Rule #1 Investing Spreadsheet / Calculator Resurrected! Version 1.5

It took almost 10 years for me to update the Rule # 1 Investing spreadsheet/calculator (and to write a post on here).  I doubt any of you reading this have ever followed this blog...so welcome!  Take a quick peek at my first post to give you an idea of what this blog is about.

Let's not belabour the origin of this blog; you're here for the Rule # Investing spreadsheet.  I had neglected the sheet for quite some time, because to be honest, I had grown beyond the methodologies of Rule # 1.  Don't get me wrong; I absolutely have Phil Town to thank for my tremendous success in investing (maybe that will be the focus of another post), especially in the last 5 years.  Rule #1 was a great start for me as a beginner.  As I matured in my investing journey, I've picked up other lessons as well and have relied less on the structure of Rule #1.

That said, the next phase of my investing journey is going to focus more on coaching, since my oldest is now 14 years old and, to my great joy, have expressed an interest in investing her own money.  This is why I have now updated the Rule # 1 spreadsheet so that she and all of you can benefit from it.

I hope this will be useful to you!  Leave a comment!

Rule #1 Investing Spreadsheet / Calculator Version 1.4.2

Update: There is a new version of this sheet.  Find it here!

Thanks for a number of readers for informing me of the significant changes that was made at MSN Money (the source of much of the stock data on the previous version of my Rule #1 Investing Spreadsheet).  10-year data is no longer available there.  As a result, I had to quickly scramble to find another source.  What I found was www.gurufocus.com and the 10-year data that it has is pretty amazing.  Therefore, I was able to revive my spreadsheet fairly quickly.

If you only use the first few tabs of the spreadsheet, you will see very little changes.  The only real change is that Canadian stocks are no longer supported (boo hoo...).  I suspect it would impact a small portion of us Canadians, but I'm mainly invested in US stocks anyway...

Anyway, you can find the new version here: http://goo.gl/GS3RyI .  As usual, to be able to use the sheet, you'd need to click on File > Make a Copy to create a copy for yourself.  You will need a Google account for this.  Cheers!

For reference, read my last post on the spreadsheet.

Rule #1 Investing Spreadsheet Version 1.4.1

Update October 7, 2014: Spreadsheet has been updated.  See http://goo.gl/KEm3ar

Hello Readers!  If you've been following me previously, then I must thank you for your loyalty, because my last personal post was written more than 2 years ago!  It's funny how priorities change very quickly in life.  Well, the word "idle" definitely doesn't describe my life over the past 2 years!  Anyhow, I'm glad I actually got around to writing this!

And if it's your first time to this blog, please take a look at all of my older posts...the last 2 years have proven that my wisdom, albeit finite, is not so bad after all.  Do click around and if you like what you see, please subscribe and/or follow (see navigation bar on right)!

Sorry, back on topic.  Although I paused blogging for a while, I definitely haven't stopped investing.  I've also made some tweaks to my Rule #1 Investing spreadsheet.  I give you Version 1.4.1: http://goo.gl/JlQYt4.  In order to use this sheet, you will need a Google account.  Once you're logged in to Google, click on File > Make a Copy and you're good to go.  You now have a copy of the spreadsheet in your Google Drive.  Feel free to make any modifications as you see fit.

Just a quick note of how to work the sheet.  In the "Stock" tab, you will see a "User Inputs" section on the left.  This is the only place where you should be typing in stuff.  Leave everything else alone if you just want to use the sheet as is.  Type in the symbol, select the country, type in any overriding inputs (e.g. estimated growth, etc.).  As soon as you type something, the sheet will automatically update.  It shouldn't take any more than a couple of seconds.

As a final note, I've been using the Fischer valuation model quite a bit and I like it over the Rule #1 model.  You can read all about it here: http://seekingalpha.com/article/960381-shhh-my-secret-valuation-model-revealed.

Have fun investing!  And write me a comment if you get a chance!

Rule #1 Analysis Spreadsheet: Minor Update to Accommodate Changes to MSN Money

Update October 7, 2014: Spreadsheet has been updated.  See http://goo.gl/KEm3ar

Update July 30, 2014: - New version 1.4.1 has been released.  See post: http://goo.gl/2gedCi

Update June 21, 2012: - I have added a locked version of the spreadsheet (see above).  This one should not have any data corruption issues.  You would need to click on File > Make a Copy in order to be able to edit it, however.

Update June 20, 2012: - I've uploaded a fresh version of the Google Spreadsheet.  Hopefully, this will eliminate the issues that we've been experiencing with Sales and ROIC numbers going missing!

Hello Folks!  MSN Money recently changed the way it displays some of the data that my Rule #1 Spreadsheet uses.  As a result, everything has stopped working.  Not to worry, I have rectified all of the problems that I was aware of and now, I present to your version 1.3: http://goo.gl/5kscR and a locked version http://goo.gl/TY5iA (which should not have any data corruption problems the other has had)!  Have fun with it!

You'll also find that I've added some more columns to the "Stock List" tab which hopefully will give you some more firepower in evaluating your stocks.  A "Noteworthy" tab has also been added to list out some of the stock symbols that have fairly good Rule #1 numbers.  Beware that some may just show up as good in this screen, but may actually be not-so-good stocks.

Please let me know if there are any bugs, etc!  Cheers!

Rule #1 Analysis Spreadsheet: Updated with Auto Stock Lookup

Update October 7, 2014: Spreadsheet has been updated.  See http://goo.gl/KEm3ar

Update January 26, 2012: I've updated the sheet.  Go to the Investing Resources to download the latest sheet.

FINALLY!  It's been a couple of months since I wrote.  A newborn and a 2-year old definitely takes up a majority of my free time!  Today was a bit of a vacation.  The family is staying over at my parents' for the weekend and so, I have some time to sit down and do some personal stuff, while there are plenty of people looking after the kids!

I promised, earlier on, to publish my Rule #1 spreadsheet with the auto stock lookup.  You can access the spreadsheet HERE.  The first thing you need to do is make a copy of the sheet so you can make edits to the sheet.  Click on File > Make a Copy, and name the file to your liking.  Oh yeah, you'll need a Google account.

How the Sheet Works
The main difference in the sheet lies in the "Stock List" tab.  The tab is designed to run the Rule #1 analysis on the symbols that is specified in column A.  Here's a simple procedure on how to use the sheet.

