frommi
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Posts posted by frommi
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Sold FAST (this was more cash/filler position, maybe i should use BRK for that next time.)
Bought a large position in SRC after reading a good writeup (http://clarkstreetvalue.blogspot.de/2018/01/spirit-realty-leveraged-shopko-spinoff.html). (this is my best idea right now beside SRG/SKT and all the netnets.) I am heavy on Retail REIT`s now, looks a bit like one large position (30% of portfolio over the 3 stocks.)
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bought SKT, and shorted MODN with buying puts@17, selling calls@17 and buying calls @22.
I'm sure this has been discussed at length elsewhere but which platform do you use for your derivatives? Thanks.
Interactive Brokers.
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bought SKT, and shorted MODN with buying puts@17, selling calls@17 and buying calls @22.
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I'm famous! I'm sure valuewalk posts like 1000 articles a day, but I never knew that my rant was picked up by them. I don't even know if that thing I put together was correct lol. Here's a more "theoretical" exercise done by the FT and an interview with the man himself.
Thanks! Btw. this is the original thread if someone is interested in this: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/chanos-nice-interview/
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Check how well Chanos funds have done. Well he has done OK for himself, but his customers sure don’t buy yachts from investing in his funds.
Do you have a link with his returns? I have just found this one: http://www.valuewalk.com/2015/11/jim-chanos-return-model/
Of course you can`t view the funds returns in isolation since it is short only. You can only value it as a market hedge, so a 0% return would be pretty good as that because it means you will extract a positive return with rebalancing and lower drawdowns. Especially when you withdraw money for retirement spending this is very important. At the moment i think i have a huge advantage over chanos because i can use options whereas i don`t think you can do that with 3-6 billion $ in AUM. So i can concentrate on the best shorts and have a limited downside. If i had for example 10 million $ i might be too big for netnets already but i still think i can buy and sell options on my shorts.
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Sold some puts on HCSG,IT and WAB to rebalance the delta adjusted position size in the short portfolio back to equal weight and at the same time adjust my net long exposure back up to 25%. (107% long, 82% short) Because of the falling market my short exposure with options gets bigger with each fall, so i have to adjust that. Bought more MPW, STOR and SRG with the money.
I am just 4 months into the "quant" short journey but i am more and more under the impression that it is much easier to create alpha on the short side, at least at the moment. I begin to understand why Chanos is just long indices and short single stocks, with higher AUM i am inclined to follow that path. (or maybe it just depends on the market valuation level, don`t know.)
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Don't do macro, don't do derivatives & don't have a large short book :) .
Haha, but it is really fun especially the last days. :)
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Bought ES futures to bring my net long position back up to 25% (120% long,95% short).
In hindsight that was not a good idea and i sold the future for a slight loss. Timing was really miserable and i punched myself several times for that move. What i wanted to achieve was to increase my net long exposure without having such a high impact on my available margin. But it felt wrong all the time. Next time i will probably just sell some of my puts. But my real problem is that most of my netnets are not marginable. Has someone an idea to change that?
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Sold a put (closed a short position) on BF.B because it didn`t fit my short strategy anymore.
Bought some more WSE:SOL,WSE:NTT,WSE:KDM,TYO:7922,TYO:9885,HKG:0398,ASX:MHI for the NCAV portfolio.
Sold puts on EAT. (a long position)
Bought MPW, FAST and ES futures to bring my net long position back up to 25% (120% long,95% short).
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Pretty fast market, so i had to do a little more:
Sold puts on OTEX because the last numbers were not that bad and i had to increase my net long position, now 30% long.
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Fear of inflation and higher rates, it looks like a replay of 1999/2000.
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Well, the pro forma balance sheet was not that suprising imho, how did you expect it would look? Last Tuesday you could buy the entire company for what I thought was basically net cash, give or take a million. On top of that you got $11m in notes, NOL's, future CDSOA payments, a small equity interest in the buyer and the upside of the go-shop period for free. Also the company signaled it wanted to do a buyback / dividend. Surely that whole package is worth something? I bought the package for what I thought was a bargain price and flipped my position when shares were up ~10% (implying a ~$1.5m increase in package valuation). Probably a bit too aggressive but I'm not in love with this idea either (and in case of a dividend I have to pay withholding taxes). I just thought the market overreacted a bit last Tuesday.
Still, I think the pro forma company is such a random (disgusting?) collection of assets that appeals to nobody that it is, if you have strong stomach, probably on the cheap side.
