Value_Added

The inflation reduction act has made nuclear power an amazing business in the U.S. for the next 10 years. Guaranteed money with a near completely protected downside. There’s a lot of upside optionality as well such as above 2% inflation, volatile power prices and selling their base-load power at a premium to mega cap and tech companies who are “going green”. Take a look at CEG (Constellation) earnings call and accompanying presentation from yesterday. Pretty impressive how much the inflation reduction act has helped them.

Seems GTX may fit here now with their recent capital restructuring (now a single share class). Tons of cash flow with minimal reinvestment needs, they seem hellbent on paying off debt and buying back stock. They bought back 10% of their shares in 2023 and approved another 15% (at current prices) for 2024. I don’t see why this wouldn’t continue going forward. Business is in a good position too from both a turbo standpoint and zero emission vehicle (battery and hydrogen fuel cell) standpoint. Seems like the focus switch to hybrids could be a small tailwind for their core turbo business as well.

Sure, anything is possible but it’s not likely. Big tech is always a day away from some new innovation that turns the world on its head. If these develop into additional high margin revenue streams, valuations and sentiment will continue in their favor. With that said, their current offerings can become out of favor just as quickly and valuation could go the other way. All businesses in their current form have a growth ceiling - even small caps. It’s important to keep this in mind. Just because something is small doesn’t mean it’s destined to be bigger. Oftentimes when small businesses chase growth, it’s value destructive which will ultimately be reflected in the stock price. Best thing to do is understand what you’re buying and understand how to value it. Once you do, buy it with a margin of safety. If you can’t, just index.

Knowing the circumstances which would cause a margin call is the big pause for me. I know a lot of people out there use leverage in an unintelligent way which is also where most of the horror stories come from. When I get a mortgage on a rental property, I have a pretty good idea of the risk before signing the papers. The value of the home dropping during a housing downturn doesn’t scare me because I won’t get a call that the loan is due because of it. I’m ignorant on the subject, but it seems like stock market hysteria could cause just that even though you know you hold a company’s stock which didn’t really lose any long term value (hopefully). I just don’t understand that aspect enough to feel comfortable with it.

I’m at 0% but not because I think it’s stupid. I think it is an extremely useful tool , but unfortunately is one I don’t understand how to properly manage. To elaborate, I understand leverage…but I don’t understand how it is initiated, what kind of market scenario would constitute a margin call, which investments are viewed by the broker as risky vs safe, etc…for now I just use options as a form of leverage, though it isn’t true leverage which is the topic of this poll. I’ve looked into it via some Google searches in an attempt to learn the ins and outs but can’t seem to get comfortable. All I really find is how people use it for their investment style versus a fact sheet of how it works. Probably because of the multitude of different results and scenarios possible with its use.

Tikr https://app.tikr.com/register?ref=e2vcqf

I don’t know the screens that finviz offers but I would screen for: +12% revenue growth +12% net income growth +12% operating cash growth (use FCF if they have the screen for it) +12% equity/book value growth ROIC of 12% or higher. Market cap <$1B Ev no more than 30% above market cap That should find you a quality company with manageable debt. Just remember that Covid really hammered these metrics for small businesses in 2020 so I would run your screen starting in 2020 or ending in 2019. You probably aren’t going to find a lot of +25% early stage growers here because they won’t be able to show profit and operating cash/FCF growth. This is more of a quality screen.

They certainly exist but quality comes at a price. The micro and small cap market aren’t as overlooked anymore and anything of quality that’s proven itself and shows up on a screen for high quality metrics, will not come cheap unless there’s an event to make them cheap. If they’re truly high quality, the current multiple may be okay given a long timeline to continue executing but you’d better have a good understanding before placing that bet because if you’re wrong, multiple contraction paired with falling metrics is an expensive mistake.