1. Fill in Columns A and B with the symbols and their respective stock exchange.
2. Click on Automation > Run Stocks - Start at Top.  This will start the script and the table will be filled with the Big 5 numbers.

If you have a long list of stocks, the Google script may time out and stop in the middle of the list.  If that's the case, use Automation > Run Stocks - Continue from List instead.  It will continue where you had left off.

In addition to just displaying the Big 5 numbers, I've also added an arbitrary formula that will rate the stock based on the numbers in Column R.  It basically gives a higher score if the Big 5 numbers are greater than 10%, a mediocre score if they are between 0 to 10% and a negative score if the numbers are less than 0%.  Feel free to change this formula to whatever you want it to be.

Data...a Lot of Data!

When I had started working on this sheet in the summer, one of my readers, Brad, got me a very comprehensive list of US stock symbols.  Due to Google's script time out issue, it took me quite a while to go through all 6000+ symbols...but here it is, available to you.  It's under the "Copy of Stock List" tab.  Keep in mind that the data is from the summer, which may be a little outdated.

Brad also gave me a lot of suggestions to add more fields such as P/E ratios, sticker price, current stock price, etc.  I haven't had time to implement much of what he suggested.  For now, I would use this sheet as a stock screener.  Essentially, it'll give you a list of stocks with a Rule #1 score, and you can filter the stocks based on the score.  Take the ones you like and do more research on them.

Let Me Know...

Please send me any feedback that you may have.  I'd like to develop the sheet further to help you out!  Hopefully, it won't take me another 6 months to release the next version!

Work in Progress: Rule #1 Big 5s for ALL Stocks!

Just wanted to update you on what I'm working on right now.  I think this will be good news for those seeking new stocks in which to invest.  One of my readers, Brad, had suggested that I somehow automate my Rule #1 spreadsheet to go through every single stock traded in US exchanges and pump out a summary for them.  I took up the challenge and decided to further automate my sheet to do this.

What I did was added another tab into the spreadsheet.  There, I have in one column the symbols of all of the stocks listed in US exchanges (courtesy of Brad) and then I wrote a script to go through each and every one of them and look at their Big 5 numbers.  Since I have 1-year, 5-year and 9-year numbers, I decided to cook up an arbitrary formula to give each company a score.  As you know, Phil Town recommends that the Big 5 numbers be > 10%.  So, if a particular Big 5 number is > 10%, the company gets a score of 3 for it.  If it's > 0% but < 10%, it gets a score of 1, and if it was < 0%, it would get a -1.  I then sum up all of the Big 5 numbers and normalize it to be out of 100.  Since I do get "invalid data" once in a while for whatever reason, I just ignore that data point.  What makes a good company?  I think a score of 60 or above is a pretty solid company.

Figure 1: Updated Rule #1 Spreadsheet

One disappointment I had was that Google limits the run time of a script to be 5 minutes.  The spreadsheet takes about 5 hours to run through the script.  So, I'm painfully refreshing the script to go through the 6000+ symbols.  Once that is done and I've thoroughly debugged the sheet, I will publish the sheet along with its results for you.

I would imagine you would want to sort the score using descending order and just see which companies interest you.  I'm quite excited to see what kind of results I get.  This is really a lot better than using an off-the-shelf stock screener since there is really no Rule #1 screener.  Here, you just hit up the stocks with a high score and start your research there.  Since you will have access to the sheet formulas, you can also create your own formula as you see fit.

Hopefully, I will have it published by the end of the week!

Stock Allocation: A Way of Increasing Returns

If you are an investor, chances are you would have heard of the term "asset allocation".  The idea is to maintain a certain percentage of your portfolio in different asset classes, for example, stocks, bonds, etc.  Why would you want to do that?  The answer is simple: it increases your return.

Suppose you have Asset Class A and Asset Class B, and you want to maintain the percentage of each to 50%.  Say you had invested $10000 in each and Asset Class A rose 50% in the first year while Asset Class B dropped 30%.  At the end of the first year, you would have $15000 in A and only $7000 in B.  You now have an imbalance.  What you do is sell A and buy B so that you have equal amounts of both (50% of each).  At the start of year 2, you would have $11000 of each of A and B.  If B then rises 50% in year 2 while A falls 30%, you would have $7700 in A and $16500 in B.  This would total to $24200.  If you had not rebalanced your portfolio, you would have had $10500 in A and $10500 in B, totaling only $21000.  Asset allocation works very well when your asset classes are not correlated (i.e. they do not move in the same direction all the time).

The really curious thing is this: your portfolio returns is actually greater than the average of the returns of both investments.  Back to that example above.  A had risen 50% in the first year and dropped 30% in the second year.  Its returns was 5% over 2 years.  B had dropped 30% in the first year and risen 50% in the second year.  Similarly, its returns was 5% over 2 years.  However, the rebalanced portfolio ended with $24200, which works out to be 21% gain over 2 years.  Both only returned 5% over 2 years, but somehow, your portfolio returned 21%! Isn’t that cool?

The key lies in correlation, the lack of it actually, between the assets.  What we are effectively doing is buying low and selling high.  Now, you all know that I am a stock kind of guy (I only hold cash or stocks).  Therefore, instead of asset allocation, I propose doing a stock allocation.  I currently have 4 stocks in my portfolio.  Chances are, they will be slightly correlated.  That is, they tend to move in the same general direction, but some times do deviate.  In Figure 1, you can see the performance of the 4 stocks over the past 2 years.  As you can see, they definitely follow different paths.  The goal is to allocate a certain percentage of your portfolio to each stock.  In this case, I may want to allocate 25% of my portfolio in each stock equally.  It doesn't necessarily have to be an even split.  I may have a belief that True Religion would outperform the other 3 stocks.  In that case, I might want to give it a 40% weighting and the rest 20% each.  It is entirely up to your discretion.

Figure 1: The Stocks in My Portfolio: Google, True Religion, First Solar, Synaptics

Dumb Stock Allocation
So, you now get the general idea of stock allocation.  You can either use a "dumb" stock allocation strategy or a "smart" stock allocation strategy.  The dumb strategy is to simply set an allocation target percentage and every few months (or weeks or years), rebalance your portfolio to that percentage.

Let’s look at a real life scenario to see how that works out.  Instead of 4 stocks, let's keep things simple and use 2 stocks.  The table below shows quarterly price data of Google (Ticker: GOOG) and True Religion (Ticker: TRLG), starting from January 2005.  If you had bought and held the stocks, you would have gotten 193% returns over the 25 quarters.  If you had rebalanced your portfolio every quarter using dumb stock allocation, you would achieve 297% returns over the 25 quarters!  It works alright!

