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beerbaron

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Posts posted by beerbaron

    Value investors performance in bull markets and bear markets

    in General Discussion

    Posted

    I also think that Buffet counted on the balance sheet to reduce the down movements. If you think about it buying a company that has the following 3 attributes how much value can it really lose?

     

    -Generates some kind of profits/FCF

    -Market value around Net Current Assets

    -Stable revenues

     

    The way I have always seen it is that under normal conditions such a company should never trade below Net Current Assets. It's like an imbedded put on your stock. There is almost no more Net-Net todays for the same reason, everybody understands Net-Net, so as soon as a company trades at a discount to Net Current Assets people rush for it... sustaining the share price.

     

    Grossly symplifying PE and Growth are going to give you the gains and the balance sheet is going to protect against losses.

     

    BeerBaron

     

     

    BP (ADR)

    in General Discussion

    Posted

    Oil is like any other limited ressources. The cost of extraction will rise, prices will continue to raise up until a pivot point where new technologies become economically viable.

     

    For those annoncing the end of oil I would say that we have no substitute for it for agriculture, no infrastructure to power vehicles with something else and power plants that rely on them. The switch from petroleum to something else is going to be long, maybe 50 years... Did it ever occured to economists that there might not be a solution for our energy needs to petroleum for a lot of applications? Under normal economic theories there is an new supply of other materials once a ressource is depleted, that is non-sense, how can the sum of many limited supplys of ressource give an infinite number?

     

    This is not the end of petroleum, it might trigger the US government to finally focus on developping other alternatives, which is great because there will be a huge need of energy in the future and that I don't see any real economic progress without cheap available energy supplys.

     

    The US government if really dedicated can find solutions to a problem (if there is one solution) quite fast. In 1939, scientists were discussing if nuclear fission was even theorically possible. They had no previous experience and equipments, the US signed a blank check, putted the greatest minds together and 4 years later they had a nuclear bomb. Quite impressive! I don't believe the US commitment to energy solutions can be compared to WW2.

     

    Oil is here to stay for a long time... and I believe that 150$ barrel was a better incentive for new technologies then any government interventions. That's the beauty of free markets.

     

    BeerBaron

    BP (ADR)

    in General Discussion

    Posted

    One thing is for sure, if someone were to invest in BP they should invest trough LEAPS. I believe it's a perfect case of "If by 2012 they are not out of business then they will be worth a lot more then the current price". It looks a lot like Greenbalt in "you can be a stock market Genius"

     

    BeerBaron

    Offshore Drillers

    in General Discussion

    Posted

    Well I'm now a happy shareholder of ESV, but to me, it sounds like I am more speculating then investing. Oil driller are out of my circle of competence and I don't feel comfortable holding it.  I'm looking for some good reading material to train me in regards to oil and gas drilling investing. I basically want to be able to transform a good speculation into an informed investment (I know I'm doing it in the reverse order...)

     

    Here was my thesis for speculating in ESV.

     

    Pros

    -There is a great confidence crisis in the US in regards to oil driller

    -The market are behaving like a chicken without a head, selling anything that has oil in it.

    -The golf of mexico is not the center of the oil universe. If regulation strengthen in the US it will not affect other regions immediately.

    -The oil and gas industry has always been able to pass the costs to the upper level in a medium term

    -The oil drillers do an extremely vital part for the society. I don't see the US banning offshore drilling and killing their economy for the next century.

    -I don't see any long term impairment to the oil drillers

    -This can be considered as a Net-Net ala David Winters

    -Solid balance sheet, it can whistand low oil prices for the next 10 years and still be business

    -Their rig are the most secure in the industry

    -Will be a great FCF generator in the next few year provided oil prices stay flat or up

     

    Cons

    -Profits are prone to market fluctutations

    -Past lucrative oil contract are being replaced by lower margin contracts

    -Subject to greater scrutiny by the authorities for the next months

     

    I have no way of knowing the future prices of oil or what exactly will be the impact of the renegociating of their deals (they can reduce income by 30% and still generate some money) but I believe those unknown were fully taken into account by Mr.Market before the explosion. With all those facts taken into account I had to buy.

     

    Now if someone could recommend me some reading material to bring me up to speed with oil drilling that would be great...

     

    BeerBaron

     

    Acceptable Request for Broker

    in General Discussion

    Posted

    A lot of the time I just write to the company and ask them for their annual reports of the last 3 years and they do it without any charges. I prefer it to printing 10-K as it's time consuming. Of course I will consult EDGAR 95% of the time but when it comes to a stock I seriously consider I get the annual reports shipped, it's nicer paper too :)

     

    I agree, who still uses a full service brooker? Why, why, why? If I spent 50 hours researching a company chances are that I know much more then the brooker.

     

    BeerBaron

     

    BP (ADR)

    in General Discussion

    Posted

    Are the clean-up costs going to be more than $140 billion?  Probably not more than $50 billion, so it could prove to be a good long term buy.  However, the risk is whether this is an isolated event, or whether there is a good chance of additional "incidents" in the near term based on the track record above.  Bottom line...I'm not buying at this level...

