Patmo

Schwab, which market will drop by 40%? Housing, energy stocks, tsx? Housing prices have to correct by 40% over time in real terms. If there's a 10% drop over 5 years with 4% growth then we are 30% of the way there. Just about every metric for Canada points to housing being 100% overpriced and the average of the metrics implies 40% drop is necessary. Unless money leaves these housing prices can persist but lending is dropping for a reason (which makes the problem worse faster). EDIT: To go with this, the US housing market is still overvalued because numerous interferences stopped the market from dropping. We will likely see flat housing prices with fast GDP growth to finish the correction while Canada may not have the luxury of positive GDP to save them. Also, the point of maximum pessimism is not even close for the Canadian housing market. If anything, this is maximum exuberance. Yeah no kidding, don't know what this other guy is talking about with his maximum pessimism. Everybody's still leveraging themselves up the ass for crappy homes at 10x their salary, and singing about it. Back on topic, I picked up a few more shares of KRN Karnalyte. Keeping it a small position, but pretty excited about the prospects of a company trading at 55% net cash, with a catalyst in early stages of ignition. It's like a net-net on steroids...

MND Mandalay just released production/sales results, stock went up a few %. I'm just collecting dividends and plugging along for the ride. One of my more comfortable bets, but more highly valued too. I can understand why some people enjoy paying up for "quality" (well that's as quality as gold mining will get), it might earn less money but it sure is soothing.

Interesting, I created a post for both of these gold miners but neither got much traction. I agree with the sentiment on both of those, although I feel more comfortable owning MND and just trade Caledonia for a sliver of my book. Last time I bought in the 60's and sold in the early dollar. I intend on repeating this time, although I am prepared for a wide range of outcomes. Caledonia does warrant a hefty discount in its share price with Mugabe and his little buddies pillaging at will, and Blanket looking like it might be on its last breaths. Also take a look at Karnalyte resources which is not a gold miner but owns a large potash project in Saskatchewan, an idea courtesy of shadowstock. Currently trading for a little more than half of net cash as of last reporting date. Has a 2mil/q cash burn, trading at 24mil, cash is 43mil. Monstrous upside if things work out, relatively limited downside if they don't. I expect not to go to 0 if things don't work out but I think money would be lost.

Educational services. Thesis is simple, market believes the company will shut down but it's not going to happen. Not a single party involved in this situation would benefit. The most likely scenario is that ESI will be forced to play nice and be useful again. Which is what is already happening, albeit at very early stage. The only question is whether the co will be able to sustain through further fines and settlements. Currently in good position to do so.

The question is what will be it's net income, going forward... (I haven't researched the idea, but based off of your post, why should 10-year avg net income matter, given how the industry has been in a flux since the last few years...?) It's just to show how cheap it trades now compared to how it has performed in the past. You won't find this kind of discrepency anywhere else. The co will end up doing better or worse than this average, but will not deviate by an incredibly large margin. Will not pump out 500mil year in year out but will not do 10mil either, let alone run sustained losses. Current run rate normalized EBIT and cash flows are both about 80-100mil currently, I think the co will end up doing much better shortly with the housekeeping that's going on but that's my opinion.

ESI has a 10-year average net income of $7.5 and is trading at $10 (was at $4 for a few months). The co is poised to start hitting an upwards trend in a couple years with its reform initiatives. Crazy valuation gap should start closing when SEC issues get cleared out. Even at $30-40 the stock would still be traded at a very conservative valuation. I swear I end up talking about this co in every thread I enter... Too bad nobody else has much interest :'(

Very much agreed, that is the essence of value investing.

Very interesting stuff. The diversification vs. concentration discussion is fascinating, both sides have very compelling arguments. Honestly it seems harder to be more diversified as you need to keep track of more names, and at some point there are only so many materially mispriced stocks. You have to be really skilled to get mind boggling returns, but you also dramatically reduce the chance of your portfolio blowing up. I bet the number of people in the world that can do 40% a year on anything more than 15 stocks can be counted on one hand if at all. The number of people that can do that on 1 stock is without doubt much larger. But also the number of people who went to 0 is exponentially larger as well. One mistake and it's game over. Hell, a mistake is not even necessary, sometimes you make a good decision and the result doesn't follow.

