Tim Eriksen
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Posts posted by Tim Eriksen
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Are they generally valued on some multiple of AUM? Do they generally trade with high correlation to the stock index? How do you identify good asset manager stocks vs bad ones?
In general they trade at a multiple of AUM; however since fees vary widely versus twenty years ago that greatly impacts the valuation. A sub-advisor earning 30 bps or a fixed income manager earning 40-50 bps is not near the same as an equity manager at 80-120 bps. ETF have even lower fees, hedge funds much higher. Then you factor in operating margin. Traditionally average 30-35% but some are clearly take a bigger piece of the pie than others. So basically I guess it is really based on free cash flow and not AUM. :)
Look at fund performance (actual investing) and fund flows (which shows how good the marketing is).
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PICO Holdings (PICO) - water rights in Nevada and Arizona
JG Boswell (BWEL) - water rights in California and Australia
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Why would a low-margin business (a grocer earning 3%, for example) invest in expansion rather than the market (earning 7%)?
Margins and return on invested capital is not the same. A grocer can earn high returns (plus 20 pct) with low margins, high volume.
Thanks, but how does that differ from market investing using leverage?
Was the grocery business thought so stable that one could use greater leverage? (I assume it is not thought so anymore.)
Totally unrelated. Borrowing to invest in the market expecting to earn a rate higher than your cost of debt is not the same as a business with low margins and high turnover. It doesn't necessarily require debt. A 3% profit margin that is achieved six times a year is a roughly 18% return on capital.
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The fact that there is a risk of catastrophic disaster is enough to pay attention. Even scientists dont know exactly how melting of the ice caps could increase tempretures or how tempreture increase will effect the gulf stream. Considering a catastrophic effect which will drastically alter our lives (or future generations) has a small but non-zero chance of happening, taking small relatively costless policy changes seems like a prudent decision to make.
Am I missing something? Relatively costless policy changes???? Aren't the proposals massively costly? In the trillions in terms of the US economy.
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“You shall not oppress a hired worker who is poor and needy, whether he is one of your brothers or one of the sojourners who are in your land within your towns. You shall give him his wages on the same day, before the sun sets (for he is poor and counts on it), lest he cry against you to the Lord, and you be guilty of sin." - Deuteronomy 24:14,15
Should there be fees for the worker to access what they are due? I don't think so.
Why should the laborer have to provide what is effectively an interest free loan to the employer.
I am generally on the conservative end of the spectrum, but that doesn't mean employers should take advantage of workers. It seems to me eventually technology will make daily pay or "advances" easier, and government will compel it by law. If men were angels government wouldn't be necessary. The truth is, men (and women) aren't, therefore if employers won't do the right thing voluntarily it must be compelled. Fair pay (minimum wage) and timely pay.
I would love to see the whole payday loan industry be put to death. It is not a service. It is abusive, sick and shameful.
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$50 billion gain means the half they purchased in the 1970's for $47 million is now worth $25 billion. WOW
Is the $50 billion realistic? Underwriting pre-tax was $2.4 billion. GEICO has $22 billion of float out of BRK's $123 billion. Investment income was $5.5 billion, or about 4.5% of float. If I attribute 1/6 of that to GEICO that is another $0.9 billion. Total pre-tax would be $3.3 billion. 16x pre-tax or about 20x after tax for a best in class, strong grower.
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After the meeting at the Willow Oak event I spoke with a guy who said he was the one who asked the question. I had skipped out of that part of the meeting so I can't confirm it was him. He was annoyed that Buffett didn't really answer the question. The guy said he purposely included arbitrage because he said that Alice Schroeder had told him that Buffett had said to her that he believed he could make 50% annually in treasury arbitrage.
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If Og is the same Eric Schleien who plead guilty to this then I understand the concern
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Yes, although it includes related persons, so it if it is a larger fund it would include all the employees.
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It is completely wrong for the step mother to put any pressure on her. As others have said you need to find out additional information. Where are 2017 numbers??
Was the father involved in the operations? Was he drawing a salary or other benefits (medical, life insurance, season tickets)? Other deductions is a large % of revenue. Is it utilities and other normal expenses? Does the step mom work in the business? Is she drawing any benefits?
The offer price is below book value which is extremely low in comparison to earnings. Return on equity is above 50%. The offer is below the cash in the business. Retained earnings has decreased over the last few years even though income is positive. Someone took a large draw.
You have to answer these questions before you know for sure. On the surface it is a ridiculously low offer. Your gf may want to offer her mom 5k more for her step mom's share and see how she reacts. Structure it so the business repurchases the half interest using its cash. Or... Why sell at all? Could they set up an LLC and structure it so she receives the same payments as the step mom??
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Yet at most universities the athletic department expenses exceed revenues.
That is more of a byproduct of Title IX. Very few sports are profitable. It is my understanding that NCAA CFB teams must have 65 scholarship athletes meaning there must be 65 female scholarship athletes regardless of whether the sport is profitable.
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Forbes has an article on the revenue and profitability of college football teams. Surprisingly, the most profitable program was Texas A&M. Go Ags!
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It is interesting. Higher than I would have guessed.
Not sure why the writer said "Income accrued within retirement accounts is tax free." Tax-deferred is a more appropriate description.
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So, FWIW some time back I had done a spreadsheet for net returns to investor with SP500 historical returns under different fee scenarios.
It is attached below. Maybe some will find it useful. The big takeway is that the Buffett model only pays for the manager when you are generating serious alpha.