GLDD -Basically just need to execute on their backlog. Pretty good setup and with the recent approval of special funding for their venture into offshore wind, it decreases a lot of risk that was unnecessarily taken when rates were cheap. Business, though crappy and capital heavy, is a necessity and they have the cost advantage by a long shot. Record funding from their biggest client paired with much of that funding being higher margin should offer an 80% upside. Short of prolonged periods of bad weather and another round of inflation/supply chain issues I don’t see much downside. Simple execution is the catalyst here. 2024 should be a great year for the business. IMXI - Continual execution from a great management in an extremely niche business should keep the stock chugging. Recent partnership with Visa should offer them more competitive advantages on top of their already large heap they have in their market. I expect to see large amounts of buybacks as they continue to generate plenty of FCF and the business needing very little capital. KRO - Down in the dumps for numerous reasons as any commodity is during a down cycle. With production being located in Europe, they were hit harder than others due to electricity costs. TIo2 is a necessity and market dynamics will again be in their favor. Historically, this has performed very well for investors when purchasing at or below a price/tangible book value of 1 or below. 9% dividend is a nice bonus.

The quick and dirty I use is equity plus debt. Every business is different and as you learn more about a specific business you can adjust certain balance sheet items as you see fit. I don’t attempt to be too precise because at a certain point you’ll lose the forest through the trees. I think it’s more important to understand how capital flows through the business to make it work and use crude metrics for ROIC.

+1 Also purchased DBI, HIBB, IMXI and METC throughout the week.

Isn’t this the whole premise of “look through” earnings according to Buffett?

If in 2018 they waived raises to tier the pay, they may well deserve 40%. Remember that raises are compounded. Assuming $60k per year 5 years ago, a 40% increase would’ve been 6.5% per year which is basically a cost of living increase plus a little bump on top of that each year. 2.5 of those years were during a period of higher inflation as well. Again, I don’t have all of the facts and am making assumptions. Traditional pensions are being phased out nationwide and isn’t surprising to see here. By the way, they will still get a pension but it will be a cash balance type. Granted, this isn’t nearly as good but if you’re making $85k base with a 401k plus matching, and a cash balance style pension, you should be able to plan for retirement pretty easily. But f*** them in regards to 40 hours of pay for 32 hours of work. How could anything else be taken seriously.

The Union asking for a 32 hour work week with 40 hours of pay is disgraceful. The unions all across the board are venturing far away from the foundation they were built on. Now they exist solely to gain membership and protect the p.o.s worker who would’ve been fired without the union behind them. Sure, they negotiate contracts and fight for more benefits and wages, but that’s no longer at their core. Does anyone know how often their contract is negotiated and what previous negotiates entailed as far as yearly raise increases? Have they been locked at their current rate for a while?

That was me. Not an amazing company, but is a necessity and they are the lowest cost producer allowing them to win more bids with better margin. Yes they are reliant on government but these projects have to happen to maintain proper infrastructure and supply chain. I’m extremely hopeful for wind contracts to proceed as planned but not holding my breath. I may reach out to investor relations to see if they’ll divulge their plans if it doesn’t come to fruition and their new expensive wind vessel is left sitting without work.

GLDD also has a ship under construction for rock installation in the offshore windmills base. Not sure what to think of the future of the offshore wind industry. Very political and subsidy reliant...worst case is all U.S contracts for offshore wind are cancelled and GLDD can sell the ship at cost or potentially better to wind companies outside of the U.S where the offshore wind market isn’t so new. Best case, they’re able to use it for their own benefit for years to come. Luckily offshore wind doesn’t factor into GLDD working out at these prices as the original thesis is playing out nicely.