Ah, the airing of grievances. The highlight of the celebration. Here's several. 1. If you're part of the seemingly every growing contingent of younger posters still living at home, please don't offer life advice. 2. For newer posters, please don't feel the need to weigh in with your views on every single thread. 3. If you post about how much angst you have with your investments and you don't know if you're investing properly, etc, please don't then 5 minutes later offer advice to someone else who asked an investing question. 4. If you're under, say, 30, please feel free to get rid of the world weary tone like you've seen and done it all. Ah the good old sarcastic holier-than-thou tone, every time I look up for the poster's name it ends up being the same guy. Do you ever contribute anything besides complaining about other people's posts? This board is free to leave if it's such a drag on your life, you know. New around here? Search Kraven's post history. He's crushed the market investing like Schloss. While most around here are doing 20-30% with 10 stocks or leverage Kraven is doing similar numbers with 100+ stocks and 20-30% cash. I don't care for his returns, he literally just whines like a bitch about other people's comments on every post I see him make. He could return 100000% a day he would still be as useless. Maybe it used to be different eons ago, I don't know but the 2kewl4skewl act just derails threads at best. There's a lot to learn on this board from and for members of all skill levels, if he doesn't want to deal with the lower-skilled among us he can stick to VIC, apparently it's all big boys pants there.

Ah, the airing of grievances. The highlight of the celebration. Here's several. 1. If you're part of the seemingly every growing contingent of younger posters still living at home, please don't offer life advice. 2. For newer posters, please don't feel the need to weigh in with your views on every single thread. 3. If you post about how much angst you have with your investments and you don't know if you're investing properly, etc, please don't then 5 minutes later offer advice to someone else who asked an investing question. 4. If you're under, say, 30, please feel free to get rid of the world weary tone like you've seen and done it all. Ah the good old sarcastic holier-than-thou tone, every time I look up for the poster's name it ends up being the same guy. Do you ever contribute anything besides complaining about other people's posts? This board is free to leave if it's such a drag on your life, you know.

Canada has a lot of tasty GARP stuff for those who are into this kind of investing. Off the top of my head Couche-Tard, Tim Horton's (pre BK), Jean Coutu, etc.

None of the stocks above have a chance in heck to compound sales/earnings at 10-15% for 10-20 years. GOOGL might have the highest growth rate in next few years, but they also have the highest risk of growth falloff. And their market cap with such growth would cross 1T really fast. This is the biggest issue with wide moat high growth investing. Unless you get in early, no trees grow to the sky and the 25 -40 PE is not really undervalued. In case people doubt this, please look at KO and the financial shenanigans it had to resort to to maintain the illusion of wide moat high growth. Buffett has realized this long time ago. That's why cash flow from See's is not invested in See's. Unfortunately, for most companies the money is either invested in diworsefication or in overpriced share buybacks. So, yes, buy wide moats when they are cheap. But don't expect great returns by buying them at inflated multiples. Nevermind that it's also way easier to spot an average business that's selling for cheap vs. a company that has a sustainable competitive advantage...

Have you been swayed to discussing your short position openly? I'm quite curious what idea made you dip your toes in the short pool.

The CEO (who I believe was also founder/owner-operator type, not sure) retired and in his place is newcomer former COO who was initially hired in 2013. The CFO subsequently left recently as well, I suspect/speculate that he felt wronged in being looked over for the new guy. At any rate I like what the new CEO says he's been doing. I'm not sure how the company works and whether the appliance sale side can be dumped or whether it's a necessary evil for the company to do business, but the trend shows they have been and will continue to increase focus on the recycling side, which is (coincidence!) much more profitable. Are there precedents for this kind of tax issue? Do companies have a chance at settling on this or is it just a black-or-white you owe or you don't, at the mercy of the governments? Also, the company only mentioned California investigating so far, I wonder if the co actually paid taxes or not in other jurisdictions. The co remains pretty cheap anyway as per your conservative calcs, but a $2ish mil charge would be nice to not have to pay. Also, I get a drastically different EV outcome than you. Do you mind sharing what you put in there? Did you factor short term debt (line of credit)? My calc is almost 10mil lower than yours.

