valuedontlie
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Posts posted by valuedontlie
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i think 20 names might be too low... if they have 10-100x potential then they're likely levered, beaten up, low/negative cash flow, and heading towards the $1 PPS range...
i would absolutely buy a basket of 100-200 of these names if you put the list together :)
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i think this is more likely to work with a large® basket of "cheap" companies that look on the brink of failure / are down significantly... get a big list with some parameters like YTD down %, low p/b, low p/cf, and maybe even single digit stock price... some likely go BK, some do OK, and some have huge returns (reminds me of HSNI coming out of GFC)...
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Markets in free-fall!!
Throw a few bucks at a few cheap(ish) looking cos?? (all figures assume you believe guidance...)
ADS -- Trading at ~6.8x 2018 EPS, set to sell or spin one (or more) business units
DXC -- $50 stock, guiding $8 in 2018 EPS and $12+ by 2022... EPS mostly = FCF
DLX -- 6.6x earnings They make checks... the kind you get at the bank... stock is flat from 2013 yet cash flow up 35%, share count down, net debt flat...
AGN -- $47bn cap... $4.3bn FCF next year... paying down debt, lapping product cliffs... 2019 down from 2018 but looks good beyond that!
BBBY -- Crappy retailer... 7x earnings... nearing guided LT crappy op margins of 5%
MYL -- 5x earnings; New product launches mean solid earnings growth for next 2-3 years... Int'l business is big mix... softens the "US generics suck" theme
WDC -- Earnings falling off a cliff (but so is stock!)... 5.5% dividend, hardly levered at all, easily <10% FCF yield even with earnings cliff from hard drive weakness...
CHTR/CMCSA -- Take your pick, cable cos both 5-year dogs...
FLEX -- 7x trailing FCF... trade war could be a problem... contract manufacturing a cyclical biz but trying to do more "value add" stuff whatever that means... have been buying back tons of stock for years now... dumb dumb's...
Happy holidays...
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thepupil or anyone else:
Any thoughts on iStar? It's a non-dividend paying REIT that's using NOLs to avoid tax. There's a decent argument that it's trading for ~50% of asset value, but it has a large amount of "transitional" and "development" assets left over from the crisis that are currently generating costs but little to no NOI. G&A is also running ~$70-75 million a year, and it's unclear to me how much of that could be cut out once the "transitional" and "development" assets are turned over into real estate finance and triple net lease assets.
Today it's basically cash flow breakeven if you put aside asset sales. The future is hazy, but you can see an outcome in which the current capital structure produces ~$125-150 million in pre-tax cash flow. The current market cap is ~$720 million.
Much more detailed writeup that's over a year old is here: http://clarkstreetvalue.blogspot.com/2016/08/istar-non-dividend-paying-reit-with.html
I put the basic math behind the ~$125-150 million pre-tax cash flow in one of the comments to the blog post linked to above.
One major update to the blog post is that last year iStar IPO'd its ground leases into a dividend-paying vehicle called Safety Income & Growth (SAFE). It currently has 40% ownership of SAFE and a contract to manage the assets.
Finally, I'm not sure about management -- will Sugarman stick to the basic blocking and tackling of running a real estate finance and triple net lease business? Will he shrink the balance sheet if that's the right thing to do (they have been buying back shares)? Also, is now the right time to be trying to recycle ~$1.5-2 billion in capital into real estate finance and triple net leases?
I own some shares of iStar... it's an interesting asset recycling idea...
My biggest concern is that they've made little/no real progress on winding down these land/development assets ($965m in 2013 and $933m today). The idea is that if they sold all these non-core/non-cash-generating properties and rolled it all into the RE finance/net lease business they could generate some $1-2+ in FFO per share.
I plan to give them a bit more time to execute on this but the portfolio hasn't really been simplifying as fast as it could. The timing isn't going to get a whole lot better to start unloading some of these things.
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A wealthy, private individual who NEEDS to invest $20-50-100m in RE might prefer a private investment over a public one. The beauty of being a private investor is that there's no mark-to-market. So while the adviser for that wealthy, private individual might get anxious with public share prices declining, it's all smooth sailing with the "absolute returns" of a private RE investment (that is, until they need to sell it at lower prices).
