thepupil

anyone looked into SCTY the stock? Can someone explain to me why this trades for 32X EV / Sales and 10X P/B when it is in a seemingly low return competitive business (and just announced it is getting into another).... I mean I can understand the cult of TSLA (it's a cool car! disruption!) and why that stock trades where it does, but I really can't understand this one. Is SolarCity's offering that much different than its competitors? Haven't read the VIC short pitch in depth, but at first glance this stock appears to be absolutely insane. I mean I understand how Elon is long on vision and short on profits, but 32X revenues for an installer of solar panels? Whaaaa? I've got to be missing something here. Although I do give Mr. Musk credit because he does issue the shit out of his stocks, which is exactly what he should be doing with a currency like that. SCTY has gone from 8.6MM to over 91MM shares according to Gurufocus and this acquisition will add more. Strong! http://www.gurufocus.com/financials/SCTY http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/116494?ideaMessageId=84812&page=0#84812

Yep that's why I bought put spreads that pay you $5 if it's fraud for the premium of 55 cents. I also would t short this for fear of halt risk and borrow risk. Some guys who successfully identified frauds got destroyed by borrow when share were halted for months. Anyways, the base case is obviously thT the deal goes through and I lose my money, but when you see a company that has delayed SEC filings announce a buyout 20 minutes after a seeking alpha article cries fraud and the acquirer is some state owned thing, I think it's a decent bet to taken given the odds the options market is giving you. Obviously to be done in small size. I know people have mixed feelings about tilson, but I think I agree with him that betting against this thing is a good risk reward , and the put spreads make it more appealing.

if you own fewer than 500 shares you'll get cashed out. If you own 500 or more you will end up owning the same number of shares at the same price it is a reverse split $33---> $16,500 but then splits back to the original (forward split) $16500--> $33. what's fun about this one is you don't know what price you will get cashed out if you are a smaller shareholder, because i think that's determined by the closing price on the day before the split. No odd lot arb opportunities here! It's a bit of financial engineering to cash out small guys at a price that is likely lower than intrinsic value. EDIT: Here is confirmation that you just get whatever the stock price is on that day. Cashed Out Stockholders will receive a cash payment from the transfer agent representing a per share price equal to the closing price of the Company’s Common Stock on the date that the Board implements the Reverse/Forward Split.

MONT Jan 2015 20 - 15 put spreads at 55 cents Tilson Right, Chinese company is a fraud buyout not real: 8 Profit Tilson Wrong, Chinese company is a fraud but buyout real: -1 Loss http://seekingalpha.com/symbol/MONT?s=mont Why I Just Made Montage Technology Group My Largest Short Position Whitney Tilson • Today, 12:30 PM • 2 Comments China Orders Montage Technology To Cease Production And Sale Aristides Capital • Today, 8:13 AM • 25 Comments Montage's stated set top box revenue is not consistent with its reputation as a very minor player; other brands dominate Montage by 10:1 to 35:1 among suppliers and finished goods. Montage produces the majority of chips in a 5 million chip per month black market; China's government recently ordered them to "stop illegal production and sales activities immediately". Excluding illegal chips, Montage trades at roughly 10x revenue. Neither PDSTI nor anyone else is likely to buy MONT at this price. Any of numerous catalysts could drop MONT precipitously.

Finally! I was waiting for this to be mentioned. I love this book, even if I don't buy Anaconda Copper when the ticker tape looks good. It's so entertaining to read about how things used to be done, how the big operators would squeeze each other, how much margin leverage would be used and Jesse Livermore (or whatever the guy's name in the book was) would go bankrupt and then bring himself back. Would also recommend The Great Game for entertaining Wall Street history. You can read about a very bold attempt to corner the world gold market, all kinds of orchestrated short squeezes, stealth stock issuances to prevent takeovers, etc. http://www.amazon.com/The-Great-Game-Emergence-1653-2000/dp/0684832879 Don't have much to add to the investing books discussion, other than I actually don't think Margin of Safety is all that great or that it helped at all with the practice of investing. Maybe I need to reread it, since it gets so much love here. I liked Marty Whitman, so clearly I'm the weird one.

