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beerbaron

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Posts posted by beerbaron

    Thoughts on PRCP

    in General Discussion

    Posted

    "The inventories kept raising in the last 4 years... which makes me think that we should deduce the CapEx in all the last 4 years. It most likely they will need to do a write down sooner or later. After all, it's not like their revenues have grown in proportion to their inventory."

     

    What "inventories" are you thinking of exactly?

     

    Inventories in 2006 were 6.43, 2007 they are  7.62, 2008 they are 8.29, 2009 they are 10.01. That is quite an increase for a company with no sales growth. With tech, the inventories tend to be obsolete very fast so I would discount the increase of inventories off their past earnings. They seem to have put the inventories in a mix of CapEx and Other investing Cash Flow.

     

    It's just my two cents, you invest in whatever you want. Personnal investing is a game against yourself not against others.

     

    Frederic Boucher

    Thoughts on PRCP

    in General Discussion

    Posted

    The balance sheet is clean but the profit opportunity is low. Looking at their last 4 years, the best they did for net income was 3.24M. Which would give us at best, a PE of 10 if they could make profit like they did 4 years ago. That is not cheap for a company with no growth and with a complex product.

     

    Also, management has retained all earnings and did not give any dividends. Why do they need 22M in cash, I rather see that money in my bank account. They did buyback a few years ago which I like but they also reversed the trend in 2008. For illiquid stocks it's usually better to give dividends since a buyback reduces liquidity even more.

     

    The inventories kept raising in the last 4 years... which makes me think that we should deduce the CapEx in all the last 4 years. It most likely they will need to do a write down sooner or later. After all, it's not like their revenues have grown in proportion to their inventory.

     

    I can't really understand what they sell and how they can benefit from the recovery. I'm an electrical engineer and I work in production and I'm not sure this is in my circle in competence. So unless you are in that specific area of the business you should not feel comfortable about it.

     

    If I had to rate this investment out of 10 I would give it a 6.

     

    BeerBaron

    The View From Inside A Depression

    in General Discussion

    Posted

    Interesting indeed! Everytime someone mentions green shoots I cringe. Is this really over? Has the deleveraging process finished? is the rebound in Asia enough? Interesting times though and an interesting article. If someone does buy the book, I would appreciate comments on if it is worthwhile buying....

     

    cheers

    Zorro

     

    And as the article says, nobody knows the answer to any of these questions. Really, there is only one actionable piece of intelligence I found in the article (from an investing standpoint) and that is to not invest using too much debt. Other than that, what else can you do except wait it out, whether it takes one year or ten years?

     

    Allocating capital toward companies that can withstand a second dip or inflation, have good earnings value and low debt. I'd rather cross the ocean with a galleon filled with food, sails and safety boats then cross it with a speedboat. Nobody knows what lies ahead but everybody know which vehicle they use.

     

    BeerBaron

    Building an ark

    in General Discussion

    Posted

     

    - Firms that provide a business process, converting from one material form to another, or from one location to another (distribution), and that have shown the ability to adjust pricing as input costs change (up or down), while still maintaining profitability.  For instance, Richelieu Hardware, and Winpak, are two.

     

     

    I own Richelieu as well I think it has even more value then what people think. The management is great and has proved that it is focused and risk averse. It is determined to add new SKUs every year, they have 55 000 SKUs right now. I see that as their moat, no other supplier could come up with 55 000 SKUs in a short period and not being a drag on inventories and operations. They can just buy other distributors for their client base, implement their software and increase the returns almost immediately with all the new SKUs added. The bonus...as said in the last conference call, they can change their pricing overnight (except with special accounts). At one point RCH represented 25% of my portfolio, I would not sell those shares for a short term profit, this is no cigar butts.

     

    I have never looked at WinPak before but I will take a peak thanks woodstove.

    Uses of Idle Cash?

    in General Discussion

    Posted

    In Canada (interests are not deductibles) paying back your home mortgage is basically the safest way to have about a 7% return on your investment and even better it's risk free. The problem is that this is not liquid money anymore!

     

    If I were to advise someone for the best risk/rewards I would say:

    -Pay credit cards

    -RRSP

    -Home mortgage

    -TFSA

    -Normal Stock and bond account

    Build Your Dreams

    in Berkshire Hathaway

    Posted

    BYD has a vertical integration that no other companies have. The most expensive component of any electric car will be the batteries. BYD has lots of experience with Lithium batteries and it is a main producer of LiFe batteries. I'm an electrical engineer and did extensive research about those batteries and let me tell you that those batteries are well suited for the automotive industry (much better then other Lithium batteries).

     

    Cost will be the main entry point of the electric car, without affordability, the electric car will stay on the drawing boards and showroom. So, from my point of view, BYD is in good position to be a serious player with it's low labor cost and battery business.

     

    Still, I will not invest a penny in this stock until I drive one of their car for a test ride... It took 25 for Honda to make descent cars. Guys, don't worry, if you keep an eye on the stock you'll get it cheap at a much better valuation then current stock prices. I would say, let's wait another 3-7 years until the first recall comes in (and there will be one) and then buy.

