KJP
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Posts posted by KJP
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6 minutes ago, Dinar said:
Altria mentioned it on the call at least once if I am not mistaken that PM claims that Altria failed to uphold its end of the bargain and there is a dispute whether or not IQOS and its later versions will be sold by Altria. Also, you can also terminate Swedish Match salesforce and have Altria sell Zyn.
Yes, there is a dispute. I suspect PM wants to get out of the IQOS license, and if they can then they could piggyback off Swedish Match's distribution system in the US. Overall increased risk and negative for Altria, unless they can develop their own competing product.
But I don't think PM wants Altria to distribute Zyn, because Zyn's biggest competitor is Altria's on!.
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17 minutes ago, Dinar said:
Yes, $15bn is an absolute steal. I am really unhappy about the price, the only saving grace is that I own PM as well. There should be tremendous synergies, particularly in distribution in the US. Fair price would probably be $25-30bn USD. Hell, analysts expect SEK 5.50 in EPS in 2024, and that's before recent USD strength. So 100 SEK offer is what, an 18 p/e pre synergies.
I think it's a good deal for PM either way but what are the distribution synergies in the US? I believe Altria has (at least for now) an exclusive US license to market IQOS in the US, so as long as that exclusive license is in place, I don't think they can get any distribution synergies via marketing IQOS and Zyn together.
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2 minutes ago, Spekulatius said:
SWMAY - looks like $PM wants it. Is it just me, but it seems a bit like a lowball offer:
https://finance.yahoo.com/m/378efe91-d398-3c46-99a9-04960755e00e/philip-morris-in-talks-to-buy.html
Looks low to me as well. But I thought the same of HMHC and that went through.
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Leatt Corp.
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For a detailed explanation of the PMTA process and why it is impossible to comply with the deadlines in synthetic nicotine statute discussed above, see this letter to the FDA from the vaping lobby:
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Here's part 2 in a series from Voss Capital sharing their view on the future of US new housing construction: https://vosscapital.substack.com/p/the-big-long-a-deep-dive-on-us-housing-755?s=r
Based on their latest 13-F, Voss appears to be implementing their bullish take primarily through building products distributors/suppliers (BlueLinx, Griffon, Huttig), though they do have smaller long positions in a few homebuilders: https://www.sec.gov/Archives/edgar/data/1730145/000139834422003244/xslForm13F_X01/fp0072899_13fhr-table.xml
A service, rather than product-supply, company with shareholder-aligned corporate governance and some exposure to Sunbelt new home construction (among other things) is IES Holdings: https://investors.ies-corporate.com/static-files/9ce45dda-60c5-4683-90fe-a72d59265b04
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1 hour ago, LearningMachine said:
Democrats have proposed windfall tax on profits above $66 per barrel. See https://www.congress.gov/bill/117th-congress/house-bill/7061 .
I believe every sponsor of that bill is a member of the Progressive Caucus. So, it's really the Progressive Caucus, rather than Democratic leadership, that has proposed that bill.
I think the probability range of a windfall profits tax in the US is low.
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The House may vote on a cannabis legalization bill this week. The text of the bill, along with the Judiciary Committee report on it, are available here: https://docs.house.gov/floor/Default.aspx?date=2022-03-28
As far as I can see, the bill would not preempt state cannabis laws; instead, it deschedules cannabis under the Controlled Substances Act and builds a new federal licensing and tax regime on top of existing state regulation. In addition, it requires the FDA to hold public meetings "to address the regulation, safety, manufacturing, product quality, marketing, labeling, and sale of products containing cannabis or cannabis-derived compounds." That sounds to me like the prelude for future FDA regulation of cannabis products, perhaps along the lines of the current FDA regulation of tobacco and now synthetic nicotine products. As I have explained in another thread, FDA approval processes typically are time consuming and expensive, so they favor large, experienced players, like the tobacco companies. So, overall I think this approach would be bullish for big tobacco.
This is a Democratic-sponsored bill, so even if it passes the House I doubt it does anywhere in the Senate anytime soon. But the fact that Democrats are proposing this approach to cannabis legalization seems particularly good for big tobacco, because I doubt Republicans are going to be less favorable to that industry.
What remains unclear (to me at least) is how courts would apply the dormant commerce clause to state cannabis laws under this bill or one like it. For example, can a state continue to require that all cannabis sold in the state be grown in the state? I didn't see any provision of the bill that addresses this issue, but the bill is 90 pages so I might have missed it.
