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lessthaniv

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Posts posted by lessthaniv

    Resolute Forest Products Commences Takeover bid of Fibrek

    in General Discussion

    Posted

    I recall sitting at $.70 wondering how things were going to play out. Fairfax organized a transaction that allowed me to sell my FBK stock at > 50% premium to  FBK's  previous trading value and use the proceeds to reinvest with the acquirer at a 20%+ discount to the terms Fairfax got. In addition those shares were also undervalued and have since closed that valuation gap.

     

    Fairfax did right by their shareholders to remove them from the FBK mess and I'm grateful they provided me with an exit strategy too.

     

    FBK was the mistake I made. The ABH acquisition was the way out.

     

     

    Should Repurchases be counted in FCF/yield per share?

    in General Discussion

    Posted

    That gets a little weird if the firm were to stop buying back shares.  You are going to have free cash flow jump from 700k to 1m in a single year, even though FCF isn't growing.  That might sound like I'm bickering over semantics, but if I was collaborating with you on a software project I would mention that your choice of naming for variables makes the code difficult for others to understand/maintain. 

     

    It might compile and run just fine though, no argument there.

     

    Let me ask you a question though.  How would you go about it if you were instead looking at a company that returned cash to shareholders only through dividends.  Would you ignore the dividend yield, or would you instead count the dividend and redefine "free cash flow"?

     

    Maybe there is another way without redefining what free cash flow is -- that's all I'm trying to say.  I'm not saying that your end result would be wrong.

     

    True, I am being lazy with the definitions. I would say the relevant metric for DCFs should be "Adjusted FCF" = FCF - Buybacks.

     

    In your scenario, if the firm suddenly stops buying back, then Adjusted FCF = FCF, and then growth becomes 0, which essentially is the pre-buyback state, although now with higher FCF/s due to the buybacks.

     

    Now if the firm returned all its FCF to shareholders via dividends, and assuming that no other cash was returned, then in that case, I would not revise the FCF figure downwards, as all FCF immediately flows to shareholders, and more importantly that cash is not reinvested to create growth in FCF/share. Therefore Adj. FCF = FCF, and growth is unchanged.

     

    That still fails my code review.

     

    I would suggest you merely add back in the number of shares repurchased.  After all, you are willing to ignore a dividend.  So why not ignore the share repurchase?  This is more straightforward.

     

    You can then think of the share repurchase and dividends as the same thing -- cash return yield to investors.  That's what they are.

     

    This.

     

    First, understand the companies ability to generate FCF. Place a value on that FCF independent of dividends/repurchases.

     

    Then, in a secondary step,  adjust your view for managements capital allocation choices. If management is making smart decisions allocating this FCF it's worth more to you as minority shareholder than the same FCF being generated by a company with a management team who is making poor decisions in allocating it.

     

     

    Patrick Byrne Memorizes Deck of Cards

    in General Discussion

    Posted

    I believe at Overstock's team meeting one morning in the last couple of weeks.  I believe Mohnish can do this as well, as he once told me he could count cards. 

     

    Looks like Patrick's lost some weight as well.  Cheers!

     

    http://www.youtube.com/watch?v=5S9cjzlQLq8

     

    Nothing to it.  Someone I know very well can count every card in a six deck shoe and compute a ratio of remaining cards to others.  :)

     

    Blackjack anyone?

    Wilbur Ross: Long-Term Bonds Are Huge Risk

    in General Discussion

    Posted

    Ironically, Ray Dalio believes you should lever up and buy long term bonds. Reason being, as bonds come closer to maturity, the steep yield curve magnifies their return.

     

    I've done great with FFH Bonds employing this over the last few years.  ;D

     

    Sanjeev,

     

    It's an interesting time. On the one hand you have Buffett and Wilbur Ross saying long term bonds are the worst thing to own. On the other hand, FFH is quoting Gary Schilling about "the great disconnect" and both warn a possible "event" on the horizon. Schilling continues with his long bond strategy suggesting in a recent interview they can hit low 2's.

     

    Two incredibly respected groups with diametric view points.

     

    Personally, I've been struggling to decide where I fall.  One the short term I could see stocks appreciating more (much like 1925) only to widen the disconnect and make the ultimate move to equilibrium even more painful. Seems  like this is what Prem is warning about.

     

    <IV

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