Doing a 10-12B search on the SEC’s website will return upcoming spin-offs. I have several pre-filtered SEC searches saved as bookmarks that I can open routinely and find potential special situations ideas . I’ll post them below. Spin-offs: https://www.sec.gov/edgar/search/#/category=custom&forms=10-12B Tender Offers: https://www.sec.gov/edgar/search/#/category=custom&forms=SC%20TO-C https://www.sec.gov/edgar/search/#/category=custom&forms=SC%20TO-I https://www.sec.gov/edgar/search/#/category=custom&forms=SC%2014D9 Going Private: https://www.sec.gov/edgar/search/#/category=custom&forms=SC%2013E3 Large Ownership Stakes: https://www.sec.gov/edgar/search/#/category=custom&forms=SC%2013D

I can speak about Shark indirectly as I don’t own it but know others who do. Never heard a bad thing about them and they are very often compared with Dyson when mentioned. When we upgrade vacuums I am confident it will be a Shark due to all of the positive commentary and comparisons to a much higher priced product. Ninja I can speak to directly as we own their pots/pans, blender, and air fryer. Can’t say enough good things about them and without a doubt all small kitchen appliances will eventually be Ninja in our kitchen. Bang for buck, there’s no real comparison in terms of the quality received. The quality is clearly there in both brands but I don’t know how that translates into the stock and longevity of revenue and earnings growth. I suspect continued strong growth ahead simply because of the strong brand quality, affordability, and word of mouth (social media). Once they get into your kitchen (many ways to do that as they continually release more products) there’s a good chance they stay and likely gain share in your appliance ownership as stuff is replaced. I want to put this in the too hard pile but yet it seems so easy. Is this one of those Peter Lynch no brainers? Amazing brand(s), unfollowed by wallstreet sitting there trading at a 11.5x EV/EBITDA and 15x EV/EBIT while growing at 20%?

Anyone looked into SN? Recently spun-off and consists of two extremely popular brands continually taking market share. Not cheap but it doesn’t look ridiculously expensive either. Haven’t done any work except reading their investor presentation…no position.

Very possible but I think he more likely got out of them what he wanted, sold and moved on. I love seeing what Bury does but I never put much thought into his investments because he's so unpredictable. I view it as an impossibility to frame why he made an investment and its catalyst or timeline to make an exit.

You aren't misunderstanding me nor are you wrong. I think you're very correct in that most applications of TA would underperform and lose money. But like @Sweet has mentioned, its when you pair it with the normal analysis you would typically perform to gather the story and value the stock. You still need to understand where the company's been, where you think its going, how its going to get there and most importantly, does it's current price offer a margin of safety and if so how big? You could leave it at that, buy the stock if it fit your investing guidelines and noone would say that was silly otherwise. If you're right eventually the market should agree but sometimes Mr. Market isn't always agreeable which is what allows you to average down after an initial purchase. The TA's I use help put the market sentiment into perspective and better gauge when I would like to enter. I implemented this after my BABA mistake because it was an eye opening example that sentiment can make you wrong for a lot longer than you plan (and I may still be way wrong in BABA and I probably deserve to be wrong for letting another investor to override my initial work and valuation). TA's don't predict the price going up or down and they certainly wouldn't override my decision to enter into a stock I wouldn't be buying anyways. They simply act as a means to enter a stock when there isn't hugely negative sentiment. I don't really classify myself as a buy and hold forever investor. I like to have some sort of event driven decline that isn't permanently detrimental to the business. When this happens sentiment can be very negative for a long time and it's easy to enter a position with a lot of downside left - even with a mostly right valuation. I believe they work well for this type of investing.

Same thing was implemented 15 years ago at my employer. All new hires get the new “cash balance” plan while then current employees were grandfathered into the traditional pension. HUGE difference in monthly payout favoring traditional. The most recent change for management is everyone under 40 lost retirement healthcare. No grandfathering… just a line in the sand. Talk about a kick in the gut. Can’t figure out for the life of me why they would implement it like that. I can only assume retirement medical is something tracked as a liability on the balance sheet and removing that liability is somehow benefitting them in the near term?

