Lazyboy LZB.NYSE analysis

About mid 2016 I looked at LazyBoy (LZB) as a company to buy into using the Buffett method of analysis. I chose LZB as it was one of Warrens trades from the 90’s. His method makes sense to me as he is really just looking at a business in terms of it’s returns, stability and debt levels.

Here we see that LZB was making no income at all after the GFC. They must have known something was going on with the economy as the graph above shows they were selling off assets left, right and centre to drop debt. Obviously they must have been pouring all their profits into paying down debt as well.Up until 2009 they didn’t look like that great an investment. Even a bit scary around 2007 where they were paying a dividend even though the Earnings Per Share (EPS) were non existent.

However paying debt down to almost nothing is as good for large companies as it is for individuals. After 2009 they were free to make profit. Most of the earning have been kept in the company and only a little has been paid out to the shareholders. If we draw a regression line through the EPS we can see the returns heading to about the 7% which is quite healthy compared to most of the market at the moment. It’s not exactly Buffets 12% minimum, but it’s better than a poke in the eye with a sharp stick. Buffett says that I company should have fairly consistent earnings over the previous 10 years, but this is a bit hard to find with the 2008 situation in the middle.

Last August the stock price was around the $32- mark which would have produced around a 5.5% earning per share based on the fact that the preceding 12 months of earnings was ;about $1.75  ($85m profit / 48.47m shareholders) of which they paid $0.33 to the shareholders in dividends. Then in late August it fell sharply. Why, I don’t know and I should look into it. Either way I bought some stock (demo trade to test Warrens theories) for 24.36 early in September which put it in at about 7.2% EPS. Not bad I thought seeing as how US government bonds are only paying about 1.57% on average.

This makes me think I should also look at the average of Australian bonds. I’ll add it to the feasibility template.  We’ll see how all this plays out over the coming years.

I was listening to Tims interview of Ray Dalio which then lead into Rays YouTube video on how he interprets the workings of economies. Going on Rays theory of the coming years it is nice to know LZB has no real debts to speak of, which means it should be able to survive tougher financial times. Looking at TradingEconomics.com we can see that most of the western world is running near or at zero % interest rates and it’s not boosting the economies as it normally does. These countries mostly have unemployment rates of over 4%, whereby anything over 4% is generally considered as pretty tough to get a job.

It’s going to be hard for the governments to produce the propaganda needed to make a decent war to smokescreen a quick economic reset, like was done in 1939. There’s too many people connected via the internet for propaganda to work. And no, the internet can not be shutdown or blocked fully. It’s technically impossible in reasonable terms.

Summarising, It looks like a reasonably solid long term bet from an income perspective. A business which makes quality armchairs. It’s not rocket science. With my analysis so far, It would be a good company to buy outright if you had the cash. Thus it makes sense to buy a chunk of it if you can when the market price drops enough to give it a >7% return (EPS).

Don’t worry about oil running out.

As a friend of mine constantly points out that if the human race were concerned about air pollution and energy over consumption then we would not be driving around in the cars we’re driving around in. “Huh, what do you mean?” most people ask him.

He then goes on to explain about air drag. We drive around in cars with the driver seat next to the passenger seat. This makes the front surface of the car wider and thus displace more air as it moves along. VW came up with this car back back in about 2002.

So what does this do?

Well my car takes about 55 litres of fuel and gets 450km which works out to 8.2km/L. Most sedans do better than this and most 4WD’s do worse, but it’s not much either side.

When you put the passenger directly behind the driver the efficiency goes to around 100km/L. People will justify all sorts of arguments in their heads against this, but the only way to look at it is this:

Take your existing car you drive now with it’s current engine and current mass.

Put all the seats directly behind the driver.

Curve all the forward edges and

if you can, make the wheels narrower.

Your fuel efficiency will improve drastically.

 

VW is going towards the same shape with the XL1

which is said to have an efficiency of about 68km/L. However the marketing department has had the final say and totally destroyed the key feature of passengers behind the driver.

I understand that if you need to carry big heavy items you need a big vehicle, but most of the time it’s just a couple of people and basic luggage. At 100km/L verses 10km/L I think many of us would start to rationalise just paying a freight company to carry our big items a few times a year. Then again if you want to convey prestige, power, wealth and (in some peoples minds, sexual prowess) then you should definitely stick with a Hummer, Land Cruiser, or F100 with the widest nobbliest tires on the market. Oh, and upgrade the engine to race spec.

