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Table Pounding Ideas?


BG2008
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With the recent selloff, a lot of stocks are down quite a bit.  Anything table pounding?  I still like FRPH a lot, but it hasn't sold off as much.  At $50, it would be back the truck up stuff again.  I still like Clipper and it has whipsawed around the past couple of days.  At low $8s with a potential $20 NAV, it's got one of the higher upsides.  Most of NYC are probably double and triple protected against whatever Covid variant coming its way already between vaccination and infection.  I am joking, but probably some truth to it.  But obviously Covid is not a great headline. But if it recovered from the surge earlier this year, it will do fine and the AFFO will still comp double digits as the base is so easy to beat from late 2020 and early 2021.  

 

If HQI goes to $18, I may sell some Berry and pick up some more.  I think at $18, you're getting a potential long term compounder at 15-18x normalized FCF multiple.  But it offers a path for years of organic growth.   

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Hi BG - CLPR and BTI here and MO under $40.  If one’s not afraid of office I think ALX, SLG and VNO are worth a look if they go a bit lower.  All of the payment processors are interesting where they are, particularly V.  If one’s a bit nuts, which apparently I am, BABA, but LEAPs probably make more sense as a way to play it.

 

Thanks

Lance

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I'm where you are on the RE stuff mainly because nothing has changed for the worse and we already know what happens with the whole covid stuff if things play out in the worst case scenario. Been there, done that. Playbook isnt a secret, so some of these sell offs arent warranted. I don't even think there will be lockdowns in the more liberal places, this will mainly just be an excuse for widespread mail in ballots to help 2022 mid terms not be a bloodbath. So much ado about nothing and really I think theres some knee jerk covid pussies selling on top of folks taking profits because lets face it, a lot of these names have straight up printed cash this year. AIV for instance Ive watched as its got hit hard but realistically its back were it was like a month ago....and up like 70% still. In the real world rents are still flying, MF is still printing 3s and 4s. I mean sometimes I am a little tone deaf and aloof, but the other day I was out by the mall and it was packed like Ive never seen it before, and then I thought about it and realized it was Black Friday. But at the same time, its a freakin mall where half the anchors are gone and it looks like the parking lot of a Giants game. Consumer is good! So I wouldnt lose sight of that amidst the panic. In many ways I think the market just needed an excuse to sell off. Much like late 2018. The Fed is an excuse. Covid is an excuse. Garbage tech bubble bursting is an excuse. 

 

My table pounding trade at the moment is to sit tight but really I think shorting 1/3/6 month OTM puts on some of these is table pound worthy. CLF Feb 17s over $1 and 14s for 50c. CLPR you actually can get some change on the 5s for June and nearly $1 on the 7.50s. CLI $15s for well over $1. Yea I am long VIX calls but its as a short term hedge and frankly, VIX over 30 and especially 40+ which I think we hit this week or next, has always been a level where you want to.....well, I'm not giving investment advice but if you've been there you know what you do when its at those levels LOL

 

I mean something is off and either I'm missing it or the market is just doing what it does every once in a while. Some things are still in the bubble and I wouldn't touch them with a 10 ft pole but others are back at levels where they are nice and if you take 10-20% off from current levels theyre 20%+ position size worthy. I think perhaps this may just be the setup for the same shit that outperformed this year to do so again next. 

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13 minutes ago, Lance said:

Hi BG - CLPR and BTI here and MO under $40.  If one’s not afraid of office I think ALX, SLG and VNO are worth a look if they go a bit lower.  All of the payment processors are interesting where they are, particularly V.  If one’s a bit nuts, which apparently I am, BABA, but LEAPs probably make more sense as a way to play it.

 

Thanks

Lance

 

I guess on a long enough time frame, we all buy Visa and Mastercard 

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I've been buying the RE stuff but on the Canadian side. Specifically AX.UN which has a new management team in place (value guys), discount to NAV they want to close, repurchase plan in place, special dividend coming and it's a REIT so sit back and collect in the meantime. 

