ATLValue
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Posts posted by ATLValue
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Thanks
I really enjoyed Bonfire of the Vanities but haven't gotten around to reading some of his other works
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i think seeking alpha has pretty decent news alerts for larger companies. Smaller companies (<1B market cap) is lacking though
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I agree with theasiareport on diversification in net-nets.
Does anyone use Piotroski score on net-nets? Theoretically, it should improve the results. Practically, I don't know since I have not bought money-losing net-nets. :)
Jurgis, I think the idea of using the P-Score for net-nets is very interesting so I wanted to bump this thread to see if anyone else did this for net-nets
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Same! I've looked around online for several years and still haven't been able to find any letters or very much other information about him or his fund
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YUM Brands, Richemont
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Thanks for posting!
I didn't realize that his performance had deteriorated so much!
Does anyone have any other notes?
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One business model that I think is really compelling is a type of business that provides a critical resource to an industry with extremely low barriers to entry. The prime example of this for me is a website like Linkedin. It is invaluable for recruiters / headhunters, a profession with extremely low barriers to entry. Another example of this is Uber, providing a critical resource to allow anyone with a car to become a taxi driver another low barrier to entry profession (made even lower by Uber).
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PGN - offshore oil driller that recently spun out of Noble. The company spun out above $10 last year and now is trading at around $1.10.
In my opinion several things are causing the stocks decline, 1) fall in oil price, 2) offshore rig sector has been weak based on speculation that the market will be oversupplied for the next 2-3 years as chinese rigs come onto the market, 3) selling as a result of the spin off, 4) recent debt for equity swap by similar competitor HERO and 5) fears about bankruptcy
Market cap: $95M (first quarter operating cash flow was $210M!!!)
Debt covenants are 4.0x EBITDA and 3.0x Minimum Interest Coverage Ratio and only apply to the revolver. As of March 31, 2015, the covenants under the Revolving Credit Facility were a net leverage ratio of 2.39 and an interest coverage ratio of 7.90
You might want to take a look at what PGN looks like in 2016 and 2017... they have some very high priced contracts rolling off and their rigs are more likely to be scrapped than re-contracted over the investment horizon before this company goes BK
I hear ya, it really does come down to what happens when these contracts expire and if the management team can find away to limit the haircuts to the rates. Speculative indeed!
I did some more work on PGN, Company is a dog, definitely not a multibagger, I'm guessing they start tripping their covenants in 2Q 2016
Isn't the revolving credit facility the only debt with coverage and leverage requirements? Won't they be able to pay that off in full before 2016?
Hey Moustachio, I never responded to your question but I did end up writing a few articles on Seeking Alpha about PGN that go into the details. One other thing to mention about this company is that they recently revealed that Petrobras is challenging their most profitable contracts. Things keep getting worse this this business.
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I'm surprised that people lend money to friends and family for huge interest. IMO it's a great way to lose both money and friends. I guess it works for some...
Haha I was thinking the same thing! Hopefully these are friends of friends of friends
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I loan money to friends or friends-of-friends that have started small businesses or need help paying for expenses in their life. They generally only go to me if they have no where else to go. My interest rate is usually 10%-20% a month. I generally require collateral or a royalty against the revenue of an event being financed. I always have contracts and I rarely rely on handshake agreements (it makes things a lot easier when dealing with friends). I've been able to earn some additional money helping one friend create databases and reports in access/excel for some small businesses and I usually only get the access/excel jobs because of the original loans. Originally, I wanted to earn some extra money and help out friends, but I have found that there are numerous benefits that come from working with small business owners that I never expected. I now have more of a 10-20 year outlook on these dealings and the potential benefits/returns that result.