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2 hours ago, Spekulatius said:
If Biden wants to help out Europeans, he should promote NG drilling, pipeline and LNG infrastructure build to allow for LNG exports. I think CVX and RDS have a huge integrated LNG business and might benefit. I should probably take a look at RDS as it has not done that well so far.
Forget about oil, I think NG is the more important strategically for energy independence in Europe and the US.
If you believe additional LNG export capacity will be build on the US Gulf Coast and use gas from Haynesville, Williams and Black Stone Minerals may interest you.
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14 hours ago, bargainman said:
Apologies for the political click bait title of this video. I thought it was interesting though wrt housing, especially in CA and NY. Basically the 'yes, but not in my backyard' issue.
A good essay on this topic: https://philo.substack.com/p/scarcity-truthers?s=r
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As far as I can tell, Zyn, on! and Velo are all tobacco-derived. They filed PMTAs for Zyn back in 2020. Those applications are still pending.
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The bill has now passed in the Senate and will be signed by Biden: https://tobaccoreporter.com/2022/03/11/synthetic-nicotine-rule-clears-senate/
I focused on nicotine pouches in my original post, but I believe this is a significant issue for many vaping products as well. Take a look at the tweets coming out of the vaping industry trade group @VaporAmerican and its President @AmandaWheeler32
Also, I believe the FDA has some discretion with respect to its enforcement authority and may issue guidance saying it won't bring any enforcement actions against non-compliant products for a certain period of time, particularly in light of its inability to process marketing applications on anything close to the existing timelines.
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I have been looking into the synthetic nicotine provisions tucked into the omnibus spending bill the House passed last week. It appears to be a nice win for big tobacco against new competition.
My understanding is that historically FDA regulatory authority extended to tobacco products and products containing nicotine derived from tobacco. This created a potential loophole for upstarts to create and market free from FDA regulation (and potentially various forms of taxation) products containing entirely synthetic nicotine, i.e., nicotine created entirely in a lab, rather than chemically extracted from a tobacco leaf.
The budget bill closes this loophole by amending the Food Drug and Cosmetic Act's definition of "tobacco product" to include products containing nicotine derived from any source. The bill is available at the following link and the provisions I refer to begin at page 1861: https://vaporvoice.net/wp-content/uploads/sites/3/2022/03/pg-1870-syn-nic.pdf
Then, "[w]ith respect to a tobacco product that contains nicotine from any source other than tobacco," the bill requires the manufacturer to submit a marketing application within 60 days after the effective date of the act, and to withdraw the product if that application isn't granted within 120 days of the passage of the act. As a practical matter, marketing applications appear to be very costly and time consuming undertakings [look at Turning Point Brands' earnings "adjustments" for context] that require significant scientific studies. It's unclear whether the manufacturers of synthetic products have conducted the necessary (and quite expensive) studies, but it seems doubtful that they'd have applications ready in time and even more doubtful that the FDA would actually rule on the applications within 120 days. For context, Swedish Match's PMTA for Zyn has been pending since 2020.
So, as far as I can see, the House bill is effectively a de facto ban on synthetic nicotine products. Big tobacco, on the other hand, appears to be marketing products -- including nicotine pouches like Zyn, on!, and Velo -- that use tobacco-derived nicotine, so they would not be affected.
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IAC, though it is focused on online-to-offline transition rather than a go-anywhere conglomerate
Also, if Clarke's relatively small size doesn't bother you, FRP Holdings may interest you, though the controlling family doesn't have the same style as Armoyan and is more focused.
Going even smaller, Volvere PLC in the UK, though the track record isn't nearly as long.
Finally, Exor (Agnelli family) or the various Vincent Bollore companies may interest you, though the latter have alot of interlocking shareholding and governance complexities that give me pause.
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24 minutes ago, meiroy said:
Is Manchin going to stand up to Warren?
For better or for worse, Manchin just blocked the trillion dollar BBB on which the President of the United States campaigned and which 48 of his fellow Senators (including Warren and Sanders) backed. I don't understand the suggestion that he would be afraid to "stand up" to any Democratic Party elected official.
Maybe he ultimately would vote for a fossil fuel windfall tax, but not because of anything Senator Warren says.
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33 minutes ago, LearningMachine said:
History repeats. Canadian oil companies might be a good way to avoid the significant probability of windfall tax if crude goes really high.
Coal is also through the roof. Is Manchin (necessary to pass anything in the Senate) going to agree to a windfall profits tax on fossil fuels? How about Casey from Pennsylvania (Marcellus)?
