Close the Books on Deutsche Bank, Put Your Money Where It Really Counts

Shah Gilani Apr 01, 2022

Russia’s unprovoked invasion of Ukraine has made waves throughout the world, politically and financially – and they are taking their toll.

It is looking grim for European economies and a recession may be on its way.

In the last week, German economists have urged business and households to cut back their energy use. Christine Lagarde, president of the European Central Bank, went so far as to tell European households to become more pessimistic and cut back on spending.

To those of you asking me about the European finance sector, here’s your answer: don’t touch it with the ten-foot pole. There is a better option and I’ll tell you all about it in today’s Buy, Sell, or Hold.

Watch the video below to learn more or…

Scroll down to read the transcript.

Thanks for watching.

Shah Gilani

04/01/2022 Buy, Sell, or Hold Transcript

Hey everybody! Shah Gilani here with your Friday BS.H (that’s Buy, Sell, or Hold) – where I recommend what you might want to do with the stocks you send me. There’s four of them today, so let’s get started.

First up is Iron Mountain Inc (IRM).

I think you probably know what IRM does – document management and storage, and art storage. But these days, they have gone digital, and in a big way.

I like what they do, but I’m going to be frank: I wouldn’t buy IRM here. In fact, I would probably think about selling it if I owned it right now. It has had a bit of run. If you own it, you should put a sell-stop down there. Give I a chance to go higher, because it’s trying to make new highs and probably will. Anyone that owns it might get a little bit more out of their investment.

But I certainly wouldn’t buy it because… I’ll tell you in a second.

I think IRM extended itself way beyond where it should be. This stock, over the last 10 years, has done nothing. It’s gone pretty flat and only recently did it breakout, but here’s the deal…

As far as revenue goes, this company is in a good spot at $4.5 billion. And I like the business that they’re in. It has good profit margins at a shade over 10%. Nothing really wrong there.

The problem is it’s got more than $11.7 billion dollars in debt and only $255 million in cash. I worry about rising rates… If they’ll have to roll over some of that debt, they’ll have to roll over at higher rates.

The profit margin is fine, but as far as its operating cash flow, not so good.

There’s another problem here… The net income, my favorite metric available to common shareholders out of which dividends are paid, is $450 million over the trailing 12 months. The cost of its dividend at $2.47, which gives you a very handsome looking yield of 4.49% on a forward-looking basis… Well, that dividend costs over $716 million dollars. So, it’s paying out $716 million in dividends out of a net income of only $450 million.

Guess what, something’s got to give here. That’s why I say, “No way is it a buy here.”

If you own it, put a sell-stop somewhere below… It’s around $55.50 heading towards $56, maybe a little bit higher, so I would put a stop in and if it comes back down, take your profits. Move on.

Next up, Hillman Solutions Corp. (HLMN).

Right now, this stock is trading around $11.56, thereabouts. It just got above its 200-day moving average, so some of you might think, “Hey, this looks pretty good! Kind of cheap at $11.56.”

Now, this is a SPAC-deal. This is a company that merged with a SPAC and it hasn’t been around a whole lot of time. But, it has been very volatile. We know that much from the little experience we have had with HLMN.

To me, the situation with Hilleman is very similar to that of Iron Mountain.

I certainly wouldn’t buy it here, but if I owned it I probably want to put some stops in there. That way, if it goes a little higher, I’m going to trail up my stops and, if it comes down (which it very easily could), I want to get out with whatever profits I can get. Not a buy.

Sure, it’s been around. This company’s been around since 1964, you know, in the hardware type business. Real hardware. Nuts, bolts, anchor shackles, door hinges, hooks, and braces. Yes, real nuts and bolts stuff. It’s been around since 1964 and they are in the negative.

Profit margin: -2.69%. What? Come on, this is a company that should be making money. It doesn’t do any good that it’s layered on debt totaling $1 billion. Cash? Only $14.6 million in the bank.

Worst of all, operating cash flow over the trailing 12 months is negative $110 million.

It’s just a waste of your capital. Do not buy this. Do not stretch for it to maybe get above its 200-day moving average. Don’t.

If you own it, raise your stops. Trail your stops up and get out when you can, because I don’t know where this thing is going. It just doesn’t make sense to me. Being in that nuts and bolts business, you should be making money. Instead, it’s got negative profit margins.

