dorsiacapital

I actually think this letter is a great example (and there have been others recently) of how hedge fund guys are extremely susceptible to non hedge fund guys who "talk the talk" regardless of whether they walk the walk long term. More than anything else, I think it explains how Hinkie was able to convince them to do the "process" for years and years. The walking the walk of being an NBA GM is actually drafting/acquiring good players. Hinkie has totally failed at that. Only Embiid, arguably, has potential but seems almost certainly headed down the Greg Oden path. I thought comparing himself to Buffett was particularly rich. Buffett shut down the partnership after over a decade of amazing returns. So far, Hinkie has lost a ton of games and acquired potentially 2 very high draft picks and that's it.

Ships passing in the night, just pitched Community Health to you in the short thread, but this IS the appropriate place to pitch it. So Community Health is kind of a piece of crap, and management badly missed their targets. They also are deeply in love with adjusted ebitda as a metric, but of course the adjustments never include their very high annual capex needs. But, here's my very rough breakdown - They currently have an enterprise value of 19 billion, which is 2 billion of equity and 17 billion of debt. Their adjusted ebitda last year was 2.8 billion. Their actual cash flow from operations was about 1.05 billion last year, and they had capex spend of about 950 million - so real cash flow of about 100 million. Not great! But, they did have 1.8 billion of cash flow from operations in 2014, and they had a sort of kitchen sink year last year with writing off delinquent accounts and various other problems. They're forecasting ebitda improvements of about 500 million this year. Who knows if that will come through. But I'm particularly interested because they are spinning off a small group of rural hospitals called Quorum in late April. Quorum has They delayed a bit when the HY market seized up, but they finally got the funding. Quorum has proforma adjusted ebitda of about 237 million. They're loading it with 1.2 billion of debt. If Quorum trades with an 8 ev/ebitda, then Quorum will have an equity value of about 400 million. Meanwhile CYH is getting 1.2 billion in cash. They've said that they'll use it for debt repayment. If they do, then that should lower their interest costs by about 100 million a year. Quorum's CFO was about 40 million a year, so that should add 60 million to cash flow from operations. Their cash flow from operations is then up to 150 million without any improvements. If you believe that they can even add another 50 million of cash flow from operations through 2016 improvements, then they'll have a 200 million dollar free cash flow for the equity stub. At that point, it seems reasonable that Community Health equity should be worth 2 billion (at a 10% fcf yield) and Quorum should be worth 400 million, which is about 20% higher than today. At that point, if they are successful on any of their various synergies, the equity stub that is CYH should increase in value quite quickly (it was trading at 60 early in 2015 and is now at 18). For example, pre 2015, the cash flow from operations from CYH/HMA (their 2014 merger) were consistently above 1.5 billion, with capex in the 1-1.1 billion range. If they can get back to that, then the free cash flow should be about 400 million, the equity stub should be worth 4 billion, which would make CYH a double. There's also at least one nice long term trend. Community Health's biggest problem is self payers. Currently, only 43% of their patients are in states with medicaid expansion access (they're primarily located in southern states), but slowly, slowly, republican states are becoming more willing to accept medicaid. (i.e. even Alabama is taking it more seriously - http://www.montgomeryadvertiser.com/story/news/politics/southunionstreet/2015/11/14/medicaid-expansion-alabama-next-big-battle/75738568/) And 2016, a presidential year with presidential turnout, could make state legislatures, like Florida, quite a bit more blue. Here's a decent, albeit promotional presentation, from last Q - http://www.chs.net/wp-content/uploads/2016/02/Q4-2015-Investor-Presentation.pdf. I do like that they're relatively honest about CFO / capex even with all the ebitda talk. I think the LEAPS options provide some very nice potential - the 2018 25s are at a mark of about 2.70. Also, on the Burry 13f, I like Nexpoint. 6% reit yielder with multi-unit apartment buildings. From what I've read, it appears 50% underrated versus peers (http://clarkstreetvalue.blogspot.com/2016/02/nexpoint-residential-trust-update.html). Seems like management is quite smart. Agree with winjitsu's comments. Still don't understand the financial institutions though.

