Greenhaven Road Q4 2018 Letter

[NomadicRiley]

https://static1.squarespace.com/static/5498841ce4b0311b8ddc012b/t/5c4bc50842bfc120277fb927/1548469513395/Greenhaven+2018+Q4+FINAL.pdf

[Gregmal]

Thanks. I have been following Greenhaven for a while and they are top notch. Very under the radar firm with some outstanding ideas.

[WayWardCloud]

Thanks! The Bluelinx thesis is enticing.

 

Recently I've read several young managers talking about playing against the algos and focusing on what screens poorly. It seems to be becoming a common criteria in a value thesis and I think that makes a lot of sense. Andrew Walker from Rangeley Capital is someone who talks about this too for example. Now, do they actually have an edge or are the true algo guys laughing because their models are already much more sophisticated than we naively think and can handle those special situations as well?

[Guest cherzeca]

Thanks! The Bluelinx thesis is enticing.

 

Recently I've read several young managers talking about playing against the algos and focusing on what screens poorly. It seems to be becoming a common criteria in a value thesis and I think that makes a lot of sense. Andrew Walker from Rangeley Capital is someone who talks about this too for example. Now, do they actually have an edge or are the true algo guys laughing because their models are already much more sophisticated than we naively think and can handle those special situations as well?

 

this is in the nature of value investing.  lumber prices are in toilet. an algo sees that and high leverage and says short.  the contrarian case is presented well in letter, but means nothing if lumber stays depressed

[WayWardCloud]

No that's not what I'm talking about. That's just trend following versus being contrarian. I'm talking about specific times in a company's history when deep changes happen which make the numbers look terrible on paper for specific one-time reasons that a computer model might wrongly interpret as a sign of long term underlining weakness.

 

"As a result of the Cedar Creek acquisition, which has the potential to be wonderful in the long term, current debt has increased dramatically and large one-time expenses are being incurred to close redundant facilities and merge operations.  Many of the machines may not factor in the qualitative attributes that attract me."

[mwtorock]

No that's not what I'm talking about. That's just trend following versus being contrarian. I'm talking about specific times in a company's history when deep changes happen which make the numbers look terrible on paper for specific one-time reasons that a computer model might wrongly interpret as a sign of long term underlining weakness.

 

"As a result of the Cedar Creek acquisition, which has the potential to be wonderful in the long term, current debt has increased dramatically and large one-time expenses are being incurred to close redundant facilities and merge operations.  Many of the machines may not factor in the qualitative attributes that attract me."

 

Yep, special situations, like teacher Greenblatt calls it.

[mwtorock]

Bluelinx updated slides yesterday. base case scenario of a bit sales growth (bear case recession and bull case SFH go above avg like 1.2m), with cost savings and reduced debt, the company could make $7-8 EPS in a couple years.

BlueLinx_Pres_March2019.pdf