Jump to content

beerbaron

Member
 View Profile  See their activity

  • Posts

    1,487

  • Joined

  • Last visited

 Content Type 

Posts posted by beerbaron

    HLYS

    in General Discussion

    Posted

    Great pick!!! Thanks for sharing!!!  =)

     

    I have a question that I'd like to bring it up to folks here.  When you encounter cigar butts or mediocre companies like the one above(maybe HLYS is not, but I'm just using as an example), should we invest in them or should we wait for a great company/fat pitch that can give you compound returns.. Once in a while I do come across such companies through screening, and I'm not sure whether I should commit capital into them or just wait for better opportunities....

     

    What are your thoughts?  =)

     

    Both are good, to use the words of Buffett himself. Dodd is good if you have a small capitalization and Fisher is better with large capitalization

     

    BeerBaron

    HIG

    in General Discussion

    Posted

    Take a look at their last investor presentation. I was not impressed, they spent the whole hours saying they are leaner and more efficient at risk management. There was no tangible examples on how they managed to shift the company's culture under such a short period. For me it sounded like a presentation with all the buzz words in the dictionary but no content. I stopped there...

     

    Just my 2 cents

     

    BeerBaron

    They are not all equal

    in General Discussion

    Posted

     

    Or think about gaming.  I'm not a gamer, but my understanding is that the latest games usually require the use of high end graphics cards in order to have the best gaming experience possible.  But that could change if our network connections get good enough.  There is a company called OnLive that has made major inroads into the delivery of computationally complex games over the network. 

     

    Forget about it cloud computing will not get into the gaming world before another 10 years. The amount of bandwidth/latency needed is so high that I just don't see the network improving fast enough for those needs in the mean term. If you believe cloud computing is going into the gamer world then rush on those level 3 shares they are going to make a killing. Talk to your kids and ask them if they would mind their latency going from 10ms to 100ms.

     

    BeerBaron

     

     

    Portfolio management for heirs

    in General Discussion

    Posted

    Why not set them up with a simple 50/50 Stock/Bond?

     

    Something like 25% Russell 3000, 25% S&P 500, 25% Investment Grade, 25% Treasury

     

    I would give them simple guidelines like to reinvest 50% of the dividends and keep the other half for their spending.

     

    They won't get awesome results but they will get the broadest portfolio available for a cost under 0.5%.

     

    BeerBaron

    Supermedia

    in General Discussion

    Posted

    Packer, you are probably right in using only FCF. But then my question to you is: If I were to buy the whole business for 200M$ when can I expect to see back my Principal+Interests?

     

    If goodwill is not worth 0 then what is it worth? What will it be worth if FCF turns negative?

     

    BeerBaron

    Supermedia

    in General Discussion

    Posted

    T-Bone, don't you think you are looking at it the wrong way? Instead of focusing on cash flow you should focus 1st on liquidation value and then on the cash flow. From looking at it real quick I see in SPSD might be worth -1.7B$ in asset liquidation value. So If you were to buy the whole business your real profit point would start to be once you paid all the debt + your purchase price (200M$). For the course of making it simple let's assume your pivot profit point is 2B$.

     

    Now from this value you can check if SPSD it's worth anything. Project you cash flows under pessimistics assumptions and see if you get an acceptable risk/reward.

     

     

    I'm not sure where you are getting this liquidation value from. Their assets are mostly goodwill, so it can only be valued on cashflow.

     

    Their "customers" are the businesses that advertise with them, and I think this is unlikely to keep declining at the rate of the last few years. They have a great value proposition, and the customers that have stuck around are likely to stay . . . i.e. they know who they are advertising to (old people, whoever else still uses the yellow pages).

     

    Exactly, there is no liquidation value. I got the 2B$ from putting the Goodwill value at 0 (Assets=1554 Liabilities=3284 Shareholder Deficit=1700). 1700 SHDeficit+200Purchase Price =1.9B. Rounded it up to 2B to make it easier to count.

    I still kept the intangible at par, but putting intangible at 0 would be an even more accurate/proper analisys.

     

    So if you were the owner of SPMD you would have to pay back all the SH Deficit before you would get return on your 200M investment right? The leftovers are what's left for you. Meaning that your business will need to earn 2B$ before you get a real profit.

     

    I used the last 4 years to determine their revenue and expense decline. You can use different assumptions but don't be too optimistic, especially on the expense side. There are some incompressible expenses and that can destroy FCF pretty fast.

     

    BeerBaron

     

     

    Supermedia

    in General Discussion

    Posted

    T-Bone, don't you think you are looking at it the wrong way? Instead of focusing on cash flow you should focus 1st on liquidation value and then on the cash flow. From looking at it real quick I see in SPSD might be worth -1.7B$ in asset liquidation value. So If you were to buy the whole business your real profit point would start to be once you paid all the debt + your purchase price (200M$). For the course of making it simple let's assume your pivot profit point is 2B$.