Smart Stock Allocation

"Smart" stock allocation, on the other hand, requires some smarts from you.  I would definitely say that this is a more advanced strategy with a combination of Rule # 1 Investing and pure gut feel.  I'm starting to employ this strategy...So, we're into uncharted territory here!  Ok, ok, I'm exaggerating...investors have done this many, many times already.  In fact, many people do this without knowing it.

Here's a real life example.  If you have followed my trading history, you would have noticed that I started buying True Religion around this time last year and began to sell it just recently.  I have also bought some First Solar recently.  This is me doing some smart stock allocation.  True Religion has run up to the high $20s in the last couple of months.  My cost was $22.55.  Because of this run up, the holding has grown in proportion.  Meanwhile, First Solar spiked up for a little while, but is now trading in the $120s, off its 52-week highs in the $170s.  It has decreased in proportion.  Therefore, I sold some True Religion and bought some First Solar.  The likelihood of First Solar moving back up to $170 is greater than True Religion moving up the same amount to $42; the True Religion stock had already gone up from $22 to $29 in a short amount of time.  If things work out as they should, we should see First Solar bounce back up while True Religion takes a breather and stays steady or retreats a little.  Hopefully, this will work out.  Pray for me!!

Some Major Major Caveats

Whether it's dumb or smart stock allocation you are using, you must have good reason to own any particular stock.  Please do not, I repeat, do not use stock allocation blindly by just picking whichever stocks you like and hope that you will make money.  If you pick 5 overpriced stocks, as the prices tumble 50%, stock allocation won't be of much help.

You need to know the intrinsic value of the stock.  My advice is to use Rule #1 to help you determine that.  Never buy a stock that is ridiculously overpriced.  For that matter, never buy a stock that is fairly priced.  Always buy a stock that is underpriced.

If you are using smart stock allocation, use technical analysis to help you figure out when to buy and sell.  Rule #1 talks a bit about the "3 tools", but from my own experience, I prefer using supports and resistances.  However, the 3 tools in Rule #1 are more objective and require less experience.

Lastly, know that stock allocation might not increase your returns.  If your one stock does really, really well for an extended amount of time compared to the others, you would end up selling more and more of it prematurely.  Therefore, study the movement of the stock.  If it tends to gyrate between supports and resistances, then it would be wise to rotate in and out of the stock as it moves up and down.  However, if the stock tends to be steadier and rises constantly, stock allocation may not end up helping you.  I would recommend doing some back testing to see how stock allocation works out.  By back testing, I mean running a simulation of the past few years of data and see if the returns are magnified or decreased (similar to what I did above with Google and True Religion).

Let me know how this works for you!

Update of Portfolio: Garmin (GRMN)

Not all things are rosy in my portfolio.  I've had some losing positions over the years and this post will be on one of them.  It is the very familiar name, Garmin (Ticker: GRMN).  If you don't know what they do, they are one of the major GPS makers (alongside TomTom).

I had started my position in Garmin when I first started reading Rule #1 back in 2008.  Phil Town liked the stock and I was a Garmin user myself.  I ran some numbers and thought that the company was on solid footing.  I started buying as it fell to $40 from $120.  I thought it was an excellent price.  I continued to accumulate and had a sizeable position, with an average cost of about $37.  As the financial meltdown took its course, Garmin fell all the way to $17.  If only I had cash left at that time, I would have bought more.

Fast forward a few years, after getting paid $1.50/share in dividends and making a small amount in Garmin options, I exited the stock at around $33.50.  I bit the bullet and took a loss, because I looked at my other holdings and realized that my money was doing not much work in Garmin and the potential for growth was smaller than the others (i.e. True Religion, Google, etc.).  All in all, I lost a couple of bucks per share, but the higher costs was really the opportunity cost.

Garmin's Brief History and Current State
Let's look at how Garmin is doing these days.  If you flip through the Rule #1 analysis below, you can see that there's some missing data in MSN Money, but the data that do exist are telling.  Every was rosy until about 3 years ago.  This was when the financial crisis hit and the smartphones started to take off.

Since many people had bought a car GPS by then, the market was beginning to saturate.  Overall growth in the company became stagnant.  It also flopped on its venture into the smartphone space.  In my opinion, it failed not because it did not have a good strategy, but because of poor design choices.  The strategy of using Android as the platform was sound; HTC has become a major force in the smartphone world by adopting the Android OS, so it could be have been done.  The failure stemmed from the lackluster hardware specifications that the Garmin phones had.  Garmin's phone specs could not match those of the likes of Motorola Droid and HTC/Google Nexus One.

Figure 1: Rule #1 Analysis of Garmin (GRMN)

However, there is light at the end of the tunnel for Garmin.  As its automotive segment begins to wind down, its outdoor/fitness, aviation, and marine segments are still doing quite well and with great margins.  These segments combined already bring in more net income than the automotive segment.  Garmin will soon find its groove again if it can successfully fend off newcomers such as Nike in the outdoor/fitness segment.

The rise of China and India also presents some much needed lifeblood for the automotive segment.  So, it is not entirely dead yet.  Garmin pays a nice 5-6% dividend, has a steady cash flow, and its balance sheet is strong.  It's current P/E ratio is 11.2, which is not expensive at all.  Investors have priced it as a steady, if not declining stock.  If the stock falls below $30, it could be start to be a bargain again.

Conclusion

So, was Garmin a mistake?  Yes and no.  The mistake was exhausting my cash a little too quickly, but who would have known how low it could go back in 2008/09.  If I had only started buying a little later, I would have made some good money.  The company is not exactly a Rule #1 stock now, since it is well past its growth phase, but it could still be a value stock.  The main reason I wanted out was because I saw better opportunities out there.  Taking that loss was difficult, but it's for the better.

Update of Portfolio: First Solar (FSLR)

Today, I will be talking about the third stock in my portfolio: First Solar (Ticker: FSLR).  First Solar is a company that makes photovoltaic (PV) panels and is also involved with large scale PV project developments.

When a typical Joe hears the words, solar energy, he is likely to think of inefficient and expensive solar panels lined up row after row in a remote desert somewhere.  There is some truth to that, but the technology is starting to gain wide acceptance, especially after the tragic Japanese Tsunami that crippled a number of nuclear plants in Japan.

