Thread for contrarian ideas

[Gregmal]

4 minutes ago, FCharlie said:

I love this. Everyone is terrified of the lack of growth and the overhang of Berkshire selling... Reminds me of Wells Fargo during summer 2020 when it was in the $20s and no one would touch it for the exact same reasons. With KHC yielding nearly 7% investors could achieve a double-digit total return if the stock just rose 6 cents per month going forward.... But who cares because Greg's got a 325 million share iceberg sitting there on the offer, right?

For that matter Spring 2023 as well. I wanna go back and compile a list of all the folks who claimed to be banking experts after SVB, and stated matter of factly that “they were all insolvent”, pretty much exactly at the bottom of a generational buy point. 

[FCharlie]

Regarding KHC, it also helps that the new CEO is going to try to do the exact same thing he just successfully did at Kellogg's.... Turn it around, split it up, and sell each piece. Kelloggs's went out at all-time highs. I don't expect KHC to go out at all-time highs, but see my earlier post. It barely needs to go up at all for investors to do really well.

 

https://www.youtube.com/watch?v=T55GQBU-J0w

 

 

 

Edited January 25 by FCharlie

[LC]

I’d say oil has to be a big contrarian idea. 

[brobro777]

https://finance.yahoo.com/news/jim-cramer-kraft-heinz-m-113739381.html

 

I do buy Kraft's BBQ sauce from Ralph's, I do

 

 

[bizaro86]

1 minute ago, brobro777 said:

https://finance.yahoo.com/news/jim-cramer-kraft-heinz-m-113739381.html

 

I do buy Kraft's BBQ sauce from Ralph's, I do

 

"We think there's less downside risk in our top AI stock pick".

 

Right. Because all the AI stocks are trading with a margin of safety right now and people might stop eating due to AGI.

[brobro777]

8 minutes ago, bizaro86 said:

 

"We think there's less downside risk in our top AI stock pick".

 

Right. Because all the AI stocks are trading with a margin of safety right now and people might stop eating due to AGI.

 

Yea bro I'm saying, Cramer wanna sell then it's probably good idea to buy some KHC - it seems like it generates lots of cash, paying higher dividend than tobacco companies!

 

I buy the Kraft Original BBQ sauce - it's cheap and surprisingly good - and you get to pass by the homeless junkies with meth pipes camping on the sidewalks on Western Avenue on your way to Ralphs!

 

[UK]

13 hours ago, backtothebeach said:

Let's hear it with your most ridiculous contrarian idea. Stuff that is bombed out, left for dead, etc.

 

My idea: KHC. What does this Greg guy know about business and investing anyway.

 

KHC is contrarian for sure. I am worried a bit about all these GLP-1 though. But hey this would not be a contrarian otherwise:) 

 

But for me, from the wilder side, maybe CVRX, if I had to chose one. Definitely bombed out heavy and for quite a while and could have just hit the max point of pessimism. But the main reasons seems temporary and the business case is as strong as it was. 

 

This was not my original idea though:)

 

Edited January 25 by UK

[Spekulatius]

7 hours ago, FCharlie said:

I love this. Everyone is terrified of the lack of growth and the overhang of Berkshire selling... Reminds me of Wells Fargo during summer 2020 when it was in the $20s and no one would touch it for the exact same reasons. With KHC yielding nearly 7% investors could achieve a double-digit total return if the stock just rose 6 cents per month going forward.... But who cares because Greg's got a 325 million share iceberg sitting there on the offer, right?

Wells had some self inflicted wounds, but the business of banking was not really impaired. However, with KHC, where is the earning growth supposed to come from? You need earnings growth to drive the shares up. Buybacks seem unlikely, the FCF barely covers the dividend. My guess is the probability of a dividend cut is very high also.

 

[Spekulatius]

A contrarian stock that could really work is PYPL,  Capital light business model, cheap, hard now leaning heavily into buybacks. I think they can buy back. High single digit percentage of their stock every year while still growing topline and earnings. They keep doing this for a couple of years and this looks like AZO or NVR all of a sudden.

