jawn619
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Posts posted by jawn619
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I've heard of people looking at amazon and saying they spend x% of their revenues as maintenance capex, everything else is "growth capex". They save a lot of taxes this way because they're booking "losses" and growing at an insane rate.
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Value investing doesn't always work in the short term, and you are indistinguishable from being wrong if you under perform. If you have investors who see you under perform and don't understand how it works, you will have to answer a lot of questions. I've found that if you have investors that don't understand how it works, they almost never will no matter how much explaining you do. It's tough especially in bull markets when clients say the S&P is up X% in this short time frame, why is the portfolio not at least matching it?
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How much do they charge?
5/44 from the wikipedia page, but the source link doesn't work so take that with a grain of salt
http://www.jamspreader.com/wp-content/uploads/2013/03/ShutUpAndTakeMyMoney.jpg
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i like annotating them myself. I felt like i learned more.
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Would it not be difficult to charge 1.25% to hold cash? Maybe he breaks it out?
I don't think I could do it. Super disciplined.
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so when do we get our money?
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an interview of with Simons.
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My impression has always been that a hedge fund is $50k+ in startup costs. That only makes sense if you're going large from the start. You mention having a few employees, presumably you have connections to raise capital already.
If you want to run lean go the RIA method. Seems like there are a lot of paranoid investors here. If someone is paying you to manage their money why would they be looking over your shoulder hourly? They probably have better things to do. If not and they don't trust you fire them as a client, you don't want clients like that.
If you're in the A camp I'd just call a lawyer and talk this through with them. What's an extra grand or two in lawyer fees if you're going to be spending a lot to startup anyways. Plus then you'll get real advice, not second hand from the internet. This is good advice, but we don't know what state you're in, your products etc. Talk to a lawyer.
If you're in the B camp then this is probably the best cheapest advice you can find. But I'd still say talk to a lawyer!
Lawyers are expensive until you get sued. I've surfed the net for business questions, spending hours and at times days looking for a good answer. I've come to learn that in many cases my lawyer knew the answer and a simple email or call would have done. If you have someone decent, someone interested in growing with your business they aren't going to nickel and dime you. That is unless you're wasting a TON of their time. Ask for all-in quotes on things as well. I've asked for the price for doing something as a package, not on an hourly basis. Usually cheaper and better for standard things like a trademark or form filings.
This is a forum of DIY people, but I've learned the hard way that professionals are often worth more than their hourly bill rate. Learn to use them!
Thanks a lot!
I will talk to a lawyer to get started. I should register an LLC first right? And then employ myself from the LLC and get director and officer liability insurance? How much would that cost?
I don't think you need insurance, and registering as an LLC doesn't take more than $200.
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I don't want this to sound like I'm picking on anybody, so please nobody take it that way.
I am not and I am thankful for your commentary. Just attempting to learn. Thank you for the clarity.
We should be thanking you for putting up with us. Thanks.
+1
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My wife's new company offers the following non-stock categories for her 401K plan. We both come in the Prem Watsa deflation wagon. Which one of the below funds should she pick? Plan to reallocate to more aggressive stock funds after a major correction.
Thanks,
High Yield Emerging Market Bond
Inflation Protected Bond
Interest Income
Total Bond Market
Long Term Corporate Bond
International Real Estate
(Stocks) ( Japan, Latin America, China, Emerging Asia)
Blended Fund - Conservative Alloc.
Blended Fund - Convertibles
Blended Fund - Moderate Allocation
Blended Fund - World Allocation
Bond Investments - Emerging Markets
Bond Investments - High Yield Bond
Bond Investments - Intermediate Gov't
Bond Investments - Intermediate-Term
Bond Investments Long Government
Bond Investments Long-Term Bond
Bond Investments Multisector Bond
Bond Investments Short Government
Bond Investments Short-Term Bond
Bond Investments World Bond
those look they have some hefty fees. check for fees and pick the one with the lowest fees first. And stay away from high yield and muni bonds.
I wouldn't recommend bonds though.... bonds are just yielding so little right now
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You've talked with Lloyd? Impressions? Any names he mentioned? Did you guys discuss VULC?
Sorry that was misleading. I meant I really like Lloyd Miller as an investor and have looked extensively at his holdings. I put more weight on some of those guys than others. I haven't spoken with Lloyd but would love to understand some of his holdings...MFC industrial and SLTC for example.
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I remember someone asked a question earlier about what good small and microcap funds to follow. I couldn't find the old thread so decided to post the ones I follow for everyone.
I really like Lloyd Miller and have talked with a couple of the funds. There are some smart ninjas in this space.