I made some quick digging, and it looks like there was a big drop in share price on news that the company didn't pay California sales tax in 2011 or 2012, and could potentially have to pay them back. The company's only California operation is a recycling facility, one of 11 for the company. Recycling was 22.1 and 26.1% of revenues in 2012 and 2011 respectively. At a 10% sales tax rate, the company would owe a little over $530k in taxes assuming the California operation is of average size (eg. 1/11 of recycling revs). I double this charge in EV in case of additional fees and a hunch that California is one of the larger recycling operations for the co. EV/ttmEBIT is still 3 factoring this charge. Very interesting considering new mgmt is being proactive in seeking out contracts and cutting expenses in the fat and the recycling business is very profitable and has a nice future. Appliance retailing business is actually a loser for the co, despite being competitive with the big retailers price-wise due to offering "special buys" (the otherwise good appliances that the appliance cos won't market, like out of box stuff, etc)

ARCI sells appliances under the brand Appliance Smart and also offers appliance recycling programs. At $2.7/share It's trading slightly below book value of $3 and EV/ttmEBIT 2.86. I'm sorry I don't have much to say just yet as I didn't read everything I could yet. I do know that there's new mgmt in place as CEO retired and CFO is moving on to bigger things. New CEO is proactive and has already begun undertaking measures to increase top line and cut costs in the fat. Guidance is high 6-figure, low 7-figure cost savings for 2015. This alone would bring EV/15EBIT down to 2.5. It looks like kind of a boring, crappy, low margin business at first glance, but cheap enough to warrant an investigation. I'll do more digging later on and provide an update on my more relevant findings.

Well you seem to be pretty damn good at reading reports/investing in general judging from what you picked up on ESI latest 10Q (unless it's a different roark?) and overall quality of comments, so I guess it would make sense to look at this as the next weapon to add in your arsenal? Short of forking over some material $ for industry reports of questionable quality, one would (often) need to go full spy mode to obtain the required information. Sounds kind of exciting. I'm just in the process of getting a grip on the nuts and bolts so personally that's not something I envision doing anytime soon and obviously I have nothing to contribute re: scuttlebutt strategy, but it seems there's nothing for you to lose in the spot you're in. Only downside is you'd have to step out of your comfort zone a little, something every big boy has to do once in a while.

What's special about William Erbey and Ocwen? Is he a Malone pupil? Or is it the way he carries his business that you think is impressive? Just curious, I don't know about this guy much.

I use a way that seems simple... I just look at ROE through a dupont analysis and adjust for leverage to find out what ROE would be with 0 debt (aka assets/equity is 1). Is there something wrong with this?

Comcast merger might have some interesting merger securities, considering how hard they're pushing for it.

Obviously, size of the comp (and other things) can affect the meaning of a comp's cash balance. What should be used as a basis of comparison to scale? % of Total assets?

God is the adult version of santa claus, the boogeyman, etc. Literally no more and no less. There has never been magic, and there never will be. This is such a simple issue to me that I have a hard time understanding how people even have arguments regarding this, let alone all the other bullshit. I was waiting for the bus a couple years ago when some priest started yelling at me (so much for live and let live) after I answered his query that no, I did not believe in god. "How do you explain the universe?!?!?", he shouts. The same way you explain everything else, keep trying until you figure it out. If god is merely a placeholder for human ignorance, it's a pretty weak god. We've been defeating it little by little for millennia now.

I think it's that we only own 6 stocks and the ones posted aren't in my circle, so I'd rather own one at 7X FCF (deducting all capex not just maintenance) than a cyclical stock at 4 or something. I weight my confidence in the business the highest of anything when considering a stock. Oops you were asking for stable companies only, I guess we just derailed your thread a bit with ESI and for profit education talk.

Not going to happen. There's too much of lobbying money, too big a political price to pay , not to mention too many employees ( around 50K) and too many students ( more than 2 million) that would be affected for govt to do anything as serious as cutting off ALL funding. Reduced govt funding - Yes. Zero govt funding - not a chance. In a reduced govt funding scenario, I think the best of the for-profits are going to survive ( irrespective of how education landscape changes). If we forget about market valuations and just go purely by quality, who do you think is/are the the top dogs?

No quick response, just hold. Tbh I read even on here everyone talking down gold at end of last year and it just flew over my head. I feel like I had a better perspective on gold than I have on FPE, but margin of safety is way too huge to listen to doomsday talk. However it turns out I know I will have had expected value from this investment skewed way in my favor.