decided to have a look at this. -20% average, 80% hit rate (negative absolute performance). Looking at the baskets i bet a lot of people are doing much better. - Hurricanes (HCI + UVE) doing well on the short side, still think there is more to come - Groceries (NGVC, SFM, TFM) also doing well, think that's pretty much played out, starting to see GARP write-ups on TFM and WFM, SFM is still probably expensive - 3D printing (ONVO, VJET), did well but i think borrow would've hurt you a lot here in the real world - Cool ATV's on steroids (PII), down a bit Losers: AAMC, TSLA EDIT: Russell -0.4% and SPY +4.7% over time period 1/3 --> 5/27

http://www.marketwatch.com/story/the-10-best-stocks-of-the-past-20-years-1331582653834/print?guid=32c7b3c8-6c71-11e1-add4-07212803fad6 Kansas City Southern is a pretty cool story how it owned Janus (lots of asset managers on these lists) and also a business with enormous operating leverage and reinvestment opportunities.

50x? Unless they buy back a huge amount of shares, that's a $1.3 trillion market cap. By my math, if you paid 8x sales (TSLA's multiple on 2014 estimated sales) for Apple in 2000 (pre-iPod), you would have made 14x and 21% CAGR over 14 years. 50X seems a touch optimistic : )

I'm not sure I'm reading your question correctly, but it sounds like you want a residual income model where you figure out the right price/book to pay given a payout ratio, long term ROE, and required rate of return. Residual_Income_Model-2.xlsx

I like SPLP. Trading at about 70% of my estimated NAV (marks subs at market values, additional upside if SXCL or others are undervalued). Granted that NAV pays full 1.5% and 20%, but Warren recently took in a nice portion of shares (which amounts to a return of full fee paying permanent capital). That tells me he thinks it is undervalued. The discount and the recent aggressive share repurchase are enough for me at the moment. I haven't started to untangle the consolidated financials yet. anyone else own?

Also SIR owns a bunch of very attractive triple net lease Hawaii assets and yields over 6%. It is portnoy/RMR managed but Commonwealth owns 44% of it. Since commonwealth is about to get a new board, SIR is likely to fall out of portnoy hands. GOV yields over 6% but is is completely portnoy controlled so I wouldn't go there unless you think that will change

Can you expand on the liquidity and tax advantages? I don't follow how private REITs can be better than public REITs. Assuming Broadstone can mark property values pretty accurately, it seems that there are probably public REITs trading at greater discounts. I looked at the publics (NNN players like LXP and O) but they all trade at lower yields with no depreciation tax sheltering associated with the distributions at the personal level. If you can find a public NNN with a yield higher than 6.8 percent I would like to know about it. Thx. Packer In order to find that you have to go team up with Nick Scorsch (who is not without controversy) and company at American Realty Capital Properties. ARCP is much cheaper than O and NNN. I think frommi and bmichaud are long and would know more about it than I.

This is one point I disagree with in the article. We should always evaluate performance over a complete cycle, preferably over multiple cycles. We are arguably closer to top of bull market. So the performance even very long term ending at this point would unfairly penalize Fairfax. Vinod I think the fairest way to do these comparisons is to make rolling 3, 5, 10 year periods (perhaps quarterly) and show the distribution of those periods against the benchmark. For good managers, I would expect something like: 65% outperformance for 3 years, 85% outperformance for 5 years, and 99% percent outperformance for 10 years, or something along those lines. Anyone happen to have the data for that? Edit: I'm also curious if anyone disagrees with measurement in that fashion or thinks there is a better way. It seems to me to be the fairest since it is agnostic to particular time frames and the initial years. I have done this for Berkshire stock. Berkshire has outperformed the s&p (inclusive of dividends) in 85% of monthly 5 year rolling periods since 1988, and 83% of those over the last 10 years. If you purchased in the months in which he has underperformed on a trailing basis you outperformed dramatically. If one based his or her stock decisions on this data the choice of which to dollar cost average into is quite clear. I own Berkshire because it is a well managed collection of businesses at a price that is relatively cheap to the s+p (there are obviously higher upside things out there) and not because of some arbitrary stock price performance statistics that i came up with to try to disprove all this "buffett has lost its stuff", but it is interesting. Also in the months that Buffett has underperformed the median trailing performance of the S+P is +117%.