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Walter Investment Management (WAC)...
WAC is a mortgage servicer/originator (NSM, OCN) going through an out-of-court restructuring for prepackaged BK filing. These were never great public companies and are highly levered, WAC will remain highly levered even if it completes a restructuring.
Long story short:
1. Senior notes would get new $250m senior note + 73% of new equity
2. Converts and common equity would share: 27% of new equity + warrants @ $325m & $500m in equity value (similar to TDW setup)
Latest presentation calls for EBITDA of $184m in 2018 and $280m in 2019 mostly from cost cuts (accuracy is debatable). Net debt would be ~$1.2bn and share count would be 270m.
If equity value were $180m (7.5x EBITDA), common would be worth $0.67/share + warrants (vs. $0.43/share current price).
Obviously lots of hair, $1.2bn in debt would mean 6.5x leverage. Term loan and senior lenders have already OKed the restructuring, not sure if they need approval from converts (which are admittedly getting screwed in this deal).
Welcome any thoughts...
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bskptkl -- could you send me copy of VIC writeup on Ciber?
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I have a friend with a public shell on OTCQB and he indicated it is costing him about ~$15k per quarter. This includes $10k annually to OTC Markets. A "cheap" audit will cost $40-60k I believe.
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The Stephan Company (SPCO) has been an interesting experiment to watch as activists took over the company some time ago. It trades over the counter and has no designated CEO/CFO. Rather, the company is run entirely by the board with an outsourced CFO. So far they've done a good job of managing costs and turning around the company. Still feel like it would be better off private though I'm not sure cost savings would be significant (doesn't appear they audit financials).
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This is a pretty competitive industry with literally no barriers -- have seen this model popping up in my town...
There is a widely known/followed reddit post by a guy who started this trend and now outsources his booking/scheduling website to other users...
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This is more-or-less what my partner and I are trying to accomplish. We've acquired 2 businesses thus far. This plan is easier said than done but the thesis is real.
Sent you a PM.
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STR Holdings (STRI)... makes solar module encapsulants... commodity, sub-scale, upstream solar business with negative gross margins and sales falling off a cliff...
Despite that... company sits on a huge pile of cash/book value... net cash is $0.78/share and BV is $2.15/share relative to a $0.165 stock price... i.e. 0.2x net cash and 0.08x book value... absolute amounts -- $14.4m cash, $39.7m BV, $3m market cap
So why own this POS?
The company is sitting on a few assets that are about to turn into cash... a $2m note receivable, a $6.2m Malaysian factory which was recently sold, and a large receivables balance (management noted A/R at 2x their "desired level") which could add $2-4m... cash burn is expected to be $2-2.5m per quarter... this would bring in a net $5-6m by yearend which would mean $20m in net cash or $1.08/share...
Then what?
Management sees the abysmal pricing of its company... they noted biz dev activity could soon bring in 1 or 2 "gamechanging" customers (i.e. turn from CF negative to CF positive instantly)... also looking at acquiring profitable companies in industry (they are sitting on $8-9m in fully reserved NOLs)...
This has hair on it (fundamentals, China solar exposure, 50% owner is Chinese company) and I have a hard time believing management's comments on fundamental improvement coming soon but I see catalysts for cash inflows and the idea of liquidation is not off the table (they are waiting to see if these "1 or 2 customers" come through)... at 15% of cash value worth a flier...
Interesting - thanks for posting
Thanks for the interesting idea. Where did you find the management comments on "gamechanging" customers and possible acquisitions?
I called them to ask what they plan to do with all that cash... They were optimistic but we'll see if anything materializes... Cash pile is going up and anything else they accomplish would be gravy...
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STR Holdings (STRI)... makes solar module encapsulants... commodity, sub-scale, upstream solar business with negative gross margins and sales falling off a cliff...