I like First Solar for a variety of reasons.  It is a "best of breed" stock in many aspects.

1. Its capacity will be around 1.4 GW in 2011, which will likely be about the 2nd largest in the world.
2. It has the lowest cost per watt, at about $0.77/W at the end of 2011.  The closest competitor, Yingli (Ticker: YGE), is at about $1.11/W.
3. It is the only successful thin-film solar manufacturer.
4. As a result of its low cost structure, it has one of the highest operating margins in the high 20s, which is more than the gross margin of many other solar companies!

Figure 1: Rule #1 Analysis of First Solar (FSLR)

The past 12 months have been good for renewable energy.  First, there was the BP Oil Spill.  Then, the Japanese Tsunami and the subsequent nuclear plant incident.  These are tragic events, but sometimes, humanity requires a shock to our system to really wake up from our dream.  China is now putting on hold new nuclear plant developments.  Tens of thousands of German citizens protested against the use of nuclear energy in the wake of the Japanese Tsunami.  2010/11 will mark the turning point in human history with respect to energy use.

It is true that solar energy will likely not replace the nuclear plants in Japan.  However, as the world awakens to the renewable energy revolution, more and more emphasis will be put on solar (and wind and geothermal). I want to make sure that I ride that wave once it hits (sorry, no pun intended).

There are some skeptics and their arguments are logical, but I will show you why First Solar can withstand even the worst-case scenario.  One of the most cited argument against solar places concerns over an oversupply of solar panels, coupled with decreased government subsidies.  Many solar companies are ramping up their production.  As the argument goes, there will simply be too many panels around and not enough demand.  As a result, the prices of panels will drop.  Companies will lose money and as a result, you will lose money if you're invested in solar.  Decreased government subsidies just aggravate the problem.

Yes, I agree with these skeptics that there will be fallout.  Evergreen Solar (Ticker: ESLR) will be one of the first to go.  The companies without meaningful profit and a lot of debt will all be in trouble.  But I'm not worried, because I've got the best of breed.  First Solar is currently making money hands over fists.  Gross margins are super high at around 50%.  Trina Solar's cost, which is its closest competitor, is about 44% more expensive than First Solar's.  If the average selling prices (ASP) drop significantly, if anyone will continue to make  money, it will be First Solar.  Regardless of how much supply there is in the market, the lowest cost manufacturer will always make money.  Ok, well, not always...but it does not make logical sense that even the lowest cost manufacturer needs to sell at a lost, as long as there is demand for solar panels.

First Solar investors should actually want ASPs to drop significantly.  What will happen is that the high cost manufacturers will start to sell at a lost.  Eventually, they run out of funds and are either bought out or have to close shop.  The supply of panels will drop as a result, leaving only the stronger players.  There will be consolidation in the solar market, but after this consolidation, First Solar will emerge stronger.

Rule #1?

You bet that First Solar is a Rule #1 stock!  Growth has been steady and phenomenal and I believe it will continue to be phenomenal.  Sticker Price/Intrinsic value is at $303, and so the stock is still undervalued.  My average price is $131.60 and the stock closed at around $160 today.  If the stock drops below $150, I may start buying again, but at the current price, I'm in a holding pattern.

This stock is also fairly volatile.  So, if it hits $170-180 in the short term, I may unload some shares and wait for a pullback to buy again.

Conclusion

Should you buy?  It all depends on your appetite for volatility (notice I didn't say "risk").  I believe the stock has relatively low risk for several reasons: its past performance, its current state (which is excellent), and the current price is not too high.  However, the amplitude of price fluctuations is large.  So, if you can stomach seeing your holding drop 20% in a couple of weeks, then this stock may just be for you!

Update of Portfolio: Google (GOOG)

Next up on my portfolio update is Google (Ticker: GOOG).  Click on the link in the previous sentence to see all of my posts on the company.  I've written not little about this company.  Reading the older posts will give you a flavour of my thoughts.

Where to begin?  How about an amazing 2010 for Google?  If you look at the Rule #1 spreadsheet below, and click on "Big 5" and scroll down to "EPS", you will see the historical earnings for the past 10 years.  The growth is phenomenal!  Aside from year when the world was coming to an end (2008 if you weren't paying attention), the minimum year-over-year EPS growth was 28.9%, which was last year.  Yes, the growth of the company is slowing, but at 28.9%, it's still pretty red hot!

Figure 1: Rule #1 Analysis of Google (GOOG)

Red Hot Growth
Is the growth going to continue?  My answer is: YES!  There are several factors that we can look at.  First, and foremost, the internet has not stopped growing.  How do I know?  Well, let's take a look at a somewhat related technology, the cell phone.  It's been around for about 20-25 years now (at least commercially) and you would think that the technology has pretty much plateaued.  Are you kidding?  Just look at the new smartphones that are coming out every week, and you know there is still tremendous growth.  Now, going back to the internet...it's just about the most revolutionizing technology of the 20th and 21st century.  It has changed the way humans do things.  Just think about it: when was the last time you wrote a letter?  When was the last time you opened a phone book to find a phone number?  When was the last time you looked for a job in a newspaper?  And the list goes on.  Is the internet mature now, after being widely available for about 15-20 years?  I hardly think so.  Facebook, the newest internet darling is barely 7 years old!  Who knows what's going to happen in the next 20 years.  But you can bet Google will be part of it.

Second, Google is still supreme in the internet space.  One piece of anedoctal data: Google makes up about 94% of the search engine traffic to this site.  Facebook, while exhibiting tremendous growth, made about $2 billion in revenue last year, while Google made about $8.5 billion in net income, and about $29.3 billion in revenue.  Facebook still has a ways to go to catch up from a business standpoint.  Many speculate that Facebook will dethrone Google, but the two companies don't really even directly compete against each other (save Google's Orkut).  In fact, I believe they complement each other pretty well.

Third, Google has good products and services.  Unlike Microsoft (Ticker: MSFT) but like Apple (Ticker: AAPL), people enjoy using Google's offerings.  Gmail is quick, Google Maps is indispensable, Android is a very compelling alternative to the iPhone, Youtube is synonymous with online videos, and last, but definitely not the very least, the Google search engine is still the very best.