Technical indicators don't read the future any better than the the rear view mirror sees the road in front of you. The key word is indicator...they can act as a gauge as to how the market or particular stock may move. It's all old data being collected and spewed out in a nice trend/graph that can be useful through the right lenses. The charts I posted above are in week intervals so swings that you're speaking of (1%-3%) on a given day or week likely isn't going to have enough movement behind it to fall below the moving average, AND change the overall momentum, AND become oversold/overbought. The daily very likely could but it would depend on the run up or fall it had preceding the change in direction. Monthly would take a long period of positive or negative movement to change the signal and would probably be the best gauge to use for long term investors. If the monthly has a change in signal it is usually due to a large change in sentiment. For example, Carvana...a stock I'm in no way interested in and one I'm sure you've seen a lot about because of some value investors who were drawn into it. You've probably heard that you could've made a killing recently on it if you could've just found the bottom and had the balls to put money into that falling knife. Using the monthly indicators I used above , it would have had you buying sometime in May 2023. Because it is plotting old data a month at a time, I can't tell you when in May so lets just assume it was at the high of around $13.15. Now remember, these aren't telling the future so this would be a complete gamble to enter at this point just based solely on indicators. IF you had a thorough analysis and knew with relative certainty that you ware right and a comfortable margin of safety exists at $13.15 it would be a great point to enter. The indicators are telling you the sentiment has now changed and momentum has been building very heavily behind this thing. Because its on monthly you didn't hit the low but you did find an entry point with positive momentum behind it. Same thing with Alibaba. You could've looked at the 3 mentioned TI's and saw that the momentum and sentiment was hugely negative and growing more negative (using the monthly's). It turned negative in Jan 2021 which was the quarter when Munger bought (we didn't find out until April or May). Just simply waiting until the TI's said the sentiment had changed would've saved you a lot of pain (trust me...I know...but MUNGER BOUGHT IT!!! lesson learned the hard way). The TI's say the sentiment and momentum changed in Jan 2023 (2 years later!). You'd still be down on the investment as of now but again, these are indicators and are only to be used as an aid and are in no way a guarantee it goes up or down. It also doesn't mean that you won't have +/- 10% - 20% swings in price without flashing another buy/sell signal. Technicals can be useful but should NEVER interfere with a full analysis of a company. Most people shouldn't use them without some sort of mental ruleset that won't allow them to skew your judgement on your hopefully thorough analysis. Burry uses much shorter periods based on his trading style. I would say based on his track record - when combining a 'mostly right' analysis of value and using TI's to enter at certain points, they are useful.

I think they were in his old MSN money letters but I’m not too sure. I think I was a bit too specific on the precise technical indicators he uses when buying and selling but he certainly uses technical analysis to find supports and resistance. Those indicators I mentioned are a “decent” tool when looking back to identify entry and exit points but they certainly don’t tell the future and should ONLY be used to aid in entering or exiting a position. As an example and based on a bullshit guess with HUGE assumptions - using his top 3 holdings (EXPE, CHTR, GNRC), he’s probably exited EXPE & GNRC already but is likely still in CHTR. If you look at the attached images you’ll see 3 charts each using 3 technical indicators which show 3 viewpoints of the market (Simple Moving Average, MACD, Stochastic Slow) . Overlayed is a Fibonacci Retracement showing points of support and resistance. I’ve highlighted my best guess where he likely entered the trades and the down arrows would assume an exit based on how he trades. CHTR was probably a very recent purchase based on the indicators and I’d guess he’s still in it. But all entry points are near or at support lines and the up arrows show the market momentum is likely not to allow it to break the support line. This is viewed in a weekly time period. Again, these are indicators I’ve set up and it’s EXTREMELY likely he uses something way different. But you get the idea. if you look at each stocks respective EV/EBITDA (I used TIKR) which I didn’t include here, you’ll find that at the end of the March reporting period, all stocks hit their low EV/EBITDA which when paired with some business analysis AND technical indicators is when he buys. Mimicking this way of trading is very difficult because the business analysis likely plays huge part of what he buys…the technical stuff just helps him “time” it so to speak.

KRO