Having said all the above, I look at my own doings and realise through my actions that I am not really an environmentalist at all, even though I’d like to think I am.

References:

http://www.autoconcept-reviews.com/cars_reviews/volkswagen/volkswagen-1-litre-concept-2002/cars_reviews-volkswagen-1-litre-concept-2002.html

https://www.caranddriver.com/reviews/volkswagen-xl1-concept-first-drive-review

 

 

Testing different surf shapes.

 

Due to my frustration with the surf conditions relative to my current boards on the east coast of Australia, I have finally decided to take the matter into my own hands. The old boards I have still work great in Western Australia, but there is no where near the power here that you’d find in Margs. Also since leaving WA and coming here I’ve gained 7-8 kgs or more and that makes a ridiculous difference. Especially when the conditions are marginal. I have been out on so many days with other surfers and watched whilst the 75kg guy gets wave after wave till his legs are burning from cutting back so many times. I only get 2 or 3 waves floating at about the mid 90kg mark (now heaver than that) on a 6’8″ , 2 3/4 thick board and the 105kg guy on a 7’8″ mini mal has no hope in hell of catching anything.

So I’ve grabbed some blanks to shape. Testing tail width first. I’ve surfed a couple of boards around here wafer thin, but with wide tails and they seem to work.. My current board has the 14.5 inch rounded tail at the standard 1ft from the tail. I figure I’m going to throw the first few boards away, so I’ll also try some weird radical ideas whilst testing tail widths. The tail width here is 18″ (457) right to the tail. Going on snowboard theory, I’ve bent the rails in and then in the profile I’ve made them as close to 89 degrees as possible. The rails have rocker lengthwise and I’ve concaved out the underside so the centre is dead flat tail to nose 2/3 of the way up the board. This flat I’ve drawn into a concave tail so that as the air compresses in under the board it can exhaust out the back once planing. The blank was not big enough to do full length snowboard style rails so I had to cut the snowboard rails shorter. Probably next time I’l just make it from a block of EPS and vacuum bag some divinicell on top and go the epoxy route instead of polyester. Standard surf blanks are not really geared to trying weird shapes. I  want to incorporate flex so that as the turn is lent into, the board bends with the turn like a snow board, but that can happen on a later board. I think I’ll probably test it without fins first to (a) purely test the planing ability of the 457 tail and (b) if it does get me going see if I can turn on the rails without fins. Either way the fun is in the design process and not so much the surfing.

The deck is also concave as I skated for years and know the difference between the old 80’s flat skate decks compared to the >90’s concave decks. Christ knows why surfboards didn’t follow the trend. I’ve seen a couple, but it’s close enough to none for it to be none in mainstream surfing.

Now that it’s shaped I really can see that I wanted to go 510 (20″) or 535 (21″) in the tail. That was the limitation of this blank, so it’s a starting point.

New fin prototype CNC milled from MDF.

This prototype fin milled from MDF came out quite well and the customer was happy with the result. This is just a proof of concept at the moment though. The main point was to see that the camber from the fin box could be machined at the right angle.

Also the tip of the foil may look a bit thick. This was intentional as I was just showing consistent proportions of foil shape down the fin. Foil shapes are measured as a percentage of the chord length. The chord being the distance from the leading edge to the trailing edge. Towards the tip of the fin the chord increases and thus the thickness does also. Therefore on this fin the foil is actually proportionately the same all the way down, even though looking from front on it does not look even. This will be changed in the final version.

This fin profile is the customers design.

See vid here

 

RaspberryPi Raspbian OS image minimised for optical recognition company.

An engineering friend (Shervin Emami) was working on optical recognition softwade for a customer and his project worked well. Shervin asked if I could do the Operating System (OS) optimisation section to get the Raspbian Linux OS  down to below 2Gb for mass roll out purposes. The client had tried to do this himself, but was unable after many hours of trying. It took me several hours and there where a few quirks linked to Raspbian OS, but I finally nutted it out with a successful outcome.

An alternative to online accounting software with payroll.

