Why I'm sharing my analyses of investment ideas that are NOT interesting to me; A look at Haverty Furniture Companies; Two ski failures that cost me $1,000

1) The most successful investors (if they're being honest) will tell you they spend the vast majority of their energy on "meh" stocks...

What do I mean?

Last Wednesday, I shared my analysis of fast-food restaurant chain Jack in the Box (JACK)...

As I explained, I had sent my breakdown to my team here at Stansberry Research after seeing Jack in the Box's management team present at the ICR conference in Orlando, Florida on January 10.

After analyzing more than two decades of the company's revenue and earnings growth, free cash flow, capital allocation, share repurchases, and debt levels, I concluded that the stock wasn't interesting to me – writing:

Like Denny's (DENN), Jack in the Box appears to be a no-growth business that was trying too hard to prop up the stock price with a big acquisition and debt-fueled share repurchases...

Sure enough, the stock has been a stinker since January 10 – down nearly 15% through Friday's close.

Regular readers may remember that I previously wrote about six companies I saw at the ICR conference (I summarized my thoughts in my March 21 e-mail). Naturally, these were stocks about which I had strong opinions – both bullish and bearish.

But they were hardly the only stocks I encountered at the conference. I actually saw 20 companies present over two days. I did a quick analysis of all of them.

So why didn't I write about the other 14?

Simple: I thought their stocks were roughly fairly valued, so why write about them?

They were classic "meh" stocks... equities that aren't terrible, but they aren't special either. And most important, the market has valued them fairly. As opportunities go, they are just "meh."

So no reason to feature them here, right? After all, isn't the point of my daily e-mail to give my readers actionable investment ideas?

Of course, I often do give these kinds of ideas – one of the best examples being my pound-the-table six-part analysis of Meta Platforms (META) in early November 2022 when shares were trading in the $90s (they closed Friday at $509.58).

But my primary goal here is to teach my readers how to become better investors.

That's why I want you to see how I do a first-cut analysis on a company.

In a world in which we are drowning in information, one of the key skills required to be a successful investor is to know how to quickly analyze investment ideas – and discard at least 90% of them.

There aren't enough hours in the day to do good, in-depth research on good ideas if you're wasting time on bad ideas. The truth is, knowing which ideas to pass over is at least as critical to your investment success as knowing when you jump in.

From what I've heard from my readers over the years, I sense that many of them don't know where to start if they read or hear about a stock that sounds interesting... so I wanted to share a few case studies of how I first approach a new stock.

I generally start with a long-term stock chart – at least 10 years.

I then look at revenue and operating profit over 20 years, followed by cash flows over the same period to see whether free cash flow is tracking profitability.

Then I look at the balance sheet, especially debt levels, and capital allocation – capital expenditures, share repurchases, and dividends. Finally, if there have been meaningful share repurchases, I look at the share count to see how much it's declined.

This usually takes no more than 15 minutes... The vast majority of the time, that's all it takes to recognize a "meh" stock.

Jack in the Box was an excellent example. It was a business I was familiar with, having owned the stock two decades earlier. But after 15 minutes of pulling up historical data on Capital IQ, I could see that the stock wasn't interesting – and I moved on.

Today, I'm going to give you another example...

2) At the same January ICR conference, I saw an interview with the CEO of Haverty Furniture Companies (HVT), Clarence Smith.

I was only half listening. In truth, I'm much less interested in what management is saying – to them, the future is always so bright that they need sunglasses – and instead was looking at the company's long-term financial performance.

After seeing the interview, I shared my analysis of the company with my team here at Stansberry Research. I started my note to my team with some background on Haverty Furniture:

It has been around since 1885, operates 124 in the Midwest and Southeast, and adds roughly five stores per year. It bought three Bed Bath & Beyond stores out of bankruptcy. The business is driven by housing sales. The stock trades at 0.7x revenues, 4.3x EBITDA, and 9.1x trailing EPS.

Like Boot Barn (BOOT), business boomed during the pandemic, but has been giving some of that back – the question is, when does it stabilize? The CEO thinks this year, as housing picks up.

