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The Bill Miller Basket


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Listened to this episode of TIP over the long weekend.

 

From the 8 min mark to about the 12 min mark Bill makes mention of some companies he thinks are strong market bets right now. I've added it to my homework list to take a deeper look at these 4 companies.

 

OMF - One Main Financial 

GM - General Motors

TMHC - Taylor Morrison Home Company

BHC / BLCO - Bausch & Loam  

 

I was wondering if anyone else has identified these as strong opportunities. 

 

 

 

 

 

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@Longnose The BHC /BLCO spinoff is an interesting one. BHC seems to be the badco and has way to high leverage, imo. Goodco BLCO looks more interesting - 350M shares, $2.2B debt and ~$3.5B in revenues. Earnings power seems a bit uncertain.

 

I think BLCO is the one to bet on, but from my experience, it is best to let these spinoffs marinate a bit before buying them.

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I dont think GM is worth owning. Look at what its done the past decade. The excuses, the questionable investments. They cut the dividend to be cautious and to my knowledge still haven't reinstated it. And even when the bulls though it finally was having its day, it essentially turned out to be a mouse fart meme stock bump, in its entirety of maybe 50-60% off its decade long range which is nothing to write home about. Just in general a terrible business run by bureaucrats who now want to be an ESG stock which....generally tends to be bad for profitability. 

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2 minutes ago, Gregmal said:

I dont think GM is worth owning. Look at what its done the past decade. The excuses, the questionable investments. They cut the dividend to be cautious and to my knowledge still haven't reinstated it. And even when the bulls though it finally was having its day, it essentially turned out to be a mouse fart meme stock bump, in its entirety of maybe 50-60% off its decade long range which is nothing to write home about. Just in general a terrible business run by bureaucrats who now want to be an ESG stock which....generally tends to be bad for profitability. 

 

I questioned this one too but Bill made some decent arguments that I havent looked at and want to look further at. 

 

He stated every car is presold for the next 2 years. Better margins on Electric Vehicles. And current Earnings ratio about 5-6 with a historical of 8-10. 

With that baseline it does seem like it could be ready for a realignment. Probably not a massive swing but a decent bump. Which is why I plan on doing my own DD to determine what price I would sell at. 

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Yea IDK but I followed it much more closely between 2014 and basically Jan 2020 threw in the towel with the name due to brain drain and lack of justifiable returns. They've always kind of touted that they trade at like 5-6x. I think they even briefly traded, supposedly at 4x during the big recall or shortly thereafter. At least on the "adjusted" metrics.

 

Nevertheless, even guys like Tepper briefly went activist here, and got drowned out by the bureaucracy. I also got totally turned off by the board arrogance. Consistently touting their returns when anyone who owned the stock could tell you there weren't many, and certainly not ones that justify owning this type of business. @RadMan24always had a somewhat different and more optimistic take, so if he's still around perhaps can fill you in on the bull case today. I think Millers is too academic. GM is awful at executing and thats the problem even if the numbers are ok. 

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5 hours ago, Longnose said:

 

I questioned this one too but Bill made some decent arguments that I havent looked at and want to look further at. 

 

He stated every car is presold for the next 2 years. Better margins on Electric Vehicles. And current Earnings ratio about 5-6 with a historical of 8-10. 

With that baseline it does seem like it could be ready for a realignment. Probably not a massive swing but a decent bump. Which is why I plan on doing my own DD to determine what price I would sell at. 

Not sure how the margins will look once warranty related repair/inevitable GM recall costs are baked in. And is anyone else worried about the legal liability of a 9,000 lb projectile that goes 0-60 in 3 seconds? I just think mass markets auto manufacturing is a tough business to generate outsized long-term free cash flow. 

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7 hours ago, Gregmal said:

Yea IDK but I followed it much more closely between 2014 and basically Jan 2020 threw in the towel with the name due to brain drain and lack of justifiable returns. They've always kind of touted that they trade at like 5-6x. I think they even briefly traded, supposedly at 4x during the big recall or shortly thereafter. At least on the "adjusted" metrics.

