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Back to Basic Materials – Second Quarter Updates and Guru Trades

August 10, 2013 | About:
Sally Jones

Sally Jones

49 followers
Three basic materials companies are currently recognized on the GuruFocus Buffett-Munger Screener for high predictability, EBIDTDA growth and yield. Here’s an update on company financials as well as second quarter trading highlights.

Royal Gold Inc. (RGLD) – 5-Star Predictability

12-month EBITDA Growth Rate: 2.5%

Incorporated in 1981, Royal Gold is engaged in the acquisition and management of precious metals' royalties. The company’s gold-focused portfolio includes 36 producing and 21 development-stage royalties or similar interests.

Royal Gold Inc. is down 28% over 12 months. The company has a market cap of $3.54 billion; its trades with a P/E ratio of 42.70. The yield is 1.40%.

Yesterday Royal Gold announced its fourth fiscal quarter ended June 30, 2013, net income of $10.7 million, or $0.16 per basic share compared with net income of $20.6 million, or $0.35 per basic share for the quarter ended June 30, 2012. Royalty revenue was $57.3 million for the fourth fiscal quarter of 2013, compared with royalty revenue of $60.1 million for the same period in fiscal 2012. Adjusted EBITDA for the fourth quarter of fiscal 2013 was $50.3 million ($0.78 per basic share), or 88% of revenue, compared to Adjusted EBITDA of $54.3 million ($0.91 per basic share), or 90% of revenue, for the prior year quarter. Operating cash flow was essentially unchanged from the prior year quarter. Results for the quarter were impacted by a lower average gold price of $1,414 per ounce, representing a 12% decrease over the prior year quarter. The company also announced that it had acquired a 70% interest in a 2.0% net smelter return royalty on certain portions of the El Morro copper gold project in Chile, from Xstrata Copper Chile S.A., for $35 million, according to a company press release.

Guru Action: In the second quarter, Mario Gabelli sold 1,700 shares at an average price of $54.12, for a gain of 0.4%. The current share price has dropped to $54.35.

Guru Jean-Marie Eveillard has a long, gainful trading history with RGLD. He first bought 135,000 shares at an average price of $17.77, for a gain of 205.9% in the first quarter of 2004.



Historical pricing:

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Valspar Corporation (VAL) - 4-Star Predictability

12-month EBITDA Growth Rate: 11.5%

Valspar Corporation is up 33% over 12 months. The company has a market cap of $6.14 billion; its trades with a P/E ratio of 22.20. The yield is 1.30%. The current share price is $69.92.

A global manufacturer and distributor of coatings and paints, Valspar Corporation was founded in 1806 and currently has around 9,500 employees in over 25 countries. The company's Coatings segment includes a broad range of decorative and protective coatings for metal, wood and plastic, primarily for sale to original equipment manufacturing (OEM) customers. Valspar’s other products include primers, top coats, varnishes, inks, sprays, stains, fillers and other coatings used by customers in a wide range of manufacturing industries, including building products, appliances, furniture, transportation, agricultural and construction equipment, metal packaging and metal fabrication.

In May, Valspar Corporation reported second quarter fiscal 2013 net sales of $1.03 billion, equal to the prior year. Adjusted net income and earnings per diluted share, excluding nonrecurring items, were $83 million and $0.91, respectively. Second quarter 2012 adjusted net income and earnings per diluted share were $80 million and $0.84, respectively.

Guru Action: In the second quarter, Meridian Funds sold 24,800 shares at an average price of $27.63, for a gain of 05%. Overall, Meridian has gained 153% on 1,764,200 shares bought at an average price of $27.63 per share.



Chuck Royce reduced his VAL position in the second quarter, selling 4,200 shares at an average price of $66.56, for a gain of 5%.

Guru Scott Black sold out his remaining 109,188 shares at an average price of $66.56, for a gain of 5%.

Historical pricing:

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Sociedad Quimica Y Minera de Chile SA (SQM) – 5-Star Predictability

12-month EBITDA Growth Rate: 5.2%

Founded in 1968, SQM is a global company based in Chile, with five business lines: specialty plant nutrition, iodine and derivatives, lithium and derivatives, industrial chemicals and potassium. The company's products are mainly derived from mineral deposits found in northern Chile.

Sociedad Quimica Y Minera de Chile SA (SQM) is down 52% over 12 months. The company has a market cap of $7.61 billion; its trades with a P/E ratio of 11.20 and P/S ratio of 2.96. The yield is 3.30%.

Guru Action: In the second quarter, Columbia Wanger increased its position by 116.85%, buying 824,938 shares at an average price of $47.56, for a loss of 39.2%. The current share price has dropped to $28.91.



Guru Lou Howard Marks also increased his SQM position by 146.39%, buying 13,264 shares at an average price of $47.56, for a loss of 39.2%. The current share price has dropped to $28.91.

Historical pricing:

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Tracking revenue and net income:

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About the author:

Sally Jones
Sally Jones writes about Real Time Picks. She says, "I truly enjoy watching the Gurus in realtime and telling their story."

Rating: 4.5/5 (2 votes)

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