Learning how to e-Valuate

With people becoming excessively worried over the fiscal cliff in the U.S and the debt crisis in Europe, stocks dropped significantly. What they did wrong is that they sold low and bought high. This is no way to invest, and it is definitely the easiest way to lose any potential gains.

S&P rose 0.5 percent, or 50 basis points to 1359.88 at 4 p.m eastern U.S time. As Walter Hellwig mentioned, any good news is going to cause prices to rise significantly, and any bad news is going to cause them to drop to the pits of... yeah. This is mostly due to the market being oversold and there being a lot of foolish investors. Anybody who can understand basic psychology can really see that the market is full of these type of "reactors" who react on impulse on good or bad news. Thus, with the prices dropping, it's a perfect time to buy in as they rise. The saying "no news is good news" doesn't take effect here. It's "good news is good news" and "bad news is bad news".

As the European debt crisis begins to solve itself, international purchases of U.S assets are down the drain, plunging from $90.3 billion in August to $3.3 billion in November. The U.S needs to take action, and when news comes out that action will occur, it's time to buy those stocks as the prices fly up.

Today we will discuss three "golden" rules regarding debunked myths around these two precious metals.

Let's first define what volatility is, as mentioned on investopedia:

"1. A statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security.

2. A variable in option pricing formulas showing the extent to which the return of the underlying asset will fluctuate between now and the option's expiration. Volatility, as expressed as a percentage coefficient within option-pricing formulas, arises from daily trading activities. How volatility is measured will affect the value of the coefficient used."

This is basically saying that volatility = risk, however volatility does not equal risk when considering gold and silver stocks. This is because banker cartels can easily manipulate the price volatility of gold and silver derivatives. This in actuality has nothing to do with the actual physical supply and demand of gold and silver. Hence, in this case, volatility is not a valid indicator regarding risk.


Next, it is absolutely imperative that you have patience for small upcoming companies to come out on top. A huge mistake that investors can make is immediately selling out after the price dropped. Gold and silver's volatility is NOT an indicator for actual risk. It is in many cases artificial, so you have to be patient for the price to rise again. For example, a gold company in the great depression lost 50% of its share price, everybody sold out, and then for roughly 6 years it earned 1258% of its share price a year. Patience is a virtue.

Typically, when gold/silver have a low risk high reward setup, the news, bankers, etc are very likely to say there is no opportunity. This is a decent point to buy in, since there's a fair chance risk is actually a lot lower than it is made out to be. Conversely, when silver/gold prices are rising, many will try to persuade you (directly or indirectly) to purchase stock. Interestingly enough, right after this, the price will drop a ton. This is all based on historical evidence.

So in conclusion, this all sounds like a conspiracy theory, however as I mentioned above it's based on factual evidence. Good luck!

Our research group pitched Bombardier today. Here are a few relevant facts that we gathered, however the most important was the introduction of their new CSeries aircraft. Q3 was just released today too, and it fulfilled our expectations, which were to depress the stock even more just so it rises in due time.

Business Aircraft
At a total retail price exceeding $6.7 billion US, NetJets' order is
the second largest aircraft purchase agreement in the history of
private aviation, second only to NetJets' unprecedented aircraft order
in June of 2012 which included firm orders and options for upto 275
Challenger jets from Bombardier with a potential value of $9.6 billion
US.

-Net ordersf or business aircraft have been increasing

Commercial Aircraft
Subsequent to the end of the quarter, we received a conditional order
from an undisclosed customer for
5 CS100 and 10 CS300 aircraft and we signed a letter of intent with
Air Baltic Corp. for 10 CS300 aircraft. Based on list prices, firm
orders would be valued at $1.02 billion and $764 million,
respectively.

-Lower demand for commercial aircraft, however the CSeries may spark
some bullishness

Emerging Markets
Significant orders:
Nordic Aviation Capital A/S (Denmark) 12 CRJ1000 NextGen - $595 million
PrivatAir (Switzerland) 5 CS100 5 CS100 $309 million
PT. Garuda Indonesia (Persero) Tbk. 6 CRJ1000 NextGen 18 CRJ1000
NextGen $297 million
Eurolot S.A. (Poland) 8 Q400 NextGen 12 Q400 NextGen $246 million
Ethiopian Airlines 5 Q400 NextGen - $160 million

Transportation
Signed several significant contracts, with: San Francisco Bay Area
Rapid Transit District (BART), U.S., for
410 metro cars, valued at $897 million



Other points:
In the second quarter of 2012, the regions Asia-Pacific and Other had
moderate levels of activity mainly explained
by a temporary slow-down of rail investment in China. We expect growth
in rail investment to resume in China as
well as in other emerging markets, driven by the strong need for
mobility to support rapid urbanization and
continued economic growth

Growth in rail investment in the region Other will continue to be driven
by the Middle East, Brazil and Russia.

