permabear

Currently short: - Medallion Financial (NASDAQ:TAXI) - they finance taxi medallions primarily in NYC. Medallion values have come down significantly over the past year due to the rise of Uber/rideshare apps. Expect wave of defaults to come. One drawback is high div yield. Also management is fighting back with a share repurchase program and claim that they have sufficiently diversified their loan portfolio away from taxi medallions (and into consumer loans) Contemplating: - Home Capital Group (TSX:HCG) - subprime mortgage lender in Canada. Recently terminated 50 mortgage brokers for fraudulent applications. Problem is likely more widespread. In a housing correction scenario, HCG should be hit pretty hard. Not backstopped by gov't. Likely not too big to fail. - Temple Hotels Inc. (TSX:TPH) - large exposure to Alberta/oil & gas markets, overlevered, possible dividend cut coming.

This is great! Thanks a lot! I had no idea something like this existed for Canadian filers. Similar to rankandfile.com for EDGAR filers.

Any updates on this? Would love to get an RSS on SEDAR pages. Thx

I don't have any names in mind, just wanted to get a sense of overall approach. A few years back I was going to (but got cold feet) short Intertainment Media on the TSX-V, which shot up from 10 cents to over $1.60 in a few months on expectations of its "revolutionary" (sarcasm) translation software (i.e. Google translate). They hyped the shit out of the name by issuing press release after press release and then it crumbled to 4 cents today.

There is no chance that ad or subscription revenue will ever justify current valuations. The model for success in this industry seems to be: 1. Build user-base (preferably no ad or subscription revenue to drive growth) 2. Sell out at insane valuation citing user engagement (IPO, M&A) Has anyone seen a social media company's business plan including expected ROIC on M&A or organic investments? What kind of operating earnings do they budget for, if at all? I feel like this isn't even a consideration. Anyways, definitely want to go short... but how?

Prof. Damodaran (look him up) uses free cash flow to the firm (FCFF) when comparing cash flows to enterprise value (the value of operating assets). When comparing equity value, he uses free cash flow to equity (FCFE) which is basically FCFF less debt service i.e. cash flow available for distribution to shareholders or to repurchase shares. For FCFF, Damodaran uses EBIT * (1-t) less capex less change in working capital. So, to answer your question, I would reduce your cash flow by taxes. If you don't want to use the above formula, you can always use cash taxes paid, which is usually disclosed as a supplement to the cash flow statement. If you forecast FCFF, you can discount those cash flows at the firm's cost of capital to get to an implied enterprise value (then back off debt and add cash to get to equity value). The cost of capital of the firm (discount rate) is where the tax benefit of paying interest gets factored in. For example, if the firm's cost of debt is 10%, tax rate is 30% and they are levered 40% debt to total capital, the after-tax (effective) cost of debt is 10% * (1 - 30%) = 7%, which would comprise 40% of your total cost of capital. So yeah, not trying to get in the weeds here, but I would incorporate tax expense into your cash flow figure.

Social media stocks have no obvious ties to earnings/fundamentals. I'm convinced the entire space is a short, however, to paraphrase Keynes, the market can stay irrational longer than I can stay solvent. Wondering if anyone here is short social media in general or a certain name in particular. What is your strategy? Do you expect a catalyst to bring about a price correction? I have the same issue looking at Canadian housing, as another example. I think prices are too high as compared to rents and NOI, fueled by foreign investment and speculation. I would love to go short, however I have yet to discover the best way to accomplish this.

If management is sitting on cash and the stock is undervalued, how exactly should they make the call between buying back stock or investing organically/through M&A? Would you look at EPS accretion? Or compare your firm's EV/EBITDA to that of your target? Would you value your firm and see what implied discount it trades at, and use that as your expected return? Return on capital? etc. Appreciate any suggestions. Thanks

http://vinodp.com/documents/investing/security_analysis/security_analysis_notes.pdf Awesome, thank you!

Thinking about buying Security Analysis - is it worth it? I found Intelligent Investor really dry and difficult to get through. My favorite investing book is definitely Margin of Safety by Seth Klarman. Thanks

Good CBC documentary on the Toronto condo market: http://www.cbc.ca/doczone/episodes/the-condo-game

One of my friends just recently put his house on the market in Markham (suburb of Toronto). He priced it in line with the same model home that sold on the same street within the last 3-6 months (under $1m). On the day he listed, by the time he got home from work, the broker had arranged a bidding war with a dozen or more people. He told me a Chinese buyer offered ~10% over asking and had a certified cheque with her for a ~15% nonrefundable deposit! Low price sensitivity. Almost like they are doing this to move money out of China.

Thanks, that was a good read. Agreed, thanks for the article. I've been waiting on the sidelines (renting) for years. I definitely think we're a bubble and I hope it pops soon. Any ideas on how you could make money on the short side? I looked into shorting the non-government mortgage insurers, but decided against it.

The Outsiders by William Thorndike, just got to the chapter on Mr. Buffett