I have also been involved in business akin to pawning since I was young. I've hit a couple homeruns along the way. I focus on books (particularly older, non-fiction stuff), more modern antiques (late 1800's and early 1900's stuff), and some liquid, in-demand everyday items (early iPhones, textbooks, and everything else that is commonly bought and sold by folks my age). This business is a lot nicer from an expected returns perspective than the music business, but it's harder to find consistent opportunities as an amateur. Profit is almost always made from judgement due to experience, which is nice in some ways. I've generally been severely burned almost every time I've strayed from my core niches. I still have a Civil War-era family bible that is worth roughly 1/20th of what I paid. Antique, US-made, bibles are a much more complex market than one would assume. I don't mean to offend anyone by talking about profiting from bibles; it's still my worst loss and a good example of the hidden complexities of markets. The reason it was such a bad investment was actually a really good lesson on value and the importance of understanding the details.
If you can easily price and sell an item then it's unlikely someone will sell it to you for a good price, unless they are desperate. Creatively trying to monetize an item can be the difference between profiting or not. This experience has been useful as I often look for "hidden value" during equity analysis. There are a couple of value bloggers that often discuss OTC stocks with "hidden value" ["hidden value" being similar to why Buffett thinks BRK is worth more than BV] and I'm often reminded of collectible markets. The pawn business is generally similar to market making. You are offering to buy at one price, sell at another, and your profit is the spread. Most items have a known trading range that fluctuates a bit (most items depreciate so the overarching trend works against you, unlike in the equity market). Another application from the pawn business is understanding the effect of portfolio turnover on returns. Multiple expansion for deep-value investments drives returns just like the time to sell an item drives pawn returns. Your returns are almost solely due to a spread in each situation, so the time it takes to realize the spread will ultimately determine your realized cagr, which makes calculating expected returns ahead of time nearly impossible. My experience has helped me better understand why I can profit from an item and why an item has any value in the first place. I think both of these have made me a better equity analyst. These experiences have likely made me approach equity valuations with a slightly different mindset. I'm used to dealing with collectibles going from highly valued to being worthless, seemingly overnight and without a clear cause (e.g. beanie babies and football/baseball cards).
I really wish I had more experience operating an actual business as opposed to just playing the spreads of various markets.
Thanks that is a really interesting perspective to come from, a few things that I never really considered but a great way to combine a hobby that you enjoy with a money making opportunity.
Lending to friends and family backed by collateral is also interesting but would be difficult to originate consistently.
Here is a thread that should help a little about thinking differently.
The best advice I can give is step out of your comfort zone to experience things your not use to. Ex. if your not into comic books go to Comicon etc. It will just start your creative juices and you will look at things in a way that others do not see.
Set hard money limits at what your willing to lose in order to gain experience or to get a feel if something is worth pursuing (enough for you not to be lazy about the business, but not enough to really set you back). Ex. I set aside some money for ticket scalping. Lost money in the ordeal but gained a lot of experience about myself, got to practice negotiating, and the ticket business. Let alone, I found some ways to get tickets cheaper for future reference and how not to fall for the bs they pull to get you to buy tickets.
That is a really great thread, thanks for sharing I hadn't come across it in my time on the forum. With respect to ticket scalping I always put in for the Masters ticket lotteries, I usually don't win but when I do get allocated some tickets it is a pretty easy $2000 payday!
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Hi Everyone,
I have been thinking a lot recently about different entrepreneurial ventures to pursue outside of public equity investing and my day-to-day job. I get the sense that many people on this board also think about different avenues for investing outside of equities such as commercial real estate, apartments, hotels and franchises. I'm very interested in hearing any other businesses that members of the forum have thought about or actively pursued.
Thanks!
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Not sure if this has been posted...
thanks
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PGN - offshore oil driller that recently spun out of Noble. The company spun out above $10 last year and now is trading at around $1.10.
In my opinion several things are causing the stocks decline, 1) fall in oil price, 2) offshore rig sector has been weak based on speculation that the market will be oversupplied for the next 2-3 years as chinese rigs come onto the market, 3) selling as a result of the spin off, 4) recent debt for equity swap by similar competitor HERO and 5) fears about bankruptcy
Market cap: $95M (first quarter operating cash flow was $210M!!!)
