Foreign Tuffett
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Posts posted by Foreign Tuffett
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I had my eye on this one SPRT...also not entirely sure if it's negative enterprise strictly defined, but life insurers seem extraordinarily cheap some of them trading at 0.5x tangible BV and less than 10x P/E.
Also check out NWLI. 1/2 TBV. Around 8x PE.
Despite all the huballo about interest rates 1/2TBV is a pretty good margin of safety.
NWLI has traded well under TBV for years and the management seems uninterested in repurchasing shares or taking any other steps to do anything about it.
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The video is interesting, but far from convincing given how anecdotal most of the "evidence" is.
I do agree with the thesis though. The unprecedented amount of uneconomic investment, especially in real estate, is a sign that something in China has seemingly gone haywire.
The signs can be seen outside of the China as well as within. I think most of us on this board are at least somewhat familiar with the debacle that is Vancouver residential real estate. Vancouver isn't the only place Chinese capital is causing issues. In Phnom Penh, Cambodia the amount of (seemingly unneeded) residential real estate towers being built by (mostly) Chinese companies is a common topic of conversation.
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Although I am absolutely horrified by the prospect of a Trump Presidency, I have to at least figure out how to position myself for the 20 to 40% chance that he will win. Other than too much whiskey, how would you gear up for getting Trumped.
Basically, I think that there is a 20% chance of him winning and a 70% chance of markets really gyrating, and in 2017 real risk (10 to 60%) of a 2008 level crack-up, with horrible trade wars possible.
My thinking is to have a higher than usual amount of cash, plus a very small amount in a volatility instrument. (Personally, I'm hoping that we have seen his highwater mark, but...)
Assuming this is a serious question......
First of all you need to figure out how confident you are in your estimate of Trump winning the election. Then you need to figure out the odds of various market scenarios in a Trump presidency. Next you need to compare your estimates to what is already priced in to the market. Once you have all that figured out then you can trade accordingly.
Good luck.
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Looks like Amazon thinks the auto parts market is ripe for disruption.
http://www.cnbc.com/2016/09/21/amazon-to-disrupt-auto-parts-industry-jefferies.html
I don't see how Amazon gets past the "I need it right now" problem. Typically when people need a new car battery, spark plugs, etc they need it immediately, making even one or two day shipping too slow. Even something like motor oil, which may not be needed immediately, seems like a poor candidate for online shopping due to weight and possible hazardous nature.
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Two points:
1. Cooperman made his living with this sort of behavior. I bet you could plot a line in the sand after Reg FD when his returns started to decline.
2. The technical definition of insider trading implies both a fiduciary duty and a quid pro quo (I am simplifying). Leon did not pay for this information, nor was there a written "duty", i.e confidentiality agreement or agreement not to trade on the information.
In other words, if you are talking with an exec (whom you don't pay for this information) and he spouts off material non-public information without getting you to sign a confidentiality agreement in advance, then you are legally allowed to trade on that information. This is Leon's argument.
In this situation, the executive has violated Reg FD and you have done nothing wrong. Obviously, the executive will claim you "agreed verbally" to not trade on that information, since if the executive didn't get that agreement from you, he would be in violation of Reg FD.
This is probably "technically" a win for Leon, but boy, oh boy, is it scummy. Additionally, the rest of the complaint regarding trading in certain securities without disclosing his trades in violations of various 13G and 13D disclosure rules is one-sided. Leon is guilty. In his letter to his investors today, he didn't even dispute that topic.
Great post. I strongly suspect your point #1 is dead on. Given how much insider trading seems to still go on, trading on material nonpublic information must have been very, very common before insider trading laws were tightened.
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Central banks don't run out of money. They magically create more when they need it. The Federal Reserve never had $4 trillion in equity to purchase all of those bonds with. They're levered like 80x to their equity base and they just created the money to purchase those bonds electronically. Crazy that you can just use fake, electronic money to acquire real assets representing claims on the value of labor measuring in the trillions, right?
Your comment hints at some of the criticisms of fiat currency that have been around for many decades (centuries?). Ultimately the success of a given fiat currency is dependent on people's confidence in it. This psychological underpinning makes some people very nervous.
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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?
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I agree with the thesis of the article, at least insofar as it's that the future of the big consumer brands is likely to be less bright than the past. Ultimately mainstream razors, laundry detergent, cleaning supplies, crackers and chips, etc. etc. are largely fungible (aka there is little difference between store and name brands). I think consumers (especially younger consumers) are becoming more and more aware of this. I think in the longer term the market is likely to become increasingly bifurcated, with cheap store brands on one end, and expensive organic and specialty brands on the other.
Anecdote: I live in anytown USA. ALDI and Trader Joe's, two grocery chains that sell next to no name brands, are becoming increasingly popular.
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Maybe a good idea would be to list characteristics common to value traps?
1) Companies with assets that may be valuable, but aren't producing positive cash flow (LUK, SHLD, lots of other companies that trade under tangible book)
2) Companies that are facing macro headwinds (life insurers, banks)
3) Complex sum of the parts stories that the market has trouble appreciating (Leucadia again, Interactive Corp)
4) Companies with ineffective management
5) Companies with slowly shrinking revenue and/or operating profits
The more I think about it, the concept of value traps seems problematic. Many of the companies commonly described as value traps seem to have little in common besides "the share price didn't go up when I wanted it to."
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Scott,just wanted to say that you're far and away the most provocatively idiosyncratic poster on this forum. And I mean that as a compliment.....
Now, since this is an investing forum: what are you currently long?
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S&P 500 index fund? Why don't you go all in on VRX instead?
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Looking at the difference between the February 13 f and the most recent April 13f, it looks like Scion reduced its equity positions from $79,939 million to $51,092 million. That's a 36% move of assets to cash or short positions or something else???
I don't think it's possible to get the full story based only on the 13F filings. Ultimately there are a lot of different things that could be going on, so I would advise against drawing actionable conclusions.
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What a cluster****
Also, this:
http://www.vendoralley.com.php5-10.dfw1-1.websitetestlink.com/wp-content/uploads/2009/06/ex_unicorn.jpg?w=300
Negative Enterprise Value Stocks
in General Discussion
Posted
I looked at SXCL last week. I believe it is trading just over net cash at the moment.
Their oil services businesses are strongly oriented towards the Bakken. This, in my mind, means they may be permanently impaired as E&Ps continue to move away from the Bakken in favor of the Permian, etc.
I can't say that I'm a fan of their sports segment either