rayfinkle

I tried to post this the other day, but I'm not sure it hit (database errors, my error, who knows!) In any case, Michael Crichton (sci fi writer) was also a graduate of Harvard Undergrad. & Harvard Medical school...so he was practiced in the scientific method. I've always found this essay pretty interesting for that reason. http://www.pe.tamu.edu/DL_Program/graduate_seminar_series/Documents/MichaelCrichton_global%20warming.pdf Separately, he's got a pretty interesting autobiography..."Travels." The book chronicles his life as an author and traveler. The first half is one of my favorite books as it reflects a very successful yet pretty torn/introspective person. The second half of the book is WIERD--so fair warning. http://www.amazon.com/Travels-Vintage-Michael-Crichton-ebook/dp/B007UH4H6Y/ref=tmm_kin_swatch_0?_encoding=UTF8&sr=&qid=

good reads thanks guys!

not likely in the near term and at scale

Yes-so generally in florida the financial returns aren't up to par with those people see in places like AZ, CA, and HI, mostly due to the relatively lower retail power rates. Having said that you can definitely get a PV system. To my knowledge the 2 largest residential solar power companies (SolarCity & Sunrun) don't operate in FL yet--but I'm sure some more local installers do. If I were in FL I would probably wait a few years...costs are coming down quickly and power rates are on the rise. Economics (and therefore returns) will get better.

Read this a while back... Fantastic http://www.amazon.com/Unbroken-World-Survival-Resilience-Redemption/dp/1400064163

What a great series! Stick with it...

Fwiw... http://www.econ.yale.edu/~af227/pdf/Buffett's%20Alpha%20-%20Frazzini,%20Kabiller%20and%20Pedersen.pdf

IMO one of the best ways to learn about debt and how it impacts operating results and management behavior is to roll up your sleeves and read a credit agreement. Understanding covenant calculations etc. can sometimes provide an edge vs. folks who don't take the time to read. A great example of this is town sports holdings (CLUB) a few years back. The market was pricing in a covi issue but a quick look at churn rates suggested that you'd need to see a cascade of unlikely events and unprecedented churn to hit cf / earnings to the point of the credit danger zone....

In a recent offering I participated in I witnessed: 1) An initial decline in price when the stock traded "ex rights" 2) Post offering, the price trade near the "expected value" of the offering (pre-offering shares x pre-offering price + offered shares x offered price) / (pre-offering shares + offered shares) 3) Since then the stock has traded up... though I don't necessarily attribute that to the offering

I reason that they install your 2.93 KW system at a profit for $14,000. Thus, the additional cost of a larger system should merely be additional parts plus per-module-installation-labor. There are roughly 12 solar modules in your system. Based on the below computations, it looks like the hardware for your 3 KW system is about $4,650 total cost for a "do-it-yourself" project. Therefore the "soft costs" on your project are at least $9,500 -- or about $800 per module for installation. So here is how I arrive at that: 1) Solar City quoted me $50,000 for a 10 KW system. 2) The solar modules for a 10KW system cost $7,448 (using Canadian Solar 245W panels -- priced by www.renvu.com) Inverters would cost another $4,200. 3) So you are looking at $11,648 dollars for the panels and the inverters. Then add lets say $3,500 for racking hardware. Total cost is about $15,000 for all the hardware to install a 10,000 watt system. Add $500 for freight delivery to the site. So there are $34,500 of "soft costs" in the 10 KW system. Divide that by the number of modules (40) and you get roughly $800 per panel. So think about that. $800 per panel for installation! And they just multiply that number by the number of panels you want installed. No cost efficiency flow to the customer. I can go into more detail, but basically SCTY does not want to sell systems outright. So if I'm understanding this conversation correctly, folks are questioning why the total quoted (cash) cost is so high relative to creating a system yourself. If you run the DCF on the PPA offering vs. cash for the same system, the PPA is better. The reason for this is embedded in their business model. SCTY finances system through non-recourse subsidiaries that raise tax equity / project debt from investors (different than their securitization facility / corporate equity investors). These funds are generally structured such that investors can claim tax benefits (accelerated depreciation + ITC + local incentives--if any) thus transferring system tax benefits to the balance sheet of a big tax payer. In exchange SCTY can finance systems cheaply with non-recourse debt. This funding dynamic does not work in the same way with prepaid/cash systems. So they are happy to take margin up front, but incentives are to fill the funds with profitable PPA business. On a separate note, I think the stock is way rich right now. Doesn't mean it won't go up, but vs. their "retained value" calc...a potentially overstated proxy for NPV of future system cash flows to SCTY, the stock is pricing in a ton of growth. They'll probably do it, but there's a lot of risk in the market cap. should any number of things cause a hiccup in the machine. Having said all this, Musk is a champ and I love this company and Tesla as a consumer...just not an investor at these prices.

