kab60

Total deaths in the US - And probably everywhere - is down because of the coronavirus lockdown... Apparently life kills, so when people are holed up at home they don't die as often...

I have a 30 pct allocation to Berkshire, which I view as a bit of a cash box, leveraged bond portfolio and equities... And I'm keeping that as a solid sleep well slow-mo tax advantaged compounder... But I think the money is to be made in leveraged companies - the big money in those that might trip their covenants... Yeah, sounds bad, but most banks would give good companies hit by a temporary airhole a waiver (that's what I hear from companies in those discussions in Europe. Covenants tests postphonedfor 6-12 months). So I understand the flight to safety, but I think one would be better for swapping some of that today for leveraged equities... those tend to do well I believe after HY spreads have blown out... Equipment rentals like Ashtead probably a decent bet because despite high leverage capex can be deferred for better times and even be liquidated if needed... Anyway, didn't answer the question. Ulta Beauty has net cash and it is a great biz. That 40 pct plus ROIC, SSS plus new stores and buybacks is a killer combo

Don't fight the FED... or perhaps simply stay invested if you hold bargains... if one didn't see bargains all over the place last week, I don't know when one will. While alot of stuff in the states has rebounded, there is still a lot of cheap stuff elsewhere... might it get cheaper? Sure. Or it might double. Or triple. Who knows.

This is why market timing is not recommended. Getting out is easy. But getting back in is the hard part. This. A lot of stuff is still cheap. But a lot of that is still up 75 pct in 4-5 days. If I missed the last crazy selloff, I'd have a hard time getting on today. The funny thing with corona, when investing globally, is that the same things seems to play out in different countries but at different times. So US retail sells off, when stores announce they close (Ulta selloff was crazy). Then the same thing happens in the UK for an example but with a bit of lag, and then things sell off there before correcting.

CAMBRIA Automobiles - 2,3xEV/ebitda, midteens ROIC, founderled

I am a little bit concerned about the debt covenants. My stomach is weaker than yours, I puked this out when it was 0.57AUD, now at 0.175AUD. It trades like an option now. Well, you did well selling. I averaged down a couple of times - and doubled it today. Ugh. Someone mailed me to get my view, quick view here (all very back of the envelope): From the recent CC (from the CEO): We have a net leverage ratio where we can't exceed 3.25 in the first year. That doesn't get tested until the end of this year. And everything is on the basis of around run rate and those sorts of things. So we're comfortable with that at the moment. And based on those, so no concerns on that. So I think end of last Q they had around 300m drawn on their 375m debt facilities and 50m cash so 250m net debr vs guidance of some 75m ebitda. So obviously close and obviously things have evolved for the worse with corona-virus (if you go to AMAs website they sent out a note to customers, clients etc.), but they're still in business - this isn't retail. And there might be pent up demand from hails storms that hit Australia. But I think what's important here is the comment on run rate which I assume means that they'll be able to include, among other things, 17m in expected synergies (they have alluded that it will be higher, so perhaps they can bump it up). Either way I think there's a real risk that they breach those covenants - but I also expect lenders to be willing to waive those given the special circumstances. Very few banks will want to write off a loan six months in - and optically it would look extremely bad. As for valuation, with a marketcap of 125m and 250 net debt the price of AMA is below the price of the Smart Capital acquisition (where rumour was others were willing to pay around 320m I seem to recall) PLUS the old Ama Group. Blackstone was close to buying the whole thing for some 10xebitda while right now - if things go as planned - they might do plus 100m ebitda in their fiscal 21 so around 3,5xev/ebitda. I know it sounds almost stupid, but that would potentially imply equity upside of some 600 pct. from here. There is real risk of permanent capital impairment, but I think the risk is severly overstated and would expect them to get a waiver if they trip covenants. Last resort perhaps call Blackstone again? And I don't think things are all that dire. This is smash repair shops that should be extremely resilent since insurance pays, AND they had good answers on the call as to what needs to be improved (and it seems pretty easy to fix). CEO owns a ton of stock, three insider buys since beginning of march - post results.

