Aker Philadelphia Shipyard - It was a 50 bagger in less than 2 years

[LongHaul]

Aker Philadelphia Shipyard

 

This was an interesting case study for me.  They are one of only 2 Jones ACT shipyards in the US that are big in tankers.

With the oil boom in the US there is a lot of oil that now needs to be transported within the US.

Aker has received a lot of orders for new ships and are riding the boom and the stock has gone absolutely crazy.

It was trading for about a $7m  market cap in mid 2012 with about $85m tangible book.

Made $1.53 EPS in 2013 and stock was ~.70 USD in mid 2012.  Pretty extraordinary.

 

USG was a 20 bagger into the housing boom. 

 

It seems like a lot of leverage riding a fundamental boom and you can really make a lot of money.

In some sense stocks of highly leveraged companies are like warrants on the company.

 

Anyone else have any examples of 10+ baggers with say 5 years with what the cause was.

 

 

Stock chart below

http://www.akerphiladelphia.com/iframe.cfm?path=218,292&uri=http%3A%2F%2Fir%2Easp%2Emanamind%2Ecom%2Firn%2Fportal%2Fmain%3Fkey%3Dakps_std%26amp%3Blang%3Den%26amp%3B

 

 

Jones Act Background

The U.S. cabotage laws, commonly referred to as the Jones Act, require all commercial vessels transporting merchandise between ports in the United States to be built, owned, operated and manned by U.S. citizens and to be registered under the U.S. flag. The law applies to any vessel operating between two U.S. ports, whether in the continental United States, or non-contiguous states of Hawaii and Alaska, and also Puerto Rico. It functions to as a barrier to entry for low-cost foreign carriers, which are not subject to the same wage, labor and environmental regulations faced by U.S. shipbuilders and operators.

 

[watsa_is_a_randian_hero]

I've been a CNRD investor for the past few years (not quite as well, but a multi-bagger).  I remember reading about AKER but can't remember why I didn't invest now (this is why I try to keep notes on all of my reviews and rationale for decision made).

 

You say this was a case study for you.  How dd you find Aker?  What was the rationale for buying at the time - valuation alone? 

[oddballstocks]

Ouch, wish I hadn't seen this post.  I was in at sub-20, sold at 40 or 50 for a nice 100%+ gain and patted myself on the back.  Looks like I could have had 10x my investment instead of 2x if I had been patient.

[thefatbaboon]

USG was great fun.  Bankruptcy filing in summer '01.  Stock was under $4, 50m shares outstanding.  This was one of my first real investments.  I remember studying thousands of pages of asbestos dockets. There was a wonderful group of very generous guys on yahoo message boards  - and I learnt an enormous amount from them.

 

I sold some at $12, most of the position at $20 and the little bit I had left at $30.  I think it continued on to $120.

 

USG will always be special to me.

[LongHaul]

I never invested.  So I did a case study as to what happened.  I only came across it after following the threads on who would benefit from higher oil production in the US. 

 

Nice play on Conrad Watsa - What did you see with Conrad Industries?

 

The thing that concerns me with some of these plays though is that there is a greater fool element at work when the profits go nuts for a short period of time investors go crazy.  But then over the long run some of these business are difficult and the low ROE settles back down.  Not so easy to value.

 

 

 

[Palantir]

Speaking of shipyards, I passed on buying HII when it was trading at book.  :'(

[oddballstocks]

Speaking of shipyards, I passed on buying HII when it was trading at book.  :'(

 

Yeah, I owned them at the spin as well, I think I sold them for a 50% profit too.  I noticed I would have made 100%+ if I still own....

 

Conrad, I still own them.  They were selling below book, a PE ex-cash of 4 or 5, high return on equity, management constantly buying back shares.

 

I'm still waiting for the strategic alternatives for Conrad, they hired bankers, no clue what came of that.  The Chairman is in his mid-90s and still controlling things, it'll be interesting to see how this turns out.

