Myth465

Thanks for the tips. I saw the releases about the move, and will check those out as well. What got me thinking is Europe and other areas are just getting to this sort of stuff while we are only beginning the early stages of moving away (and its really only the early adopter crowd). As you said the emerging markets havent even scratched the surface yet. We went to Brazil, and would have been lost without a GPS. Interesting idea, it and Heelys are at the top of the list of things to look into when time permits. Now you have me wanting to look into MIM. This reminds me of MSFT, but with better allocators.

BIDU has been in the Journal and the Economist, everyone knows they exist. Not sure about the other one. People have realized that reading a 10k for a $100 million dollar company halfway across the world (when fraud is rampant), doesnt tell you much. My guess is 95% of the weakness in the shareprice is due to people thinking it might be a fake. If its not then you would be handsomely rewarded. If it is you loose out. I think the company is fine if its real, and I think most others do as well.

This is a very good point. They probably have alot of safegaurds on the concept. Not sure what its worth but its free. What intrigues me is this looks like alot of fun, much funner then skateboarding, and could generate another fad. I also like the design. The units will increase sales for the shoes, and vise versa.

Here is a good write up with great comments - http://www.gurufocus.com/news.php?id=79713 I listened to a technology event for the company and thought about it a bit. Everyone dismisses the company due to the user / smartphone market eating up the auto / mobile division. Everyone agrees that will happen, but it will likely happen overtime. We can consider that business in runoff, and know that Garmin will extract cash from that segment, as well as try to continue to grow it for low to no capex. They mentioned possible agreements with car companies to install the device. If we take the cash, put that business into runoff with no hope of growth, and put a decent multiply on the other 3 decently moated segments then you get a decent value calculation. The question is do we have much of a discount. The other issue is Management. They appear very reasonable but I will need to do more reserach. They are buying back shares, paying an increased dividend, and not wasting cash. Rick what are your thoughts?

If I am bored this weekend, I will probably check a few skater message boards. If they get any kind of transaction and you can place a 5x or 10x multiple on the cash flow then you would have a pretty nice share price. If not, you have the cash protecting you no the downside. I believe you all said that Southwest owns most of the shares. Why do you wise they would sell?

Rick thanks alot. After seeing your Japan post I decided to review your stocks in more detail. This may be a viable company and could work out great. This got me excited - http://www.heelys.com/SitePages/MoreInfoNano.aspx I am a grown man and even I want a pair, if they get even the slightest following in the skateboarding market then we could have a huge winner. I plan to do some scuttle butting, but have you heard or read anything review wise? I am also looking at Garmin, maybe it deserves its own thread.

Bobs has been on my to research list for a while. A guy I know owns it, and I remember seeing there restaurants everywhere when I was done there. They appear to be selling at a reasonable price, for a growing business. How did you get a market cap of $26 million, I have always seen 60 million - is google reporting incorrect share count data? http://www.google.com/finance?q=OTC:BOBS

Thanks Rick, that was a very useful thought exercise.

The economist had a whole briefing on this, last week. Basically 30 minutes of spoken word about this. Very interesting.

Speak of the devil. http://finance.yahoo.com/news/KSea-Transportation-Partners-bw-2333166268.html?x=0&.v=1 Upon a quick 3 minute scan it looks like they got 5 pounds of flesh and there is not much value left, high rate, payment in kind, low convert price. Management will probably end up staying for giving such a sweetheart deal.

Im fully in but plan on waiting to do anything. I was hoping for $10 dilution, but will take $5 now lol. Management has really mishandled this. They could have probably raised capital at $6 when the stock rallied, or $9 a month or 2 ago. Now we are at the mercy of a hedge fund manager, because the covenant adjustment is contingent on a deal. Its at least $85 million and our market cap is close to or below that, what if they issue $135 million at $5 - $6. It seems pretty dumb but at this point I cant take anything off the table. Shareholders have been bag holders at $20, $10, and now $5 - at this point the only person guaranteed to make money is the hedge fund buying in. If I were an unscrupulous hedge fund manager, I would string them along until about tomorrow then make them issue equity at 30% more than that price. The market will continue to knock 3% - 6% off a day inmo until we hear something. The stock could have been worth as much as $20 if they were able to get through this rough patch without dilution so I think there would have still been value with dilution, but if we get too low of a conversion then the margin of safety is eventually killed.

Didnt realize it went till November (and sadly I live in Houston) you are right we are now in the thick of it. Earl will be interesting.