[shhughes1116]

Chemicals.  They’ve traded like dogshit for a few years, although they are off the lows now.  Sentiment is still generally in the toilet.  And if the administration runs it hot, chemicals will do well.  I like Huntsman after their dividend cut. 
 

REITs.  Sentiment doesn’t seem great across the board, new unit construction has slowed, and some suffer from pretty unique discounts, like the Mandami discount.  I like Alexander’s for that reason.  I also like NXRT.  Sure, deportations will keep a lid on rents for a little while, but I think this will be short lived.  

[shhughes1116]

On 6/14/2022 at 5:36 AM, MattR said:

I am getting bullish precious metals. I believe that the market prices in a lot of rate hikes - but I think the fed won't do them and inflation is here to stay. They can't break the system, and a lot would break at 5% fed fund rate. 

While I like some precious metals for their industrial utility, I’m more interested in base metals.  I think copper has further to go and we’ll see a new price paradigm.  Nickel has only just started its move, and the price paradigm has likely changed given the actions by Indonesia.  All of this supported by resource nationalism, reshoring, and CapEx.  
 

I think of Brent $100 as the ejection seat handle.  When Brent hits $100, it’s time for me to eject from the metals space.

[longlake95]

Chemicals. I’m buying OLN.

[Eng12345]

10 hours ago, Gregmal said:

For that matter Spring 2023 as well. I wanna go back and compile a list of all the folks who claimed to be banking experts after SVB, and stated matter of factly that “they were all insolvent”, pretty much exactly at the bottom of a generational buy point. 

I make so much money inversing the "experts" - even when I'm admittedly not an expert. Nonetheless I always feel and am worried it will blow up on me one day.  

[KPO]

23 minutes ago, longlake95 said:

Chemicals. I’m buying OLN.

I’ve looked at it off and on for years, including well prior to the Dow transaction. Like IFF, these Reverse Morris Trust transactions typically take a while because they start life with challenged balance sheets. What do you like about it at the current price and place in the cycle? 

[longlake95]

26 minutes ago, KPO said:

I’ve looked at it off and on for years, including well prior to the Dow transaction. Like IFF, these Reverse Morris Trust transactions typically take a while because they start life with challenged balance sheets. What do you like about it at the current price and place in the cycle? 

I just think it’s cheap on normalized earnings basis. So, you have to believe, at some point, we get another up cycle. Not much has to go right here from a 2.6B MCAP. I’m under no illusion that this is some kinda wonderful company. But I do think the Winchester business is under-rated. I’m probably wrong, but I view BRK buying OxyChem as a pretty good signal that we are closer to the bottom than a top. 

[Marco Van Basten]

11 hours ago, Gregmal said:

For that matter Spring 2023 as well. I wanna go back and compile a list of all the folks who claimed to be banking experts after SVB, and stated matter of factly that “they were all insolvent”, pretty much exactly at the bottom of a generational buy point. 

Well, many of them, like Bank of America or Citi were, if I am not mistaken.  They were allowed to earn their way out of it.  

[FCharlie]

4 hours ago, Spekulatius said:

Wells had some self inflicted wounds, but the business of banking was not really impaired. However, with KHC, where is the earning growth supposed to come from? You need earnings growth to drive the shares up. Buybacks seem unlikely, the FCF barely covers the dividend. My guess is the probability of a dividend cut is very high also.

 

I don't think they will need to cut the dividend. In 2023 KHC generated $998 million FCF in excess of its dividend. In 2024 $1.229 billion FCF in excess of the dividend, and in 2025, they are expected to (according to Merrill Lynch) generate $1.370 FCF in excess of the dividend. It helps that they are not increasing the dividend per share, and the buyback is actually reducing the total dollars paid out (3.4% lower over the last two years). I do think they are going to prioritize debt reduction over share repurchases in the near future, but unless free cash flow were to decline materially, I don't see the need for a dividend cut. 