[Morgan]

Pier 1 Imports (PIR) had a ton of troubles leading up to the crisis. Management made mistakes and in 2007/08 they were finally replaced. The new management changed the product line up from less big expensive pieces (furntiture, beds, etc) to smaller knick-nacks. This strategy worked quite well as the stock went from $0.11 (yes, eleven cents) to ~$25.00 a share. I was so close to buying on the day it was eleven cents, but passed becuase I thought they were going to go bankrupt. Needless to say, a 225x bagger is hard to forget, but is a good lesson. I guess. To cut myself a little slack, I think it's quite likely I would not have held until $25 and maybe not even $1. I may have just taken my profits and ran.

[yadayada]

Seems conrad was a really good idea a few years back where pretty much everything lined up for a really cheap price.

[vikx01]

VIC has a good writeup on Aker

http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/112363

 

 

[One World Trader]

What appears to be a multi bagger today?

[One World Trader]

I asked this thread on the forum earlier if there are any multi-baggers. I guess there are less opportunities than I thought.

[dpetrescu]

I followed Buffett into local newspapers a while back. I invested in MEG and LEE. The concept was that local newspapers and tv stations have a competitive advantage, unlike large newspapers that have a more unpredictable future with changing technology. I can read world news in 100 blogs all over the world but if you're looking for high school basketball scores, you really need one central local source. They were trading at prices predicting bankruptcy. Take a look at a chart of MEG and LEE....not quite just yet a 10 bagger but very very close to it. I still remember a few months after investing, they were down 25% to 30%....I should have taken advantage. I still hold them.

 

I asked this thread on the forum earlier if there are any multi-baggers. I guess there are less opportunities than I thought.

[yadayada]

whenever I see people looking for multibaggers I am reminded of tournament players from my poker days. The lure of turning your 215$ buyin into like 250k$ draws alot of players. But in the end you wont make much on average.

 

For something to be a 10 bagger, the market  needs to very badly misprice it. That kind of mispricing seems pretty rare. Unless they are like 20m$ microcaps. But then volume sucks, and often your married to your idea.

 

And in most cases there are serious risks, or there is simply little info available to make a very informed decision imo. I rather have something that is almost certainly worth like 100% more right now with alot of visibilyt and pretty high certainty. Then something that only if alot of things go right, with not much visibility might be worth 10x as much.

 

I mean, how am i, by reading a few annual reports, going to know so much more about a stock to determine it really is worth 5 or 10x more then the people who will sell it to me. They have to be pretty big suckers to sell it for that big of a discount.

[dpetrescu]

I think extreme mispricing on a massive scale might not be as rare as one would expect if the market was rational. Isn't that the reason we have 20% crashes and 50% market recoveries approximately every seven years for the last century? Let's invert this thought. Today I can more easily name potential reverse multibaggers than potential multibaggers. Salesforce, Tesla, Gamestop and other tech/internet usual suspects are likely 5x or more overvalued. I don't think someone that bought Tesla shares last week had different information than others. They don't know less about it, in fact the buyer last week likely knows more about batteries and car manufacturing facilities and progress in direct selling state regulations. But that 5x gap is based on future expectations, not knowledge of facts. In a few years during the middle of the next recession, the long multibaggers might be as obvious and more numerous than the short reverse multibaggers are today.

 

 

whenever I see people looking for multibaggers I am reminded of tournament players from my poker days. The lure of turning your 215$ buyin into like 250k$ draws alot of players. But in the end you wont make much on average.

 

For something to be a 10 bagger, the market  needs to very badly misprice it. That kind of mispricing seems pretty rare. Unless they are like 20m$ microcaps. But then volume sucks, and often your married to your idea.

 

And in most cases there are serious risks, or there is simply little info available to make a very informed decision imo. I rather have something that is almost certainly worth like 100% more right now with alot of visibilyt and pretty high certainty. Then something that only if alot of things go right, with not much visibility might be worth 10x as much.

