It's a guess. A pure guess. We have no real mathematical basis for determining this.
In contrast, there is lots of math supporting TRN as value: PE, PEG, PS, PB, ROIC, cash flow, and balance sheets. It's valuations are well below trailing N year averages.
How do you ever put odds on how a lawsuit will go? Maybe I'm more cynical as I get older? But I am deeply suspicious of a legal system and a government that has allowed what to me seems like a greater degree of corruption than ever before.
A lot of financially pressed interests see TRN as a convenient target. I won't rest easily until this is fully resolved...albeit I am holding my shares through it...on a pure hunch that all will be ok. That's all I have...a hunch.
The market is broken. Not CBI. I'll chime in again with my usual mantra: price must track earnings.
I still believe this is a great time to accumulate CBI. I'm averaged in at $61 or so, a basis of $25k. I remain confident if beating the S&P500 within 18 months. At the very least, I believe the price of oil will stabilize during this period, helping CBI to normalize...and I also believe overvalued social, mobile, and cloud computing companies will have faced their day of reckoning as well...further reinforcing companies that really make money.
Stocks trade with greater volatility that is more quickly moved by sentiment. Right now sentiment is suspect about CBI. But as I said, strong fundamentals will correct what I think is the irrationality of the herd here, not to mention wall street rigging.
Coincidentally, it's the same with steel. I bought into MT. I'm looking hard at AKS, NUE, and X. Although, to be fair, some of these steels can go bankrupt during this cyclical crash of steel.
All the best.
I kept my shares. But I have no illusions about foresight. Like you, I'm getting lucky...especially that the lawsuit isn't materializing into anything concrete yet.
I hope it stays that way. If so, sure, TRN is a serious long term winner. But the winds of politics can turn quickly. And TRN hasn't extricated itself from these winds.
I'm up 2x. I was once up near 4x. I'd love to see that again. Fingers crossed.
I bought some MT. Mostly because it is too big to fail for within the EU. It will indeed be supported by the EU. And it is globally diversified with decent ongoing cash flow. It was almost a no brainer for me to make a bet...as I'm fairly confident it won't go belly up, withstanding the current downturn in the steel cycle.
But AKS and X are a different story. I really like the idea of buying AKA. I really want to believe that the US government sees steel as a matter of national security. And that it would prop up domestic steel.
But unlike with Europe, I'm not so sure our government will do anything. Therefore, the specter of bankruptcy is not insignificant with AKS.
Make no mistake about it, dumping is occurring. Steel is under severe pressure. Ironically, it's low energy prices that made it worse for American steel makers. Higher energy costs favored our companies, due to the emergence of North American shale. Russian steel magnates were investing in American steel for this reason.
Obviously oil is cratering. The icing on the cake are unions. Probably more with X than AKS. Our companies seem like they will need government intervention to stay solvent...although this is just a guess on my part.
I'm a value investor, not a trader. However, I'll gamble a small % of my portfolio on trading. But even in this latter context, I'm not sure AKS is worth a foray. I can't shake the feeling of bankruptcy.
Any intelligent thoughts are welcome. Thanks in advance.
Your comments are mostly valid. But I'd be careful about the lawsuit. Nobody knows what the government will assess against TRN. As I've posted before, we're in an era where corruption seems to be at an inflection point, not least due to politicians exploiting class warfare polemics.
I'm still holding 927.35 shares averaged at around $16.85/share. It's definitely taking patience staying long. But I am betting on a recovery.
But like I said, the government might really wreck TRN. It's not an insignificant threat. I believe the lawsuits are without merit, frivolous, and highly political...but dirty interests can and do win sometimes...even in a nation like ours.
I hope for the best.
I am really interested in opening a position. AKS has been brutally battered. There's proverbial blood in the streets here.
Can AKS stay solvent? Is it a broken company and sector vs just a broken stock? If steel has a future in the US, this can be a huge long term winner.
On the other hand, I think MT offers a more concrete margin of safety. It will be capitalized by European money. It is globally diversified. And obviously scales.
Thanks in advance for your thoughts.
Solid comments. I agree in general. We're ultimately in a correction or perhaps a cyclical bear market. Any weaknesses will magnify themselves.
But as you noted, long term earnings will materialize into normalized prices. Namely a fair value PE of around 16. It's a matter of patience, a question of when, rather than if.
I still see CBI above $70 within 18 - 24 months.
China has much greater energy and transportation costs than the US. Never mind less technology capabilities. I have to think that US steel makers can use this to offset labor costs. Especially in optimizing labor costs...which means a reckoning with unions.
This strategy works in many other areas of US manufacturing. Why not steel?
As for Chinese steel subsidy, sure, fight fire with fire. Besides, their labor costs are increasing. Fast. It's happening in tech. This is going to be a war of attrition unfortunately.
I saw a similar situation with solar. Chinese companies eventually got decimated. At some point, their steel companies too fall under financial physics.
I'm watchful and waiting. But I'm not blaming Obama vs Bush vs whatever. Again, I leave the partisan demagoguery and voodoo economics to others.