I don't dispute that, that might be true. I just don't see how this is anything but another bump in the road nor why it should impact valuations much considering it'll eventually blow over and interest rates might be lower on the other side, thus increasing attractiveness of equities. For what it is worth, I'm not saying buy the index. I think a lot of stuff is still trading at nosebleed valuations - or at least I'm not smart enough to figure those cases out. But almost everything has been thrown out and discarded - some so much that it's probably the biggest buying opportunity since the GFC. If things settle here for 3 months, I'd expect private equity to come thundering with their 2 trillion plus of dry powder and go bargain hunting.

I haven't pulled the trigger myself, but GTX looks like a potential multibagger from here. I think a basket of equity stubs with huge FCFE would do well.

Radiant has a history of acquisitions, but I'd say it has been quiet poor. I was actually invested some years ago but didn't like what I saw. Otherwise I agree, this is a real cash crunch for a lot of Companies. And many will breach their covenants. But, I think that's a huge opportunity. I'd expect, and do see signs of that, of banks' willingness to work with lenders. Banks have been vilified since the GFC, and this is their time to shine - this is their time to keep main street and businesses afloat. Thus, companies working with bank lenders shouldn't have any trouble getting a waiver on the covenants. No banks wants to take a writedown due to 3 months of liquidity issues - nor risk getting in the headlines for bankrupting sounds companies hit by government mandated lockdowns. I can't say I'm hunting for Companies that risk breaching covenants, but there'll be multibagger among those that look dicey and will eventually make it through.

Which numbers? 3k deaths in a Country with plus 1b people. Diamond Princess numbers. Numbers out of Sweden. So far nothing to speak of in Denmark where I live. Italy is somewhat scary but seems like an outlier. Seems like it's possible to handle with the right actions. And if one is a cynic, if it isn't handled well, perhaps it'll be over pretty soon. The World is a peaceful place these days compared to history - pandemics or not, people live longer.

More AMA Group... Price chart makes one puke, but I think it's a potential 5-10 bagger, and unless I've completely missed something, I think I've rarely seen a selloff as crazy as this one. Might wanna write it up.

But is this virus even terrifying? Doesn't seem very frightening when looking at the numbers. And it seems the potentiel issue is bad prepping (like lack of sanizer, face masks, testing etc,) which risks overwhelming healthcare system. Pretty sure most countries will have stocked up and be 10xbetter prepared next time.

I don't know about that, Spek. People always tend to think they live in extraordinary and uncertain times, and now it's a virus from China that is on everyones mind. All these lockdowns will obviously have an effect, some companies will go bust, but most will live on, and soon enough it'll be over and we'll probably find something else to fuss about. Or we'll all be dead!

