Screener B – November 1, 2024

1 Ovintiv (OVV) – new to list

First appearing on the list in September 2024 (Y240913), Ovintiv is a North American exploration and production (E&P) company focused on onshore oil, natural gas liquids and other gas products. Ovintiv’s proved reserves are ~2.3 MMboe as of 2022 (57% proved developed) with production over 545,000 boe/d in 2023. Similar to other oil companies, revenues and earnings over the past decade have been volatile. The company pays a dividend buy has been issuing stock as part of the consideration paid to fund recent acquisitions. Management has targeted debt paydown (~$2.0bn) and intends to continue distributing at least 50% of FCF (post dividend) to shareholder returns via special dividends or share repurchases.

2 Molson Coors (TAP) – remains on list

Molson Coors has intermittently been on and off the list throughout 2024, first appearing in May (Y240504). The company is one of the largest brewers in the world, and sells their alcoholic beverages (Coors, Molson, Blue Moon, Carling, etc.) globally. Formed through a 2005 merger, the Coors and Molson families combined control +90% of the Class A stock and control voting rights. Top line has grown ~9.0% annually over the past 10 years, while EPS has only notched low-single digit annualized growth. The common stock pays a reasonable dividend and the company has repurchased only a small amount of stock in the past two years. Debt to EBITDA has come down to the 2.5x-3.0x area, while remaining substantially below Anheuser-Busch, a similar global competitor although much larger in scale.

3 Intel (INTC) – lost this week

Intel was lost this week. The price to book ratio is now slightly above 1.0x however shares are still changing hands in the $20-$25 area.

Intel is one of the world’s largest semiconductor companies that designs and manufactures computer CPUs and related technology. Headquartered in Santa Clara, CA the company has recently been the primary beneficiary of the CHIPS and Science Act and is the central component on Washington’s big re-think on semiconductor manufacturing. Spurred by the perceived over-dependence on Taiwan for cutting edge chip manufacturing, the U.S. Federal Government has rolled out capital programs and incentives to entice chip manufactures to make more chips in the continental U.S. Intel’s net revenue (2023A) outside the United states was 74%. Top line and EPS are trending sharply down. The dividend has been cut and share repurchases are expected to be nonexistent. The company is facing gigantic headwinds as their customers have found substitutes for their core CPU technology / architecture. New market entrants have begun successfully designing their own purpose-designed chips. 

Interpreting results

Broadly this is an output of U.S. companies with a current market equity value above $10bn, a very low market price relative to GAAP book value, and negative price performance over the last 52 week period. While the circumstances that push a company to meet these criteria are virtually infinite, typically the company is facing heightened profitability risks, competitive challenges, legal or regulatory risks , or other circumstances directly endangering the probability of future profits.

Every so often, we find a company that is facing temporary challenges and / or circumstantial headwinds. These instances warrant timely investigation and review.

Why this screen can be helpful

We find watching this output over time, allows us to quickly identify potential companies or situations to investigate further, augments the weekly Value Line publication well, and keeps us informed on the less-loved corners of the public markets without having to watch misleading charts or spin our wheels on short-term market movements.  We like to observe new entrants and subsequent exits to the list, over time, and share with our trusted readers.