of 2008–2009. However, this is too simplified, completely ignoring history.

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A king is falling – why Altria’s butt is burnt down

Altria is a stock from the illustrious circle of the “dividend kings”. It is even so special that it has actually raised its dividend more than once a year over the past half century – 57 increases over 53 consecutive years. However, the last few years have been disappointing in operational terms. Recent results, in particular, have shown the direction this company is likely to take. There are still a few puffs left, but don’t be surprised by the impending dividend cut at this darling of many dividend investors.

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Zombie companies – The Walking Dead?

Being dead and being alive are mutually exclusive conditions. But with stocks, there are companies that to a large extent fit into this scheme. Now facing a heavily toxic cocktail of likely higher interest rates and a slowing economy, many of these businesses will be tested for their survivability. Even if they do survive as a whole business, it is nonetheless dangerous to invest into equities of heavily indebted zombies – no matter how high the temptation might be.

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Dollar stores with discounted prices, but expensive shares

Physical retail stores as a whole in most developed countries have more likely than not reached their peak. However, there is a sub-category in this sector that is expanding quickly. More than that, the so-called “dollar stores” have even been beneficiaries of a diminishing middle-class. Are the respective stocks a good investment idea, especially as inflation is trimming budgets?

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The funeral business: dead money or under-looked opportunity?

Last week, I wrote about farmland and farmland stocks. But land can also be used for other purposes. While being asked about land, the most common answers will be farmland or land for housebuilding. Maybe also forestry. However, there is another sector that could prove to be a more valuable investment opportunity due to being less followed, but obvious in hindsight.

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