Spekulatius

Bought a bit of AJRD for $43 at the close. AJRD is supposed to merge with LMT for $51 but now the vote on this merger got delayed. I think the downside is protected even if the merger doesn’t take place. AJRD trades at similar multiples in term of EV/EBITDA and P/S than other defense primes and it is a unique and irreplaceable asset with an EV of a mere $3.3B. After it was floundering for a long time, current management has started to run the company well and their balance sheet is in great shape (net cash position). I also think it will ultimately have to merge because the industrial logic to combine rocket propulsions manufacturing with the rocket itself is indisputable. I do think it’s possible that AJRD gets split into pieces that go to different competitors (NOC would be one, maybe even SpaceX), if the merger with LMT fails to get approval.

@competitive-advantage I am no expert in online ad marketing, but it was clear that Twitters ad targeting was atrocious. it basically was no better than blanket TV ads. So most ads were just blanket ads and image campaigns . It looks to me as a user as they have been slowly improving this. My thesis is that the bar is low and TWTR is cheap by some metrics - for example they are trading at 5x revenues right now. Also, Twitter didn’t really have a real CEO, Jack was in it half heartedly and quite frankly, I don’t think he knows how to run a real business (he has vision and is a good founder). I did start buying into TWTR only after he left. I don’t know much about the new CEO but suspect that pretty much anybody can do better than Jack at this point.

SQ & Afterpay merger breakdown:

This is the new Buffett: Why do people bitch about Pelosi when he is the true goat?

McNealy’s quote regarding 10x revenues valuation is misleading. Sun back then was selling fairly low margin hardware. So SUN trading at 10 x revenue made Little sense. Todays best in class SAAS companies have 80-90% gross margins and can probably get 30-40% EBIT margins at scale. so if you buy these at 10x revenues, you could get a 3-4% pre-tax FCF yield that still grows at a healthy clip in the best case. This could mean that 10x revenue for such a business is actually quite cheap.

Twitters user base is fine, even I am there. The problem is more how it’s used - the users aren’t exactly going there looking for something to shop.

You open a brokerage account, buy the above Reits and then throw the password away. Volatility problem solved.

I work in manufacturing and I expect a similar result. I am definitely taking a hit on purchasing power from my salary this year. My wife is nurse and is raking it it with her bonuses just for showing up.

I bought my first stock in 1982 (underaged). Every decade felt different. The 2020's decade certainly feels different. Except for a brief period in 1999, I have never seen so many idiotic things and idiots in the stock market than there are now. I sort of feel i can take advantage here and there, or at least stay clear. However, I am also aware that too many of them can stink up the whole joint when they all take a dump at the same time. I am not sure where I should go from here quite honestly.

I wonder if we have seen the top for retail sales. I know Yoda says "A month a trend does not make" but still. https://www.cnbc.com/2022/01/14/retail-sales-december-2021.html We have got 7% inflation and I am willing to bet that most people do not get a 7% salary increase, unless you are a in low payer job. Stimmies are gone too.

I am optimistic on Twitter too, have a position and adding to it. I like that they have a real CEO now, for the first time basically. Maybe it makes a difference. I do agree that eyeballs are hard to monetize on Twitter.

Sold my remaining FOPE.MI. Turned out to be roughly a double but on a fairly torturous path.

I use Neti pots to alleviate my allergies mostly. Very little downside. It also helps if you have the cold with a running nose.

Jethro Tull today. Love this trippy video clip from 1976. Watch that fellow in the blue jacket. Any idea what drug he is on?

Well, 378M/7.4 (reverse split)= 51M shares + 20M (IPO offering) also gets you to ~71M shares. Different path but same result.