Lloyd Miller III
Steel partners
Cannell capital
Royce & associates
David Nierenberg
Peter Kellogg
Kinderhook
Diker Capital
Bandera partners
Hummingbird Value
Vulcan Value
Brian Bares, Bares Capital Management, CIK 0001340807
Glenn Fuhrman and John Phelan, MSD Capital, CIK 0001105497
Jeffrey Gates, Gates Capital Management, CIK 0001312908
Paul O ’Leary, Raffles Associates, CIK 0001169581
Robert Robotti, Robotti & Company, CIK 0001105838
Wilbur Ross, WL Ross, CIK 0001128452
Toby Symonds, Altai Capital Management, CIK 0001478982
John Lewis, Osmium Partners. Search for CIK 0001316729
Baker Street Capital Management, LLC CIK#: 0001488207
Moab Capital Partners LLC CIK#: 0001377817
GREENWOOD INVESTMENTS, INC. CIK#: 0001121943
RUTABAGA CAPITAL MANAGEMENT LLC/MA CIK#: 0001128239
Nantahala Capital Management, LLC CIK#: 0001472322
Sagard Capital Partners, L.P. CIK#: 0001423385
Mangrove Partners Fund, L.P. CIK#: 0001486623
Schultze Asset Management, LLC CIK#: 0001297629
Raging Capital Management, LLC CIK#: 0001444376
12 West Capital Management LP CIK#: 0001540531
COGHILL CAPITAL MANAGEMENT LLC CIK#: 0001162675
Venor Capital Management LP (Filer) CIK: 0001399348
Trigran Investments, Inc. CIK#: 0001336800
Indaba Capital Management, L.P. CIK#: 0001524362
Meson Capital Partners LLC CIK#: 0001535880
Bulldog Investors CIK#: 0001462180
Candlewood Investment Group, LP CIK#: 0001531741
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what are you not buying today? Stocks on sale
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FNMAS trades for $3.94, with a par of $25. An upside of a little over 6 to 1.
The common on the other hand is a little harder for calculate the upside but i'll try (please correct me if you see any mistakes).
In 2013 they had about $19B in earnings before taxes and 2014 had about $12B. The most recent quarter they had about $2.7B in earnings which comes out to be about $11/12B if projected out on a yearly basis. There's 5.9B shares outstanding so at $12B it amounts to about $2/share in "earnings". Doing a DCF assuming no growth, 15% hurdle i get a value of $15.5. Shares trade at $2.5 now so that's also about a 6 to 1 upside from here.
The preferred's are probably safer in that they get paid first but they don't seem like an extremely good deal in relation to the common, especially since the common gets to participate in the upside Fannie ever gets released. If anything, my calculations for the common are too conservative because Fannies cost of capital is probably lower than 15% and because earnings are currently understated because of the interest hedges.
I haven't looked at the income statement in a while so I can't comment too much on that for now. But I know that the companies will need to raise quite a bit of capital, even assuming that sweep is used towards principle payments. So you need to account for dilution.
FNMAS is one of the more expensive ones. I own FREJN, FMCCG, and FMCCN; which are $6.55, $5.51, and $5.26 as of the last tick, on a par value of $50.
Those all have different coupon rates right? It looks like FNMAS has the highest of all the preferred which would explain the premium in relation to the others.
Either way I can sum up this investment up. It's a speculative bet where there is a real chance of permanent capital loss though the chance is unclear. The upside seems to be asymmetric compared to the downside.
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He doesn't like the limited upside of the preferred. I don't think this situation will be resolved anytime soon. I would say 2017 at the earliest. As Bruce mentioned, this is an investment for people with patience, persistence and courage of conviction. Having a legal background has supported my conviction, but of course, I cannot predict the outcome.
While the ultimate resolution will take 2 years or longer, there will be evidence and catalysts along the way to support one way or another, which is a positive for owning the preferreds rather than not, despite the par ceiling. I think people often miss this fact. For instance, say we have a decision in 2017 overturns the 3rd amendment. Rather than an overnight jump from $5 to $50 for the preferreds, I think it's more likely that we see a gradual rise as more transcripts, documents, briefs, etc. are released. After all, the preferreds were selling for less than $1 a few years ago. But the progress in the Claims Court case, various documents and supporting evidence has led to the rise.
The ceiling does take away from the upside, but I personally haven't arrived at a valuation for the common that makes me feel like they are a substantially better bet. I used to own a mix of the two before Lamberth threw out the District Court case, but have switched everything to the preferred given that the common have rebounded substantially whereas the preferreds have remained just about where they were after the drop. I also am not sure about what sort of capital raise (dilution) will be required if and when the companies are released; this poses another risk for the common.
Can you talk about what upside you see for the preferreds and the specifics you used to calculate that? TIA
They're selling for about 11-12 cents on the dollar. I'm not a lawyer but I've read many of the court filings and opinions on both sides of the issue. I think if the rule of law is upheld, it's fairly obvious that the sweep is illegal. Certainly confident enough at 8 to 1 odds. If it gets to 2 to 1 or even, I will probably sell depending on the facts at that time.