I also bought it on tuesday before the press release as a NCAV stock at 55-60% of NCAV. The press release came after or at the close and after reading the press release i was not sure how the liability side of the balance sheet will look like. I made 15% on this, but who cares it was on just 700 shares. I planned to buy more the next days if i had a better view of the situation, but the news and the price moves killed my plans. Since it doesn`t trade below ncav it doesn`t fit into my strategy anymore.
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Small chunk of 0635:hkg. Few shares of STLY a couple of days ago (is that allowed in this thread?)
I was also able to get a couple of shares of STLY, but that amount is immaterial to me. Do you understand the implications of the latest 8K filing? I am not sure that i am able to predict how the balance sheet/NCAV will look like next quarter.
STLY just filed a proxy with a pro forma balance sheet, that doesn`t look very promising. I sold the few shares i got. Its only a good investment if they are able to collect 100% of the notes and they are able to use the NOL`s. But since the tax reform NOL`s are much less valuable than before.
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Shorted TWLO by Selling calls with a strike of 27, buying puts@27 and calls@36 in equal proportions july 18 expiration.
Shorted DERM by Selling calls@30, buying calls @40 and selling! puts @30 september strike. But sold only 1 put for every 5 calls. That way everything from 4$ to 35$ is a profit with a max loss at or above 40$, with the stock currently at 31$. Crazy volatility in the options.
Net exposure down to the minimum level of 10%.
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I sell net-nets often below NAV (80% of NAV is typical for me). But I buy them even cheaper...typically at least <60% of NAV. And I rebalance often...almost continuously actually. I'm thinking of lowering to once a quarter. My backtests indicate quarterly rebalancing is significantly better than annual rebalancing. The following appear to really work well in a "net-net" like strategy:
1) Large cash balances....lots of cash is far far better than lots of inventory or receivables
2) Few financial but not necessarily operating liabilities
3) Lots of extra, not necessarily current assets
What you are basically looking for is a company in an excellent liquidity situation because they have a tonne of cash a few financial liabilities (operating liabilities are far less important). And simultaneously a low price to book ratio...lets say around 60%. Examples of such companies are:
1) KDM Shipping
2) Namura Shipbuilding
3) Kikukawa Enterprise Inc
4) STR Holdings
5) Walker Innovation
Interestingly 2) and 3) often don't show up on net net screens.
In other words net nets are really a combination of two things:
1) cheapness
2) great liquidity => immunity from bankruptcy
Traditional nets-nets which may include companies with a tonne of inventory and often lots of financial liabilities...can be terrible.
Thanks!
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I'm just trying to understand your use of terminology here. With regard to "momentum", are you here referring to the short term movements/trends in the market of the USD / XXX pair, so "momentum" here is related to sentiment to some extent?
I measure 1, 3 and 6 months return of each currency against the USD and then create a rank for each currency. So its just the past price movement.
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If someone wants to understand currencies i can recommend the currency article series from Ruerd Heeg on Seeking Alpha. https://seekingalpha.com/article/4139335-best-currency-positions-february-2018
In general i think you want to be in a currency where short term interest rates are higher than inflation (and 10y bonds are a good proxy for that) and that is undervalued on relative purchasing power. That way the purchasing power of your money is maximized.
Ideally the interest rate in the country you want to invest in is higher than in the country from which you exchange, that way you also get paid for the exchange so you have a positive carry.
And of course despite the fundamental side, momentum also works but the effect fades after 12-15 months.
At the moment the mexican peso is the best currency to be in, and the € momentum is already starting to fade. Going forward i don`t think the € is a good currency to be in, even if slightly undervalued against the dollar, because the spread between interest rates and inflation is pretty high, you are losing roughly 1.7% every year to inflation and the central bank is far from closing that gap. In the USD you are losing just 0.9% and the central is on the run to close that gap this year. The USD is now in the middle of the pack fundamentally, but the worst by momentum so it is not the best currency to be in, too.
And btw. i think currencies are just a big hassle, they only add volatility and frustration if unmanaged and hedging is very cheap in the form of futures. So not doing it and finding pseudo arguments like "they even out over the long term" is just an excuse for being lazy! :)
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Small chunk of 0635:hkg. Few shares of STLY a couple of days ago (is that allowed in this thread?)
I was also able to get a couple of shares of STLY, but that amount is immaterial to me. Do you understand the implications of the latest 8K filing? I am not sure that i am able to predict how the balance sheet/NCAV will look like next quarter.