There are many reasons to short, some good and some bad. 1. Institutional allocators are adverse to paying incentive fees without big hurdles to long only managers. So people run long short to reduce volatility, isolate more of their alpha, and convince those paying them that they should pay 10-20% of gross profits because they are taking less market risk by running lower net exposure ( a typical l/s fund runs 40-60% net, 130 by 70 is pretty standard long short fund). So lots of good stock pickets ( even those who are not adept short sellers) run jones model hedge funds because they can make more money in incentive fees, which means they can buy yachts, hire more expensive analysts, build out infrastructure etc. 2. It allows you to run levered long while taking less general market risk and more security specific risk. This is a matter of debate as to what exactly is risk. Many people (and I presume many here, because this board tends to attract a certain breed of fundamental long only concentrated investor) will argue that having a book that is 130% long and 70% short is twice as risky a book that is 100% long, because you are taking on a form of leverage, you are borrowing at an unknown rate (like selling insurance). Others will say the short book should have negative correlation to the long book over time and reduces risk. There is no right answer, but the bottom line is shorting generated cash, in most cases reduces volatility and can allow one to lever his or her long book. Refer to the chanos thread where I argued his returns of 2% per annum were excellent for a short only because the market did 12%. Short books cannot be viewed in isolation but as part of a broader strategy. If you had the chance to borrow at -2% for many years, you'd obviously take it. Making absolute returns (even if low) over time is the holy grail of short selling because when paired with an outperforming long book, you can make a lot of money (see greenlight, third point, etc.) 3. Shorting doubles your ways to make money. You can look at more things. It also (in my opinion) helps you be more intellectually honest, if every stock you look at is a potential long or short, you fight the generally positive parts of human nature and look at everything more skeptically. 4. It allows for stub trades, or to hedge out an unwanted risk, ie if you find a cheap oil stock but don't want too much oil risk. 5. incentive fees 6. Incentive fees 7. Did I mention the incentive fees ? 8. It's fun and just as if not more intellectually stimulating than finding longs. I've had a few short successes and it is a special kind if enjoyment to watch stocks blow up and make money while others are losing it, particularly if bad people are involved. In all seriousness there is definitely too much money in long short strategies out there. Many should be long only. But the demand for higher gross exposure, lower net exposure funds is out there and many people will pay too much for it so the demand gets filled. It's tough to lose a big portion of your beta because even the best will admit the general upward surge of corporate profits comprises a big piece of their return. I wouldn't calm shorting stupid. I'd call it hard and you have to be good at picking longs to fight the negative carry if being short. AND most people pay way too much in fees for long short strategies. *i short stocks but have made much more money in my longs over time.

http://online.wsj.com/mdc/public/page/2_3062-amexshort-highlites.html#shortF http://seekingalpha.com/article/2060273-s-and-p-1500-most-heavily-shorted-stocks http://www.highshortinterest.com/

http://www.trunkclub.com Sounds somewhat like trunk club. They pick expensive clothes for you and send you outfits. You send them back what you don't want. It pops up on my Facebook newsfeed a lot. I've never used it.

http://thelongshorttrader.com/2012/09/25/the-alchemy-of-reits/

http://www.milwaukee.gov/ImageLibrary/Groups/cntyHR/pdf/GMO_Presentation_210.pdf Googled GMOs client list, got this. Big institutions who , by the nature of their size , must consider asset class level valuations when making decisions.