     

    Now from this value you can check if SPSD it's worth anything. Project you cash flows under pessimistics assumptions and see if you get an acceptable risk/reward.

     

    I would use 3 scenarios

     

    Projection from past scenario

    (8% Declining Revenues + 4% Declining Costs)

     

    Bad times scenario

    (12% declining revenue + 3% Declining costs)

     

    Life suck scenario

    (16% declining revenue + 2% Declining costs)

     

    If scenario 3 returns 10% and more you might have a plausible investment if you believe management will accept to die and distribute profits.

     

    BeerBaron

    scary article

    in General Discussion

    Posted

    Guys, what we all want is a margin of safety. Take the future cash flows and discount it to the present value, compare with the margin of safety...that's all.

     

    Just make sure your future cash flows estimates are reflecting what you feel the economy is going to do.

     

    BeerBaron

    Can Manulife get the money back?

    in General Discussion

    Posted

    In the Q2 conference Call Donald Guloien says that under Canadian GAAP they had a 2.4B$ loss but if they reported in US GAAP they would show a small profit. Also he stated that in Canadian GAAP their shareholder equity is 7B$ smaller then US GAAP.

     

    Can anybody explain what accounting differences are in play here?

     

    BeerBaron

    EBITDA Is Not Cash Flow

    in General Discussion

    Posted

    There are very few businesses where EBITDA actually means anything. If I put 5000$ of cash per year to maintain it but I don't count it at the end when talking about my disposable income I'm just lying to myself I'm not getting richer... same thing with companies.

     

    BeerBaron

    Cheap Industries

    in General Discussion

    Posted

    A huge part of the directory companies is usually Goodwill, so there is no liquidating value there. As stated previously the shareholder will not be able to get any returns until the debts are repaid. If the directory companies had a lot of TBV it would be a completely opposite story.

     

    Also, can directory companies really cut down their costs in proportion to their decreasing revenues for the next 5-10 years? It all depends on how much workforce is used for the operations. What's fixed and what's variable?

     

    Radio companies were stated in other posts as well, I liked the valuations but did not like the amount of leverage/time it would take me to get 100% of the FCF...

     

    BeerBaron

    Berkshire Emerges From Recession...

    in Berkshire Hathaway

    Posted

    That's funny, are the medias going to talk about those derivatives until they expire? Geesh, everybody knows there is some puts and we have no idea of their real impact until at least 2015 why do "competent journalists" still give bearish news about those.

     

    Thanks Parsad, I love the article. Future looks great for BRK...

     

    BeerBaron

    Amortizations of Goodwill and intangibles in Canada

    in General Discussion

    Posted

    Hi guys, I believe there might be a knowledgeable person here to help me out the tax savings possible due to intangible amortization.

     

    Does somebody know the amortization rate of the goodwill and intangibles for Canada?

     

    Is the amortization supposed to be linear or declining balance?

     

    Will the fact that canadian corporations/trust will be respecting FASB in 2011 change anything to the amortization rate?

     

    I believe that all the Income Trusts that re currently converting to corporations will start using their goodwill/intangible amortizations to reduce their tax rate, am I mistaken?

     

    Thanks guys

     

    BeerBaron

    Prem Watsa interview

    in Fairfax Financial

    Posted

    I think it is interesting that you have two camps of people, one arguing that the risk is inflation, another that the risk is deflation, and they are each convinced they are right and have a lot of supporting data.  If I had to bet I'd agree more with Watsa than others, though I think he is drawing too much of a parallel between the US and Japan.

     

    I think that some of the people worried about inflation are motivated by a distaste for the government bailing and spending programs that were enacted to stem the crisis, they aren't really concerned about inflation per se but are speaking out about government intervention indirectly by complaining about the risk of inflation.

     

    The US government is actually doing pretty good on its bailout funds... they borrowed money at near 0% (at times less than 0%) and loaned it out at about 5-15% plus equity kickers.  US tax payers will actually profit from most of these bailouts, rather than be required to fund them.  No inflation there.

     

    Well I'm in the camp of "I don't know what's going to happen but it is dam cloudy in front of us". Mr. Market must give me some very cheap valuations for me to take the market risk.

     

    BeerBaron

    Returning value through share repurchases rather than dividends

    in General Discussion

    Posted

    The example is extreme, but the point is still valid.  In the real world , I can only recall one example where a company was able to buy back the great majority of its shares for a price that was less than IV without moving the share price.  This was when Jay Pritzker bought back all the minority shares in The co that owned the cocoa beans using payment in kind. WEB and BG made a nice profit on that deal, but Pritzker made out like a bandit.  He wound up owning shares in that co that were worth many times the price per share that the stock traded for before that astonishing operation.

     

    Pre-Paid Legal Service has had a nice buyback program as well. My guess is that in 5-7 they won't be able to purchase shares anymore. Then the dividend is next.

     

    BeerBaron

×
×
  • Create New...