What happened today with LUK is why I find it difficult to put more than 30% of my networth into an idea. You just cant control black swans.

I think you are right, D&T would catch anything major. Its hard to screw up the cash part of an audit, but is D&T really doing the audit or is it a local partner? I havent looked so I am actually just asking. I think too many people have been burned, so Chinese stocks are stuck with low multiples until they get there acts together collectively. It will provide a margin of safety if you can find a credible firm being unfairly punished. As an American / European I would say you are significantly at a disadvantage vs. a Chinese person or shop which specializes in China (they can actually just send someone to the buildings and addresses in the 10k to verify things exist). I am getting burned with financials and risks I understand, so I have plan to pass on plays like these. If I had more time I would do good old fashion scuttle butt, I would make phones calls and things like that.

Maybe there's a miscalculation in valuation. JNJ isn't the cheapest stock around. And with MSFT, maybe you're not pricing in MSFT's problems with long term growth. It's a bit like DELL really. I am as frustrated as anyone but I can say my bets were off with KSP, and FBK. Both have slight Management issues, and with both I should have demanded a higher margin of safety. With FBK Cardboard you were actually the voice of reason and even if it works out, I think we can all agree we were looking to capitalize on the temporary highs in pulp. Management mistimed things and robbed us of a chance to sale high. The banks forced KSP to raise equity, but they did it in the worst possible way. Now they are at the mercy of a hedge fund who can wait them out and potentially force them to issue shares at $3. They should have just issued shares at $6 when it rallied given the situation. Today was a great day, but it does appear that we are losing more then winning. I like MSFT, but they are one or two Yahoos away from being overvalued. Also those guys who are winners if they hold they will be burned too at some point. Its all about timing. Its been a bad few months, which hopefully means good news is around the corner.

And Munger, I do appreciate your thoughts. I tend towards optomise and your posts are a healthy dose of reality. As I said in the gold post, part of my problem is if things get severally bad then my small amount of capital wont matter. I will be fairly screwed either way. Eventually I would be laid off and my savings would be exhuasted. I have to think we will muddle though and it will be painful. Everyone hopes they are just right. I can agree things look bad, but can also admit I have no idea what will happen. I have been raising cash, closing options position, and demanding a higher margin of safety. I shun large caps because I dont see a 100 billion dollar company doubling very easy. With that said, im still 75% invested and hope things will improve. Politically, We are in a situation with no good answers, and I wouldnt want to be in power. The paradox of thrift makes taking your medicine seem rather pointless, and the other options look pretty bad also. ---- Rick we got the point. Just from a surface level review see a declining business model. Similar to USMO, Blockbuster, Yellow Books, or any other declining business. You asked why not invest. We answered. Now maybe they are moving into another market, or something but ... ATSG is at 4 x FCF and growing. I own it for the same reasons you own Garmin.

So, you are saying that you prefer something that makes you feel good even though you know it is not good for you? That's not value-like behavior. Markets are inefficient, lunches are not free, and people are not always rational. We both know that. Extreme deflation and inflation are bad examples. The argument was 2% inflation was not such a bad thing and can help to keep the masses at ease. The argument was also that rational or not Joe wants his 2% whether prices rise or not. He doesnt really care, and likely wont care for the explanation. Try showing your employees the CPI and raising there salary / lowering it based on it. Then tell them its rationale when salary doesnt move cause CPI was flat that year, and let me know how that works for you. --- I dont agree with Eric. Its simple a fact I had not considered in relation to Joe and Jane. I found it interesting. My opinion in this discussion is irrelevant, because as it is we wont switch to gold. I am agnostic to gold as an investment, and have to use dollars to eat and pay rent regardless of how I feel. My goal is to protect / growth my wealth. Gold in terms of a discussion is interesting, but I dont understand it enough to put serious money into it. People who like it pretty much say its always been worth something then stop. Thats not much better then the full faith and credit stuff, but at least you can spend dollars. Im all for a change but lets go with something useful at least. Oil, silver, wheat, something that has some value on its own. It seems foolish to me to get rid of fiat money and start a new system based on some shiny rock just because men thousands of years ago found it intriguing. If the world falls apart, I would rather have a gun and some can food, instead of less then $100,000 (my net worth) in Gold.

