Today two companies from my portfolio presented quarterly results – AAPL and BEN. I decided to go through results of BEN first, as it is less popular company. In the following days I will write my opinion about AAPL results.

At the opening shares were down by around 3% and are in green currently. Quite strange initial reaction – let’s look at numbers.

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Well, EPS is up by 6% vs previous quarter so it is not bad. Decline in assets is flattening so it gives some hope for the future.

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Policy concerning distribution of capital is still very favorable:

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Taking market cap of $20b and return to shareholders of $1.75 gives us a return yield of 8.75% – definitely a good result! Especially if you consider that company is somewhere in local bottom as it comes to trend on AuM. Also remember that it is not returning capital while increasing debt at the same time. Company is generating a strong cash flow – Cash and cash equivalents and investments were $10.7 billion at September 30, 2016, as compared to $10.6 billion at September 30, 2015.

 

Subtracting cash from market cap gives us around $12b market cap cash adjusted (I assume that some of $10b cash is needed for operations). With expected earnings of around $1.5b (so $2.7 per share) it gives us a P/E cash adjusted of around 8. Well, it is probably one of the cheapest companies in Dividend Aristocrats lists.

 

What can go wrong?

Well, the biggest risks are obviously the continuation of negative trend on AuM and worsening of situation on equity markets. No one knows whether it will happen, but I assume that market is still very reluctant to BEN, valuation is low and downside potential is limited.

 

Summing up, I am still a happy owner of BEN shares and I see no reason to sell it.

 

Disclosure – long BEN