+++++++++1 And thanks for your very thoughtful feedback on my shorts. I figured CAT/DE were the shorts most in line with your sensibilities. I totally take your point on the idea that some of these (MNKD in particular, also VRX) are priced with incredibly high volatility. I've been playing a bit with the idea that in some cases, option pricing lags underlying reality. Like for some of these E&P companies, bankruptcy in <6 months seems like a very high probability, and even if the implied volatility is very, very high, it's still not high enough to fully reflect just how horrible their situation is. Or, for example, the VRX $5 Oct 16 puts are selling for about 50 cents - they'll give a near 10 to 1 return if VRX goes bankrupt. If VRX has a 20% chance of going bankrupt in the next six months, then the option is mispriced. Or BTU seems totally screwed, but the $3 Jan 2017 puts are at about $2 - I'd say BTU has more than a 66% chance of going bankrupt by then. Curious to hear your thoughts. Also, this is the wrong forum for this, but as a Burry head, have you checked out CYH? One of his under-commented on holdings in the new 13F. Interesting upcoming spinoff and I particularly like LEAPS options with spinoff catalysts....(like many Burry holdings, more of a mean reveresion than a "good" company, but CYH is highly levered, (like 19 bil enterprise value, with 17 bil debt) and unloading 1.2 billion of debt into their spinoff, if at least some of that unloaded debt becomes equity value (from somewhat reduced interest payments if nothing else) then there's some nice potential. Trading at about 18 right now but it was at 60 at the beginning of last year.

Sort of funny you say this considering one of the most vocal Chanos bear positions has been on China for the last 5 years. I agree that Chanos hasn't always been successful, running a short only book is just incredibly difficult and probably makes you stretch on deals, but I do think many of his calls (like Enron) have been damn impressive. I haven't done the work on LNG, although so far Chanos results have not been buffoon-ish (published short position in October / price around 47, now around 32). Don't know your entry point however. If you're looking for a cartoonish short, I think Left may be more promising...

This short list is anything but short. Here are some names I'm either short or itching to short at the right price. ATHN PFPT MNST SC (still hasn't filed their 10k, but I'm sure subprime auto is fine) CAT DE Offshore drillers like NE VRX (much reduced from before, now just using 17/18 otm puts as a bankruptcy play) INSY MNKD MNK/HZNP DRII Last legs oil companies (UPL, LINE, EXXI) if the hedging can be worked out I must say I'm intrigued by your AGN idea b/c of what a hedge fund hotel it has become. If the merger doesn't go through and I don't think it's a sure shot, I'd be very curious about the price action. The big drops in LNKD and VRX over the last few months show how messy it can be when a HF trade becomes much less appealing. (Basing this on unfounded speculation that there was some margin calling/abrupt selling in both cases). Haven't done a real study of the company though.

The alternative universe was Paulson who was late to the trade but much, much, much better at managing investors and made the biggest profit ever in the history of hedge funding.

My point was that the oil industry's development of fracking was aided by government investment. Perhaps it would have developed exactly the same without that investment, but that's a hypothetical world, not the one we live in. There's also a strong argument that countries that have industrialized successfully (U.S. in the 1800s, Japan, South Korea) did so with a tariff-heavy model that nurtured their internal industries that would not have survived if they'd been exposed to the open market. http://www.theatlantic.com/magazine/archive/1993/12/how-the-world-works/305854 I think the over-usage of the world socialist to describe any governmental approach to the market beyond FREE MARKET RULEZ TAXES DROOL shows, at best, a sloppy and juvenile understanding of the world.

And of course direct government research in and tax breaks for the development of fracking technology http://www.huffingtonpost.com/2012/09/23/fracking-developed-government_n_1907178.html

http://www.motherjones.com/politics/2014/04/oil-subsidies-energy-timeline Very long history of tax breaks for oil companies.