 

I've been nibbling every few days into $V and $DIS. I don't know if they're screaming buys but probably will make out okay as my timeframe is pretty long in holding quality names. 

 

I'm also a sucker for the newish CEO of Intel.....

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I bought more Atlas today. $13? Should be able to earn close to $2 next year. Omicron will likely deliver more supply chain pain which is good for Atlas (extend hard market for container shipping prices). Now its shares will likely sell off further if we get a big sell off… but as we saw in 2020 the business IS resilient and earnings should still roll in largely as expected.

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every crash I end up doing the same darn thing..i sell the crap pile and buy the quality.

That's it. I've had it! from now on i buy the quality pile first - and just wait...and ignore the cheap pile even though I know 100% it will go back up on a recovery and usually much more.

However the quality also goes down less usually on the downside. Maximizing returns and risks just not needed.

 

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Houghton Mifflin Harcourt

 

1.  Essential industry finally shifting to digital.

 

2. The digital shift has produced nice winners in the recent past:

 

3. Balance sheet has been cleaned up:

      a.  https://www.hmhco.com/about-us/press-releases/houghton-mifflin-harcourt-completes-337-million-debt-paydown-with-proceeds-from-hmh-books-media-sale

      b.  $300 million in 9%(!) notes callable in February 2022  [Note current cash balance -- refi is no issue]

 

4. Operations have been turned around

      a.  COVID/work from home provided helpful cover to push through workforce changes accompanying emphasis on digital -- look at decrease in fixed cost base (e.g., Q3 2021 presentation slide 13)

      b.  Now showing strong booking growths and very high net retention

 

5.  Highly cash generative

      a.  Government customers who pay in advance (see Cambium thread for discussion of "billings" vs GAAP revenue)

      b.  Very high (60-65%) incremental cash margins on new bookings

 

6.  Large tax loss carryforwards

 

7.  M&A can produce value -- buy small company with good product and plug into company's massive distribution network (look at VC and PE activity in space, e.g., Weld North)

 

8.  Federal spending bills appear to be showering money on K-12 education over at least the next 2-3 years.  Nice near-term tailwind.

 

COUNTERPOINT:  This is a competitive industry.  I'm not a good position to evaluate the company's product portfolio relative to competitors.  Instead, I'm relying on recent growth as evidence of sufficient quality.

 

Edited by KJP
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Bought V, MA, Prosus/ Tencent - nothing original here.

Dufry worth looking again at these levels - it may bounce back next year big time. Advent International and Alibaba entered via capital raise to delist Hudson plus give cash. Now the price is good again thanks to Omicron.

I have just resisted buying HLF - I need to end my addiction to cheap crap...

 

forgot to add, ADSK after it tanked, but not cheap...

 

cant find anything else at these prices

Edited by NotSoWise
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15 hours ago, Viking said:

I bought more Atlas today. $13? Should be able to earn close to $2 next year. Omicron will likely deliver more supply chain pain which is good for Atlas (extend hard market for container shipping prices). Now its shares will likely sell off further if we get a big sell off… but as we saw in 2020 the business IS resilient and earnings should still roll in largely as expected.

+ 1 on this. I’ve been buying in drips and drabs for months now. 
 

MSGS still looks interesting. Idk if it’s pound the table, but the price is attractive. 

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Stelco is getting close (again) to table pounding levels (if it is not already there). 1/3 of market cap (C$3 billion) is in cash (assuming Q4 comes in as expected). Stelco is already close to 1/3 through Q1 (given extended lead times and lags to pricing) and selling at very good prices. So Q1 looks great (another $500-$600 million in earnings?). That would put cash at end of Q1 at 1/2 of current market cap. They also have the pending land deal.
 

The key risk is the CEO does something stupid with the $1 billion in cash. There is also a good chance he actually does something very good for shareholders… that is all additional upside for investors.

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1 hour ago, Viking said:

The key risk is the CEO does something stupid with the $1 billion in cash.