I envision a world where everyone has a smart phone with a built in free GPS. What role will garmin play in that world. That world is a few years out. Outside of rental car companies I dont know how Garmin will make money. Its a USMO situation. IF they want to put the business in run off and pay off excess cash then I would consider buying. Anyway thats my 2 cents after 5 minutes of research. Nice cash flow though and great net cash. Agreed, my point is we all know this. Everyone agrees in theory you just want things cheaper. What I am saying is we should all agree to disagree. One person wants 7x, one 10x, one 4x. All think the economy is in various stages of sucking, and all think one day things will recover. 1 thinks the worst is behind us, 1 thinks its yet to come, 1 thinks it doesnt really matter. I am saying we all seem to agree on the basis thesis but, disagree on the place in the cycle and the multiple demanded. I think we should agree to disagree, and focus on identifying bargains (how ever we choose to define them).

Munger it seems as though everyone is in agreement in principle on everything with the exception that you all have a different idea of margin of safety. Some want 10x FCF with a large cap that is fairly immune to macro and you want the same or a lesser quality company but with a 5x FCF. It seems as though everyone is repeating the same thing, thread after thread. You are saying the world will end and then recover so batten down the hatches, they are saying it will be painful but we will get through buy quality when its priced right. My basic thesis is things are never as good as they say or as bad as they say. Everyone is so doom and gloom, so I dont think its that bad.

Also remember Microsoft was trying to pay quite a bit for Yahoo a few years back. FCF gets thrown out of wack when you have deal makers. Let me have some of the cautiousness and I think we will both be better off. LOL I think it helps though, and will need to get deeper into the details once things slow down at work. They say only the paranoid survive.

I am an accountant, but I rarely spend so much time analyzing companies in such detail (that can hurt sometimes such as with KSP). You can typically boil things down to 2 - 3 points that will determine where things go. The points I think are important is how will MSFT deal with the change in landscape (Search, Phones, and Challenges to OS). I think the stock is cheap for these issues and these issues are largely overblown. The next big point and most important one to me is what will MSFT do with the cash. If you had unlimited wealth you could buy MSFT and have the entire basis paid off in 7 years or so, probably less if you cut R&D. Anything after that would be a return. I think the OS business dominance will last another 10 years at least making MSFT a good deal. The issue is - will they reinvest that cash wisely, dividend it out, or blow it on stupid pointless things. My guess is 1 or 3. Tech companies dont like 2. If get comfortable with how they use their cash then its a no brainier. I am not so comfortable at this point. I think they will use the cash to pursue the fade of the day - Search, Social Networking, and Phones. I think its tough to pick winners in those spaces, and would prefer not to.

Something I didnt consider, but you are right. I dont give Joe enough credit sometimes.

You are probably right, I wonder who is the buyer. Should be interesting to get the details. Thats the one benefit in all of this. INMO, the hands of Management (probably a good thing, man were they aggressive with growth) will be tied and they have the highest incentives to get the best deal possible. I would be happy with $10. Hell I would take $7.50 with a dividend of 20 cents in December. Especially with the high watermark of $2 for incentive divs. I wonder if they can amend their comp structure, and the IDR / Div split. MLPs hurt in the long term, but help in situations like this inmo. If you can get in after a collapse you can do quite well. BBEP worked out well., but they were able to avoid dilution I am hoping this one does as well. The only issue for me is the options create a time element.

Yes I am 100% certain that the average Joe likes his 3% raise even though inflation is 3.01%. I am also 100% certain he really doesnt understand, but prefers to say he is making $39,000 vs $33,000 a number of years ago. Do you disagree? I have a decent understanding and even I prefer option 1. Psychologically no one wants to make less.

I was just thinking about MSFT - our IT guy is very excited about the new window's 7 phones for some reason. Thats interesting, have you asked him why? I dont think they stand a chance. I know of no one who uses Windows for anything (maybe Office) because they like it. Most use it because they have to at some point and dont want to switch. Apple gets people to take the time to learn how to use there products and many want to use them, same with Google. Once they start they are usually hooked, and avoid change. Phone OS is going that way. Some are hooked on Apple, some Black Berry, and some Google. BB and Apple are proprietary, and everyone else is backing Google as a way to stay viable (except for Nokia I think, but Samsung, Motorola, and HTC are). I dont see where MS fits into the puzzle. I have really enjoyed my HTC Shadow and Dash for the last 3 years, but once I switch to the Android phones MSFT will have a tough time getting me back. Apple users mainly dont switch, and Corporate users are stuck with BBs for now. The only advantage I have heard, is Corporations may use MSFT or Apple to avoid having to pay for a black berry server and license.