Is there a bubble? Pullback coming?

[Cardboard]

CRVP presented by Harry Long is very cheap. The company could be debt free in 3 years with no growth. Earnings would also move from $0.10 to $0.17 and the stock trades at $0.85. Nothing fancy about what they do, but the math is there.

 

HYD in Toronto. I have held this thing for a long time, but things are now in place with a big rebound in energy services. It trades for less than net-net. It could be a 2 or 3$ stock or more when contracts roll in. They do a big % of international work now while they did none 5 years ago.

 

LVLT is controversial, but there is no debate that data transfer is growing exponentially. I see people showing such interest for computers, Facebook, You Tube and hand held devices nowadays that it is mind boggling. It was considered nerds stuff just a few years ago and now everyone is a nerd! As their pipelines get filled, free cash flow will appear and the stock will look very cheap.

 

Cardboard

[oec2000]

With all due respects to Sanjeev, I've to respectly disagree.

 

A. Citing berkie and fairfax against macro focus is misguided at best. Buffett and Watsa have a built in macro meter that guides them well. They follow the "be greedy when others are fearful really well". Why in the world did prem buy CDS at the time he did? Do you think he had no idea of macro and the housing bubble?

 

Why did buffett sell those puts? A belief that fed wont let market go to zero. Being in insurance biz they are tuned to going against grain, ie writing policies when times get tough and pulling out when ez money is in. They are experts in mean reversion.

 

B. Lets take pabrai, he lost his shirt in delta financial. DFC was cheap on P/B , growing etc. not many could have predicted their demise. Fact is, they depended on outside funds for survival. DFC is like a strong man inside an oxygen chamber. The chamber is the macro. When O2 os great, DFC thrives. Anyone only paying attention to DFC and not the chamber would have lost the money.

 

The prudent thing is to monitor the level of oxygen, as some biz dont generate their oxygen.

 

Heck, pabrai's holdings are all in commodities that are subject to boom and bust. These co's depend on macro more than ever.

 

I like the saying on some poster, "worry top down, focus bottoms up".

 

I think we need to differentiate between cyclical and secular macro trends. Cyclical macro trends are tough to play and this is where the argument for a bottom up approach makes sense.

 

However, there are also longer term secular macro trends that are perhaps easier (but not necessarily easy) to spot because they usually start from extremes in economic circumstances. Examples include the tech bubble, the housing and debt bubble, the Japanese bubble in the 1980s, the interest rate bubble in the early 1980s. Buffett has clearly made a number of such macro calls in the past - winding up his partnership in the late 60s, identifying the cheapness of equities in the early 80s, the tech bubble, and the USD short. Of course, FFH has made quite a few outstanding macro calls too.

 

Buffett may not have quite called the 2008 crisis but he did go into it with a boatload of cash which allowed him to profit during the crisis. Was his build up of cash in the pre-crisis years a macro call of sorts?

 

The point I want to make is that there can be times when the odds are so strongly weighted in favour of a particular macro position that we would be foolish to ignore them. Buffett ha said it is dumb to differentiate between growth and value stocks.  It could be similarly argued that we shouldn't just ignore macro for macro sakes. There are times that when the situation is so obvious that it would be dumb not to let the macro risks or opportunities guide our stock picks. It should boil down to our handicapping of the odds - if we can play the macro game with odds strongly in our favour, why shouldn't we?

[Guest Dazel]

 

 

I am and have been mentally trying break down the "fear factor" that being involved in 2008 has caused...it was more like Buffett said about public speaking and I think investing....The Dale Carnegie course did not teach him to stop his knees from knocking but it taught him to Speak while they were knocking! Similar to buying what we did in 2009 and 2010. The fact is folks no one knows what is coming...don't overleverage and you will be fine.

 

"My best advantage in the 1950's was that I was not emotionally scared from the 1929 crash...I was able to buy cheap stocks while the investment community waited for the next crash... that never came."

 

Warren Buffett

[Guest broxburnboy]

Marc Faber weighs in on the "crack up" boom:

 

Caution: the following article contains mature "macro" themes and may not be suitable for all viewers:

 

http://www.cnbc.com/id/41713182

[Myth465]

Caution: the following article contains mature "macro" themes and may not be suitable for all viewers:

 

 

Lol thanks for the warning. Always useful on a value investing board.

 

Faber is turning out to be more wrong then right these days. We are all doomed. The middle east is turning into a power keg.

[Myth465]

Well we have the beginnings of a slight pull back. Everything seems to be down.

[ERICOPOLY]

CRVP presented by Harry Long is very cheap. The company could be debt free in 3 years with no growth. Earnings would also move from $0.10 to $0.17 and the stock trades at $0.85. Nothing fancy about what they do, but the math is there.

Cardboard

 

I own a bit more than 1% of the outstanding shares of CRVP -- learned about it when Harry posted it.  He then deleted the post, somebody asked why, but no response.  Given how hard it has become to accumulate, I think I know why.  It's a pity that I can't get a lot more without significantly increasing the bid.

 

[KFRCanuk]

Canned meat is doing well ;)

 

http://blogs.wsj.com/marketbeat/2011/02/22/food-stocks-including-spam-rising-against-red-tide/

[RRJ]

I like and understand the business of CRVP.  My concerns relate to the control group and the related party transactions.  The proxy shows that as of December 31, 2009, the Baker family, in aggregate, had $13.5 in loans outstanding, and collected $1.66 million in interest.  That might be what it took to keep the company going, but it is also a good way for the control group to siphon off shareholder profits.  The notes pay 12% interest, are interest only until maturity, and are due in 2012.

 

Then there are all the related party leases - also a great way to feather the control group's nest.  Then there is the employment agreement for the old man of about $50k per year for "consulting work", which doesn't seem like a lot, but probably speaks to the intentions of management here. 

 

In short, I'd worry about these related party transactions, and the overall balance sheet and ability to withstand the business cycle if clients slow pay them, which is rampant these days as large companies slow pay smaller ones, and smaller ones slow pay in turn.  This seems like the kind of business that would easily be put on the slowpay track.  Can't tell from the 10-k from 2009, so would have to look A/R trend.  Finally, from the Jan. 27, 2011 press release on Year end results, Other Income, net, benefited from a one-time increase in non-operating income of $3.5 million.  That's a pretty big adjustment item for them.  The $.20 cents in net income for 2011 is probably not solid.  Weird too -- they then take this "one-time item" and say "compared to a one-time increase in non-operating income of $3 million in fiscal 2009."  So is it one-time, and if so why is it repeated?  Could be hidden value being captured, or could be maniuplation.  Just started looking at this, so I can't say either way.   

[Guest broxburnboy]

Canned meat is doing well ;)

 

http://blogs.wsj.com/marketbeat/2011/02/22/food-stocks-including-spam-rising-against-red-tide/

 

I think Spam is looking good right now, demand should pick up from the food stamp crowd, although it will remain a hard sell in Muslim countries.