Arnold Van Den Berg (Trades, Portfolio) is the founder of Century Management. Van Den Berg is a value investor, and considers himself a student of Benjamin Graham.
Arnold applies value investment strategies as his investment philosophy. His investment research seeks to determine the appraised value of a company, often referred to as intrinsic value. Investments are then made at a significant discount, normally 40% to 65% below the company's current intrinsic value. This is his margin of safety. Arnold usually holds 35-40 companies when fully invested, and invests primarily in U.S. headquartered companies.
Arnold initiated a position in Chicago Bridge and Iron (CBI, Financial) in third quarter of last year. He added more to his position over the last two quarters. Last quarter, he purchased 194,170 shares of the company. As of March 31, 2015, he was holding 708,060 shares of the company. The following chart shows his holding history in the company.
Chicago Bridge and Iron Company is a leading engineering and construction company. The company has an impressive track record of growth. The company's diluted EPS has increased from $3.07 in FY2011 to $4.98 in FY2014. In the same period, its revenues have more than doubled to $12.97 bn aided by the Shaw acquisition. According to sell side estimates, the company's topline and adjusted EPS are expected to grow 9% and 8%, respectively in the current fiscal.
Chicago Bridge and Iron's business is a long lead time one with high visibility. The company received $3 billion in new awards in the last quarter, and its order book stood at $30 billion at the end of 1QFY2015. The company's healthy order book and award wins provide a good visibility into the company's near to medium term revenues which should reassure investors who are worried about recent fall in oil prices and its impact on the company.
Chicago Bridge and Iron should also benefit from acceleration in gas-fired power plants projects in 2015. Markets in the United States are showing acceleration in the pace of gas-fired projects to replace coal plant retirements. Chicago Bridge and Iron has been focusing on this market for quite some time. Recently, the company signed a significant strategic agreement for NET Power – CB&I's collaboration with Exelon (EXC), Toshiba (TOSBF) and 8 Rivers Capital. As a part of this agreement, CB&I will be an exclusive partner and contribute the expertise to the engineer, procure, construct, commission and test a 50-megawatt natural gas-fired electricity generating demonstration plant. This will be a first-of-a-kind demonstration plant to validate a new natural gas power system that produces zero atmospheric emissions. If successful, it will represent a potential game-changing opportunity to comply with clean energy regulations.
Chicago Bridge & Iron is trading at 9.91x FY2015 consensus EPS estimates. According to Gurufocus DCF calculator, the company has a business predictability rating of 5-star and margin of safety of 29%.
Out of 20 analysts covering the company, ten are positive and have buy recommendations, six have hold ratings and four have sell ratings. Analyst at Goldman Sachs recently upgraded the stock citing "stronger market share" performance. Given the company’s low valuations, I recommended buying the stock.