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7 minutes ago, nafregnum said:
And now oil producers are going to to lock in at these highs.
Not sure how much a producer can lock in. Oil curve is quite backwardated, so if you have oil for delivery in, say, December you can't lock in $120 for that oil today.
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3 minutes ago, Gregmal said:
What would people peg as the odds, say we were running a bookie operation, that ANYTHING neutral or sharing the Russian POV here can be found in a MSM piece? Not saying I support them, but if I was looking for an unbiased way to see both sides of this thing, anyone think I could get it in the good old US of A?
Does this qualify? https://www.newyorker.com/news/q-and-a/why-john-mearsheimer-blames-the-us-for-the-crisis-in-ukraine
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26 minutes ago, mcliu said:
Don't higher energy prices benefit Republican states and harms Democrat states? US politics is interesting.
There is a high dispersion of effects in those states. For those directly involved in O&G it's great. But the further away you are from that industry, the more you just get the downside, which can be particularly acute if you live in, for example, a rural (and thus likely largely Republican) area in which driving relative long distances is required. To give a specific comparison, think about how high O&G prices affect an oilfield worker or someone who sells trucks in the oil patch versus a teacher, police officer, or mailman.
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42 minutes ago, JRM said:
Why?
1. I've already got exposure to U.S. natural gas (and the Haynesville in particular) via Black Stone Minerals. I prefer to keep that over Williams.
2. At the current price I think it will be hard to make 15%/year on Williams, and I don't want too many investments that don't meet that standard. That belief isn't based on much though. At the price I bought, very little research was required. At today's price, I think you need to look deeper into the company, and the pipeline business doesn't interest me enough to do that.
3. The Williams shares I sold today ~$32.80 I bought two years ago for around $7. This ought to have no bearing on anything, but I suspect it continues to color my views about reasonable valuation.
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Williams (WMB)
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7 minutes ago, KJP said:
I've also heard the hesitancy among public E&Ps. On the other hand, oil futures are in pretty steep backwardation (April 2022 $110, January 2023 $85) and rig counts are steadily increasing, though still below 2019: https://www.investing.com/economic-calendar/baker-hughes-u.s.-rig-count-1652
Midstream, e.g., Williams, Enterprise Products Partners, also doing very well, which also suggests some bullishness on US oil & gas production growth.
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I've also heard the hesitancy among public E&Ps. On the other hand, oil futures are in pretty steep backwardation (April 2022 $110, January 2023 $85) and rig counts are steadily increasing, though still below 2019: https://www.investing.com/economic-calendar/baker-hughes-u.s.-rig-count-1652
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29 minutes ago, wabuffo said:
The main threat would come from PLA subs sinking merchant ships - much like the German U-boat campaign during WW II that tried to blockade England. But submarine campaigns, even when they have complete air and sea superiority only take down 10% of cargo. Of course, the PLA's hope would be to scare merchant ships out of the area completely.
Meanwhile, the US (and its allies) would have weeks and months to consider their options (as opposed to the very short reaction time required to counter an invasion) and rally the world into opposition to the blockade. My guess is that in addition to sanctions and financial measures, the US could deploy its submarine force to attack the PLA subs and escort merchant shipping through the strait - a strategy not without risk but probably low risk to the US Navy. The US nuclear subs would just loiter silently in and around the Taiwan strait, wait for the "noisy" Chinese subs to expose themselves in order to enforce the blockade and then take them out and scoot out of the area. This is what ended the German U-Boat campaign after the Allies launched their anti-submarine campaign.
If they had adequate anti-ship targeting capability, I believe the Chinese would implement their blockade of Taiwan with land-based anti-ship missiles, not submarines. So convoys with submarine escorts would be ineffective. Depending the capabilities of the Chinese missiles, convoys with surface combatant escorts may also be ineffective for the same reasons that even a carrier battle group may not survive attacks from sufficient numbers of advanced satellite-guided anti-ship missiles.
Conceptual problem with reinvestment rate formula
in General Discussion
Posted
If I understand the question, I believe it's to make the numerator and denominator apples-to-apples. Typically, NOPAT includes depreciation. So a capital expenditure expense (albeit, a backward-looking historical one, rather than a cash one) is already embedded within NOPAT. Since the expense is embedded in and reduces NOPAT, it's also removed from the numerator via looking at net rather than gross CapEx.
Put another way, "Net CapEx + change in working capital" is the amount of capital added to the business beyond the amount that NOPAT assumes (via its use of depreciation) the business consumes in steady state.