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jawn619

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Posts posted by jawn619

    Register as RIA

    in General Discussion

    Posted

    I remember a few people were looking to register as an RIA.

     

    I went through the process, have an RIA with $500k of AUM and was thinking of starting a business like RIA in a box that helps others do it too (but for a fraction of their price). I've found that having an RIA and real track record via smas to be the easiest and cheapest way to great credibility when in front of allocators. Wanted to see if anyone had interest or questions on the process.

    Shoe Dog - Phil Knight

    in Books

    Posted

    I got about a 3rd of the way through it, and sort of got bored and moved onto something else. Maybe I should revisit it. I found his writing pretty boring, and thought he included way too much useless information. I don't like how it's a full year-by-year summary of the company.

     

    +1 same

    Cash Flow Statement & Interest Income

    in General Discussion

    Posted

    GAAP income is booked on an accrual basis.  Accrual essentially means income/expense is recognized when earned as opposed to the cash basis which is recognized when cash goes in or out.

     

    My guess is that the company "earned" the income but didn't collect the cash.  Perhaps deferred interest or a PIK note. 

     

    I have seen this on at least a couple of frauds though where interest was accrued but nothing was actually collected.  Imagine a borrower who cannot repay a loan but a fraud keeps booking the interest income.

     

    +1

     

    great explanation

    Field Research

    in General Discussion

    Posted

    Can you give details in your scuttlebutt approach? I'm curious about if anyone has a systematic way of doing it. My main question is... with so much to do and so little time/effort/attention, how to do leverage your time talking to suppliers,customers, former employees, etc.

    The 22 year old hedge fund manager

    in General Discussion

    Posted

    It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat. - Teddy Roosevelt

    The 22 year old hedge fund manager

    in General Discussion

    Posted

    I hope he does well.  He's a kid.  When I was 21 I wrote cringeworthy stuff as well.  I'm sure at 41 I'll think the stuff I wrote at 35 (now) will be cringeworthy.  It's a growing process.  Kudos to him for starting early.

     

    This board reminds me of something I saw when I was younger and followed a bunch of bands.  There'd be these little bands sharing a $300/mo apartment living in squalor playing in disgusting bars that weren't "found out yet."  If the band was good they'd start to play bigger and bigger venues, gain a wider audience and move up.  Fans always felt they'd sold out.  Nothing was as good as the old days when you could see them on Tuesday night when beer was $.25 and wings were $.10 in a basement bar.  The problem is those days sucked for the band.  Who cares about the music if you're sleeping in quarters that a submariner would say were too small?

     

    The board reminds me of those fans.  Fund managers are "cool" and doing something different if they manage $2m out of their mom's basement.  But heaven forbid some guy wants to hang his shingle, advertise and market themselves and do well.  "He's SELF PROMOTIONAL!!!"  I wonder if Pabrai ever promotes himself?  Or Buffett?  Oh wait...those guys are CONSTANTLY promoting themselves.  Buffett is the greatest self promotion machine the market has ever seen.  He has a bit more experience and has perfected this home spun persona that people love.  This is what comes with experience.

     

    Maybe there is some level of purity that comes with managing a tiny amount of capital.  At least this kid is out there hustling, writing for Seeking Alpha, looking to tutor kids.  He'll do well.  He seems to know the value of a buck, and he's working hard to find them.

     

    +1

     

    I have nothing to add. except for his most recent letter!

    2016-09-01_Askeladden_Capital_Q3_Letter_-_Lucky_or_Smart_FINAL.pdf

    Young Hedge Fund Manager Cracks The Private Equity Code

    in General Discussion

    Posted

    When we've talked to PE they always discuss multiples related to us and others as a multiple of just EBITDA, 5-7x is what they seem to get. 10x is high for most mature industries from what I've been told.

     

    I know they use multiples of other things as well, but usually they discuss multiples of just EBITDA when getting down to it.

     

    Is this EV/EBITDA or P/EBITDA?

     

    P/EBITDA

     

    It's EV/EBITDA.

     

    Comparing price to EBITDA is like comparing apples to oranges.

     

    He uses both FCF to equity and EV/EBITDA as metrics.  I've read his writeups on Sumzero. They're pretty good. Clear thinking.

    Count Acquisitions in Free Cash Flow

    in General Discussion

    Posted

    I'm not one to take shortcuts...

    As for whether or not to reduce OCF for acquisition costs, you shouldn't because those costs are already taken out in calculation of net income.

     

    Maybe I'm misunderstanding this part. Do you mean once the acquirer consolidates the acquiree's operating business? Because as far as I know, there's no hit to income for the cost of the acquisition (save for some restricting charges or the like). It's mostly the balance sheet which is affected, and then costs are capitalized in future periods.

     

    What do you mean by acquisition related costs? If you mean hiring an investment banker, doing due diligence, and costs integrating an acquired company, it does hit net income via SG&A.

    Count Acquisitions in Free Cash Flow

    in General Discussion

    Posted

    I'm not one to take shortcuts...

     

    Sorry I didn't mean to imply anything about whether or not you take shortcuts. I think your question was regarding acquisition costs and how they affect free cash flow. Let me give an example to illustrate what I'm talking about

     

    Let's say a company's FCF is $8M this year but they incurred $2M of acquisition related costs. Now you think the company is worth 10x FCF, should you put a multiple on $8M or $10M? I would say put it on the 10 because when you put a multiple on something, you are doing a DCF in disguise. Meaning you should put it on the 10 unless you think that $2M of costs is going to repeat every year. 

     

    As for whether or not to reduce OCF for acquisition costs, you shouldn't because those costs are already taken out in calculation of net income.

     

     

    Count Acquisitions in Free Cash Flow

    in General Discussion

    Posted

    Wondering if most here reduce operating cash flow by any acquisition-related costs when calculating free cash flow. For serial acquirers, I think it's apt, but am on the fence when a company maybe makes a few occasional acquisitions. Curious as to hear other's thoughts on this.

     

    Depends on how you want to use free cash flow. If you put a multiple on it, you are doing a shortcut for a DCF, which means you shouldn't include it unless you think it will be an ongoing expense.

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