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David Winters' stocks trading at Low P/E

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Jun 18, 2015
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Established in 2005, Wintergreen is an independent global money manager. Its manager is David J. Winters, follows a global approach to investing that combines the following key elements: Activism and Arbitrage, Cash and Convertibles, Financings. All client assets are managed on a discretionary basis.

The following are the stocks of

David Winters (Trades, Portfolio)’ portfolio trading with the lowest P/E


Reynolds American Inc

Reynolds American Inc (RAI),manufactures cigarettes and other tobacco products in the United States and It’s reportable operating segments are RJR Tobacco, American Snuff and Santa Fe.

By the end of June a deal between Reynolds American and Lorillard (LO) will be closed and finally tobacco industry will be reshaped and it will concentrate market power in the hands of a duopoly. Of course Reynolds' pending merger with Lorillard Inc. got delay due to further Federal Trade Regulation probes on anti-trust concerns while the merger got approved by shareholders of both the companies in Jan 2014.

For the past decade, Reynolds American, Lorillard, and Altria (MO) have owned over 90% of the combustible cigarette market.

The stock which currently trading at 26.60 of P/E, almost near highest level in the history, +34.48% from its 52 weeks low and -1.56% from its 52 weeks high. Over the past 12 months, the price rose by 24%.

The DCF model, gives a fair value of $32.04 that put the stock as overpriced by 138% at current prices. Even the Peter Lynch earnings line put the stock as overpriced, giving a fair value of $41.4.

RAI has a ROA of 9.65% that is ranked lower than 57% of the 30 companies in the Global Tobacco industry and a ROC of 225.77% that is ranked higher than 80% of its competitors.

Over the last 12 months, revenue grew by 5.60% , EBITDA by 1.00% and book value dropped by of 9.00%.

James Barrow (Trades, Portfolio) is the main guru holding RAI with 3,559,161 shares (0.67% of shares outstanding, or 0.33% of total assets of its portfolio


Canadian Natural Resources Ltd

Canadian Natural Resources Ltd (CNQ) is engaged in the acquisition, exploration, development, production, marketing and sale of crude oil, NGLs and natural gas.

While about 73% of Canadian Natural’s assets are in Alberta, they announced that the nation’s largest heavy oil producer, is considering a shift in investment away from Alberta as the province plans to increase corporate taxes and review royalties. It could devote more spending to operations in Africa, the North Sea, Saskatchewan and British Columbia and of course many of their assets in Alberta that would be impacted and they already warned the government to tread carefully when considering a change to its royalty policy.

It seems that what is most possible is that the government will carefully review Alberta’s royalty regime, working with industry during this period of low oil prices and increasing international competition because there are a significant number of jobs at stake and for sure their intent is not to create an environment in which job losses will be the outcome.

The stock is currently trading at 11.40 of P/E and over the past 12 months, the price dropped by 35%, and is now trading +10.45% from its 52 weeks low and -38.14% from its 52 weeks high.

The DCF model, gives a fair value of $30.25 that put the stock as fairly priced while the Peter Lynch earnings line, with a fair value of $43.0 put the stock as undervalued.

CNQ has a ROA of 5.42 %, a ROE of 11.38% and a ROC of 7.61%. These ratios are ranked higher than 71% of the 453 companies in the Global Oil & Gas E&P industry.

Over the last 12 months, revenue dropped by 3.40% , EBITDA by 0.30% and book value by 5.10%.

First Eagle Investment (Trades, Portfolio) is the main guru holding CNQ with 23,561,775 shares (2.16% of shares outstanding, or 1.72% of total assets of its portfolio. David Winters (Trades, Portfolio) holds 0.29% of shares outstanding.


Norfolk Southern Corp

Norfolk Southern Corp(NSC)is engaged in the rail transportation of raw materials, intermediate products, and finished goods it also transports overseas freight through several Atlantic and Gulf Coast ports.

Because of declining coal shipments (as a result of structural changes in coal production and power plant stockpiles coming out of the winter season) recently their railways lost more than a billion dollars in revenue over the last four years. In 2009, coal made up about a quarter of Norfolk Southern’s volume. That fell to 17 percent last year and in the first quarter of 2015 is was about 15 percent, they expect railroad will be hauling 19 percent less coal in the second quarter of 2015, than the same time last year.

The stock is currently trading at 14.70 of P/E +3.88% from its 52 weeks low and -20.77% from its 52 weeks high. Over the past 12 months, the price dropped by 9%.

The DCF model, gives a fair value of $86.97 that put the stock as overpriced by just 7% at current prices. The Peter Lynch earnings line with a fair value of $95.1 says the stock is fairly priced.

NSC has a ROA of 5.89%, a ROE of 15.98% and a ROC of 13.27%. Profitability & growth is rated 8/10 and this is confirmed by growing ratios; over the last 12 months, revenue grew by 3.50% , EBITDA by 7.40% and book value of 5.60%.

David Winters (Trades, Portfolio) holds just the 0.01% of shares outstanding of NSC that is the 0.33% of his total assets.

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