+1

 

The mountain of cash will be there so it’s use has been the main concern for me as well. Based on everything he’s said I find it hard to believe he would do something dumb. He has repeatedly stated the high return hurdle (30%) he has for internal projects. The buyback in august was close to todays prices. Buybacks would be nice but I’m more hopeful for a special dividend. 
 

Edited by hasilp89
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1 hour ago, hasilp89 said:

+1

 

The mountain of cash will be there so it’s use has been the main concern for me as well. Based on everything he’s said I find it hard to believe he would do something dumb. He has repeatedly stated the high return hurdle (30%) he has for internal projects. The buyback in august was close to todays prices. Buybacks would be nice but I’m more hopeful for a special dividend. 
 


Kestenbaum’s capital allocation track record at Stelco is impressive. As i used to say to my employees “past performance is best indicator of future performance”. If Kestenbaum can buy shares in volume at below market prices i hope he keep going with the share buybacks. They did a special dividend back in 2018 (timing?) so that would not surprise me. Imagine if they start kicking out $5/share special dividends very quarter moving forward… $100 to $200 million/quarter would still be building on their cash hoard on their balance sheet. Bizarre (in a very good way).

 

And for all of those people who are waiting for steel prices to pull a lumber… they might want to look again at what lumber is doing. Lumber futures are back over US$900. And Dec-March is typically when lumber prices peak (seasonally strong demand). In tight markets it does not take much to spike prices. All lumber needed was a once in a century rainfall in the pacific northwest / massive floods / causing massive destruction of transportation routes in BC (a province that chops a few trees)… They should have the big problems fixed by Feb of next year. That dog RFP is starting to bark again 🙂

Edited by Viking
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3 hours ago, Viking said:

And for all of those people who are waiting for steel prices to pull a lumber… they might want to look again at what lumber is doing. Lumber futures are back over US$900. And Dec-March is typically when lumber prices peak (seasonally strong demand). In tight markets it does not take much to spike prices. All lumber needed was a once in a century rainfall in the pacific northwest / massive floods / causing massive destruction of transportation routes in BC (a province that chops a few trees)… They should have the big problems fixed by Feb of next year. That dog RFP is starting to bark again 🙂

viking I know you are following RFP closely - in terms of damage to transportation infrastructure (rail lines etc) - how that might impact their movement of lumber? If they can't move the lumber until Feb, could they lock in the current favourable pricing? 

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36 minutes ago, glider3834 said:

viking I know you are following RFP closely - in terms of damage to transportation infrastructure (rail lines etc) - how that might impact their movement of lumber? If they can't move the lumber until Feb, could they lock in the current favourable pricing? 


Glider, RFP only has operations in Eastern Canada (Quebec and Ontario) so their operations are not affected by what is happening in BC (West coast of Canada). But the price spike is a big benefit to RFP.

 

The transportation issues in BC are affecting primarily West Fraser and Canfor and also Interfor and Western Forest Products.

 

BC has also significantly raised log costs (it is actually tied to the selling price of lumber but with a lag); BC has gone from being the lowest cost region in North America to the highest cost region today. This also impacts decisions by lumber producers to curtail production in BC. BC government is also looking to remove another large swath of forestland from the current allowable cut. Bottom line, the size of the lumber industry in BC has been shrinking in size for the last 5 years and it will continue to shrink for at least the next 5 years. This is a big reason why the big lumber producers like West Fraser and Interfor are being so aggressive with acquisitions right now… they KNOW BC is shrinking in size and that combined with strong demand from housing in the US will keep prices much higher than historical levels. 

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2 hours ago, Viking said:


Glider, RFP only has operations in Eastern Canada (Quebec and Ontario) so their operations are not affected by what is happening in BC (West coast of Canada). But the price spike is a big benefit to RFP.

 

The transportation issues in BC are affecting primarily West Fraser and Canfor and also Interfor and Western Forest Products.