I then started my overview with a 10-year stock chart, writing that "the stock hasn't done much the past 10 years" (note that all of the charts here include the most recent data, not as of January 10 when I wrote this note to the team):

As I did with Jack in the Box, the first historical data I looked at for Haverty Furniture was two decades of revenue and operating income (I typically look at this time period to see how a company performed before, during, and after the global financial crisis):

Then I looked at the company's operating cash flow and capital expenditures ("capex") and wrote: "It generates steady free cash flow." Here's the chart:

Turning to capital allocation, here's what I said about it:

Haverty is very good at returning cash to shareholders. It has been buying back moderate amounts of stock for the past nine years, pays a regular dividend of 3.5%, plus special dividends that double that most years.

As a result, I noted that "the share count is down 26% from 22.8 million to 16.8 million in the past eight years," and included a chart:

At this point, after 15 minutes of analysis, I decided to move on. As I concluded to my team:

Overall, I think HVT will likely be a decent compounder, but there's nothing exciting here. I don't think the market is missing anything.

Since January 10 through yesterday's close, HVT shares are down 7%.

3) I had two highly unusual ski failures last week at Jackson Hole, Wyoming, which cost me $1,000 (but fortunately I escaped unharmed!)...

The first was on Wednesday at the top of the tram. When we got off, I stepped back to line up this picture before asking someone else to take it:

As I did so, the hydraulic gate came up behind me (to make sure nobody fell into the open space when the tram left) and it pinched the back of both of my boots – the right one much worse. It looked like this:

My boot still locked into my binding, so I was able to ski down. But when I brought it into the ski shop, the folks there tested it and said it wasn't safe. (They also said they had never heard of this happening and had never seen this type of damage to a boot.)

I bought these Strolz boots in Switzerland five years ago and paid $1,200 because there was an option to inject hot foam around my foot to make a mold for the inner lining. I did this so that my boots wouldn't chafe the little nubs on the outside of my feet that make regular boots really painful.

So I contacted Strolz and (long story short) the company is sending me new boots, into which I will transfer my custom liners – but it's costing me $600!

Despite the ski shop's warnings not to use the boots, I'm too much of a cheapskate to rent (uncomfortable) boots.

So I just decided to take it easy for the last three days, avoiding moguls and tree skiing (which wasn't much of a sacrifice, given that there hadn't been any fresh snow in more than a week, so anything that wasn't groomed was hard and unpleasant).

But it looked like I made the wrong call...

As I was skiing down under the Casper lift on my second run on Friday, one of my skis (I'm not sure which) suddenly detached and went flying down the hill – fortunately stopping at a patch of trees 100 feet away without hitting anyone.

I was wondering why my ski brakes didn't stop it – and discovered why when I saw the back half of my binding in the snow near me. It had disconnected from my ski!

(This had nothing to do with my damaged boot – in fact, it was lucky that I was using it because I was expecting a detachment and therefore was skiing at a moderate speed in open terrain.)

When I went into the shop, the guy said this can happen with old skis – over the years, water seeps in and rusts the screws and/or weakens the ski around the holes.

He said he could try to redrill the holes, but it might not hold very well. And when I told him the skis were nearly 10 years old, it was clear to both of us that it was time to get new ones.

So on Friday afternoon and Saturday morning, I demoed five skis: a Salomon QST 98 and the larger 106 model, a K2 Mindbender, an Atomic Maverick, and a Black Crows model.

I skied about an hour on each, and my clear favorite was the Salomon QST 98.

So in the hour before we went to the airport on Saturday, I bought a new pair, and the ski shop transferred my old bindings (which are fine – they just needed new screws and new skis). And because I was buying at the end of the season, they were 40% off, so I was happy to pay only $410...

I didn't even have time to do one run with my new skis. I'm eager to try them out, so maybe I'll zip up to Windham, New York this coming weekend for 24 hours to ski with my buddy on Saturday afternoon and Sunday morning.

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.