 

I agree with you that banking is a better business than some of KHCs worst brands. I do find comfort, however, in the fact that KHC traded much higher in the past with these same exact brands. And the new CEO was able to get growth out of Kellogg's brands so maybe he can do the same here. Growth or no growth, I think lifting the Berkshire overhang alone could bring KHC back up to the high $20s. With a 7% dividend, you don't need much to do well. 

 

 

[FCharlie]

10 hours ago, LC said:

I’d say oil has to be a big contrarian idea. 

Yes. I think of oil today very much how I thought of silver years ago. Not that long ago, no one thought silver was a good idea, even at $20 and when it was in a supply deficit. No one cared. Today, oil is one of the few commodities that isn't at or even close to all-time highs. Almost no one is bullish oil. It's one of the most valuable resources on earth, global demand continues to rise every year, and no one cares. 

[Sweet]

41 minutes ago, Marco Van Basten said:

Well, many of them, like Bank of America or Citi were, if I am not mistaken.  They were allowed to earn their way out of it.  

I don’t think either were.  Neither had to sell their assets.  Citi’s unrealised losses were not even that large.

[KPO]

1 hour ago, longlake95 said:

I just think it’s cheap on normalized earnings basis. So, you have to believe, at some point, we get another up cycle. Not much has to go right here from a 2.6B MCAP. I’m under no illusion that this is some kinda wonderful company. But I do think the Winchester business is under-rated. I’m probably wrong, but I view BRK buying OxyChem as a pretty good signal that we are closer to the bottom than a top. 

Agree on Winchester. They should spin or sell it since there’s no real synergy with the chemical business, plus it would speed up the debt reduction timeline. 

[FCharlie]

21 minutes ago, Sweet said:

I don’t think either were.  Neither had to sell their assets.  Citi’s unrealised losses were not even that large.

Bank of America's Held-To-Maturity portfolio of low-yielding MBS and Treasuries has declined by $110 billion in the last three years, from $632 billion Q4 2022 to $522 billion today. I don't believe they have taken a loss on anything. This is just natural runoff from principal payments and maturities. Everyone agrees in hindsight BAC was stupid for owning this much low-yielding MBS, but in BACs defense, they've always had a massive zero cost deposit base to support it. And FWIW, anyone who sold BAC stock in 2023 because of unrealized losses missed out on a doubling of the stock since then. 

[Sweet]

On the topic of a contrarian idea that might outperform, I’m a bit more optimistic about Europe.  Nowhere near a slam dunk, but I think their world has been rocked and they are signs they are going to start getting serious (once the SWOT analysis is done ).

[lnofeisone]

6 hours ago, longlake95 said:

Chemicals. I’m buying OLN.

I did the same. I had my starter in OLN and CE a bit early but have slowly been increasing.

 

The other one I'm starting to slowly add to is my DIS starter. 3 years of going nowhere. I don't think it's crazy undervalued but with right puts, it can be market-beating trade.

 

Also, KMX. I have a starter but so little conviction. 

[bizaro86]

16 hours ago, brobro777 said:

 

Yea bro I'm saying, Cramer wanna sell then it's probably good idea to buy some KHC - it seems like it generates lots of cash, paying higher dividend than tobacco companies!

 

I buy the Kraft Original BBQ sauce - it's cheap and surprisingly good - and you get to pass by the homeless junkies with meth pipes camping on the sidewalks on Western Avenue on your way to Ralphs!

 

 

Oh for sure, I understood your comment. I was just making fun of the article.

 

Because Ketchup is a lot less likely to get disrupted than an AI business.

 

No KHC position but I appreciate it getting brought up and I'm going to dig in this week.

[longlake95]

1 hour ago, lnofeisone said:

I did the same. I had my starter in OLN and CE a bit early but have slowly been increasing.

 

The other one I'm starting to slowly add to is my DIS starter. 3 years of going nowhere. I don't think it's crazy undervalued but with right puts, it can be market-beating trade.

 

Also, KMX. I have a starter but so little conviction. 

I don’t know what’s hated worse right now…. Chemicals or food stocks…