Which companies do you like the best? I don't follow that many, so I'm likely missing out on potential ideas. I agree with your general point that the amount of general posts here has swamped company-specific posts for awhile. It's been hard to get any conversation going about specific companies. I don't even know where to begin. I think the ground is littered with bargains. I'm not saying you're wrong. I'm genuinely interested in understanding the companies you're referring to. Lots of mega caps and sleep well at night stocks seem cheap; Berkshire, Google, Altria. I think ALT managers have a bright future and like KKR where apart from earnings there's some tangible value in their investments (which have taken a hit, obviously). Espescially with low rates. Unlike say BAM you don't have to have a strong opinion on malls. Also like retailers (ugh!) like Ulta Beauty - and an asset light (but sub prime heavy!) play on retailers like Alliance Data Systems. The last one has been expensive for me, but hopefully it'll be a multibagger from here. I also like car dealerships. Auto Nation and Ashbury Automotive are cheap and well run in the states, but they also have a bit of leverage. Their new car sales will be hurt in a recession, obviously, but they're making around 40-45 pct. of their GP on service, which is resilent. I like both, but have invested in Vertu Motors and Cambria Automobiles in UK instead - they're simply cheaper. Vertu with around half of the market cap in net cash and coming out of a large investment cycle (thus harvesting FCF now), Cambria arguably a better business and with a fine balance sheet but bigger capex cycle ahead (perhaps some will be postphoned). I also really like Clipper Logistics in the UK (a play on retail and ecommerce), which I've written up, as well as St. James Place (money manager with sticky capital, high ROIC, asset light). My biggest position is Berkshire, second biggest is Linamar, which is a founder-led Canadian auto parts, industrial and and agri company. 2019 was a tough year for them, and they did close to 700m in FCF vs. a market cap of 1,6b today. Guided for another 500-700m this year. That was a couple of weeks before auto OEMS closed shop, they themselves will be shut down for some time, but I think the world will go on in 6-8 weeks, and I expect them to keep throwing off cash and diversify further (latest is into medtech - hopefully something less cyclical!). Trades around 0,3xBV and will probably do mid/high teens ROE if things start hitting on all cylinders at some point. Insiders have been buying. All can be debated - well not really, most have gotten killed - but they're pretty simple business that are easy to understand and should be here in 5-10 years if they don't go bust before then. No idea about the upside, I'm mostly trying to figure out the downside, because if they get through to the other side, I'll much prefer to own 10 plus ROE businesses with fat dividends and half-resilent earnings and net cash should at 1,5xev/ebitda (Vertu) than hold cash - volatility be damned. Thanks for the thoughts. To the extent it's useful, I have an eye on the following: FRP Holdings Griffin Industrial Realty Williams Companies LICT Corp. Rosetta Stone Comcast Black Stone Minerals (it's hard to even type that right now) Daily Journal Hill International NVR For a few of them, I've been buying a bit here and there, but largely waiting for them to get even cheaper. I'm familiar with most of those (and have a large stake in WMB since recently). How do you decide whether they're cheap enough or not? The other day, when WMB went down 30 pct. to below 9 - apparently somewhat due to forced selling from ETF's - I think that seemed like a good time to pounce. Things can always get cheaper, obviously, but I think it's too difficult to try and time the bottom and thus stay fully invested - now with a little margin on top - if I can find investments that meet my criteria. That was possible for me before the selloff (I might have to increase my hurdle rate - I'm too easily lured I think), and it has been dead easy since S&P went down 1/3 in 4 weeks. Anyway, my question is - when we've had a day like today (up 10 pct.) - how does one ever get back in if things just shoot up? Not saying that'll happen, or that it's even likely, but doesn't one risk missing all the action because one is anchored to prices just last week (with a lot of stuff since then up 50-100 pct.)? I think I would. I already find it extremely hard not to anchor to prices that aren't around 52-week lows - as arbitrary and dumb as it is. I know being fully invested isn't for everyone - I've been down almost 50 pct. in 4 weeks - but it takes a lot of difficult mental gymnastics out of the equation. Obviously one needs to be able to stomach some crazy volatility. And be able to find decent investments.