 

BC has also significantly raised log costs (it is actually tied to the selling price of lumber but with a lag); BC has gone from being the lowest cost region in North America to the highest cost region today. This also impacts decisions by lumber producers to curtail production in BC. BC government is also looking to remove another large swath of forestland from the current allowable cut. Bottom line, the size of the lumber industry in BC has been shrinking in size for the last 5 years and it will continue to shrink for at least the next 5 years. This is a big reason why the big lumber producers like West Fraser and Interfor are being so aggressive with acquisitions right now… they KNOW BC is shrinking in size and that combined with strong demand from housing in the US will keep prices much higher than historical levels. 

Interesting insights thanks viking 

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On 12/1/2021 at 9:57 PM, thepupil said:

The thing that I’m most tempted and terrified to buy more of is…Softbank

 

I added on the dip today, effectively putting the kiss of death on Softbank.

 

www.bnnbloomberg.ca/softbank-poised-to-lose-74-billion-payday-if-arm-deal-is-halted-1.1690618

 

I'm not betting on the NVIDIA deal going through, but WTFK, maybe Masa will get approval by threatening to set himself on fire again? If not, he'll eventually IPO ARM Holdings and crikey, the proceeds could nearly represent the current market cap of Softbank.

 

www.wsj.com/articles/SB106633694181524900

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FRPH got to $53 and change today, it's getting to table pounding territory.  These 30-80% drawdowns in crap tech growth names is really something!!! With FRPH, I'm thinking rock pits and DC waterfront property.  Go back to reading or playing with my kid.  If it goes to $49, they have bought back stock in the past.  If it goes to $40 somehow (can't imagine), they will probably buyback 5% of the S/O like they did last year.  

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After spending most of the last year making fun of BABA holders, I started buying in on Friday. Here is my thought process. 

 

Risk Factors) It obviously has a lot of risk factors, PRI, China accounting, the fact the trading stock is a VIE in the caymen islands, pending SEC rule that could force delisting, etc. It's structure is also complex, easy to hide losses among a morass of subsidiaries, etc. Also Jack Ma pulled a hugely shady deal a decade ago to mostly steal Alipay (their Paypal like subsidary) from western investors, and BABA basically has no control over Alipay as a result. Jack is no longer CEO, but still exerts a big influence. Lastly Jack was "disappeared" by the PRI a year ago for a few months because he criticized financial regulators, demonstrating how much control they could exert if they wanted to.

 

Valuation) It's been growing 60% a year for last decade and is trading at only 10-11 times FCF. It's basically the Ebay, Amazon and Paypal of China all rolled into one, and those are three very powerful moats. It's current price would be unprecedented for a 25% growth rate with strong moats, let alone more than double that. If it was a US business it would be fairly valued at around 40x free cash flow.

 

Thesis) The chances of outright massive fraud are fairly small. Clearly those businesses exist and operate with huge mass, there is little reason to believe revenues aren't . What's most likely is that if there is fraud it's overstating earnings. And neither the SEC or PRI want US investors to get screwed, it's likely even if they can't work out their differences on the PCAOB accounting issues, that BABA will continue to trade OTC in the US, albeit at lower volumes.

 

But we are getting a tremendous price to compensate for all that risk. If 20% of the time BABA goes to zero and 80% of the time things work out to where it gets a reasonable valuation for it's free cash flow and growth ($400?), our blended result is over $300 per share. Obviously thats a level of risk that precludes taking a very large position, but it's not enough to preclude taking medium one, say 10-15% of portfolio. And I doubt the risk of going to zero is anywhere close to 20%.

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I might be a broken record, but DFH is on pace to hit over $3 per share in earnings in 2023, which implies a 6x P/E on 2-year fwd earnings from a company generating a 30-40% ROE. They're exposed to the homebuilding cycle, i.e. interest rates, wage and materials cost inflation, and other hard-to-predict factors, but the CEO is a finance guy who builds houses and I think he saw what Dwight Schar has done at NVR (almost take NVR bankrupt, then raise it like a phoenix from the ashes using only land-options, then granting himself generous options while buying back oodles of stock, then becoming wealthy enough to be a minority owner in the team currently known as the Washington Football Team, who then agitated for Daniel Snyder's ouster as majority owner of the team) and wants to see if he can do something similar.  

 

 

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