Debt covenants are 4.0x EBITDA and 3.0x Minimum Interest Coverage Ratio and only apply to the revolver. As of March 31, 2015, the covenants under the Revolving Credit Facility were a net leverage ratio of 2.39 and an interest coverage ratio of 7.90
You might want to take a look at what PGN looks like in 2016 and 2017... they have some very high priced contracts rolling off and their rigs are more likely to be scrapped than re-contracted over the investment horizon before this company goes BK
I hear ya, it really does come down to what happens when these contracts expire and if the management team can find away to limit the haircuts to the rates. Speculative indeed!
I did some more work on PGN, Company is a dog, definitely not a multibagger, I'm guessing they start tripping their covenants in 2Q 2016
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PGN - offshore oil driller that recently spun out of Noble. The company spun out above $10 last year and now is trading at around $1.10.
In my opinion several things are causing the stocks decline, 1) fall in oil price, 2) offshore rig sector has been weak based on speculation that the market will be oversupplied for the next 2-3 years as chinese rigs come onto the market, 3) selling as a result of the spin off, 4) recent debt for equity swap by similar competitor HERO and 5) fears about bankruptcy
Market cap: $95M (first quarter operating cash flow was $210M!!!)
Debt covenants are 4.0x EBITDA and 3.0x Minimum Interest Coverage Ratio and only apply to the revolver. As of March 31, 2015, the covenants under the Revolving Credit Facility were a net leverage ratio of 2.39 and an interest coverage ratio of 7.90
You might want to take a look at what PGN looks like in 2016 and 2017... they have some very high priced contracts rolling off and their rigs are more likely to be scrapped than re-contracted over the investment horizon before this company goes BK
I hear ya, it really does come down to what happens when these contracts expire and if the management team can find away to limit the haircuts to the rates. Speculative indeed!
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PGN - offshore oil driller that recently spun out of Noble. The company spun out above $10 last year and now is trading at around $1.10.
In my opinion several things are causing the stocks decline, 1) fall in oil price, 2) offshore rig sector has been weak based on speculation that the market will be oversupplied for the next 2-3 years as chinese rigs come onto the market, 3) selling as a result of the spin off, 4) recent debt for equity swap by similar competitor HERO and 5) fears about bankruptcy
Market cap: $95M (first quarter operating cash flow was $210M!!!)
Debt covenants are 4.0x EBITDA and 3.0x Minimum Interest Coverage Ratio and only apply to the revolver. As of March 31, 2015, the covenants under the Revolving Credit Facility were a net leverage ratio of 2.39 and an interest coverage ratio of 7.90
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Non GAAP Adjusted EBITDA is definitely one of my pet peeves and one of the most misleading metrics that exists.
1) Evaluating a company using EBITDA is ridiculous because D&A are real expenses or rather they reflect real expenses that occurred in the past. Very rarely can a company operate without any capex
2) Insane EBITDA adjustments include "pro forma synergy estimates", " restructuring expense (happens every year)", "one time legal / transaction fees", "Management and Consulting Fees" and "executive stock compensation".
I used to work for a company owned by private equity (CD&R) and run by ex GE executives and every single quarter end the accounting team would raid the balance sheet for accruals and find addbacks for EBITDA. If you think that publically traded companies manipulate earnings than you should really try to get a hold of PE backed private companies, it is a whole other world.
For perspective, the company had a $40M operating loss and $360M of Pro Forma Adjusted EBITDA haha
So, what you are saying is that every investment banker and PE executive that uses EBITDA all the time don't know what they are doing??? :o The reason they use EBITDA is that it is a useful figure that serves as a proxy for the cash flow power of the business before the impact of capital structure and tax rates. Since it is part and parcel of the way professionals in the financial services industry speak, they know what EBITDA is and isn't.
And as to the adjustment the CD&R guys were making, I assume that as part of their credit agreement, they needed to maintain certain leverage ratios as measured by "Adjusted EBITDA". If you worked for this company, presumably you'd prefer that they did NOT trip their debt convenants? :)
Bull$hit is still bull$hit, no matter how many people speak BS language.
