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beerbaron

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Posts posted by beerbaron

    My interview with Zeke Ashton of Centaur Capital

    in General Discussion

    Posted

    Thanks.

     

    Enjoyed the article.

     

    I have tried to have a more focused portfolio (~ 10 companies)

     

    How do folks here purchase their core holdings? say you want a 10% position + you find a company like what is mentioned in the article + company is selling at a good price (say 40% discount to intrinsic value)-do people just buy the full allotment or do you buy say 2.5% at a tie and average in (I have had the same experience  that asoon as I purchase something the price will continue to contract a further 20%). Portfolio size is say 4 x your net income so that 10% is relatively large $$$ some.

     

    If it's a great company for a good price: I buy in blocks of 5-10% of my portfolio if the price drops an additional 15% I add another 5-10% up until I reach 25%.

    If it's a good company at a great price: I buy 5% of my portfolio and not more.

     

    I have a very concentrated portfolio, but that's all my schedule can afford. The reason my blocks are big compared to my portfolio is that I want my frictions costs (less then 0.2%) as minimal as possible and that my portfolio is small enough to allow it.

     

    BeerBaron

    Chou America Funds!

    in General Discussion

    Posted

    I might go back to university in January and will likely not have any time for managing my portfolio. Chou is one of the few prospects that I consider to give my money to, like all canadian funds the management fees are quite high tough.

     

    BeerBaron

    VISA

    in General Discussion

    Posted

    In China, ebay does not have a chance to win. Taobao.com is dominant in China and with Alipay in China, I do not see paypal has a chance to win either. Both Taobao.com and Alipay are owned by Alibaba Group. eBay retreated from China market a few years ago. Yahoo made a smart move, Yahoo gave Yahoo China to Alibaba Group + $1Billion, in return Yahoo now owns 40% of Alibaba Group.

     

    Thanks for the info, I stopped my research on eBay after I understood how bad at investing they are.

     

    BeerBaron

    VISA

    in General Discussion

    Posted

    No matter how I look at Visa all I see is an expensive fully valued company. I'm way too cheap for this, I like to buy Fisher at Dodd's prices.

     

    E-Bay sounds like a much better buy with a PE of 10 and Paypal as a kicker. If only E-Bay's management could start allocating their capital sensitively...

     

    BeerBaron

     

    Baron do you think the Amazon creep into EBay's market thesis is overblown?

     

    Well, when I first started thinking about eBay I did thing they had a very solid moat for the web. But the more I tough about it and the more it seemed like eBay has diverged from a pure auctioneer to an online merchants host. The lines are getting blurry now, I took some time to look at their new Ebay IPhone apps and it looked like the focus was taken off their auction and more toward the selling part of the business. Not a smart move in my opinion, they are getting toward the broad market instead of staying in their very lucrative niche. There is a real danger that they will lose focus and open door for competition. I don't see Amazon going into the auction business but they don't need to, eBay is diluting it's own moat by itself.

     

    On the Paypal side, the business seems nice. Especially with EBay as a showroom. China/India to more likely to use EBay before Amazon, those are cultures that are more used to person to person trading then institutionalized trading like Amazon. So if China start using eBay first, then Paypal gets visibility and defacto becomes a leader. the question is... is eBay going to penetrate the chinese market? Payments is a business where the leader gets more business because he is the leader.

     

    On the capital allocation side I was not impressed take a look at: http://en.wikipedia.org/wiki/List_of_acquisitions_by_eBay . The fact that they paid 1.2B for BillMeLater, 2.6B for Skype and god knows for that RedLaser app. Come on a bar-code reader that will tell you the price of the item as well as all the other prices in your area... there is such a easy workaround for the merchant, they will get their own SKUs instead of using the generic ones.

     

    To resume my thesis, I love the eBay/Paypal combination they are complementary and should be making a lot of money. I hate what they did with their money and their lack on focus on their core strengths. Hopefully the new CEO will, but so far it left me no clue to believe so.

     

    Still, I'd rather own eBay then Visa, you get Paypal for free and you have a descent valuation.

     

    BeerBaron

    VISA

    in General Discussion

    Posted

    No matter how I look at Visa all I see is an expensive fully valued company. I'm way too cheap for this, I like to buy Fisher at Dodd's prices.

     

    E-Bay sounds like a much better buy with a PE of 10 and Paypal as a kicker. If only E-Bay's management could start allocating their capital sensitively...

     

    BeerBaron

    How do investors use information from message boards to formulate decisions?

    in General Discussion

    Posted

    This is the only forum I visit too. I like to get my opinions tested by other's opinions and this site is great for it. I try to read everything and ask questions only when I could benefit from it. There is a handfull of people on this site that I respect and that I expect them to destroy my ideas. I want people to challenge me, not persons that will acknowledge me.

     

    BeerBaron

    Comments on FinReg & Trust Pfds

    in General Discussion

    Posted

    Anybody has the stated Annex?

     

    For listings of individual securities, please see:

    (1) Preferred Securities Catalog, Tables 8-10 for all

    outstanding $25 par TruPS issued by US banks.

    (2) Preferred Securities Valuation Report for UBS

    Wealth Management Research covered securities.

     

    BeerBaron

    The Other Brit

    in General Discussion

    Posted

    The calculation gives the statistical dollar (or pound on this one) return.

