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Why Mohnish Pabrai Likes GM, Fiat, and Southwest Air


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Could someone help me understand the difference between Pabrai's bullishness on airlines VS David Einhorn's Bullishness on MU in 2015?

 

http://www.gurufocus.com/news/373674/david-einhorn-comments-on-micron-technology

The thesis sounds pretty familiar.

 

"Our thesis has been that Micron Technology’s primary product, DRAM, has consolidated to three players, who are likely to create more industry profits compared to when DRAM production was highly fragmented.

The problem is that structural industry improvement doesn’t make DRAM less cyclical. The large capital requirements force participants to make large investments in anticipation of future demand. If the industry overestimates demand, it still makes sense to operate at full capacity and oversupply ensues."

 

MU has not been doing well even in a three player industry. Revenue and EBITDA still shows the cyclical pattern.

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"We aren’t going to see high oil prices, pretty much ever, because if oil goes to $60 a barrel, they will start pumping in West Texas. The fracking companies can be profitable in some parts of Texas at $35-a-barrel oil. So oil, for any sustained period, isn’t going to go up."

 

I don't understand this claim. West Texas certainly isn't the marginal producer of oil. The marginal producers are mainly offshore or remote locations (Canada, Alaska, North Dakota, Brazil, etc). West Texas wells that are profitable at $35 are already going full throttle.

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I think there are a fair number of things in Texas not being drilled right now due to capex budgets. 

 

Anyway, I think his point is that there is plenty of capacity that is idling to put a cap on oil prices, even if we don't label where that particular capacity is.

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I took that to mean adding some transatlantic routes, not going into short haul within Europe.

 

Still would be pretty stupid and is nothing more than a pie in the sky idea they use to sucker in people looking for growth IMHO. They don't have the plane to do it, would lose efficiencies that they have with fleet commonality, etc. If your idea for investing in SWA has anything to do with Europe you are a flat out sucker.

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Is there a way to read this without having a Barron's subscription?

 

Google the title and click on the link from Google.  Or I can save it for you.

 

Still surprised not everyone knows about this already.

 

This stopped working, at least for me with wsj, a while ago

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Or install the add-on Block Referer (in Chrome, don't know if it exists for other browsers) and reroute these sites to always go via google.com. Some sites instead of the Google backdoor have a lock after a certain number of read articles. For them you could just try with another browser, because how they read your IP differs between browsers.

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