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URL:  https://boards.fool.com/last-year-i-started-this-work-on-romv-i-guess-i-31682494.aspx

Subject:  Re: ROMV Process Date:  3/24/2015  11:48 AM
Author:  chessburger Number:  5664 of 5674

Last year I started this work on ROMV. I guess I think its pretty interesting although it hasn't sparked much attention. But hey -- each to his own.

Here's an example of what I started doing.

Cooper Tire & Rubber (CTB)

Price $23.86 on 02/25/2014

Source: Magic Formula (Gurufocus website)

ROMV -- $3.58 (15%*$23.86)

Estimate for 2014 was $2.54.
Estimate at time TTM was $3.73
Gurufocus showed $4.02 in Dec'11

So it seemed that $3.58 was within the operational capability of CTB.

So I highlighted CTB as worth doing more diligence.

CTB now is trading at ~$41 and Dec'15 EPS is $2.99 and Dec'16 is $3.36.

So Dec'16 isn't quite at $3.58 but the stock has already appreciated 50% from when initially found as a diligence candidate. Note that 10X * $3.58 = $35.8, which would have been 50% gain.

This would have been a successful application of CTB if I had done diligence on Dec'16 EPS and verified it as reasonable estimate.

Another example highlighted was Molina Health that turned out positive over that time frame.

Examples that I flagged for additional diligence/watchlist.

ARO: nope, more attractive today?
BXC: nope, what about today?
TITN: nope, what about today?
GDOT: nope, what about today? looks like should review again
IPAR: well a story worth following -- break-even-ish after material decline since initial screen

Ones I panned after quick ROMV review; possible watchlist but no recommended diligence:

DGSE: nope
GAI: nope
GMAN: nope, might have watched with intermediate continued price decline
BONT: nope
WPRT: nope
AEPI: maybe -- ???
GEVO: nope
FBP: nope -- financial, tend to stay away for now
BTH: nope
MRLN: nope -- but on the move now
ATNI: nope -- but also on the move; interesting movement after initial screen; magic formula screen
ALDW: yes -- but rocky with huge move last Nov/Dec; interesting
TFM: yes -- but rocky with continued downard slide through July/Aug 2014

I'm not sure there is a huge takeway except that I was able to take various screens like 52-week-low or Magic Forumula and them run them through the ROMV process to identify companies worth additional due diligence. A couple of the more interesting names did pan out but many did not. Some got cheaper in the interim which would have been worth doing a follow up to recheck the assumptions.

And note that one of the highlighted firms (made the diligence/watchlist) is owned by a value manager that uses the ROMV process. It is also one that hasn't worked out so clearly the diligence is a key ingredient and that just because a firm can hit the numbers to generate a buy signal -- doesn't mean it will be successful.




chessburger
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