Also is be aware that the big indices and ETFs probably include the more expensive internet companies like yandex , mail.ru, and some other ones I can't think of. These are much more garpy than the deep value energy and financials

I like sberbank and have 2% in the ADR with the intention to build as i learn more (and verify info about the ADR, I was undisciplined and was buying when there was blood in the streets before I could confirm all the particulars. I'm sure it's super corrupt and has all kinds of issues, but they make money and pay a dividend and grew book value by like 10x since 2001. Sahm of Kerrisdale had a nice writeup in VIC about 30% ago (can be viewed on delay access). http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/107293

ourkid, we actually totally agree! Perhaps I wasn't clear. Backward looking, ANY fee structure would seem cheap on that kind of ridiculous and amazing performance. Forward looking, if you hired 10 guys at 2.45% flat or 1 + 15% w/ no hurdle, you'd have to be the world's best manager picker to meaningfully outperform. I very much dislike allan's fee structure and much prefer Mohnish's, Sanjeev's, Todd's and Ted's (unfair since they are managing gigantic sums of permanent capital), and many other long only fee structures purveyed by managers that are far more favorable.

No one should care given the performance! I would love to have paid Allan all those fees. In fact I expressed a desire to pay him more (the structures I think make more sense from a limited oartner perspective would definitely have paid him more). I just think there should be more pay at risk in the case of the hefty well above market flat fee of 2.45% (which by itself is awful and incentivizes growth in AUM over returns, once again judging the structure , not the man, his skills or his fund) And in the case of the no hurdle 15%, I don't think people should be paid for the component of returns that is market driven. No ones returns sre purely skill and over the long term some market benchmark or reasonable absolute hurdle should be used to strip the "beta" (I know many here hate that word) which is and should be free out of someone's performance. Please do not mistake this for me saying that Allan's returns are market driven. He started pre crisis apparently and has absolutely killed it. I do t know him like many here do and he seems to be in the top 0.01% of managers. All I'm saying is his fee structure is awful. I think Berkshire will outperform SPY by 500bps per annum over the next 10 years (9% vs 4%). I could be wrong. I could be right. I am certain I will pay no fees. I may think Allan will outperform by 1000 bps. I may be wrong, I may be right. I'll certainly pay him 245 bps of that; can't say that about other structures mor favorably aligned with limited partners.

Not knocking the guy ( because he has obviously earned it many times over!) but those are actually pretty high fees to pay a long only w/o a an absolute or index hurdle. Is it actually 15% of gross profits? Or is it 15% of outperformance ( much better, even better if hurdle compounds is hard and has a clawback). Those fees are at the high end of any long only institutional manager I've ever come across ( not hedge funds, people bend over for alpha). The toniest of hedge funds that have been launching long only products don't charge 2.45%. He has earned it, deserved it, and his investors have prospered, but it is despite the fees, not because of them. So lets say he makes 10% and SPY makes 10%, he gets 1% + 0.15*9= 2.35%. Or with the flat fee he gets 2.45%. I don't thinke he should make anything in that hypothetical year. I don't want a fee structure where I give 20 +% of profits to someone even if they just make what the index did in a given year. 1% and 15 over something seems fine though. I'd prefer 0 and 25 over index or a reasonable absolute number. Even though I would've paid more fees and be less wealthy than the current structure and it would've been better under the current regime, on principle I don't want to have to count on knock your socks off performance to come away with good net returns.