Despite that... company sits on a huge pile of cash/book value... net cash is $0.78/share and BV is $2.15/share relative to a $0.165 stock price... i.e. 0.2x net cash and 0.08x book value... absolute amounts -- $14.4m cash, $39.7m BV, $3m market cap
So why own this POS?
The company is sitting on a few assets that are about to turn into cash... a $2m note receivable, a $6.2m Malaysian factory which was recently sold, and a large receivables balance (management noted A/R at 2x their "desired level") which could add $2-4m... cash burn is expected to be $2-2.5m per quarter... this would bring in a net $5-6m by yearend which would mean $20m in net cash or $1.08/share...
Then what?
Management sees the abysmal pricing of its company... they noted biz dev activity could soon bring in 1 or 2 "gamechanging" customers (i.e. turn from CF negative to CF positive instantly)... also looking at acquiring profitable companies in industry (they are sitting on $8-9m in fully reserved NOLs)...
This has hair on it (fundamentals, China solar exposure, 50% owner is Chinese company) and I have a hard time believing management's comments on fundamental improvement coming soon but I see catalysts for cash inflows and the idea of liquidation is not off the table (they are waiting to see if these "1 or 2 customers" come through)... at 15% of cash value worth a flier...
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Buying private/public businesses is difficult. I have been looking at small private businesses to purchase for several years now without success and that is simply with my own capital. Doing so with other peoples' money would make it much more difficult. This is why private equity funds exist.
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Arlington Value Capital - DNOW 12.7%, MSM 4.8%
Atlantic Investment Mgmt - WCC ~10-11%
River Road - FAST 1.6%
ValueAct - WCC 0.4%
And Vulcan Value - MSM 2.7%
These are position sizes for each.
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Arlington Value Capital - DNOW 12.7%, MSM 4.8%
Atlantic Investment Mgmt - WCC ~10-11%
River Road - FAST 1.6%
ValueAct - WCC 0.4%
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Has anyone noticed the recent flurry of buying in the distribution space?
WCC - Atlantic Investment Mgmt at 5%, ValueAct at 2.4%
MSM - Arlington Value Capital at 1%, Vulcan Value at 7.7%
FAST - River Road at 1%
DNOW - Arlington Value Capital at 3.8%
The majority of these positions were accumulated in 1Q15. I find it even more interesting considering each of these companies have short interest >10% (same with GWW as well).
Anyone have thoughts on distributors at these levels?
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also, regarding raising rates, i don't understand why they would rise signficantly. Most the the yield curve is very low, and the fed hasn't been buying for a bit. Is it possible that the market rate for money is very low because we are in a long term secular deleverging? businesses not borrowing, but instead paying back debt
I think people have bought into the "Fed is going to raise rate => rates are going to rise" idea so much that, its very possible that the 10Y actually collapses sub 1% after the first rate hike. Just look at the German 10Y Bunds (7bps), Japan 10Y (30bps).....the UST 10Y at 188bps looks artificially high! Fed doesn't control the 10Y, only the overnight rate.
I am in the camp that long term rates aren't going anywhere but down in near future absent a stupid US govt crisis.
Now, compare the SP500 index dividend yield against this rate backdrop. I don't understand how people are so confident about a general market overvaluation. Dividend yields have been rarely below 10Y rates and we are in an environment with one of the lowest dividend payout ratios...
I tend to agree here. The two paths that could take place would be for the long end of the curve to rise (growth picks up meaningfully) or the long end of the curve falls (low growth). The latter looks more likely right now.
The action in the bond market is perturbing. I share Munger's feelings on interest rates from the DJCO annual meeting: "Anybody who is intelligent who is not confused doesn't understand the situation very well."
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I would second the Third Ave Focused Credit Fund. Tom Lapointe writes a great quarterly letter and spells out his thoughts on individual issues.
http://www.thirdave.com/fund/third-avenue-focused-credit-fund/
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He purchased a significant amount of Now Inc. (DNOW) in the quarter. Distributor of consumables in energy industry. Interesting as this hasn't gotten all that cheap during the recent sell-off in energy space (particularly when compared to MRC).
What's the best site for checking insider transactions?
in General Discussion
Posted
openinsider.com is the only one worth using...