Following up on my last post I decided to look for some accounting software I could run on my computers or servers. Jam paying for web accessible software if I can’t load it on my own cloud servers. Double entry accounting is not that complex a subject. Neither is payroll and neither are tax rules for small businesses.  I also wanted to be able to access the database behind the accounting software and payroll had to be in there. I started with GNUcash, Quicken, then SQL Ledger. I was happy to pay a fee for support.

SQL Ledger was looking nice, but it’s not a 5 minute install affair. If only they had an apt-get installer. Quicken has evaporated into the cloud. Xero and MYOB just said a flat “NO” to me buying even a binary to load on my own systems. Finally I came back to GnuCash. It’s a bit different, but it’s actually way easier to use. You can download QIF or OFX files from the bank to bring in your transactions and it does automatic transaction matching like MYOB Essentials although you can’t build rules as yet. Then again, the gnu cash method combined with the fact that it runs lighteningly fast more than makes up for it. Now I am tending towards quickly checking transactions as some of the text pattern matches I made (usually late at night when I’m fading) have been incorrect. It has an auto transaction download feature which I’ve yet to set up with the banks. AAAannnnd,, drum roll please,,,, wholly cow, it is able to connect directly to a remote SQL database (Postgres or MySQL).

How bloody awesome! I’ve yet to test the SQL connection, but just the fact that it’s there is good. Because it’s open source there is no rubbish in there. No bells and whistles which a marketing department has asked for. It just works. The only thing is that there is no automated payroll. When you think about it though, for the business with only a few employees, what’s the big deal? It’s pretty easy to ammortise 8.4 weeks of sick leave, public holidays and normal holidays over the other 43.6 weeks of the year.  Super is 9.5%. Tax is just read off the tax tables from the ATO. A spreadsheet and throwing the saved chunks into liability accounts until they come due. No probs. When it becomes more complicated well it’s not too hard to write a web app to automate it if you’ve access to the SQL database in the background. That’s if the people at GnuCash don’t get to it first.

An other thing is the sub accounts feature. You can make hundreds of levels deep. MYOB is only about 4 or so.

I’m not going to say I’m totally sold, but I am testing it from here on in. Watch this space for how it goes as the months pass by. If you want my spreadsheet templates for payroll, let me know and I can make a download page for you.

Online software

Something that I am not comfortable with is the whole notion of online software. When I am writing code, I’d like to think that I am giving the end user something of quality which will be everlasting until a new better technology comes out. If I write some web based software and an end user enters all their hard work into it, shouldn’t they be able to access their work forever more?

With the current model which most coding companies are adopting, it is about renting the software for a monthly fee. If I ask them about using my data say 8 years later, but had stopped using the software, their answer is for me to resubscribe to the service and then I can access my data. But what if 8 years later management has changed and they no longer support the old data structures. Why should I have to pay again to access something that I created?

Also it’s not a capital expenditure whereby, your business pays down the initial outlay and then you can start to make more profit. Yes, I do understand that renting is often more cost efficient or profitable than buying in many situations, but I want the option to choose.

The other issue is that  I have to trust staff in another company that they will do the right thing, or they will know how to do the right thing. Problem here is that the definition of “the right thing” varies depending on who you’re talking to and who holds the keys to the gate., In this situation, if you are not comfortable with their service, you often can’t just fire them without losing your data. Often they will give you your database, but who can read a raw database?

As Matt Mullenweg mentioned in an interview recently, it’s kind of like buying a car whereby when you look in the engine bay and all you see is a black box which you’re not allowed to open, even though you paid for it. Now it’s a level worse in that the black box isn’t even in the car. There’s just a string hanging from some sort of sky hook which you pay a monthly fee for. When you stop paying your monthly fee, the string disconnects.

I understand I.P., but this just does not seem right. For me personally, I am looking for web based software I can host on my own web servers that I build and upgrade. I want an unrestricted licence once I’ve purchased it with a preference for being able to access the source code.

As much as this is a criticism of the current way things are, I have not escaped it. For instance, I do use online software like MYOB essentials, Fusion360 and Workflowy.

MYOB has saved me up to 4 hours per week because of it’s automatic transaction matching, but text matching is not such a complex piece of software to write. I am looking for something else now whereby if I close a particular business and want to see the accounts in 10 years time, I simply load the OS in a VM, install the accounting software and check what I need to. Or even better have it stored on a VM image and just boot it.