I think it's important to remember what exactly every investors role actually is and how they've positioned themselves. Whether it's Watsa, Buffett, Klarman, or whoever, they all do different things and are positioned accordingly. WARNING: long rant with little coherent thought and many statements of the obvious Buffett has positioned Berkshire to be a constant buyer of high quality businesses. He basically keeps insurance float in cash and fixed income for a rainy day and constantly buys something with every dollar that comes in from his wholly owned businesses and investment income. He basically has multiple years of insurance disaster in an "emergency fund" and then reinvests everything else. His time horizon is perpetual and he ALWAYS has a sizable portion of his overall firm's assets and equity in cash coming in. Berkshire, the corporation, is like a miser with a very stable job and 3 years of spending in the bank. Why wouldn't said miser plow all additional earnings back into assets withe the highest expected long term returns? Last year Berkshire had $28B of Pretax income, it invested 11BN in capex, 3B in bolt on acquisitions, 12BN on Heinz, added a little XOM to the mix and ended up with a similar amount of cash. The gun gets constantly reloaded so there's no worry about not having bullets for a more promising hunting environment. Also, if there is anything I have taken away from Snowball and studying Buffett, it's that it is in his DNA to always want more, to keep continue compounding (in a safe way and for society's benefit) but he is in it for the journey, there is no destination. I remember being shocked when Buffett said he liked JPM and owned a million shares in his PA. Not because I thought JPM was a bad investment, but because of the window into his psyche that offered. Why on earth does Buffett need a PA? He owns tens of billions of Berkshire. In my opinion he is simply wired to seize every great opportunity and compound his net worth. I would have all cash and gold hidden under various mattresses, jurisdictions, fields etc. in my PA if I has 1/100th his wealth in a stake in a nicely diversified growing public corporation. Klarman runs a value oriented gigantic hedge fund that makes the bulk of its money (from what i've read of him, which isn't very much besides his book which is dated) on distressed credit and equity opportunities. His investors have no tax considerations (he only takes non profit clients) are hopefully sophisticated and strong enough to give him money when the time comes and his opportunities increase. Imagine if Berkshire gave back large portions of its assets and then tried to raise money quickly in the depths of the crisis. It would likely be very value destructive. Not so for Baupost. There is no insurance liability to offset, no mandate, AND no perpetual mindset or social obligation like a corporation with 300,000 employees that is also the nation's most important railroad and utility. According to wikipedia, Baupost has 42 employees. Running Baupost, the management company, is entirely different than running berkshire. Baupost can stop playing the game whenever it wished and then come back. Burlington Northern, GEICO, National Indemnity, MidAmerican cannot stop playing the game because the lights would go off, the oil would stop being delivered; their capital expenditures and purchases of investments must go on. There is a difference in mandate. Baupost does not control most of the companies it has positions in so price is very important because returns come from rerating and changing prices. Baupost buys 50 cent dollars and sells them. Berkshire buys 80 cent dollars (and some 50 cent one's too) and then reaps perpetual equity coupons (the economic return of those dollars). Post purchase price and rerating are much less important to berkshire because it rarely sells. As for Watsa, I see him as somewhere in between the two. He is more levered than Berkshire (8/36 < 220/480), owns lower quality businesses and not as much in sheer dollar terms to have tons of non insurance cash pouring in, and is therefore more sensitive to drawdowns in market prices and economic conditions. He has to worry/care about the macro. Maybe he is going about it in the wrong way, maybe not. I like his Russell short (though obviously he was WAY early), his low downside high upside deflation bets, etc. But whether he is right or wrong, he is doing what he thinks is best for the organization he runs, and that's what the other two titans are doing as well. I don't know if that really was coherent or added anything to the conversation, but its just my two cents. You always need to consider what exactly the person does when he gives some sort of advice or opinion on positioning. EDIT: Personally, I'd rather just buy way OTM puts on Berkshire to hedge the Watsa scenario. Imposing this hedging cost (which obviously compounds over time and is significant) allows me to stay more than fully invested with comfort. I've probably spent 3% of my berkshire on berkshire hedges over the course of the past 3 years, but that's allowed me to be comfortable with a big position in it and never be tempted to sell. If i always have savings coming in and i can't lose more than 20%, then the depression/deflation scenario doesn't phase me too much

HJ, really enjoyed this post. thanks for your perspective. the CLO vs. TRS example is great.