Next up is another SPAC… Well, de-SPAC because it merged with a company that does something I really like. It’s Vertiv Holdings Co. (VRT).

Vertiv Holdings is trading in the neighborhood of $13 and $14 – closer to $14 right now.

I love the business there, man. They pretty much provide services for data centers and we know that’s big business because everybody is housing stuff in the cloud. This company provides all kinds of stuff, from ACDC monitoring systems to system management.

It sports a pretty big revenue, over $5 billion.

I like all that. What I don’t like is the profit margin. Only 2.39%.

With a revenue of $5 billion, you’ve got a lot to work with there. But 2.39%… That should be a lot higher. The business has (hopefully) room to grow that profit margin, but right now it is not doing a very good job of it. It’s not really worth it to me.

However… The stock has tumbled and I like that, because that creates (sometimes) an opportunity. I love the business there and I think they can expand the profit margins. I think it can grow the business.

And now might be a good time to step in. So, as far as VRT goes, it’s fine down here. But you’ll want to have a little bit of a strong stomach because you might have to endure a 25% drawdown from here. But I think it can go back up.

The most interesting this about this stock, chart wise, is this stock had a huge gap down – and I like to play gaps.

Right now, the stock is trading around $13.75. The gap could really go back up to $19.66. If it fills that gap, that’s a nice little move and I would feel much better about the stock moving higher.

So, yes, I like it down here, but you’ve got to have the stomach.

Another way to play VRT down here…  Earnings are coming up.

Let’s see… The date for earnings is April 27. To play it, buy some calls that expire, maybe, on May 20.

On May 20 there’s the $15 calls. They’re trading around 55 cents and they’ll probably take up quickly if the stock continues to go a little bit higher – but that’s not even halfway back.

Halfway back is $16.70. So, if you bought the $15 calls for 55 cents and the stock pops on earnings (or maybe for no other reason than people want to buy it), then you get a nice profit as the stock fills the gap to $16.70.

Your intrinsic value is $1.70. If you paid 50/55/60 cents for the calls, that’s a profit. You can then go out to the $17.50 calls. They’re trading… or they were trading yesterday at 15 cents at the close. Real cheap.

And you can get above there because as it fills the gap you’ll get up to $19 and change. VRT is a buy down here on this fill-the-gap play.

Yeah, I like the business in the long term. I hope it gets its act together, because it’s the kind of business I want to have some money in.

Now, Deutsche Bank Aktiengesellschaft (DB). Yeah, you heard me turn the page.

It’s like, “close the book.”

No. Do not touch. Do not go near Deutsche Bank.

I don’t know why anybody would want a European bank right now, especially Deutsche Bank. It’s had so many problems.

Oh! Well, maybe you’re looking at the dividend yield of 1.72%.

So what. Why waste your capital? With all the problems Europe’s having in addition to the possibility its going into a recession. These banks have all kinds of exposure to Russia assets and Ukrainian assets and all kinds of stuff. They have huge problems.

Do not touch Deutsche Bank with a ten-foot pole.

But if you want yield, buy JPMorgan Chase & Co. (JPM).

It has a tremendous dividend yield at 2.85% – and you know JPMorgan Chase ain’t going anywhere.

Besides that, the profits they make are going toward a share buyback program. So, you’ve got that aspect to it, too.

Deutsche Bank doesn’t make enough money to buyback its shares. It ain’t going to happen. That stock is a roller coaster and, believe me, you don’t want to waste your capital on Deutsche Bank.

If you own it, sell it.

Don’t buy it. Not even on a speculative basis.

That’s all for today.

Good Friday to you, cheers.

4 replies on “Close the Books on Deutsche Bank, Put Your Money Where It Really Counts”

  1. DougM says:

    JPM 2.85% OH WOW whoop ti do !! If you hold this for a year, you might only lose 5% Not as bad as DB but close.

  2. Anna Genfan says:

    Thank you.

  3. JAY pAXTON says:

    How about the regional banks….. still hot with Truist for a “long haul”, ie; custodial account for a minor child?

  4. Bill lyon says:

    Shah, very appreciative of your thoughts regarding the aforementioned stocks. Words of Wisdom, thanks.

    Bill Lyon

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