Since founding Century Management in 1974, Arnold Van Den Berg has handily beaten all of the indices. Mr. Van Den Berg is a value investor, and considers himself a student of Benjamin Graham.
Arnie applies value investment strategies as his investment philosophy. His investment research seeks to determine the appraised value of a company, often referred to as intrinsic value. Investments are then made at a significant discount, normally 40% to 65% below the company's current intrinsic value. This is his margin of safety. Arnie usually holds 35-40 companies when fully invested, and invests primarily in U.S. headquartered companies.
Last quarter, he increased his stake in Chicago Bridge and Iron (CBI, Financial) by buying 194,170 shares of the company. The following chart shows his holding history in the company.
Chicago Bridge and Iron Company is a leading engineering and construction company. According to Gurufocus DCF calculator, the company has a business predictability rating of 5-star and margin of safety of 36%.
Last quarter, the company posted net income of $132.2 million, or $1.21 per diluted share, an increase of 40 percent against adjusted net income for the comparable period. Revenues for the first quarter were $3.1 billion, up from $2.9 billion, or 7 percent from the first quarter 2014. New awards for the first quarter totaled $3 billion, which resulted in a backlog of approximately $30 billion. The company has an impressive track record of growth. The company's diluted EPS has increased from $3.07 in FY2011 to $4.98 in FY2014. In the same period, its revenues have more than doubled to $12.97 bn aided by the Shaw acquisition. According to sell side estimates, the company's topline and adjusted EPS are expected to grow 10% and 8%, respectively in the current fiscal.
Chicago Bridge and Iron's business is a long lead time one with high visibility. The company received $3 billion in new awards for the fourth quarter, and its order book stood at $30 billion at the end of 1QFY2015. The company's healthy order book and award wins provide a good visibility into the company's near to medium term revenues which should reassure investors who are worried about recent fall in oil prices and its impact on the company.
Chicago Bridge and Iron should also benefit from acceleration in gas-fired power plants projects in 2015. Markets in the United States are showing acceleration in the pace of gas-fired projects to replace coal plant retirements. Chicago Bridge and Iron has been focusing on this market for quite some time. Recently, the company signed a significant strategic agreement for NET Power – CB&I's collaboration with Exelon (EXC, Financial), Toshiba (TOSBF, Financial) and 8 Rivers Capital. As a part of this agreement, CB&I will be an exclusive partner and contribute the expertise to engineer, procure, construct, commission and test a 50-megawatt natural gas-fired electricity generating demonstration plant. This will be a first-of-a-kind demonstration plant to validate a new natural gas power system that produces zero atmospheric emissions. If successful, it represents a potential game-changing opportunity to comply with clean energy regulations.
Chicago Bridge & Iron is trading at 8.97x FY2015 consensus EPS estimates. Out of 21 analysts covering the company, eleven are positive and have buy recommendations, six have hold ratings and four have sell ratings. Given the company’s low valuations, I recommended buying the stock.