I sold TYO:6907 (reached NCAV) and bought more SGX:B9S, SGX:BTG and HKG:0422.
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Thanks for sharing
I found an even better method. When IV is between 25% and 50% i create a synthetic short with an embedded stop loss by selling ATM call options, buying the same amount of OTM call options and a smaller amount of ATM put options. That way you can have 0$ option premium ticking against you and still have limited downside and >100% upside. And when IV > 50% i sell a very small amount of ATM put options (10% of the calls) in addition to the calls, with IV so high you only lose if the stock goes up by 20% and everything below ends with a profit. And because of the OTM call option your losses are also capped.
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frommi, how far out of the money are you buying the puts?
I have to say thank you for your question. After thinking about it i realized that i never really questioned my put strike selection, so i did some tests today. Using the probability distribution from Montiers paper i tested it with several strike prices and stocks. I realized that my selection was in some cases flawed and i will change this in the future. In general it looks like it is best to use higher strike prices for puts with high implied volatility(>30%), but with lower imp vola it makes more sense to use ATM (~25-30% impl. vola) or even 10-20% OTM options (20% impl. vola and highly levered stocks). But only if >=1 year put options are available, otherwise i would stick to higher strike prices, this is most equal to direct shorting and has the highest probability to end in the money.
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This is great, so much information embedded in your post. I have been looking for a good set of shorts so I will do some dd on your put names. Curious what you mean with your japanese netnet, do you have a fixed period of time you will wait before selling?
I sell netnets at NCAV, but after 1 year i reassess the situation and when i find something a lot cheaper i make the switch. I can recommend the short screens that James Montier mentioned in 2008, here is a link: http://www.designs.valueinvestorinsight.com/bonus/bonuscontent/docs/Montier-Shorting.pdf
frommi, how far out of the money are you buying the puts?
I only buy in the money put options where the strike price is 5-20% above the current price. (implied volatility is normally lower on higher strikes). Ideally the implied volatility you pay is lower or equal to the historical volatility of the stock.
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sold a japanese netnet (holding period over), GGP (I don`t expect a bid that is much higher from brookfield and think that SRG offers more value now) and
bought more KDM Shipping, SRG, TSLA puts, KRNT puts, IT puts, ERI puts, SPNS puts, RBA puts and OTEX puts. Reduced net long exposure from 25% to 15%. The puts are based on profitable short screens, so the selection is purely based on financials. (F-Score,Asset growth,Accruals,M-Score)
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Happy New Year!
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6% in €, 20% in USD.
Currencies -13%, Puts/Options/Hedges -8% (mainly index puts), Longs +27%. Long side very diversified (~60 holdings at the moment, 50% netnets rest dividend growth stocks/REITs).
Learnt a lot about currencies and shorting this year. Going into the year i had a rough idea of a netnet system and a hedging system over the summer with index puts. After the losses in currencies i read a lot and improved my investing process. I did a lot of backtests on portfolio123.com. (somewhere around november, so it didn`t really change results this year).
Changes/Improvements:
- improved my international netnet-system, added past 5 year maximum price/ncav and size to my selection criteria.
- startet a currency system based on RPPP, carry, term spread and momentum
- started a dividend growth system based on value, beta and estimated growth in the middle of the year to get cashflow for living expenses and lower drawdowns on the long side during market corrections. (even though it is a diversified, defensive buy and hold system to minimize taxes and fees it unexpectly outperformed the market.)
- started two concentrated shorting systems with put options that are active all the year instead of just the summer
- net long exposure will be a function of CAPE. (learnt from reading hedgefund wizards and thought this is a good idea, maybe i play around with this a bit over the year)
- will concentrate a little more on the long side in the future, started this already with bigger positions in SRG and PBSV.
I think i found the way to invest that best fits my personality now and i am really curious what 2018 will teach me.
Congratulations to all, the average results in this forum are really impressive!
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SRG. Currently undervalued on 2018 numbers and high returns on capital for a long time. Don`t know any other stock where these two attributes come together.
What are you buying today?
in General Discussion
Posted
I am more of a Graham type investor i don‘t really care about quality. I buy things below liquidation value and only demand that liquidation value is stable or growing. Ideally you have a management team that is aware of that discount, sells assets at liq value and buys back stock. In case of SKT NAV is at 33-35$ depending on the caprate you use. (i would think that currently 6.5-7% is very fair for these assets)