bz1516

Let's say eps increases 20% before stock based incentive compensation compensation, but after the incentive compensation costs are subtracted the eps increase is 10%. This is a regular occurrence. Do you just count it as 10% or do you think of it as 20% or some amount in between. I'm curious to know what people here think?

Most of the suitable sand is in the US in several counties in southwestern Wisconsin, in an arc that extends a little bit into Minn. and Illinois. There are now API standards for frac sand, but not certain how restrictive they are. The distance shipped matters in the sense that it tends to give the advantage to the half dozen large players that now have transloading facilities all over the country. There is evidence that drillers can easily pay a lot more for frac sand than they are currently paying, so any cost increases are not a factor. The weight of the analysts following the three public sand companies believe frac sand demand is growing faster than the ability for supply to respond to it and that there is growing pressure in Wisconsin to further limit the growth of frac sand mining. This is slowing down the ability to bring new sand on stream. I think all commodity plays suffer from the issue of potential supply response, and this may or may not be better than most, but its hardly the worst. There is also the potential for international export business as fraccing takes root overseas, but that would be long term. Even though EMES and SLCA have already become multibaggers, the metrics are still very investable as the market for frac sand is now growing at an accelerating rate. The play in frac sand is the growing and greatly increased intensity of sand use per well, both because the laterals have increased in length and in the intensity of sand use per foot based on new fraccing methods pioneered by EOG and WLL. Frac sand usage will increase dramatically as these methods, that more than double sand usage per well, are adopted by most other drillers. This is happening right now and accounts for the current upsurge in sand usage and stock prices. Estimnates are frac sand usage will increase over 25% this year.

I have a couple of successful shorts, one of which is getting close to losing most of its remaining value. My question concerns what happens when it gets delisted and goes into the black hole of the pink sheets? I’ve been told there are several risks. First if it goes into the pink sheets and trades as a penny stock it will still carry a minimum margin requirement of $2.50 per share. So I would have to pay any borrow fee on the market value and margin interest as if it were $2.50 per share. This would go on as long as and until DTC removes it entirely. It may also not be able to be traded with no way to end the costs? I’ve also been told this situation could last for years if the stock goes into litigation and DTC still has not removed it. On the positive side I have also been told that if I don’t cover for a realized gain there would be no tax liability? Sounds too good to be true, but if true holding until DTC removes the stock from their system may make sense? Any help with these issues would be greatly appreciated

You can own the sand pit or the mine so to speak. You can own the plant that processes and washes the sand, and you can own the transloading facility. The transloading facility is purely logistical. The majors own all three, but the big profit comes from owning the sand pits. Victory and Athabasca clearly own or are developing the transloading facilities and Victory may own or be developing a processing plant, but that is not where I would be investing in a prospectively developing commodity play. The money is in the mine as it is in every commodity play. Victory says they have a report that says they have a fraccing sand deposit. i would discount that the same as I would discount the thousands of reports out there in Canada that claim commercial grades of every mineral you can think of. Besides why invest in hope when the best plays, EMES and SLCA offer more appreciation potential?

All these type articles seem to make a good case that the odds of a serious decline are elevated, but not that such a decline is likely. I think most economists would have to come to that conclusion. As for ghost cities my own personal visits to China indicate they are less of a problem now. I posted pictures on COBF from my last visit to China of a mall in a "ghost city". hardly what anyone would expect.

if I'm not mistaken, isn't ABM a logistical play in frac sand? if so, that's not where the action is. There are very few places in North America that have the Northern white sand that meets API standards for fraccing. The best sand in the continent comes from a several county area of Wisconsin that extends into Minn and Illinois. I would not be surprised if the company you are referring to is the same one 50centdollars owns.

Anyone have any positions in frac sand companies? They have done quite well in the last year. Its the only commodity i can think of that could experience a significant supply shortfall over the next several years. I like both EMES and SLCA of the 3 public companies in the space. The investment thesis is based on increasing intensity of sand use in fraccing, both longer laterals and more sand per lateral foot. Of course this is just my opinion, but these stocks still look cheap based on 2015 forecasts.

As a US a/c i always had 30% on approved TSX stocks. So do Canadians get better margin now on US stocks at 30% than we do for Reg T a/c's? Of course US residents and maybe Canadians are eligible for portfolio margin which is even more favorable on US stocks. You also have to consider the difference between initial margin and maintenance margin requirements.

This question has been around ever since term insurance became popular. the only pure insurance is term insurance as you allude to. I'll bet your carrier has all kinds of options for you to convert partially or fully to term. It would be interesting for you to find out how much protection your cash value could buy in a lump sum term policy as one of the conversion alternaTIVES. Once you have a nest egg large enough to support your family you don't need life insurance except possibly as an inheritance tax avoidance measure later in life. My thinking is if you are a disciplined saver then whole life as you've discovered is not a great deal.

Agree its scum infested. However, I don't think you should stay away from it because of that. Plenty of pond scum on the NYSE too. Out of several tens of thousands of stocks in the investment universe I have 7. Finding even 10 good quality companies on the Venture or any other exchange shouldn't be that daunting. So the issue isn't that an enriched environment of scum should keep anyone away, but in learning how to avoid the undesirable companies. Here are the current companies I own on the Venture: GUD.v, RX.v and DAP.U. All are good quality companies in my opinion. Just to complete the picture of the portfolio, I also own HCG and EH on the TSX, and EMES and SLCA on the NYSE. I am short a couple of disreputable companies, RVLT and STSI, both on Nasdaq.

Thanks the different viewpoints. One difference implicit between my view of liquidity and the responses is I'm looking for a quick exit if things don't go according to plan.