     

    BeerBaron

    Anyone buying stocks right now?

    in General Discussion

    Posted

    Over the summer and fall, I've been loading up on this awesome little security that is waaaaay out of favour.  It shows up on my brokerage statement under the ticker symbol CASH.  Do your own research, but I think it's a no-brainer.   ;D ;D ;D

     

    SJ

     

    Amen! Deciding to take no action is an action by itself. Even better it does not cost any of this CASH and gives you some of this TIME everybody wants ;)

     

    In march I was reading 90% financial reports and 10% learning management/finance/economics. I just switched to 90% learning and 10% financial reports.

     

    Real estate has 3 key words, location location location. Investing has 3 key words, discipline discipline discipline.

     

    BeerBaron

    How did you do in the downturn? What helped performance?

    in General Discussion

    Posted

    Thanks for the compilation DP, I added this year's results. As they were not included in my first post.

     

                             2008               2009

    beerbaron            Down  26%      UP      77%

     

    There is one trend among almost everybody... the trend is green big times. There won't be many years like that in an investor's lifetime! I hope that everybody took the opportunity to back up the truck on equities that will give ever increasing returns over the years. These are the rarest opportunities.

     

    Two thumbs up for all the ones who managed to stay green last year. Not many money managers could say the same.

     

    BeerBaron

     

    Hoisington - 3Q 2009

    in General Discussion

    Posted

    I agree with you SJ, I'm not a doomsayer but I prefer to read bad predictions then good. It helps avoid dumb mistakes. TV news are basically saying to all investors, close your eyes and cross the street right now... that screams risk to me.

     

    Ah, by the way, I try to stay away from any media coverage of the economy. Their job is to report information not to be good at analyzing it.

     

    BeerBaron

    Pabrai Funds Up 112%+ YTD!

    in General Discussion

    Posted

    Said otherwise, simply investing in $Cnd government bonds with staggered maturities would have trounced those Sequoia returns.

     

    The question is it possible to do this apriori? One could have also said that investing in gold in 2000 would have trounced returns in many currencies. One shouldnt ignore that we are in a secular bear market. Historically these cycles have lasted for around 20 years since 1900. It all comes to probabilities. We are also in the midst of a change where the center of power is moving from the west to the east.

     

    Most investors mistake the word probability with past experience. If you studied probability you should remember that to have a reliable sample data you need a sample large enough. If you take a secular market as you base unit then your sample is very (10 samples maybe) small which makes it an unreliable data.

     

    You should take past experience for what it is... an historical past. It is by no means a measure of the future. Especially with a sample rate of that size.

     

    You often hear comments in the economic media that state things like "September is historically a bear month". If you'd give that comment to a statistician he would tell you that September is no extraordinary months as it still a low standard deviation. Just like having 12 persons flipping coins 80 times, one is going to be a bigger loser then the others.

     

    BeerBaron

    How did you do in the downturn? What helped performance?

    in General Discussion

    Posted

    I did -26% from Dec 31st 2007 to Dec 31st 2008. What helped:

     

    -I had 50% of the portfolio in the SP500 index that I bought at par with the CND and sold when the CDN was around 81¢.

    -I had lot of cash lying around, so I could average down very often.

     

    For the results to be comparable we should all agree on the method of computing returns. For simplicity's sake I use (Value Year 2)/(Value Year 1) - External Cash Inflows.

     

    BeerBaron

    Evaluating risks/rewards in a lawsuit

    in General Discussion

    Posted

    One of my stock has been engaged in a litigation for about 6 years now. The results of this litigation in a best case scenario could result in an instant 10 bagger or in the worst case scenario about 15% losses (I didn't buy this stock for the lawsuit, the lawsuit is the kicker).

     

    I always find that when there is a legal lawsuit the information on how things are advancing are REALLY thin. You get communicates every year basically saying "we sent some documents, we are waiting". How do you guys go out and get how the legal case is really going, is there some public information that will state the requests, the full legal claims, the liabilities, how things are advancing, etc...

     

    BeerBaron

    Business that can pass inflation

    in General Discussion

    Posted

    Judging from what Buffett states I would say that money management firms would do fine in inflation. Their pool of money grows at the same pace as inflation but they still keep their 1%.

     

    So putting it all together, a money management firm that has lots of preferred shares an free cash flow would be a good buy. Maybe there is still some of these available at an affordable price.

     

    BeerBaron

     

    BeerBaron

    Business that can pass inflation

    in General Discussion

    Posted

    Since there is a lot of talk about upcoming inflation I tough it would be a good idea to have a discussion about which businesses valuations could resist the most to high inflation.  I have listed a few of my toughs out of 10. A grade of 10 means a business that profits from inflation, 5 will absorb high inflation at par and 1 will decrease in value with high inflation.

     

    Gold & luxury metals  9

    Oil & Gas                  7

    Non luxury metals      7

    Money management    6

    Restaurant                2

    Cars and trucks        3

    Semiconductors/tech  1

    Military                    2

    Infrastructure            2

    Retail                      3

    Restaurant                3

    Computer science      2

    Advertisement          3

    Agriculture                6

    Insurance                4

    Health Care services  4

    Banks                      4

    Pharmaceuticals        4

    Entertainment            3

    Real estate                5

    Distributors                4

     

    This is only my own thoughts and I have not made an intense study about each sector just my feel. I'd be interested to know what everybody thinks. Feel free to add industry sectors as I probably forgot lots of them.

     

     

     

     

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