Source? I'd say there's a reasonable argument that 2008 was a contradictory indicator depending on your interpretation of events. Not to get sucked down into this argument, but I find it hard to blame 2008 on a free market when you're talking about the most regulated industry in the world and where government sponsored agencies, like FNMA and Freddie Mac, were also involved.... Not to say that greed, which is present in free markets, didn't play a factor, but you're really stretching here.... Agreed, when talking 2008 people often name greed as the sole reason why it all went the way it went. The "greed" of the mortgage lenders and the investment bankers that sold the securities were part of the problem. But an often overlooked cause of the crisis was the interference of the government in the mortgage market. The government wanted to make it easier for low-income/less-priviliged citizens to purchase real estate. Agencies Fannie Mae and Freddie Mac had to have a minimum percentage of totale mortgage acquisitions for these categories. The agencies were partly allowed to do this by buying mortgage-backed securities issued against sub-prime mortgages. The gubmint did not require any bank to originate subprime loans. And I would imagine the banks were very happy and perhaps even encouraged the government intervention when it allowed them to make more loans while everything was going great. Fannie and Freddie loans also performed historically better than pure private lending: http://www.huffingtonpost.com/marvin-meadors/fannie-mae-freddie_b_1549411.html

Source? I'd say there's a reasonable argument that 2008 was a contradictory indicator depending on your interpretation of events.

I do think that the situation in China is concerning. I know people argue that China's stock market is not correlated with the U.S., and that China exports are a small fraction of the U.S. economy. Nonetheless, we haven't seen a real hiccup in China before since it became a major player in the global economy, so I'm curious how it shakes out. Perma-bears I give little credence too (beyond wondering about the odd discrepancy in belovedness of perma-bears vs. specific short sellers), but I think that some more respectable names (Gundlach, Tepper, etc.,) have been warning that the market is frothy. I do think that there's a middle ground between the market could go down 20-25% and we're going to the bottom of 2008 all over again. 2008 (I hope) was a once in a generational event, bear markets are much more common.... (For reference, I hold put options in Valeant, Monster, and Athena Health.)

I would distinguish between oil and gold. Oil is a resource that people need for the functioning of the economy; gold is, based on tradition, generally a currency hedge. Gold does have functional usages for jewelry and such, but it could be replaced by silver in a way that oil, at least as of now, can not. There's various interviews with Buffet where he puts gold on one side and productive assets (farms, exxon mobil) on the other side that I think express this point very nicely http://www.gurufocus.com/news/239678/gold-vs-farmland-vs-exxon-mobil--buffett-makes-ense-of-it-all

Thanks all, I was looking for a quick and dirty formula but couldn't quite think of it. I still plan to play with the math a bit, but it makes sense. (I would imagine that most of the cars being replaced are the old ones, but certainly accidents could play a big factor too....).

Hello, I think I'm missing something obvious, but I've been struggling to reconcile the following figures. Any help would be much appreciated. Average Age of Automobiles on the Road (http://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/publications/national_transportation_statistics/html/table_01_26.html_mfd) 2010: 10.6 2011: 10.9 2012: 11.2 2013: 11.4 2014: 11.4 Total Highway Registered Vehicles http://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/publications/national_transportation_statistics/html/table_01_11.html 2009: 254,212,610 2010: 250,070,048 2011: 253,215,681 2012: 253,639,386 2013: 255,876,822 2014: (?) New Automobile Sales https://research.stlouisfed.org/fred2/series/ALTSALES 2009: 10.4 2010: 11.55 2011: 12.735 2012: 14.43 2013: 15.53 2014: 16.435 So, here’s my question. Between 2009 and 2013 (no 2014 data), the totalhigh way registered vehicles stayed basically flat at 255 million. From 2009 to 2013, a total of 81 million new vehicles were sold (average blended age of about 2.5 years), and yet, the average age of the automobiles on the road actually increased by a year. This doesn’t seem to be possible. All of the new vehicles being added to a vehicle population that stays the same size should drive down the average age of the automobile on the road significantly. What am I missing? (I’m very curious about this because the continuing increase in average age of automobile on the road has been repeatedly cited as a source of strength/opportunity for the auto industry…). A few minor points Total highway vehicles contains a mix of things including motorcycles and heavy duty trucks – I checked and each category appears to stay basically constant over the relevant period. More anecdotally, vehicle miles driven and vehicles per capita has remained flat for the last few years (and declining a bit from car usage in the early 2000s). These anecdotes could be wrong, however, and American car ownership could be increasing per capita. http://usa.streetsblog.org/2013/05/14/millennials-will-drive-more-as-they-age-but-still-less-than-their-parents/ http://usa.streetsblog.org/2013/06/21/has-america-already-hit-peak-car/