In India, investment in mass transit continues to be promising with
multiple cities
expected to invest in metros and monorails

We continued our long-term investment in emerging markets, with: the
opening of the monorail facility in
Hortolândia, Brazil, in April 2012

In North America, the level of activities increased due to major metro
contracts awarded in New York and San
Francisco, which represent a significant share of this marke

Many people seem to be having trouble with understanding what this number means. Let's start off with a definition, from investopedia:

"A calculation of a firm's cost of capital in which each category of capital is proportionately weighted. All capital sources - common stock, preferred stock, bonds and any other long-term debt - are included in a WACC calculation. All else equal, the WACC of a firm increases as the beta and rate of return on equity increases, as an increase in WACC notes a decrease in valuation and a higher risk."

What the heck does this even mean, really? What is a cost of capital? What's a beta? Valuation? WHAT?!


WACC stands for weighted average cost of capital. 

The cost of capital is simply the minimum rate of return that investors expect when they buy stocks, lend etc to the company. More concisely put, it is the rate of return an investor should expect on a project given a specified risk.

The beta of a firm is simply its overall volatility compared to a benchmark, usually the market (S&P 500).
Ex// The beta of a new technology company is 2.0 and the market is ALWAYS 1.0. This means the volatility is 2x more risky than a company with average volatility. This company will either do extremely well given good conditions, or hit rock bottom. It is very sensitive to changes in economic activity, etc.

Valuation is simply the value of the company/stock. If the WACC increases, then its minimum return on projects are larger and thus riskier. In summary, a lower WACC (2%, e.g) will always be better than a higher WACC (10%, e.g) although the case of 2% is quite rare and may not be realistic. Certain industries will always involve higher WACCs, such as precious metals.

Hope you learned as much as you can -- I had to be concise. Time is money.

Buy, Hold, or Sell?

Overview

Bombardier is experiencing significant growth in emerging markets, and is taking advantage of this by shifting its focus towards non-US customers. Demand in many regions remains high and above the world average, including Brazil, Latin America, and Asia-Pacific. China and Europe, with their recovering economy, are going to be one of the major players in the company's growth. Bombardier also secured a $7.3 billion order with Buffet's NetJets. This is quite important, as its the largest purchase agreement in the history of private aviation. In addition, its new CSeries of jets, being more environmentally friendly and so on, has a significant amount of orders and may play a part in company growth. It is expanding its operations too -- in April 2012, it opened a new sales and marketing office in Shanghai. In Nouaceur, Morocco, it built a new manufacturing plant. This is big news.

Risk

The company experiences quite a variety of risk, being in such a volatile industry. Oil prices, appreciation of the Canadian dollar (less exports), subordinate voting share structure (The CEO Pierre Beaudoin and his family own 64% of total shareholder votes), volatility of airline customers (Air Canada, anyone?), etc. These all impact the company and impact our decision on whether to buy, hold or sell.

Conclusion

Based on analysis of EBITDA and FD EPS, I suspect the price will go up to $4.65-4.80. This is over $1.00 of a capital gain.

Buy it.

After a massive low, this company seems to be doing some justice regarding increasing stock prices. It is virtually dominating competitors, with the exception of First Majestic Silver (TSX: FR). Also, its stock prices closely correlates with S&P. Whether investing in precious metals is a good idea or not, many consider it to be an excellent hedge against inflation. If you know this or not, more money supply being injected into the economy allows for gold/silver prices to inevitably increase. This is happening as we speak especially in the Asian countries.

Silver Wheaton has been closing tons of deals lately, so people are definitely going to be optimistic. The company risk is generally low, since it doesn't own mines at all -- just the silver. Its market cap is around $13.5 bln, where the average silver company is around $4.5bln. This is an enormous difference, and this goes hand in hand with their earnings that have been increasing over the past few years.

Their EPS is expected to skyrocket for 2013, so many feel this is the best time to buy in. However, it is just important to note that after the price goes up, get out as fast as you can. A goal of buying in around $37 and selling at $43 may very well be a viable choice. As many know, after silver goes up, it goes down like crazy. You make the choice.

Hi all,

After some thorough analysis on SNC-Lavalin, I came to a few conclusions. If you noticed, they had a new CEO October 1st, 2012. Interestingly enough, after this date, the stock price began to rise gradually again. Actually, they've been going up finally instead of dropping significantly. The 52-week high is $55 or so, so I believe the stock still has a lot of room for growth.

You can see this >here<.

Moreover, SNC-Lavalin is winning quite a significant amount of contracts, in which their revenues should continue to experience respectable growth. The problem with the company is not cash flows or revenues though, it is their expenses. Due to the previous CEO and other key executives cooking the books and breaching the code of ethics in various foreign countries, this has put a lot of undue stress unto the company in forms of expenses to various stakeholders and also contingent liabilities. In fact, they have a contingent liability of $1.5B from a class-action lawsuit from stakeholders. More than likely this won't go through, the company seems to be doing all it can regarding getting back on track and so forth, and it is a solid company in general.

In case you're interested, here are the remedial measures the company has been doing to get back on its feet:
1) Management override policy (specific procedures if management does unethical things/tries to force certain things)
2) Code of ethics amended (whistleblowing encouraged)
3) New financial management solution in individual business units

Note: this is taken directly from the MD&A, rewritten a bit in simpler more concise terms

The stock price should be going anywhere but down. They have a new CEO, new policies, and a solid foundation for a company. I am sure shareholders are wide aware that such a scandal will very likely never be happening again. Things are looking optimistic.