Believe me, I want to invest in American steel. Russian magnates actually have poured billions into US steel. I'm still ultimately waiting on the supply and demand situation to change...having some hope our steel manufacturers will survive...even some faith that steel is intrinsic to national security.
We're a rich country. Somebody will pony up some money at some point to keep us alive here. I'm waiting.
I don't want to be too harsh. But most comments here reflect partisan demagoguery and voodoo economics. Rarely is objective and complete enough analysis.
It's not one administration versus another. US national life is much more nuanced. It's a combination of factors: global supply and demand, domestic labor costs, energy & transportation, and sheer culture.
American steel is in big trouble. Let's face it, we're expensive. Especially because of labor costs, in spite of historically cheap energy, manufacturing, and transportation costs. This alone is a huge statement about the intransigence of management and labor to work intelligently.
Also, China command's the lion's share of demand. It is what it is. And currently Chinese demand is low relative to excessive global supply. Hence, the survival of North American steel ultimately depends on fast scale up and scale down...with enough capitalization to withstand the slump.
North American capital exists for providing the latter. Whether it is provided is another matter. Given the inability of management and labor to work intelligently, one can understand investor reluctance...as more compelling options exist with the likes of MT.
The US government? What can they do? Actually in the past 8 years, they've been less incompetent. It's wishful thinking they'll intelligently catalyze massive infrastructure and jobs development, giving tax credits here...which is what our country really needs.
We Americans have a mean culture right now. Across the board. Government, corporations, the rich, and main street. The longer we promote greed and sloth, the longer this pain will be prolonged.
Lastly, I'm waiting for a true steel bottom. I have my eye on AKS and MT. But I am waiting for a true bottom, as China is on the verge of a correction. And yes, I hope AKS is around when the cycle becomes positive.
The more I think about it, the more I think you are right about a drop. Sentiment is sentiment. If rates rise, even nominally, I think the market will react against higher PE steady dividend stocks.
That might be your opportunity. I am holding the likes of JNJ, KO, and CNI. But I may indeed sell AWK, given the differences in size and potential movement.
Don't get me wrong. AWK is long term quality. But it does have a high enough PE and is not a larger cap...yet. I too would buy in heavy if it were to drop.
We don't. But it ultimately could be $0 for all we know. This is all now guessing.
So much uncertainty doesn't usually make for a compelling investment. Nevertheless, as I posted before, I'm holding my shares. Corrupt as the government and legal system seems in this situation, I'm still betting that they won't destroy what is otherwise a fine company.
I have to believe that the government has some intelligence here. Fleece TRN. But not so much that they won't be paying tax for years to come with earnings.
This should be due warning to any company to rigorously stay in administrative compliance. Governments, lawyers, and special interests are always looking for a payday. Simply consider the issue of patent trolling, another farce facilitated by the bright folks in government and our legal system.
Twisted stuff. But nobody will ultimately do anything. It was last year that GTAT went bankrupt on an elaborate pump and dump. I got out in time, but a lot of people tragically lost money in what turned out to be an elaborate pump and dump. The insiders got away with it...with class actions doing nothing...no cash cow left to milk.
The beat goes on.
I bought the basis at good value. Most of the dividends were reinvested at good value. It took a while, but you can see the impact now that MSFT is reverting closer to longer term .
I think MSFT is a solid buy now. It has solid earnings prospects. It has a moat in technology with Office, which it is fast leveraging for all kinds of cloud work.
I view CBI in a similar context. A moat. At value. A history of solid earnings. Continued decent earnings, withstanding occasional negative cash flow due to how contracts are structured.
Again, it takes patience, discipline, and the passage of time. All the best.