Money saving tips for homeowners: For appliances, Costco is now hard to beat. If you are in n area with a lot of immigrants, try immigrant owner contractors. We lived in the Bay Area and there were great deals to be had with Chinese contractors. They often have also immigrant run stores for kitchen stuff. We found kitchen cabinets way cheaper at a Chinese store and got an unbelievable deal with countertop (50% less than what HD quote for similar quality) through a wholesale place on Oakland. Same in Long Island where there was a kitchen store ( Asian immigrant run) near the Roosevelt Mall as I recall. I never found that HD much less Lowe is particular cheap.

I think the right sharecount is 71.5M shares outstanding after the IPO based on 33.6M/0.47=71.5M shares. the yahoo/finance market cap is off. I guess they only count the A shares but not the LLC units, which are economically equivalent. Their NPS is on par with Chick Fill-A. I think their locations are more expensive. it not an explosive grower, the add a few locations every year. Revenues are ~ 516M / year if you annualize their 6 month revenue numbers. I am getting an EV of 71.5M (shares)*$30+~300M debt = $2445M EV so a P/S of 4.74. Please feel free to correct me where I am wrong. Probably a ~10% grower. It's not a cheap stock, imo. 71.5*30+300

May be one off , but when I had my HVAC replaced in Long Island, Costco was the most expensive quote from the four I got surprisingly. The cheapest one was a bid I got from Angi's list contractor and I went with that. Those fellows were pretty good. I never again got a good quote from Angi's list again for other jobs.

I actually like to look at Bill Milers portfolio - it is pretty esoteric in that covers deep value as well as some growth style bets. Always great for leads: https://app.tikr.com/investor?id=5059044684&ref=o94y6y

JST.DE (truck trailer etc) seems like a great business, but it is also somewhat expensive. It appears they dominate their niche. I think SHA.DE (Schaeffler) may be a better bet than LEONI risk adjusted. Somewhat levered but profitable. Family controlled which could be an issue. Statistically cheap, but hasn't been a great performer since IPO.

I think I am going to put another chunk on by the end of this month.

What does it cost you to have an account with Fidelity? Trades are free. They don't charge you to keep assets there. You can call somebody if there is a problem. They sent you statements, you get goodies like a credit card with 2% cash back, per affiliation. Who are you going to call when there is a problem with a decentralized exchange? Who pays for trading costs.? Who sent statements? What problem are you trying to solve to begin with? Defi and crypto looks more like solution in search of a problem than the other way around.

The Feds goal is employment and price stability , probably in that order (The German Bundesbank actually had price stability as the first priority with employment a second but those days are gone), What is different in my opinion that the labor market is so saturated that the Fed may be able induce a recession and really not impact employment all that much. That would be a soft landing for the economy, but probably not for the stock market and asset prices. I am fully aware that what I am stating here is speculation and nothing like this might happen, but I think we are a very strange time and I think monetary policy may change for what we have seen the last 30-40 years. One the other hand maybe we go full MMT or project Zimbabwe as Kuppy calls it. I think that’s a possibility too. I am older too and if I sort of keep what I have, the Spek family will be fine. I am leery of swinging for fences in any direction. I do think that a healthy gold allocation may be a good hedge.

5% risk free interest rates would probably mean ~5% mortgages which is actually less than I paid for my first mortgage in 2002. That rate back then was 5 7/8% and it was considered a bargain back then because rates in 2001 were higher. Higher mortgage rate would probably reduce demand a bit, but if inflation runs at 7%, it would still free money at effective -2% interest rate considering inflation. I honestly have no idea what happens and if any of the above is realistic, but I think it’s within the realms of the possibilities. I don’t think the chiefs in the Fed know either, they’re probably make it up as they go. I do think at some point the Fed might accept that they may need to deflate asset prices to get inflation under control. I know they caved before , the last time in 2018. However, back then inflation wasn’t really an issue and now it is.

That I am not sure about. The cost that I talking about above have very little to do with energy inputs, it’s just broad industrial input cost inflation. My concern is that this will not be pretty. If we continue to run at a 7% inflation rate by the middle of this year, the Fed will have to step up the interest rates much more than is currently anticipated. I am talking 5% or something like this. This will not be pretty and probably cause a recession.