I too have worked for and with PE / PE run companies and I'd argue that the "private" in PE is the big reason why so much BS goes on. As for those that work for the company, I'll say a prayer for them. Too bad the owners sold them out to the vultures.
I'm not saying they don't know what they are doing, I think they know exactly what they are doing which is providing a manipulative measure of a company's earnings power. EBITDA is not a good proxy for cash flow. A good proxy for cash flow is.... cash flow.
On a seperate note, I Luckily found a new role at a Company that actually makes money.
Cheers
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Non GAAP Adjusted EBITDA is definitely one of my pet peeves and one of the most misleading metrics that exists.
1) Evaluating a company using EBITDA is ridiculous because D&A are real expenses or rather they reflect real expenses that occurred in the past. Very rarely can a company operate without any capex
2) Insane EBITDA adjustments include "pro forma synergy estimates", " restructuring expense (happens every year)", "one time legal / transaction fees", "Management and Consulting Fees" and "executive stock compensation".
I used to work for a company owned by private equity (CD&R) and run by ex GE executives and every single quarter end the accounting team would raid the balance sheet for accruals and find addbacks for EBITDA. If you think that publically traded companies manipulate earnings than you should really try to get a hold of PE backed private companies, it is a whole other world.
For perspective, the company had a $40M operating loss and $360M of Pro Forma Adjusted EBITDA haha
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They should stop issuing shares. I think Fairfax is too aggressive with their funding methods
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got my print, thanks!
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Enriching your employees and giving them equity was unheard of in Brazil.
Have you ever heard of Maverick by Ricardo Semler? It was about his family company, the Semco Corporation, based in Brazil. It was published around the time that the 3G guys opened their partnership, and Semler talks about how bad the business environment was in Brazil in those days. Semler also started a profit sharing program for his employees which I suppose must also have been unusual for the time
I think I just heard a Ted Talk from him that was really interesting:
I'm working at an extremely bureaucratic company right now (run by some old GE folks) and it really resonated with me. As a side note, never invest in GE.
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The more that I learn about Warren Buffett, listen to his speeches and read his letters I have come to realize that he is extremely nuanced in what he says. Coupling this with someone who is also someone who is trying to be completely rational in all situations often comes across as hypocritical when people generalize his opinions or stances.
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when someone finds a good transcript of the event, would they mind posting a link? I've been pleasantly surprised how there always seems to be one diligent go-getter willing to take super fast notes during the meeting...
these are pretty good
The Best-Performing CEOs in the World
in General Discussion
Posted
There is an HBR podcast where they talk about their methodology: https://hbr.org/ideacast/2015/10/the-condensed-november-2015-issue.html
In a nutshell this ranking used to be entirely based on financial metrics but this year they added in an environmental, social, and governance (ESG) ESG ranking. They waited each factor based on "gut feelings" and even mentioned that they re-ran the rankings several times to see if what they had "looked right".
To me it seems entirely idiotic to 1) change their yardstick of how they are measuring CEOs, 2) adding in the ESG ranking and 3) arbitrarily setting the weights to produce a type of list that "made sense". Seems like typical MBA none sense.
Here is an additional article they put together to explain why Warren Buffet isn't included on the list: https://hbr.org/2015/10/wheres-warren-buffett
"The second factor is Berkshire’s environmental, social, and governance (ESG) performance. On this metric, Buffett ranked #798 out of the 907 CEOs we looked at. Sustainalytics, the research firm that produces the ESG scores, says that low rank is partly due to Berkshire’s poor disclosure on its governance and social policies. Another consideration was how Berkshire incorporates ESG issues into its selection of investments. Relative to peer holding companies, Berkshire’s initiatives for addressing sustainability within its investees are weak, Sustainalytics found. Although the ESG ranking counts for only 20% of a CEO’s overall ranking, Buffett’s very low placement in it was enough to pull him out of the top 100."