I have positions in two small companies that avoid binary risk. One is BioSyent, RX (TSX.V) and the other is Knight Therapeutics, GUD (TSX.V). RX completely avoids drug trial risk by in-licensing and GUD does in-licensing and Phase 2 and 3 combination in-licensing and financing deals which will spread the risk quite adequately imo. Knights founder has a good track record having founded Paladin Labs.

"Good capital allocator" is a term you hear a lot lately. i don't want to show my ignorance, but I'm not sure I know what a good capital allocator is? It sounds like a finance function, but I have a feeling it isn't?

Next week when the the monthly macro economic numbers are released we will have another opportunity to open the debate over whether China will collapse or not. After terrible Jan-Feb macro numbers and a terrible trade report yesterday once again China is at the brink. Previously in this situation they have put up good numbers. This time though the leadership has ruled out large scale stimulus. So a bad set of numbers could send them into a hard landing. The numbers going into next weeks report also look a little worse than before. Not sure a collapse is imminent but growth could slow sharply. It could create a good buying opportunity.

I use one day's trading volume, based on the median volume over a 90 period. Beginning to think I'm being too restrictive? How do others deal with this issue?

Am a relatively new member at MCC. I like it quite a bit. Have already gotten two actionable ideas and one derived from there. They are a good group of people whose one mission is to find good stocks and share information on them. To become a member you have to submit an idea, similar in that respect to VIC, but the process of getting in seems more open. recommend it for people interested in microcaps.

Agreed. That's why I don't own any oil and gas producers. Rather own the companies that will make money the more oil that's produced, rather than be subject to pricing. Frac sand providers are the most leveraged to shale oil production in the North America. The three public names are EMES SLCA and HCLP in that order.

I don't see a reason why there should be a hard and fast rule on using margin? It depends what other non securities assets you have. Lets say two people each have $2mm in securities, but one has $400,000 equity in his residence, and the other has $3mm in several properties. Their margin should be different, the same if one expects a fairly large inheritance vs the other who will not inherit anything. Another issue with margin is investing style. The investor with more volatile investments shouldn't have a much margin as the one with less volatile holdings. I'm more inclined to let my individual securities selection determine what proportion of my nav is invested. I think its a good idea to limit your margin outright or relatively if you feel a need to, i just don't think its a correct to say its good for everyone in all circumstances..

They do at Berkshire. I think a bigger concern would be if he may do something stupid and blow the company up with excess leverage or poor underwriting. Cheers! Isn't that the point, we don't know since it is the first foray in conglomeration, if their skill set can successfully take them into a completely different business, especially one as idiosyncratic as insurance? And shouldn't the first question be, if fries are such a great business, why go into something so culturally and analytically different as insurance? Why not the first step out acquisition in something similar, like a chain of retail stores or a chain of some other service? Or in their case a chain of non franchised restaurants would seem to present sufficient new challenges for management to show their stuff. Franchising obviously involves the least demanding skill set of almost any business. Non insurance guys are not going to be sensitive to buying someone else's problems, hidden away by reserving practices. The adequacy of reserves of casualty companies can be just as elusive as the long term reserves of life companies. Not saying there are problems, just that the risks have gone way up when non insurance people buy into the industry.

From selling fries to casualty insurance. Raises a lot of questions. How many investors or analysts want to deal with both fries and insurance?

Service companies have there own kind of moats. What moat did H&R Block have in the classical sense of the term?

I am having the most difficult time ever finding good long ideas. Am only 35% invested. I agree Canada offers the best value by far. 4 of my 5 longs are Canadian micro and small cap. 3 of my 4 shorts are from the US with one LYC from Oz.

China released their Jan-Feb monthly macro numbers early this am. They were pretty awful and suggest that China has shown no sequential growth since the end of December. UFAI, Urban Fixed Asset Investment, dropped from 19.6% increase to 17.9%. This includes all infrastructure spending as well as commercial and residential construction. Because of the infrastructure spending it is a good proxy for government spending. These numbers imply a drop to about half the previous growth rate or about 9%. Industrial Production dropped from a growth rte of 9.7% to to 8.6%. these numbers imply an actual drop in industrial production. Perhaps most shocking, the drop in retail consumption went from 13.6% to 11.8%. These numbers imply a drop in sequential growth of about 6% annualized. Retail consumption looks like its contradicting the 10% growth in imports recently announced. At the same time, Industrial Production tends to confirm the sharp decrease in exports recently reported. UFAI suggests the government is indeed tightening the reins on national and provincial infrastructure spending. Overall a pretty nasty story. Hard to justify any investments in basic materials right now nor any investments that relate to East Asia.

I think issues of market saturation work similar to the way they do in the US. To say there are 3 million square feet of empty office space in a city or 100,000 empty homes makes for exciting journalism, but in analyzing the situation that is just having the numerator when you also need the denominator. Hangzhou for instance is a city larger than Philadelphia, so once you get beyond the sensationalist headlines, 100,000 empty apartments may be a perfectly reasonable percentage to have vacant. Since the stock market is considered risky by most Chinese they put their money in residential real estate and keep them empty for investment reasons, as was mentioned by one of the articles. So there are going to be a lot more empty apartments in that culture in a stable residential market than in ours. The last vestige of the Hukou system is that urban immigrants are not permitted to own property. As an example if that were to change many of these apartments would experience increased demand. I'm not saying China's economy is not under significant pressure right now. Its just that journalism has different goals than macro analysis and to make readable news things tend to get dramatic, as in this case.

Or you could go to interactive Brokers, open a portfolio margin account, borrow money for 1.5% and leverage your money 7x. Then you could buy a bunch of stable high yielding MLPs like EPD etc.