Lastly, Google has vision.  The co-founders Sergei Brin and Larry Page are two of the brightest computer scientists around.  They have the technical know-how to steer the company in the right direction.  The foresaw the emergence of mobile internet a few years ago, bought a small company called Android, and developed it into the smartphone platform that now has the greatest market share in the US.  It could very well have developed a "gPhone", but instead, it made a platform that was free to phone manufacturers.  Consumers like choice.  Some people, like myself, just don't want to own something that everyone already has.  I like to be relatively unique, but don't want to sacrifice on performance either.  Android fills that gap nicely.

Cloud computing is undoubtedly the next progression in computer technology.  Google understands that and is already committed with their Google Docs and upcoming Chrome OS.  If you have not used Google Docs before, it's a cloud-based replacement for Microsoft Office.  Granted, it's nowhere near what MS-Office could do, but for everyday, simple tasks, it fills its shoes quite nicely.  Lately, my wife and I have been contemplating moving to a larger house and we use Google Docs to collaborate and save listings that appeal to us, whether we're looking at the listings from our computers at home, or browsing during our lunch hours (I swear, I never surf the web during work hours!! [just in case my boss reads this] LOL!).

Some Numbers
Looking at the Rule #1 spreadsheet above, the fundamentals look good.  The only thing is that Google is approaching its intrinsic value or sticker price of $673.  However, it has seen a slow, but sure drop to the $550 250-day EMA support lately.  Couple this with a forward P/E of around 14, I thought this was the biggest discount the stock was going to see.  So, I did what felt right: I added to my position.  We'll see what happens next.

My current average cost is $494.  So, I'm making a bit of money.  Analysts have Google making around $34.59 in 2011.  If the P/E ratio is maintained at around 20, the stock price could go up to $700 by the end of the year.

Some Caveats
There are some caveats for sure.  They include i) China and ii) ethics.

As we all know, the Great Firewall of China is even more formidable than the physical wall itself.  China is very paranoid about free speech and the free flow of information.  It requires that search engines present censored search results.  If you don't believe it, go to www.baidu.com and search for "tiananmen square massacre".  I got a total of 8 results...8!!!  Google.com gave me 477,000 results!  Just early last year, Google decided it wasn't going to censor its results anymore.  The Chinese government quickly blocked the site.  Google now runs google.com.hk as its Chinese version of the search engine, because the Hong Kong Special Administrative Area has different laws than the mainland.  However, the government can still block that site from its mainland users at any time.  When everyone is trying to get into China, Google has opted for higher moral ground and has gotten out.  This may not be an permanent situation, but for now, it definitely has not helped its business in China.  Investors have punished Google for this move in 2010.

Google also has some fairly left-wing leanings.  It fully supports the homosexual movement and advocates for them.  I've discussed this issue before.  So, please check it out.  In any case, this is one thing that holds me back from 100% endorsing in the company.  I have weighed the pros and cons in my reflections and have determined that this does not warrant me to pull my investment from Google, but I do keep an eye on any new developments and may change my position to reflect them.  If you do decide to invest in Google, I advise that you do the same.

Conclusion
From the business side of things, there really are no concerns.  Google is in a good position to capitalize on the continued growth of the internet.  It is fully aware of its competition and I'm sure they've got some bright brains behind the curtains working on something.  Unless the business fundamentals show significant deterioration, or the ethical side of things take a really horrible term, my money is still with this company.

Update of Portfolio: True Religion (TRLG)

Over the next few posts, I will be reviewing the various stocks that I have in my holdings, since they all have reported on their 2010 Q4 results.  For now, you can check what my trading activity has been.  Clicking on "Felix's Trading History" at the top right will bring you there as well.

I will be starting with True Religion (Ticker: TRLG), the highlight of the week.  If you have been following this blog for the past year, you would know that I have been accumulating this stock.  I started buying the stock in April of last year, at $29.  I started with a small amount and planned to "scale" into the stock (as Jim Cramer would call it).  In essence, if I wanted to buy $10000 worth of a certain stock, I would buy, say $2000 worth each time.  If the stock dips, I would buy more.  If instead the stock rises, then good for me, I've made some money, but I wouldn't not buy until it dips.  The stock got punished, in my opinion, unfairly, over the course of the last 10 months and bottomed at $17.50.  I continued to buy as it went down.  The stock started out making up about 3% of my portfolio to being more than 20% now.  I even started to sell naked put options because I was getting bullish about the stock and wanted to make good use of my margin account.

Yesterday, I was rewarded.  True Religion reported Q4 earnings that beat estimates and the stock rose by 19% in a single day, to $25.07.  My average cost was $22.55.  A few lessons learned (even though there surely will be more lessons ahead): i) if you are fairly certain of your analysis and prognosis, then trust it, even when the market says otherwise, ii) accumulating a stock is a sure way not to miss a big jump in a stock, iii) the market is sometimes not very logical.

Let me elaborate on lesson #iii.  First, the Q4 press release was not stellar.  The results were good, but guidance was a little soft.  In 2009, True Religion made $1.92/share.  In 2010, that number dropped to $1.86/share.  They forecast $1.80/share for 2011.  The trend is definitely not something an investor would like to see.  But the stock got bid up 19% anyway.  Of course, earnings is not the whole story, and for True Religion, it isn't, but usually, the market should have reacted opposite to how it did.  So, this reaction has not been expected.

But was the reaction a correct one?  Was the 19% jump justified?  Absolutely!  The stock had been hammered for a long time and it was much undervalued.  Remember how I got in at $29?  I thought $29 was undervalued; imagine what I felt at $17.50!!  I believe a lot of the investors saw the revenue growth, which was by leaps and bounds ($311 million in 2009, to $364 million in 2010, to projected $405 million in 2011), and same store sales growth of more than 7%.  The expansion plans look good with 23 new stores opening in 2011, most in the US and a handful in international cities.

The only "bad" number in the report was that SG&A was up, which hurt earnings and will continue to hurt earnings in the coming year.  This is the cost incurred by setting up stores and offices in international locations.  These are growing pains, which are necessary to ensure sustained growth.  I like how management is "biting the bullet" and would rather take an earnings hit now, than to sacrifice growth potential in international markets.

I've embedded a Rule #1 analysis spreadsheet for True Religion below.  The sheet does not reflect Q4 numbers, but is close enough to give a somewhat accurate sticker price.  I've assumed a P/E ratio of 20 in calculating the sticker price.  The stock is still undervalued!