     

    My guess is that BP has raised it's attention toward safety to a very high level. They will probably add a lot of talent to avoid a repeat of what's happening. The thunder never hits twice at the same spot. It's funny how many people put a lot of price on risks of offshore drilling companies while before it was not a concern at all. I believe at the current valuations, people are reacting as if there was going to be a spill every years or so.

     

    BeerBaron

    Gulf effects

    in General Discussion

    Posted

    I think it's the opposite, the amount of work and $ being focused toward the oil spill will be incredibly high which could boost's Florida's economy in the short term. Cleaning up the shores will be labor intensive in a state that has an oversupply of it. Tourists will go elsewhere, so the money will likely be spent anyway.

     

    Uncommonprofit, I do agree that in the long term we will see amazing new technologies. But until gas gets to the point where other technologies become attractive we will not switch. Until then I believe we will see efficiency improvements in existing technologies (insulations, heat pumps, lighting, etc...) but these will be somewhat minor compared with say controlled nuclear fusion.

     

    I'm also one of the believers that oil prices precipitated the crisis and if it would not have been for a financial failure it would have been something else. Too many resources were allocated to a single sector of the economy.

     

    BeerBaron

    MSFT

    in General Discussion

    Posted

     

    I love the nice exponential curve of Apple, most market projectors must be really excited to put the exponent in their calculator and imagine buying their retirement.

     

    In my opinion,

    Apple is pure growth stock

    Microsoft is pure Value stock

     

    BeerBaron - that seems more like a tactical error on behalf of the local government, and a government-specific issue, rather than anything equal in weight to bigger issues.  IMHO.

     

    I agree it's not a game killer, but if you think about it... the monopoly moat in all public service areas gets destroyed if they can't prove they did due diligence in evaluating other software. This would not stop me from buying the stock if I were buying but it's a fine example of something completely out of the blue that could hit you, you better keep a look all around your portfolio for bullets...

     

    BeerBaron

    The government printing money

    in General Discussion

    Posted

    Inflation is tricky, once it is set in motion it will weaken the confidence in a currency. If the confidence in a currency decreases then it decreases in value. If it decreases in value then the confidence declines...

     

    Therefore, advanced economies understand it is their well being to keep their currency at a certain level.

     

    You don't even want to know the havoc it would cause on the global economy if the dollar would depreciate in a spiral.

     

    Can you imagine all the write-downs around the world?

    The other countries debasing their currency to keep they currency at an acceptable ratio?

    International trade stopping because nobody would accept foreign or local currency?

     

    It seems to me the pill would be worse then the disease.

     

    P.S. The Federal Reserve did use quantitative easing (AKA money printing) in the credit crisys. Paulson argued that he was merely re-creating money that was destroyed. That leaves me skeptic. If the 10% of the country's wealth disappeared and that you print 10% more money it won't make the wealth come back.

     

    BeerBaron

     

    MSFT

    in General Discussion

    Posted

    I guess this tread could have been very similar 10 year ago talking about Apple... Remember it traded at about 8$ in 99.

     

    Problem with Microsoft is that the upside is much more limited then Apple in 99.

     

    BeerBaron

    The government printing money

    in General Discussion

    Posted

    The process of printing money is some simple that it is mind boggling.

     

    Let's say you have a house that is worth 100k and mr government wants to buy it. They wire the money from the Federal Reserve to your bank account and voila you have 100K in your bank account even tough there was no money in the FED's account. As simples as that. (Note that the FED has a balance sheet tough but it's "unlimited to leverage")

     

    They don't open the printing press anymore, they buy back assets like the examples I gave you.

     

    Yes they can pay their debt trough inflation, it's the oldest trick in the world. If you pay 5% interest on a 30 year bond but that you set-up the inflation at 10% then your are earning a net 5%. Inflation is the ultimate tax on all assets and it's very hard to avoid it when it happens.

     

    It's kinda weird to understand but instead of running the printing press they just change the digits on the Federal Reserves's balance sheet. It's much more efficient then printing paper.

     

    Regards

    BeerBaron

    Goldman Sachs

    in General Discussion

    Posted

    Ive been a buyer of the preferred D shares.  Traded for 70% of face recently.  They are floaters, and therefore protect against inflation.  Great buy, for the risk level.

     

    Nice catch, on today's price it's about 5.8% it's quite a nice yield for a floating.

     

    On the common I would buy GS if I could understand it... I think I just can't. This is goes into the too hard pile.

     

    On the preferred tough... I can certainly understand that GS is good for the money.

     

    BeerBaron

    What happened to the SNS board?

    in General Discussion

    Posted

    I have always wondered... why would any companies hire compensation consultants... How hard is it to look at a peer group and determine a good compensation package. Sometimes it looks like the BOD doesn't even want to do it's job. I wish I could be a director, you know.. get paid 5k per meeting, 10 meetings a year. It's the best job on earth.

     

    BeerBaron

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