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How value investors use Skaffold

Value investors, including SMSF trustees, AFSL licensees and private investors, use Skaffold share investment software to guide their investment strategy.

There are many different ways value investors can use Skaffold. Whether you’re looking for the best stocks to buy for your SMSF, seeking short-term high growth to finance another venture, or using Skaffold as a professional investor, Skaffold’s flexible features ensure all value investors can take advantage of investment opportunities suited to their risk profiles and investment strategies.

Lloyd Evans, SMSF trustee

Lloyd Evans, SMSF trustee Lloyd Evans uses Skaffold to manage his personal and family’s SMSF investments.

“Prior to Skaffold my investment results tended to roll with each new fad. Now I wait patiently and take my cues from business value appreciation rather than share price gyrations.

“Skaffold allows me to review a large amount of key information about a company quickly, weed out the businesses with poor economics and focus on what is important – top quality businesses trading at discounts to their future intrinsic valuations.

“I tend to use Skaffold initially for my stock selection and back test my expectations on intrinsic value growth and return on equity. I use it as a check method. As I tend to be a glass half full person in my day-to-day job, I also err on the side of caution with analyst consensus forecasts available in Skaffold. Analysts tend to extrapolate growth projections”, Lloyd said.

Click here to read about Lloyd’s winning investment in Codan (CDA).

Andrew Rowan, AFSL licensee

Andrew Rowan, AFSL licensee Andrew Rowan is the founder of boutique financial planning practice Andrew Rowan Wealth Management. Andrew is based in Ballarat, Victoria, and has been advising clients for more than 20 years.

Prior to using Skaffold, Andrew relied on research from external brokers and research platforms, which generally resulted in a lack of uniformity across his clients’ portfolios.

“I was drawn to the value investment approach through a lot of reading and research. Before Skaffold I ran spreadsheets and charts to arrive at preferred stock positions.

“Then I discovered Skaffold.

“I’m a visual person so I was attracted to Skaffold’s visual presentation of a company’s fundamental information.

“After comparing a number of research options, I felt Skaffold provided myself and my business with the most useful range of stock information which we could use in building client portfolios.

“It’s built on the same principles that are consistent with my own personal views on what constitutes a good business”, Andrew said.

As a professional financial advisor, Andrew’s primary aim in managing client investments is to avoid disasters.

“I tend to focus mostly on a company’s cash flow and balance sheet – the same sort of things that you would use to evaluate the health of a small business”, Andrew added.

When asked how he uses Skaffold to find new stock opportunities, Andrew said, “We use Skaffold’s Filter and Table Aerial View to trim the universe to stocks that Skaffold rates A1, A2, B1 and B2, because they tend to be the type of companies that have good balance sheets and strong cash flows.

“I then only consider stocks that have increasing intrinsic values and earnings outlooks, and make an assessment on future year safety margins so we can hopefully take longer term positions.

“Skaffold has provided us with more structure in the way we go about building client portfolios”, Andrew said.

Christophe Capel, private investor

Christophe Capel, private investor “When I evaluate a company in Skaffold I generally start at the final Evaluate screen, Skaffold Line.

“Next I look at the Cash Flow screen. I like it because it helps me assess the cash flow ratio of a company (without having to calculate it) and whether it is above 0.8 or not. The cash flow ratio is important for me because it indicates how well a company can cover its current liabilities using cash flow generated from operations. It is a great indicator of liquidity.

“I also check whether both the Funding Surplus (green line) and Cash Flow Generated from Operations (blue line) are rising (the steeper the better), and are above $0.

“I avoid companies in a Funding Gap because this means that the company will need to increase debt, raise capital (which dilutes equity) or dip into its bank account, (or a mix of these). My preference is for a company to fund itself with cash flow generated from operations (eg company puts money in its pockets versus spending more than it earns). I also check whether Reported Net Profit After Taxes (NPAT) is rising”, Christophe said.

“The other Evaluate screen I always check is Capital History. I like it because it helps me check the company’s forecast return on equity, which is the best economic measure of business performance according to Warren Buffett, and its average ROE over the last 4 years.

“On the Capital History screen I can also see the total debt of the company and how it has been moving in the last few years at a glance. I also check the company’s net debt / equity ratio is under 30 per cent.

“Other questions the Capital History screen helps me answer at a glance are: have profits been rising and are they forecast to continue rising?; has NPAT been increasing or not and is it forecast to continue heading in the right direction?; how has equity been changing?” Christophe said.

Steve Macdonald and Dane Pymble, professional investment managers

Steve Macdonald

Dane Pymble

Infinitas is a boutique firm with particular expertise in investing for income following the value investing methodology.

“Infinitas Asset Management uses Skaffold as an important tool for investment idea generation.

“We were keen to shift our Women's/Income portfolio from a pure yield focus to incorporate some growth elements – "growthy yield".

“Skaffold was throwing up Flight Centre (FLT) as a high quality business that was substantially undervalued. We similarly viewed it as high quality, with potential growth in its yield and having net cash.

“Given the discount to intrinsic value that Skaffold was highlighting, we added Flight Centre to some of our model portfolios with our maximum 10 per cent weighting.

“The stock has performed strongly, buoyed by positive earnings guidance and subsequently a strong profit result. As its discount to valuation narrowed we have reduced our position size but retain a reasonably large position in the stock in portfolios due to its high quality (rated A1 by Skaffold) and continuing positive outlook particularly as the US business moves back into profitability.

“In many ways this epitomises the Investing Like A Woman approach: a common sense, considered and well-researched assessment of the opportunity; a focus on moderately low risk investments providing sustainable and growing income; prudent capital allocation; and in this instance a welcome opportunity to invest in a well-managed company with a female COO was the icing on the cake.”

Steve shared his insights on global investing at a Skaffold webinar.

Lindsay Byrnes, SMSF investor

Lindsay Byrnes joined Skaffold in November 2011 as Founding Member to help him manage the investment portfolio of his self managed superannuation fund (SMSF).

Skaffold complements the excellent support Lindsay receives from his full service broker, allowing him to identify opportunities that may be outside his broker’s research scope, likely to be in the smaller company sectors.

Skaffold is an excellent tool to evaluate his broker’s research recommendations in the larger cap sector, as a further check that the companies measure up, is Lindsay’s review of Skaffold.

As a means of earning income and providing modest hedging, Lindsay also uses options. He only writes options, through the services of his broker, for covered calls and puts. “Skaffold is a handy tool in helping confirm strike prices and to bring the net cost of acquisitions, given the option premium received, closer to the stocks’ intrinsic value”, he said.

Using this strategy Lindsay can invest in the riskier resource area, mitigating risk by writing options over the stock or to reduce the entry point should a put option be exercised.

As a self-funded retiree, Lindsay says Skaffold also helps him identify the best dividend stocks. “Skaffold is also helpful in maximising dividends between different stocks, particularly banks whose relative intrinsic values fluctuate to provide opportunities to sell one in favour of another, given different dividend cycles, to maximise yearly fully franked dividend income.”

“Skaffold’s integrity in the calculation of intrinsic value is very helpful in acting as tool to support my investing decisions with the benefit of consensus forecasts. If a stock is overvalued and the forecasts are not bullish, it’s a good indication that the stock is overvalued”, Lindsay said.

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