     

    That means I have 97% chance of winning 1 pound versus a 3% chance of losing 1.7 pounds (return to the original price). The result would give you your gains if you took this bet many times, the more often the bet is taken the more it will converge to the statistical gain. I red fast previously, I tough the pre-merger price was 7.5.

     

    3% is the only number I found, I usually add an extra 6% as a margin of safety, it's like any other investment. You take what you think is going to happen and you discount it to get some margin. As I said earlier, I spent many hours seeking for good arbitrage and could never come with a single opportunity that was worth it. It's probably because my knowledge of mergers requires me to put a much higher margin then other knowledgeable participants.

     

    Your catch seems good, I wish I could investigate further but my broker does not let me order in LSE (no point being teased on this one).

     

    BeerBaron

    The Other Brit

    in General Discussion

    Posted

    Never heard about the Mesqueta’s methodology can you give me a book or reference?

     

    I remember reading that about 97% of the mergers go trough. My approach has always been to use plain dumb odds before even looking at an arbitrage.

    It looks like the following:

    (0.97 * 1) - (0.03 * 1.5) = 0.925 Pounds statistical profit

     

    There are very very few arbitrage that offer any profits when you apply a simple statistical analysis. Therefore, I have never made one. The spread are so thin that the margin of safety is inexistent. When the spreads are good there is an evident reason, so what's the catch with this one?

     

    BeerBaron

    Life Insurers

    in General Discussion

    Posted

    There has been a lot of discussions on this board about P&C Insurers but almost no talk of life insurers. Life insurer's accounting is a bit different then P&C so I was wondering if anybody had good recommendations or reading regarding those. I have just finished reading a few financials reports of NWLI and I'm a bit deficient into understanding everything in there.

     

    Here is my thesis on insurers:

    Some life insurers look incredibly cheap, for example NWLI is currently trading at 0.45 BV and there does not seem to be any catch to it.

     

    Also, I believe that life insurers BV are worth significantly more then the stated BV. The treasury yields are so low right now that their bond portfolio is probably worth about 8%* more then their stated prices. So if I take the example of NWLI that has about 6B$ in stated bonds. Now add an 8% mark to market real value and we get a real book value in the area of 1.5B$. The stock trades at around 500M$, So for about 0.35$ for every dollar I get a profitable business. That seems crazy cheap to me.

     

    *I evaluated the value of the bond portfolio by simulating buying 1 share of 7-10 Bond ETF for the last 3.5 years and comparing with the current market value.

    Offshore Drillers

    in General Discussion

    Posted

    I sold ESV 2 weeks ago, I bought at 35$ and figured I could learn the business. The more I searched, the more I realized this was not in my circle of competence and that it would take me months before I could understand the supply/demand and all the complications of the business. For example, buying an offshore driller at 0.9 BV seemed cheap but by looking at some 1992 reports I could see that it was about 0.5 BV even less. The cycles seemed long too, so I could have bought at the middle of a falling wave, etc...

     

    Still made a nice little profit, it is really not my style to hold a stock for 2 weeks but I would hate to lose money by buying at the end of a cycle.

     

    BeerBaron

    Apple Study: 8 easy steps to beat Microsoft (and Google)

    in General Discussion

    Posted

    Technologies are minutes away from being outdated... what a hard business.

     

    Here is a simple question to sort all companies, it has the disadvantage of killing almost all tech stock:

     

    -I ask myself what their business will look like in X years. X being determined by the current PE, a PE of 20 will require an outlook of 10 years and a PE of 10 would require an outlook of 5 years. If I don't have any ideas what the business would look like in X year then how can it be considered an investment. The lower you PE and the lower your outlook need to be because you should get your investment back faster.

     

    Peter Lynch also had a nice rule of thumb not to pay more then the growth rate. So if the growth is 15%, you should not pay more then a PE of 15.

     

    BeerBaron

    goldman initiates coverage on berky

    in Berkshire Hathaway

    Posted

    I don't see hoe BRK would be forced to post collateral while all the others would not have to. Requiring collateral on existing contracts would reduce the banks ratios by a wide amount. BRK is not alone against retroactive collateral and of all the companies involved it is probably the least affected by it.

     

    BeerBaron

    BNI vs. Ebay

    in Berkshire Hathaway

    Posted

    One of the main question about eBay is what are they going to do with their Free Cash Flow? Did they talk about it the latest conferences calls?

     

    I'm usually very vary of companies with nice FCF but no dividends. The fact that the management see themselves as a growth creator makes it scary for shareholders that are seeking value. I hate seeing companies waste good money on bad investments. If there is no clear synergies then that means that there will no value creation by merging the entities.

     

    E-Bay/Paypal  businnesses are great. As a buyer I would never go into the hassle of going into another auction site. I even have a few hundred buck sitting in my Paypal account... think of all the people with a few buck that they are probably never going to use. That is a nice float at absolutely no cost or risk. Talk about a nice moat...

     

    BeerBaron

    The Yuan appreciating against the Dollar

    in General Discussion

    Posted

     

    Isn't that enough for you? ;D

    According to the Chinese commerce minister, average profit margins for exporting firms are a tiny 1.8% - http://english.peopledaily.com.cn/90001/90778/90861/6936424.html

     

    I deal with China's electronic factories on a day to day basis and they run at 30% gross margin. Probably 10% net margins.

     

    I can tell you that distributors in the middle will get their margins squeezed for the next few months.

     

    Beerbaron

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