Figure 1: Rule #1 Analysis of True Religion (TRLG)

Since True Religion already makes up a good chunk of my portfolio, I do not plan on adding to my position.  I will be in a holding pattern for the stock in the coming months, and potentially be selling more put options.  I particularly like selling options for True Religion because the options are priced fairly highly compared to the stock price, which is due partly to the high volatility of the stock.  For a Rule #1/value investor, volatility is actually a friend.  One would buy at dips and sell at peaks.  For me, I would also sell put options at dips.

In short, the company is in good shape.  It's selling products at high margins, has a good expansion plan, and its stores are far from saturation in the US, and especially in international markets.  Best of all, the stock is priced nicely, where you can still get some margin of safety.

Rule #1 Analysis Spreadsheet: Updated with Auto External Data Import

My cousin, Kelvin, works a major Canadian bank.  So, he's used to working with automated spreadsheets with VB scripts, etc.  So, when I sent him my manual Rule #1 spreadsheet, he mocked at how rudimentary it was.  So, thanks to him, I've decided to educate myself on how to further automate my spreadsheet.  I already knew how to pull external data from websites, but didn't know how to dynamically update the query when I changed the stock symbol.  The solution was simple: use the record macro function on Excel.  What I did essentially was record how I would manually change the web query and modify the code that was recorded.  It actually took about 10 minutes to make the change.  I wonder why I didn't do that earlier!

So, with all its glory, I present to you my automated Rule #1 Analysis Spreadsheet!  With this spreadsheet, you really only need to look at 3 tabs.

1. Go to the "Stock" tab.  Fill out the 3 pieces of information there.  Click on "Refresh Data" and wait for Excel to update the data from the web.
2. (Optional) Go to the "Sticker Price" tab.  Change the growth and P/E numbers if you want.
3. Go to the "Summary" tab.  Look at the results.  Voila!

The previous spreadsheets weren't bad.  One would need to spend about 2 minutes populating the data by copy and pasting.  Now, you can save about 90 seconds every time you use the sheet!

The story with Kelvin didn't just end here.  I sent the spreadsheet to my friends (thanks Jit), including Kelvin, for some real-life stress testing.  The sheet worked perfectly, for all of them...except Kelvin.  D'oh!  I use Excel 2007 and he's got 2003.  I believe that could be the root cause of the problem.  Since I don't have Excel 2003 on my computer, I couldn't do much debugging.  I've given up!

Instead, I realized that there could be potentially a better solution: I moved to Google Spreadsheets!  Now, investors, take note.  This is a classic example of how Google continues to draw user base from Microsoft, and how cloud computing is starting to take hold.  Mind you, I'm almost always an early adopter in technology...In any case, I'm now working on a Google Spreadsheets version of the Rule #1 spreadsheet.  I have it running already, but there is some fine tuning to be done.  If you want to check out the current version, it's here: http://goo.gl/goru5.  You'll need to log into your Google account and make a copy of the file in order to actually use it.

Give me some feedback, on either version of the sheet!  Enjoy!

Update December 3, 2011: I've updated the sheet.  Go to the Investing Resources to download the latest sheet.

Rule #1 Analysis Blitz #10: Coca-Cola (KO)

This is the concluding post of the Rule #1 Analysis Blitz Series.  I had intended to write 10 posts in 10 weeks, but due to sickness and various other reasons, I was unable to stick to that goal.  Luckily, I was only behind a week or two.  So, I'll give myself 8 out of 10 for punctuality! :)

This week, I'll end with the company with which everyone is familiar: Coca-Cola (Ticker: KO).  Coca-Cola happens to be one of Warren Buffet's favourite companies and we will explore why that is the case.  Let's see if it meets Rule #1 standards!

Moat

You can download the completed Rule #1 spreadsheet here.

Coca-Cola is the ultimate example of a company with a brand moat.  Time after time, Pepsi has shown through blind taste tests that people generally prefer the taste of Pepsi.  However, most people I know, when ordering fast food, will order a "Coke" and not a "Pepsi".  When it happens that the fast food place only sells Pepsi, I get a little annoyed when I'm asked, "Is Pepsi ok?", when I asked for a Coke.  Heck, I don't even know if there's any difference in the taste, but just the thought that I'm not going to get a Coke frustrates me.  I won't go much further, but I think you understand well the power of Coca-Cola's brand.

Looking at the numbers, they look pretty darn good.  Considering Coca-Cola is a more than 100 years old, the growth is pretty spectacular.  ROIC is very high in the high teens to low 20s for the past 10 years.  EPS growth is at an impressive 14.3% over last 9 years.  BVPS and free cash flow growth are both excellent.  The only yellow flag I have is sales growth.  Sales dropped a bit last year and grew at single digits for the past decade.  As I said, this is a mature company, the sales growth numbers are not bad.  However, this is truly a yellow flag.  This trend cannot continue indefinitely.  If sales growth is slow, EPS growth will eventually slow because gross/operating margins cannot increase indefinitely towards 100%.  And of course, we all know that earnings is pretty key in the valuation of a stock.  So, it can be expected that, unless sales growth accelerates, EPS growth will likely decrease to the levels of sales growth.

Recently, Coca-Cola bought the North American operations of Coca-Cola Enterprises, which is the bottling company for Coca-Cola's products.  This is seen as a move to gain more control of how product move through the pipeline and also to enable better adoption of non-carbonated drinks as demand shift.  So, management sees this as a move to accelerate revenue growth.  At least, Coke knows what requires work in their numbers!

Coca-Cola gets a 10 for the qualitative portion of Moat, but overall, I'm going to give it an 8.

Moat Score: 8 / 10

Figure 1: Rule #1 Analysis of Coca-Cola (KO)

Margin of Safety

Unfortunately, Coca-Cola is overpriced right now.  At $63 right now, the stock has a P/E ratio of 19.4.  It's fairly high for a company whose EPS growth has been single digits.  For comparison, Apple (Ticker: AAPL) has a P/E of 22 right now and its year-over-year EPS growth was 78%!

Using somewhat conservative numbers of EPS growth of 9.0% and P/E ratio of 16.7, we come up with a sticker price of $33.03 and entry price of $16.52.  So, the share price is almost double that of its current value and almost 4 times that of its entry price!

Payback time is also at 10.9 years, which is way too long for stockpiling of the stock.

Coca-Cola gets a 2 out of 10 for Margin of Safety.

Margin of Safety Score: 2 / 10

Management

Muthar Kent is the CEO and Chairman of Coca-Cola.  He has a long track record with the company, starting his employment there as an entry level employee some 30 years ago.  He worked his way up the ranks, left the company for about 6 years in the late 90s to mid 2000s, and finally returned to Coca-Cola and assumed the CEO position in 2008.