Of course, the traditional hedge fund structure is egregiously expensive for the investor.
The Buffett fee column is incorrect.
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Minimum net worth requirements in order to charge incentive fees are the same for SMA's and hedge funds. Both are the higher amount.
My fund's annual admin, tax, and audit runs about 23k annually. The expense is shared by all partners, GP included.
I found SMAs less sticky. The client questions everything, especially positions that go down.
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Agree. Not just price. If "only price" were true you could sit on an investment for years w/o showing Buffett's 20+% returns. Have seen this first-hand waiting on cigar puffs to yield large gains. Prior to, there were many years of zero yield crops. Shouldn't a value investor try to assess which catalyst will catapult price? And once established, shouldn't the "when" question follow?By its nature, value investing is market timing for the most part.
Cigar butts often aren't growing intrinsic value. Thus the discount is deceptive. Looking for a catalyst in a stock, or becoming it in Sandborn Maps, is not market timing. Market timing is basing your decision to buy based on overall market valuation and/or direction.
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I always wonder how much is timing and how much is pricing. Pricing to a high margin of safety often produces results that look like market timing.
The partnership had three broad categories. General undervalued which may well be prone to market swings, control positions where Buffett could encourage the Board to distribute excess capital promptly returning value even in down markets, arbitrage which is largely immune to market swings.
+1 It is all about price.
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Quick glance at the most recent 8-K filing noted that Goldman Sachs would get 45% of equity at a cost of up to $10 million for providing a rather small $4 million DIP financing.
https://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=12449410
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micro cap - ORBT
regional bank - CUBI
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I received an email form TD Ameritrade that the Senate bill has a FIFO requirement on all stock transactions. Interesting.
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Senate Finance committee version.
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I add back the charge or benefit from warrant liability and adjust the share count (and cash from the exercise).
Stock based compensation while not a cash expense is certainly real. I would not add it back.
Buffett has always added back items that were non-cash due to accounting quirks such as intangible/goodwill amortization and presumably taxes when there is NOLs, in order to get owners earnings.
Buffett and Munger hate the use of EBITDA. EBITDA is a whole different ball game since interest and taxes, except as noted above, are real costs, and depreciation is usually 100% real as well. Only when depreciation clearly exceeds economic reality should any adjustment be made, and even then you have to be careful.
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If a company issued warrants as part of an acquisition, accounting policy required the change in the value of the warrants to be reported quarterly in the income statement. Essentially the warrants are marked-to-market at quarter end. If the company's share price went up in the quarter the liability went up. If the price of the stock went down the warrant there can be a benefit.
It seems stupid to me. As it penalizes earnings when things are good, and benefits earnings when the the stock drops. I ignore it since it is non-cash except for when it is material to diluted shares.
Here is an example for Contura Energy. It also notes that FASB apparently issued a change in July 2017 regarding this.
On July 26, 2016 (the “Initial Issue Date”), the Company issued 810,811 warrants, each with an initial exercise price of $55.93 per share of common stock and exercisable for one share of the Company’s common stock, par value $0.01 per share. The warrants are exercisable for cash or on a cashless basis at any time from the Initial Issue Date until July 26, 2023. For the period from July 26, 2016 to December 31, 2016, the warrants were classified within non-current liabilities in our Consolidated Balance Sheet as a derivative liability and were initially and subsequently marked to market with changes in value reflected in
earnings.
The fair value of the warrant liability for the period from July 26, 2016 to December 31, 2016 was estimated using a Black-Scholes pricing model, with changes in value reflected in earnings. The inputs included in the Black-Scholes pricing model used in the valuation of the warrants included the Company stock price, the stated exercise price, the expected term, the annual risk-free rate based on the U.S. Constant Maturity Curve, and annualized equity volatility. The annualized volatility was calculated by observing volatilities for comparable companies with adjustment for size and leverage. The annualized volatility as of December 31, 2016 decreased relative to the annualized volatility used as of the Acquisition Date due to improvement in the Company’s leverage ratio. However, due to significant increases in the Company’s stock price as of December 31, 2016 the Company recognized a cumulative mark-to-market loss on the derivative liability of approximately $33,975 recorded in other expenses within costs and expenses in the Condensed Consolidated Statements of Operations for the period from July 26, 2016 to December 31, 2016. As of December 31, 2016, the warrants derivative liability balance was approximately $35,141 classified within non-current liabilities in our Condensed Consolidated Balance Sheet.
During July of 2017, the FASB issued ASU 2017-11, which provided updates for Accounting for Certain Financial Instruments with Down Round features. Pursuant to ASU 2017-11, the Company’s warrants are considered equity instruments, eliminating the derivative liability treatment and the mark-to-market adjustment requirements. The Company early adopted ASU 2017-11 for the period ended June 30, 2017, with retrospective adjustments to the Condensed Consolidated Balance Sheet through an adjustment of approximately $33,975 to retained earnings as of the beginning of the current fiscal year for all prior
period mark-to-market adjustments and adjustments to the Condensed Consolidated Statement of Operations through the reversal of all year-to-date mark-to-market adjustments. Pursuant to the adoption of ASU 2017-11, as of June 30, 2017, the Company’s warrants value at approximately $1,161 are classified within additional paid-in capital in the Condensed Consolidated Balance Sheet.
Anyone found a broker that allows you to buy dark/defunct/grey stocks?
in General Discussion
Posted
Odeon ask for Michael Zlatin.