 

I mean, how am i, by reading a few annual reports, going to know so much more about a stock to determine it really is worth 5 or 10x more then the people who will sell it to me. They have to be pretty big suckers to sell it for that big of a discount.

[frommi]

When you search for the next 10 bagger just go to pennystocks. But the problem is for every tenbagger you find, there are 8-9 bankruptcy stocks and in the end you would have been better of concentrating on the 2-3 baggers in 3-5 years.

[Guest hellsten]

You can also become friends with Putin and borrow $200 million to buy a state-owned company worth $2.7 billion (10-bagger in one day):

http://en.wikipedia.org/wiki/Roman_Abramovich#Acquisition_of_Sibneft.2C_aluminium_wars.2C_and_loans-for-shares

 

75-bagger in 10 years (2004):

Bought for a total of US$200 million, Sibneft is now worth seventy five times as much.

 

Just remember to write off the billions used to bribe government officials in your tax report:

Abramovich later admitted in court that he paid huge bribes (in billions) to government officials and obtained protection from gangsters to acquire these and other assets (including aluminium assets during the aluminium wars).

 

I don't know how accurate Wikipedia is in this case…

[matjone]

One interesting one was CASA.  There was no big fundamental change, they were just really cheap.  If I remember right they had something like 50 restaurants and the entire market cap was less than the cost to open one restaurant.  Granted some of the restaurants were losing money and probably never should have been opened, but still it was very cheap if you assumed they would survive.

[EliG]

Anyone else have any examples of 10+ baggers with say 5 years with what the cause was.

 

AutoCanada (ACQ.TO) 13x in 4 years. From $4 in 2010 to $55 yesterday.

 

ACQ is the only publicly traded auto dealership group in Canada. They are riding the wave of dealer consolidation. Mom and pop dealers are selling and retiring. ACQ acquired 7 dealers in 2013. They expect to add another 10 to 12 in the next 24 months.

[DTEJD1997]

One interesting one was CASA.  There was no big fundamental change, they were just really cheap.  If I remember right they had something like 50 restaurants and the entire market cap was less than the cost to open one restaurant.  Granted some of the restaurants were losing money and probably never should have been opened, but still it was very cheap if you assumed they would survive.

 

I am proud to say that I had some CASA.  Wish I had more.  At it's low point, the market cap was indeed less than one restaurant.  It also had a P/E of maybe slightly less than one, and was trading for 5% of book value if I remember.

 

I actually showed up to their annual meeting, and they couldn't believe a shareholder showed up.  I was the first one in 12+ years to attend the meeting.  Once they got over their shock, management was generally pretty friendly.

 

Wish I could find more CASA's....

[matjone]

I should listen to you more as well.  I didn't make a resolution this year so maybe that will be it.  I didn't buy CASA.  If you find any more like that let me know.

[watsa_is_a_randian_hero]

Nice play on Conrad Watsa - What did you see with Conrad Industries?

 

I got lucky that a friend told me to check out Conrads because he knew I had invested in many similar-themed stocks in the past:  small, tightly controlled (possibly founding family), owner operator, cheap, businesses with long track records of success.  At the time I looked into Conrads It was 2x earnings after backing out cash, and fit the aforementioned bill for the type of businesses I like.

[watsa_is_a_randian_hero]

A stock similar in some regards I wrote up is Triyards:

 

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/rc5-triyards-holdings-ltd/

[watsa_is_a_randian_hero]

What appears to be a multi bagger today?

 

ATW to me appears to be something that should be a 2x-5x over the next 5 years or so.

[SpecOps]

I remember passing on Aker, although I think it was in mid 2013 so I don't feel too bad :p

 

I can't see any of the stocks I own becoming 50 baggers, but under bullish conditions a lot could be 2-5 baggers, that's generally what I aim for but is only really possible these days with tiny stocks that no one follows.