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August Newsletter

Company Profile, Buffet's 12 Investing Fundamentals and inside Investify.

Company Profile: Freightways Limited

Source: Investify financial insights dashboard (as at 30/08/21)

Business Summary

Freightways Ltd. engages in the provision of express package and business mail services, and information management services. It operates through the following segments: Express Package and Business Mail; Information Management; and Corporate. The Express Package and Business Mail segment covers network courier, point-to-point courier, and postal services. The Information Management segment offers paper-based and electronic business information management services. The Corporate segment includes corporate, financing, and property management services. The company was founded in 1964 and is headquartered in Auckland, New Zealand.

Investment Merits

Share price growth over the last 5 years has been steady (63.62%) and year-to-date has increased by 24.75%
Year-on-year growth in revenue for the company with FY 21 revenue growing 26.9%
Growing Free cashflow in the last two years opening possibility of increase in future dividends subject to acquisition cost
For FY 21, Freightways continued the growth in operating cash flow with an increase of 6.17%
Analysts predicted steady growth in revenue and EBITDA of 20% and 21% respectively till 2024.
Five Analysts following the stock are recommending a HOLD with a 12-month target price of $13 which has a small upside potential compared to the current price

Investment Risks

Freightways Current Liability is higher than its Current Assets resulting in a Current Ratio less than 1 and an indication of short-term liquidity issue. However, the company has managed to reduce its bank borrowing by $58.9 million from the previous year and improving its outstanding debt position
Earnings per share reported no change from FY20. However, this is mainly due to the change in fair value of acquisition of Big Chill from the previous year and depreciation and amortisation costs claimed in FY21. Earnings per share are predicted to improve to 58 cents per share by 2024 compared to the current 30 cents per share.

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How To Screen for Stocks Using 12 Buffett Investing Fundamentals

When it comes to investing using the basic principles of fundamental analysis, Warren Buffet is considered the modern messiah. While some critics feel that Buffett’s strategy cannot be duplicated, author of a number of popular books that highlight Buffett’s core investment principles, Robert Hagstrom, CFA, disagrees. In The Essential Buffett: Timeless Principles for the New Economy, Hagstrom argues that it is possible to duplicate Buffett’s strategy through an initial four stage approach with any potential investment. They are:

Analyze a stock as a business
Demand a margin of safety for each purchase
Manage a focused portfolio
Protect yourself from the speculative and emotional forces of the market

Hagstrom identifies 12 basic Buffett principles that a company should possess to be considered for purchase. Not all of Buffett’s purchases displayed all these tenets, but as a group the principles help to establish a reasonable approach to selecting stocks. The tenets cover both qualitative and quantitative business elements. These are used to create the Buffett Hagstrom screen.

Buffett’s Business Tenets
1. Is the business simple and understandable?
2. Does the business have a consistent operating history?
3. Does the business have favorable long-term prospects?

Management Tenets
4. Is management rational?
5. Is management candid with its shareholders?
6. Does management resist the institutional imperative?
7. Focus on return on equity, not earnings per share.
8. Calculate “owner earnings.”
9. Look for companies with consistent and high profit margins.
10. For every dollar retained, make sure the company has created at least one dollar of market value.

Valuing a Stock
11. What is the value of the business?
12. Purchase stock if it can be acquired at a significant discount to its valuation.

In summary, Warren Buffett’s approach identifies “excellent” businesses based on the prospects for the industry and the ability of management to exploit opportunities for the ultimate benefit of shareholders. He then waits for the share price to reach a level that would provide him with a desired long-term rate of return. Most investors have little trouble understanding Buffett’s philosophy but its successful implementation is dependent upon the dedication of the investor to learn and follow the principles. It requires the ability to stick to the approach during times of market volatility.

Inside Investify..

This month we launched two new additions to our platform – The Watchlist and the Portfolio Tracker functionality. While a watchlist helps to identify potential investing opportunity, regular portfolio monitoring leads to better returns on the investments.
Members can now add their preferred stocks to their watchlist and able to see stocks they have viewed in the past. This way you will always have access to the search history and find stocks that came to your radar in the past in less time. The portfolio tracker will give the ability to try different portfolio strategies before someone takes the plunge and shows the performance of the individual stocks added to the portfolio in the past. We are now working on improving these two additions further and any feedback is always welcome.
We are now working on announcing the quarterly performance of some stock portfolios that we created using the intelligent and advanced filters. The initial results look very promising, and we are aiming to release the results in early September. Please keep following us on social media or newsletter and we will announce the results.
Any feedback on Investify is always welcome and very much appreciated, so please feel free to tell us what you think about us through the form below. All feedback providers will get extended FREE trial of the platform as a form of gesture from our side for helping us out.