It isn't rocket science. As Benjamin Graham aptly says in "The Intelligent Investor", it's more about traits of character than intellect. Here's an example of 1 of my value investments: MSFT
date shares total_price $/share
8-May-2006 500 $11,831.95 $23.66 basis
14-Sep-2006 1.73 $45.00 $26.07 div
14-Dec-2006 1.69 $50.17 $29.76 div
8-Mar-2007 1.81 $50.34 $27.77 div
14-Jun-2007 1.65 $50.52 $30.54 div
13-Sep-2007 1.75 $50.69 $29.03 div
13-Dec-2007 1.59 $55.95 $35.10 div
13-Mar-2008 1.96 $56.12 $28.65 div
12-Jun-2008 2.05 $56.34 $27.44 div
11-Sep-2008 2.11 $56.57 $26.78 div
11-Dec-2008 3.35 $67.12 $20.04 div
12-Mar-2009 4.06 $67.56 $16.63 div
18-Jun-2009 2.9 $68.09 $23.46 div
10-Sep-2009 2.75 $68.47 $24.88 div
10-Dec-2009 2.31 $68.82 $29.78 div
11-Mar-2010 2.38 $69.12 $29.01 div
10-Jun-2010 2.77 $69.43 $25.07 div
9-Sep-2010 2.9 $69.79 $24.11 div
9-Dec-2010 3.17 $86.36 $27.28 div
10-Mar-2011 3.4 $86.87 $25.57 div
9-Jun-2011 3.67 $87.41 $23.84 div
8-Sep-2011 3.34 $88.00 $26.35 div
8-Dec-2011 4.34 $110.67 $25.48 div
8-Mar-2012 3.48 $111.54 $32.10 div
14-Jun-2012 3.86 $112.23 $29.11 div
13-Sep-2012 3.7 $113.00 $30.53 div
13-Dec-2012 4.77 $130.80 $27.44 div
14-Mar-2013 4.71 $131.90 $28.00 div
13-Jun-2013 3.84 $132.98 $34.66 div
12-Sep-2013 4.09 $133.87 $32.76 div
12-Dec-2013 4.38 $164.11 $37.45 div
13-Mar-2014 4.32 $165.34 $38.31 div
12-Jun-2014 4.105 $166.55 $40.57 div
11-Sep-2014 3.606 $167.70 $46.50 div
11-Dec-2014 3.892 $186.78 $47.99 div
12-Mar-2015 4.411 $187.99 $42.62 div
total shares: 610.844
avg $/share: $19.37
current price: $46.86
current value: $28,624.15
total return: 141.92%
S&P500 wi reinvested dividends total return: 97.046%
S&P500 wi reinvested dividends CAGR: 7.828%
shares earned as reinvested dividends: 110.844
base value of shares earned as reinvested dividends: $3,384.20
current value of shares earned as reinvested dividends: $5,194.15
I hone in on companies and industries in distress. Steel is definitely in distress, as are most of its supply chain companies. Iron ore materials companies and steel producing companies.
Suffice it to say, we seem to be at rock bottom in the steel cycle. Chinese demand has decreased, in the face of an oversupply of iron ore and steel. The key is assess how quickly this supply and demand situation can improve.
As for AKS, it's $880m market cap implies more significant price movement if things improve. However, it has $3 billion in debt vs $50 million in cash on hand, producing horrible debt ratios. Yet I read that there are assets worth $4 billion - $5 billion asset worth, implying a margin of safety in book value. I also read that AKS is less exposed to locked in contracts.
Is there any real danger of AKS running out of cash? Earnings are negative after all. Is it realistic to expect the steel cycle to improve just in time? By the way, I am also looking at MT, just to diversify and hedge with a larger steel company.
Thanks in advance.
Nobody can deterministically predict price movements. The best we can do is to identify value and buy with a margin of safety...and then expect a reversion to a mean valuation at some point in the future. Anybody saying differently is basically reading tea leaves.
I'm down 16% on a $26k basis in CBI. I remain fully confident that CBI will significantly outperform the S&P500. My guess is the next 18 - 24 months. I can't say for sure...only that the odds are high that it will come back to supported valuations, as anything else would be a low odds outlier.
My ultimate aim is to beat the S&P500 by a margin that justifies individual stock investing. I've gotten to the point where I double my money every 4 - 6 years, which achieves this...but it takes time and patience. Again, anybody telling you different is either lucky or selling something.
All the best.
Tampa, there is no rhyme nor reason to this situation anymore. The bottom line is that current investors are at the mercy of the courts and opportunistic interests looking at TRN for a payday. The fact that it got this far, in spite of tests apparently exonerating TRN with regards to safety, infers an insider witch-hunt.
I'm no conspiracy theorist. I'm an Occam's Razor guy. But I see no objective evidence of fraud, safety violations, or intent to mislead.
Roll the dice here. That's the best I can say. I can't advocate TRN to new investors, sad to say.
I'm staying with the dice. I'm holding 927 shares, averaged at $16 a share. Fingers crossed.
Utterly surreal. TRN now jumps? Hell, I'm pleasantly surprised...but this is irrationality and corruption at its Orwellian finest. Doublespeak and doublethink 101. All at the whim of concentrated interests, including our government.
I'll continue to hold. But lord knows what will happen. TRN could go away? Maybe the judgement gets dismissed on appeal? This simply is a wild and whimsical investing context.
I'm a patriotic American. But I really am beginning to detest our legal and political system. It should be much better than this.
What really kills me is that many ordinary Americans are oblivious to this. Well, I guess they don't call it "the irrationality of the herd" for nothing. I admit I use this to my investing advantage...but like I said earlier, it sucks when the herd colludes with government and special interest to attack good companies.
Sorry for the rant.
This is going to be an interesting test for our country. Sure, it seems like a small matter. But in my view, it could be a canary in the coal mine sort of thing.
Wall Street is increasingly rigged. Especially short term. IPOs these days are beyond even fully valued. Pro forma reporting trumps real earnings. Big money interests more brazenly create hype, pumping and dumping both ways.
Disciplined value investing was long my way to beat the street. But an indictment like this is disconcerting. I can't beat lawmakers, lawyers, and activist juries colluding to bring down even a good company.
Mind you, I don't know for sure that Trinity didn't do anything wrong. But based on what has been released, it sure seems like this is a case of government and special interest fraud. Interesting times.
One last thing...I'm holding.