Kent comes from an interesting and noble background.  His father, Necdet Kent, is nicknamed "Turkish Schindler" for helping saved many Jews during the second World War.  Kent was born in New York City, when his father was consul-general there.  He grew up in Turkey, was educated in the UK, and worked in the US (later back in Turkey).  He definitely has led a cosmopolitan career, which is almost a requirement for the CEO of such an international company.

Kent has ownership of about 68000 shares of KO, which is worth about $4.3 million.  If you compare this to ownership of, say, Google executives, this is peanuts.  Is this a cause for concern?  Maybe...But do keep this in mind: Kent only rejoined Coca-Cola a few years back and has been CEO for less than 3 years.  Also, he has not sold many KO shares recently.  So, my guess is that he has only started to accumulate his ownership of KO shares.  As much as most of us think executives of big companies are billionaires, they are probably far and few between.  These billionaires are likely produced "overnight", when their creation transformed from a startup to being an industry stalwart within a few years (read Microsoft, Google, Facebook, etc.).  Kent is not one of these billionaires! His net worth, I'm guessing, is probably around $20 to $50 million.  Having $4 million, or 8 to 20% of ones net worth in his own company stock is probably pretty significant.

Looking from all angles, Kent seems to be a trustworthy, reliable, and ethical leader.  There is some degree of uncertainty due to his short tenure as CEO at Coca-Cola, but I believe in the years to come, he will demonstrate his leadership.

Management Score: 8 / 10

Meaning

Who doesn't like Coke in this room?  Didn't think there were many of you!  Unlike some people I know (my cousin), I don't live on Coke.  It takes a couple of parties at my house to clear out the 2 cases of Coke in my basement, but that is exactly the power of the brand.  I consume maybe 1 to 2 Cokes in a month, and yet, I still have 2 cases of it sitting in my basement.  It is the universal beverage!  When someone comes over to your house, what do you offer them as a drink?  It's either a coffee/tea (depending on your ethnic background) or a Coke.  Coca-Cola is universal.  Does it have meaning to me?  You bet!

On the ethical side of things, is the drink itself ethically positive, negative, or neutral?  No one has ever praised Coca-Cola for being a healthy drink.  It has plenty of calories, lots of sugar, some caffeine, etc.  Diet Coke or Coke Zero is no better.  Just the thought of drinking something tasty but has zero calories tells me something is wrong.  However, many products out in the world are not good for you.  You can argue that oysters are not good for health because they have high levels of cholesterol.  But as with all things, Coke needs to be taken in moderation.  Like myself, I can freely enjoy a Coke whenever I have it, because I don't drink it 3 times a day.  So, I don't necessarily buy the argument that because Coke does not contribute positively to your health, then it is an unethical product.  The product itself is neutral at worst.  Having said that, Coca-Cola also produces healthier products like Minute Maid, Dasani, Nestea, Powerade, etc.

Coca-Cola is a company that supports gay/homosexual rights.  I talked a bit about this issue in my Google post.  Although this is not something Catholics would like to see, it is not something that would cause the USCCB to withdraw its investment funds.

There has been some complaints in Coca-Cola's business practices.  One example involves a Coca-Cola bottling plant (which may not even have been owned by Coca-Cola, but rather, Coca-Cola Enterprises, which is a separate company...but, we'll assume Coca-Cola is the culprit) in India where the bottling plant has caused a decrease in groundwater, in an already poor area.  Another example is allegations that union activists were dealt with in a violent manner in Latin America.  Where there's smoke, there is fire...so, I'm sure that these allegations have some merit.  In a corporation as large as Coca-Cola, you can be sure to find some part of the company that has less than desirable business practices, especially in developing countries.  This is not to give Coca-Cola an excuse, but it does not appear that the problem is systemic.  In North America and Europe, Coca-Cola has had a good reputation in its business practices and all-in-all, I don't see too great of a concern over the company's ethics.

Meaning Score: 6 / 10

Summary

Moat Score: 8 / 10

Margin of Safety Score: 2 / 10

Management Score: 8 / 10

Meaning Score: 6 / 10

OVERALL (not an average): 4 / 10

If only the shares were not overpriced, I'd probably invest in Coca-Cola too.  Warren Buffet has about $11 billion in Coca-Cola.  So, there's probably some merit to owning KO.  I'd wait for a dip in price!

And so, this concludes my Rule #1 Analysis Blitz.  If you've enjoyed it and would like to see more, please leave me a comment and also the company you'd like to see.  I'm probably going to continue this kind of post, but it'd be done in a lesser frequency.  I'm also open to constructive criticism!  Thanks for reading!

Rule #1 Analysis Blitz #9: Exxon Mobil (XOM)

As you may have noticed, many of the stocks that I picked for my Rule #1 Analysis Blitz were tech stocks.  It wasn't really on purpose, but this is what Rule #1 is all about.  It's about stocks that have meaning for you.  To me, a youngish male engineer, tech is where it's at!  It's probably not a good thing since we want to diversify in our portfolio.  We want top-notch Rule #1 stocks, but preferably companies in different industries.  A good mix may include a stock from each of the following industries: tech, energy, healthcare, retail, banking/finance.  In my own portfolio, I have 3 out of 5 categories...so I'm trying.

So, in this post, we're going to shift gears a little bit and head to something I'm not too familiar with: an energy stock!  Let's choose the biggest one...in fact, let's choose the world's biggest company by market capitalization: Exxon Mobil (Ticker: XOM)!  If you don't know what Exxon Mobil does (which I doubt), in short, it drills for and sells petroleum and lots of it!

Moat

You can download the completed Rule #1 spreadsheet here.

Oil is a commodity.  It doesn't matter whether Exxon Mobil, Shell, or BP makes it; oil is oil.  You hear about the price of crude going up.  Yep, that's the price of crude oil, regardless of its maker.  As long as its composition falls within some specification, it's considered to be the same stuff.  That's the essence of a commodity.  Phil Town doesn't like investing in commodity or commodity stocks.  Why?  The profits are highly subject to the price of the commodity.  As you'll soon see, Exxon Mobil is no exception.  But why is that a bad thing?  Well, when you invest in a company, you'd like the company to be in more control of its destiny.  If you own a commodity stock, even a very well run company can suffer if, through no fault of its own, the price of its product falls.  So, first off, the fact that Exxon Mobil sells a commodity warrants a couple of points being docked off.