FNMAS trades for $3.94, with a par of $25. An upside of a little over 6 to 1.
The common on the other hand is a little harder for calculate the upside but i'll try (please correct me if you see any mistakes).
In 2013 they had about $19B in earnings before taxes and 2014 had about $12B. The most recent quarter they had about $2.7B in earnings which comes out to be about $11/12B if projected out on a yearly basis. There's 5.9B shares outstanding so at $12B it amounts to about $2/share in "earnings". Doing a DCF assuming no growth, 15% hurdle i get a value of $15.5. Shares trade at $2.5 now so that's also about a 6 to 1 upside from here.
The preferred's are probably safer in that they get paid first but they don't seem like an extremely good deal in relation to the common, especially since the common gets to participate in the upside Fannie ever gets released. If anything, my calculations for the common are too conservative because Fannies cost of capital is probably lower than 15% and because earnings are currently understated because of the interest hedges.
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He doesn't like the limited upside of the preferred. I don't think this situation will be resolved anytime soon. I would say 2017 at the earliest. As Bruce mentioned, this is an investment for people with patience, persistence and courage of conviction. Having a legal background has supported my conviction, but of course, I cannot predict the outcome.
While the ultimate resolution will take 2 years or longer, there will be evidence and catalysts along the way to support one way or another, which is a positive for owning the preferreds rather than not, despite the par ceiling. I think people often miss this fact. For instance, say we have a decision in 2017 overturns the 3rd amendment. Rather than an overnight jump from $5 to $50 for the preferreds, I think it's more likely that we see a gradual rise as more transcripts, documents, briefs, etc. are released. After all, the preferreds were selling for less than $1 a few years ago. But the progress in the Claims Court case, various documents and supporting evidence has led to the rise.
The ceiling does take away from the upside, but I personally haven't arrived at a valuation for the common that makes me feel like they are a substantially better bet. I used to own a mix of the two before Lamberth threw out the District Court case, but have switched everything to the preferred given that the common have rebounded substantially whereas the preferreds have remained just about where they were after the drop. I also am not sure about what sort of capital raise (dilution) will be required if and when the companies are released; this poses another risk for the common.
Can you talk about what upside you see for the preferreds and the specifics you used to calculate that? TIA
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Anybody interested, I am selling a personal 100 year bond with 0.01% yield! AAA+ character references from CoBF! :P ::) Much better deal than those negative yield euro bonds! 8) ;D
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No scientists in the house?
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Biotechs burn cash when they go through R&D, yet R&D clearly has some economic value. Anyone have a way of estimating how R&D translates back into sales or income?
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I had a discussion with a trader who does index ETF arbitrage and he showed me a theoretical opportunity where an ETF was trading $0.15 from fair value and asked me if I would trade against it and how big my position would be. I said I would trade on it but don't know how big of a margin of safety it was. He said he would put his maximum buying power in it, take out a second mortgage on his home, call his parents and take out a second mortgage on their home and put all that money into the opportunity. It just made me think of how different people's think of risk differently.
What would have to happen for you to put 100% of your net worth into one position?
Berkshire Hathaway trades at 0.1x book? Google trades at 4x P/E? IBM becomes a net net? Discuss
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Eat the book...that way you'll really internalize it
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Long term puts? LEAPS essentially.
The implied volatility on the options of social media stocks are insane. Some of them imply a 60-100% move on an annualized basis...meaning options are really expensive.
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I still didn't get an answer... When you evaluate the attractiveness on an investment, you want to see what you get vs what you pay. So generally I've been using EBITDA-MCX as "what I get" and using Enterprise value for "what I pay". This differs on a case to case basis (for example if a company is capitalized hugely with debt you have to take in account that the interest charges become a big expense.)
I'm asking is it more correct to use EBITDA-MCX then subtract out the tax? Even though taxes vary it is still a real expense. I don't see a lot of people accounting for it when doing DCFs or calculating intrinsic value and was wondering if someone could shed some light onto why.
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no, you get 200k. Operating earnings is after taxHelp me understand better. Tell me where I'm going wrong.
Lets say I'm a company and I make per year
$1,000,000 in rev
$500,000 in gross profit
$250,000 in operating profit
$200,000 in owners earnings after I subtract what i need for maintenance capex.
now as an owner I don't get the $200,000, I get $200,000*(1-tax rate). Say its 30%. Doesn't that means the cash I get out of the business is $140,000? Aren't taxes an expense as well?
How is operating earnings after tax? operating earnings is what you have after you pay for your cost of goods sold and your operating expenses. Don't taxes come after?
Small caps undervalued?
in General Discussion
Posted
how many billion dollar market cap net nets do you see? I've found that markets are pretty efficient on most sizes, but as you get lower in market cap there are definitely more ideas trading at lower valuations.