It seems like many (most?) folks on this board are not professionals...meaning that many of us hold day jobs and invest using non-work time. For me, this means that an investment process leading to a decision cannot be a comprehensive, Tiger-fund like cavity search diligence process, but rather relies heavily on 80/20 analysis and a basic understanding of the psychology of a situation. So, the question is, what does your pre-decision process look like? For me it is: -Identify idea (screen, blog, message board, meeting, serendipity): 1-3 hours -Passively consider idea (1-3 days) -Read financial statements, annual reports (3 hours) -Research other secondary analysis (3 hours) -Basic financial model (1 hour) -Buy/sell So, call it ~10 non-consecutive active hours. I then spend a chunk of time feeling guilty about how I should have done more work! It seems the decisions I've spent more time on (trying to figure tough stuff out, understanding turnarounds, unraveling complexity) have worked out worse than the really simple ones. I guess not surprising. Thanks!

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I always recommend reading buffet's letters (compiled for $2.99 on kindle!) and amazon's shareholder letters. Neither is really heavy on "valuation" but both are rich with business 101 & competitive thinking.

Thanks vinod, makes sense. I appreciate the explanation.

Vinod, how do you think about the borrowing cost of these leaps?

Thanks to everyone. racemize, I view this the same way. Hopefully this is new to some of you! Atlas Financial Holdings, AFH. They have good shareholder presentations, and a decent VIC write up here: http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/105763 Next time I'll do a better job of describing the company :).

Roe approx 10%. True on loss reserves. Indications are that mgmt is adequately reserving.

I've owned this company for most of 2013 and it's been great for me. It fits into my category of a good+ business and it's growing fast, but the price has run up significantly. I'd love this group's view of "fair value" for a company with the characteristics I describe below. After a few responses I'll post the name & some more information. I wrote this up pretty quickly so it's not at all comprehensive...I'm happy to add more as necessary. Thanks in advance. -Niche insurer—not an “all things to all people” P&C. Market is small ($1.5B annually) but very specialized (technology and process experience helps them service needs of their niche more effectively than competitors or larger insurers) -Targeting 20% market share. 20% of $1.5B is $300M annual gross premium opportunity. Current ~$100M. Gross premiums written for most recent quarter were up 3x vs. 2Q 2012… It seems that management has a credible path to continue to grow, but time will tell. Importantly, they are taking share from competitors as prices increase. -Growing rapidly—gross premiums written up 37% Y/Y -High renewal rate, >80% w/ upward trend -Profitable: operating ratio of 94% in recent quarter -Conservative investments…yielding 1.7% annually on average; average S&P rating of AA, duration 3.9 years -Market is hardening…premiums have upward pressure—3 to 5 % in past several quarters -Management seems credible—have done what they’ve said they’d do. Insiders own roughly 5% of shares. So, what would you pay? Any metric works, but for common language maybe we start with price to book. 0.5x? 1.0x? 1.5x? 2.0x? More?

I'm on the same page...when I go through the exercise of calculating returns (that aren't black boxed from a brokerage to some degree)...I create a synthetic fund (in excel) wherein cash infusions are represented as me buying shares at book value. Then AUM and share count is adjusted accordingly.

I'm in the high 30%'s as well. For those using Fidelity, I can't prove it but it seems like returns account for option premiums received as contributing to return calculations immediately. It seems like this is not the "intellectually honest" way to go...assuming all premium is captured then at a minimum you are going to have some timing issues, and if you are exercised the calculation could be muddled further. Anyone have insight into the calculation?

Eric-can you spell out the tax situation you were describing in your BRK example?

The logic makes sense to me--but there's a middle ground too (which I think I saw elsewhere on the board)... hold "cash like" downside protected, asset cheap investments instead of cash, that have some probability of a high (>30-40%) return on an uncertain timeline. For example in accounts I manage I often hold these types of things (mutual bank conversions, OTC growers at double digit earnings/fcf yields, etc., even merger arb.)...the type of stuff that can re-rate at some point but is highly unlikely to be permanently impaired. Granted you don't have ALL the liquidity benefits of cash...