 

Nevertheless, even guys like Tepper briefly went activist here, and got drowned out by the bureaucracy. I also got totally turned off by the board arrogance. Consistently touting their returns when anyone who owned the stock could tell you there weren't many, and certainly not ones that justify owning this type of business. @RadMan24always had a somewhat different and more optimistic take, so if he's still around perhaps can fill you in on the bull case today. I think Millers is too academic. GM is awful at executing and thats the problem even if the numbers are ok. 

Well, the bull case is GM becomes a software-defined, high tech EV and Hydrogen Fuel Cell logistics company that dominates the world, earning a trillion dollar valuation, 10 years from now. Saddle up! 

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2 hours ago, KPO said:

Not sure how the margins will look once warranty related repair/inevitable GM recall costs are baked in. And is anyone else worried about the legal liability of a 9,000 lb projectile that goes 0-60 in 3 seconds? I just think mass markets auto manufacturing is a tough business to generate outsized long-term free cash flow. 

The GMC HummerEV is dope. But if you are worried about recalls and warranty repairs, stop by Ford. 

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25 minutes ago, RadMan24 said:

The GMC HummerEV is dope. But if you are worried about recalls and warranty repairs, stop by Ford. 

Dope and quality can be two different things. Your Ford choice is probably true, but as someone that has owned two Toyota FJ cruisers, which were made 100% in Japan, I’ve only been to the dealership one time in 15 years……and this was for a door seal issue.  That’s quality. The early EVs have had a lot more quality issues than the popular media let’s on….and they rip through tires at a much higher volume due to their 25-35% greater weight relative to similar ICE vehicles. Buy GT I suppose, particularly if you want a hedge for significant oil gains recently! I did. 

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7 minutes ago, KPO said:

Dope and quality can be two different things. Your Ford choice is probably true, but as someone that has owned two Toyota FJ cruisers, which were made 100% in Japan, I’ve only been to the dealership one time in 15 years……and this was for a door seal issue.  That’s quality. The early EVs have had a lot more quality issues than the popular media let’s on….and they rip through tires at a much higher volume due to their 25-35% greater weight relative to similar ICE vehicles. Buy GT I suppose, particularly if you want a hedge for significant oil gains recently! I did. 

My sarcasm didn't catch - I wasn't speaking on individual vehicle terms - Ford is worst in industry this year with recalls and warranty issues. 

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I think there is a chance that the auto industry become structurally better (more profitable). Reasons are EV transition, higher tech content and higher service revenues from going closer to consumers as well as offering more services.

 

I think the EV transition could affect the business  either way and make the business worse (at least in the interim) so I don’t know. I do think that the automobile business is likely fundamentally changing.

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10 hours ago, RadMan24 said:

Well, the bull case is GM becomes a software-defined, high tech EV and Hydrogen Fuel Cell logistics company that dominates the world, earning a trillion dollar valuation, 10 years from now. Saddle up! 

 

It seems like a good narrative for traditional automakers to come out and emphasis on "software" or "tech" focused company, but I find it so hard to grasp it because the business is so capital intensive, and innovations in hardware will never stop, or should stop. One of the other OEMs came out and said they expect to generate (22.3) billions from subscription services by 2030. I find that number laughable. 😕 But I am sure I will be wrong.

 

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I won't ever buy an automaker unless sustainably dividends + buyback give me like 5-7%+ yield. Look at that sexy GM FCF or Earnigns yield and see how much comes back to you. toyota's good for about $6-$9 billion / year....so I'd buy it at maybe $120 billion (-60% from here and 0.5x book...it traded to 0.7x in the depths of the GFC)...I therefore conclude I'll never buy an automaker because i have unrealistic expectations. 

 

they're basically non profit entities organized to provide better cars for the world in the form of plowing all earnings into capex. 

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