A second disadvantage of selling a commodity is the absence of a moat in the product itself.  Unlike shopping for the Apple iPod, you can get the same oil if you went next door to Shell or BP; you can't get an iPod from Sony, Creative, or Sandisk! 

The only real moat that a company like Exxon Mobil can have is its cost structure, much like Walmart has.  If it can make commodity items at a much cheaper price, it can make much more money than its competition.  Let's see if Exxon's numbers show this.  Last year's numbers were bad, real bad.  We had a couple of yellows and 3 negative growth numbers.  Sales, EPS, and free cash flow all declined from previous years.  Looking farther back, the 5-year numbers look a little better, but not by much.  ROIC is the only number that is above 10%.  The rest are below that threshold and free cash flow continues to decline.  Ditto for 9-year numbers.

Looking a little deeper, you'll see in Figure 2, the EPS history of the last 10 years.  You will notice that EPS dropped significantly in 2009 and 2002, which happens to be the end of the last 2 bull cycles.  So, Exxon Mobil is a highly cyclical stock which depends greatly on the economic circumstances of the day.  I'm not an economist and therefore, I cannot see what's going to happen to the macroeconomic environment a year from now.  Sometimes, even the experts can't tell.  So, why pick a business where it depends largely on this great unknown?  Rule #1 investors want to find companies that do well regardless of the economy.  Obviously, no company is immune from economic downturns, but you want some kind of trend or moat to help defend against economic uncertainties.

Exxon Mobil doesn't have much of a moat, but it has been a profitable company for the last 10 years.  So, it does have some merit.  If you can get in at a good price, the stock may produce good gains for you.  But let's continue in our analysis before we get to that.

Exxon Mobil gets a 3 out of 10 for Moat.

Moat Score: 3 / 10

Figure 1: Rule #1 Analysis of Exxon Mobil (XOM)

Figure 2: EPS History of Exxon Mobil (XOM)

Margin of Safety

To calculate the margin of safety, I used an estimate growth of 8.3%, which was the analysts' estimate, and a P/E of 12.  For a company like XOM, the growth of earnings is not very predictable.  If the price of oil skyrockets, its earnings would do the same.  Conversely, if the price of oil tanks, the revenues generated by selling it may not cover the costs of running drills, refineries, etc. and the company may end up losing money.  Some already believe that we have reached "peak oil", which is the term that designates when the overall worldwide consumption of oil will start to decrease as time passes.  If this is true, the macro conditions may not bold well for Exxon Mobil.  However, Philip Morris (Ticker: PM) is in a similar situation with number of cigarette smokers declining, but still managing to grow its business.  So, Exxon Mobil may still be able to do the same.

In any case, the sticker price calculated was $37.13 and entry price was $18.57.  The stock is currently trading in the $70s.  There is a large gap between those numbers.  Even if the growth rate were15% and P/E were 20, the entry price would still only be at $56.40, which is lower than the current share price.  There's absolutely no margin of safety for this stock.  Stay away!  2 out of 10!

Margin of Safety Score: 2 / 10

Management

Rex W. Tillerson is the CEO of Exxon Mobil.  He joined the company in 1975 as an engineer.  That was before I was born!  If anything, Tillerson has shown to be very loyal to the company.  Over the years, he has moved steadily up the ranks in the company, until he was elected as CEO in 2006.

It was recently reported that he owned about 1.5 million shares of Exxon Mobil, which equates to about $113 million!  There also hasn't been any recent selling of shares of a significant value.  So, things look good from an ownership standpoint.  He has a large amount of money vested in the company and doesn't seem to be offloading much at this time.

Just recently, Tillerson was awarded the Corporate Citizenship Award by the Woodrow Wilson International Center for Scholars.  It was awarded for his and Exxon's work on improving education, empowering women, and fighting malaria in developing countries.  Seems like an all-around nice guy!

Although there was not much that I could find on Tillerson on the internet, from what I could find, he is a leader who has earned his position at the company, is very loyal, and has vested interest in the company.  Pretty good if you ask me!  I'll give him an 8 out of 10.

Management Score: 8 / 10

Meaning

After Al Gore lit up a fire on the topic of climate change in his Inconvenient Truth, there has been increased momentum to increase adoption of renewable energy and to decrease impact of fossil fuels.  Complement this With the recent BP oil spill in the Gulf of Mexico and the high cost of gasoline, oil companies have definitely shifted into the role of the antagonist.  Oil, in and of itself, is a good thing.  It gives us things like fuel, plastics, asphalt, etc.  Rather, it is our use (or mis-use) of oil that may present ethical concerns.

The USCCB socially responsible investment guidelines have a category specifically on protecting the environment.  So, if we determine that Exxon Mobil's business has an adverse effect on the environment, we may not want to invest in it.  About 81% of each barrel of oil goes into making fuel including gasoline, jet fuel and diesel fuel, all of which produce carbon dioxide when burned.  Is it unethical to produce a product that contributes to global warming?  Well, is it unethical to drive a car that burns gasoline?  It's sort of in a grey area, but there is some responsibility on all parties, whether it is Exxon Mobil making the fuel or the end user burning the fuel.

Exxon Mobil is an oil company, but it can also be argued that it is an energy company.  Unlike its counterparts, such as British Petroleum, it invests relatively little in renewable energy.  It was also alleged that it funded global warming skeptics.  Exxon Mobil itself was ranked poorly by the Political Economy Research Institute as a pollutant emitter.  Overall, Exxon Mobil does not have a very good image in terms of protecting our environment.

In the end, is Exxon Mobil harming our environment?  Directly...probably, with its own emissions.  Indirectly...absolutely, because its main products are fuels.  What is worse is that it has very interest in shifting its own paradigm from fossil fuels to renewable energy.  It is both harming the environment, and also not striving to protect it.  It gets a 3 out of 10 for Meaning.

Meaning Score: 3 / 10

Summary

Moat Score: 3 / 10

Margin of Safety Score: 2 / 10

Management Score: 8/ 10

Meaning Score: 3 / 10

OVERALL (not an average): 3 / 10

The only good score that Exxon Mobil obtained was Management.  Otherwise, this company is most definitely not "investable"!  It has little moat because its products are commodities; the stock is overvalued; and it is not the most environmentally friendly company out there.  I'd stay away from it!