MU - Recurring Unusual Expenses are Indeed NOT Unusual
I entered long on Micron around February of this year at $43.55 based on their intrinsic value of around $88 calculated using Discounted Future Cash Flow but have since noticed some accounting practices which I take issue with within their balance sheets, income statements, and cash flow statements.
I've since further examined their income statements from 2013 to 2017. While in 2013, MU recorded an Unusual Income of $1.378 Billion, the subsequent 4 years (2014 to 2017) showed recurring Unusual Expenses of $288 Million, $34 Million, $67 Million and $25 Million. Four years in a row of "Unusual" Expenses? By my definition, these expenses are no longer truly unusual and this is a bad sign of potential accounting trickery to fluff the income statement.
Upon examination of Micron's (MU) 2017 balance sheet reports a Goodwill net income of $1.228 Billion. In my mind goodwill income is a misleading spin on the company having potentially overpaid for an investment. "Goodwill" should more accurately read "We Hope So". I'm not putting my capital on the line for the Goodwill assets of a company who has managed to lose over $1 Billion every year in capital expenditures (investing) . With that track record I'm not overly enthusiastic about the reliability of 2017's Goodwill numbers.
The kicker to all of this is that Micron does not pay a dividend. In conclusion, no thank you, I'm out, but best of luck. I withdrew my position in Micron in two separate withdrawals, first on 7/19 at $56.435 then today (7/27) at $53.59. My funds will be allocated to holdings in an undervalued company with a transparent balance sheet, cash flow, and income statement yet to be determined.
I've since further examined their income statements from 2013 to 2017. While in 2013, MU recorded an Unusual Income of $1.378 Billion, the subsequent 4 years (2014 to 2017) showed recurring Unusual Expenses of $288 Million, $34 Million, $67 Million and $25 Million. Four years in a row of "Unusual" Expenses? By my definition, these expenses are no longer truly unusual and this is a bad sign of potential accounting trickery to fluff the income statement.
Upon examination of Micron's (MU) 2017 balance sheet reports a Goodwill net income of $1.228 Billion. In my mind goodwill income is a misleading spin on the company having potentially overpaid for an investment. "Goodwill" should more accurately read "We Hope So". I'm not putting my capital on the line for the Goodwill assets of a company who has managed to lose over $1 Billion every year in capital expenditures (investing) . With that track record I'm not overly enthusiastic about the reliability of 2017's Goodwill numbers.
The kicker to all of this is that Micron does not pay a dividend. In conclusion, no thank you, I'm out, but best of luck. I withdrew my position in Micron in two separate withdrawals, first on 7/19 at $56.435 then today (7/27) at $53.59. My funds will be allocated to holdings in an undervalued company with a transparent balance sheet, cash flow, and income statement yet to be determined.
Comment:
Another thing I forgot to mention is that their shares are controlled predominantly by institutions (somewhere around 75%) this can cause some significant price volatility including in after hours trading where it's a bit more difficult for little guys like me to make any sort of portfolio adjustments.