Clipper Logistics

Which companies do you like the best? I don't follow that many, so I'm likely missing out on potential ideas. I agree with your general point that the amount of general posts here has swamped company-specific posts for awhile. It's been hard to get any conversation going about specific companies. I don't even know where to begin. I think the ground is littered with bargains. I'm not saying you're wrong. I'm genuinely interested in understanding the companies you're referring to. Lots of mega caps and sleep well at night stocks seem cheap; Berkshire, Google, Altria. I think ALT managers have a bright future and like KKR where apart from earnings there's some tangible value in their investments (which have taken a hit, obviously). Espescially with low rates. Unlike say BAM you don't have to have a strong opinion on malls. Also like retailers (ugh!) like Ulta Beauty - and an asset light (but sub prime heavy!) play on retailers like Alliance Data Systems. The last one has been expensive for me, but hopefully it'll be a multibagger from here. I also like car dealerships. Auto Nation and Ashbury Automotive are cheap and well run in the states, but they also have a bit of leverage. Their new car sales will be hurt in a recession, obviously, but they're making around 40-45 pct. of their GP on service, which is resilent. I like both, but have invested in Vertu Motors and Cambria Automobiles in UK instead - they're simply cheaper. Vertu with around half of the market cap in net cash and coming out of a large investment cycle (thus harvesting FCF now), Cambria arguably a better business and with a fine balance sheet but bigger capex cycle ahead (perhaps some will be postphoned). I also really like Clipper Logistics in the UK (a play on retail and ecommerce), which I've written up, as well as St. James Place (money manager with sticky capital, high ROIC, asset light). My biggest position is Berkshire, second biggest is Linamar, which is a founder-led Canadian auto parts, industrial and and agri company. 2019 was a tough year for them, and they did close to 700m in FCF vs. a market cap of 1,6b today. Guided for another 500-700m this year. That was a couple of weeks before auto OEMS closed shop, they themselves will be shut down for some time, but I think the world will go on in 6-8 weeks, and I expect them to keep throwing off cash and diversify further (latest is into medtech - hopefully something less cyclical!). Trades around 0,3xBV and will probably do mid/high teens ROE if things start hitting on all cylinders at some point. Insiders have been buying. All can be debated - well not really, most have gotten killed - but they're pretty simple business that are easy to understand and should be here in 5-10 years if they don't go bust before then. No idea about the upside, I'm mostly trying to figure out the downside, because if they get through to the other side, I'll much prefer to own 10 plus ROE businesses with fat dividends and half-resilent earnings and net cash should at 1,5xev/ebitda (Vertu) than hold cash - volatility be damned.

Which companies do you like the best? I don't follow that many, so I'm likely missing out on potential ideas. I agree with your general point that the amount of general posts here has swamped company-specific posts for awhile. It's been hard to get any conversation going about specific companies. I don't even know where to begin. I think the ground is littered with bargains. Can they get cheaper? Sure. Who knows. I'm just surprised how pretty much every study indicates it's impossible to time the market (Ray Dalio called cash trash like 3 weeks before COVID-19 struck...), yet when I read this forum I get the sense the world is about to end and most prefer cash - which wasn't my impression two months ago. But perhaps people like myself have simply gotten our asses kicked (I have!) and stay low while all the cash-rich fellas' are looking to invest at the bottom.

I think the fear on here is quiet interesting since decent to good Companies are 50-75 pct. off since their most recent highs and yet it sounds like risk has increased. There are stocks that'll be multibaggers off these levels, still it sounds like a lot of people are almost 100 pct. cash and spend more time acting as hobby epidemiologist or prepping for zombie apocalypse. Denmark, where I live, seems to have flattened the curve after 12 days of lockdown. More countries in Europe seem to turn the corner. You Guys in the states might be last but you'll get through this as well. And all politicians seems pretty committed to use a fiscal bazooka if needed. Good luck to all.

Great suggestions. Covectrus looks interesting. If one is looking for a gamble, GTX also looks interesting. Optically huge amount of debt, but they can defer asbestos liability payments which is not used to calculate leverage. Cash flow machine with high degree of variable cost, but auto parts and they might trip covenants. No position in GTX, but I have one in Australian AMA Group, which is smash repair shops. Those usually do fine in a recession since insurance pays. Down 80 pct on weak H1 and slashed dividend which probably scared retail. Company has Lots of liquidity and there has been insider buying. Blackstone almost acquired the Company for 10xebitda in 2018.

Why not just go with a pipeline operator like Williams which is mostly demand driven from utilities and NG? Decent ROIC, irreplacable assets, fat yield. If rates stay low, essential infrastructure should do pretty great. Otherwise I like the idea of betting on oil by going long the ruble - perhaps through something like Sberbank. Doesn't have to constantly drill holes to keep status quo.

ADS, Berkshire

Denmark is pretty hard hit and in a lockdown. Worst case is 5,5k deaths. Or 1/1000 of population. 16k die each year from tobacco. We'll get through this. And then when we get through this, rates might still be crazy low. So high appetite for stock and infrastructure. I think. :D

I'm long AMA Group and down 75 pct in like a month. Insiders have been buying.

Ulta Beauty, Autozone I'm long Ulta, think it is crazy cheap (more so yesterday)

WMB, KKR, SFL, ULTA,