What are you buying today?

[kab60]

More AMA Group... Price chart makes one puke, but I think it's a potential 5-10 bagger, and unless I've completely missed something, I think I've rarely seen a selloff as crazy as this one. Might wanna write it up.

 

I am a little bit concerned about the debt covenants. My stomach is weaker than yours, I puked this out when it was  0.57AUD, now at 0.175AUD.

 

It trades like an option now.

Well, you did well selling. I averaged down a couple of times - and doubled it today. Ugh. Someone mailed me to get my view, quick view here (all very back of the envelope):

 

From the recent CC (from the CEO): We have a net leverage ratio where we can't exceed 3.25 in the first year. That doesn't get tested until the end of this year. And everything is on the basis of around run rate and those sorts of things. So we're comfortable with that at the moment. And based on those, so no concerns on that.

 

 

So I think end of last Q they had around 300m drawn on their 375m debt facilities and 50m cash so 250m net debr vs guidance of some 75m ebitda. So obviously close and obviously things have evolved for the worse with corona-virus (if you go to AMAs website they sent out a note to customers, clients etc.), but they're still in business - this isn't retail. And there might be pent up demand from hails storms that hit Australia.

 

But I think what's important here is the comment on run rate which I assume means that they'll be able to include, among other things, 17m in expected synergies (they have alluded that it will be higher, so perhaps they can bump it up). Either way I think there's a real risk that they breach those covenants - but I also expect lenders to be willing to waive those given the special circumstances. Very few banks will want to write off a loan six months in - and optically it would look extremely bad.

 

As for valuation, with a marketcap of 125m and 250 net debt the price of AMA is below the price of the Smart Capital acquisition (where rumour was others were willing to pay around 320m I seem to recall) PLUS the old Ama Group. Blackstone was close to buying the whole thing for some 10xebitda while right now - if things go as planned - they might do plus 100m ebitda in their fiscal 21 so around 3,5xev/ebitda.

 

I know it sounds almost stupid, but that would potentially imply equity upside of some 600 pct. from here. There is real risk of permanent capital impairment, but I think the risk is severly overstated and would expect them to get a waiver if they trip covenants. Last resort perhaps call Blackstone again? And I don't think things are all that dire. This is smash repair shops that should be extremely resilent since insurance pays, AND they had good answers on the call as to what needs to be improved (and it seems pretty easy to fix). CEO owns a ton of stock, three insider buys since beginning of march - post results.

[kab60]

CAMBRIA Automobiles - 2,3xEV/ebitda, midteens ROIC, founderled

[petec]

SPG JEF FIH - but all small.

[Guest cherzeca]

I bought a 2 year leap on FAS, super leveraged play on banks.  small investment.  doing well last few days of course, but I expect banks to recover to prior levels during the holding period

[Santayana]

The daily "reset" feature of those leveraged ETFs means they won't always behave the way you think they will.

[TwoCitiesCapital]

Bought more puts. Sold another 3% or so of my longs.

 

The data says I'm right to still be concerned and that this gets worse before it gets better.

 

The stock market says "f*ck the recession and the accelerating pandemic - we'll trade at average multiples of trailing earnings that are guaranteed to drop dramatically"

 

One of us will be right but it certainly sucks to be me right now.

[Guest cherzeca]

The daily "reset" feature of those leveraged ETFs means they won't always behave the way you think they will.

 

they work 3x per day, so I realize that there can be variance from a straight line move.  I have played with it before and I am aware that it can be a wild ride.  I am just making a relatively small directional bet over a recovery period.

[Gregmal]

Bought a few SDS calls into the close. Kind of hoping to hedge out and "get ahead" of those looking to "get ahead" of those getting out of the market before the weekend...

[dpetrescu]

Here’s my prediction:

 

In 10 years, all of us will still be in here looking for things to invest in. Will stock prices will be higher or lower in 2030 compared to today? Market tops and bottoms don’t exist in real time, they only exist in retrospect.

 

I’m willing to guess prices will be a whole lot higher and that 10-20% will be barely noticeable. I’m also willing to guess most of the appreciation will be mostly due to a handful of random days. I’ll also guess we shouldn’t be surprised that prices will be lower in the next month or so than today.

 

The only conclusion I come up with is keep buying and holding, don’t trade the volatility. You miss one or two days and you miss out. The only question is how to raise funds and how to manage the buying based on the funds you have and how long should you buy heavily?

[scorpioncapital]

Here’s my prediction:

 

In 10 years, all of us will still be in here looking for things to invest in. Will stock prices will be higher or lower in 2030 compared to today? Market tops and bottoms don’t exist in real time, they only exist in retrospect.

 

I’m willing to guess prices will be a whole lot higher and that 10-20% will be barely noticeable. I’m also willing to guess most of the appreciation will be mostly due to a handful of random days. I’ll also guess we shouldn’t be surprised that prices will be lower in the next month or so than today.

 

The only conclusion I come up with is keep buying and holding, don’t trade the volatility. You miss one or two days and you miss out. The only question is how to raise funds and how to manage the buying based on the funds you have and how long should you buy heavily?

 

If it will be higher due to inflation it's a nothing burger.

[orthopa]

The daily "reset" feature of those leveraged ETFs means they won't always behave the way you think they will.

 

Can you expand more on this? Is it along the lines of the decay with the leveraged vxx etf/ns?

[Guest Schwab711]

The daily "reset" feature of those leveraged ETFs means they won't always behave the way you think they will.

 

they work 3x per day, so I realize that there can be variance from a straight line move.  I have played with it before and I am aware that it can be a wild ride.  I am just making a relatively small directional bet over a recovery period.

 

 

As a heads up. In general, they don't work as well in highly volatile markets because a lot of the market movement tends to occur in 'gaps' and not during market hours.

[sleepydragon]

WFC

[plato1976]

A few bad news related to this name, not sure if fully priced in:

 

1. https://www.reuters.com/article/us-health-coronavirus-banks-dividends/uk-banks-scrap-dividends-on-coronavirus-fears-pressure-on-bonuses-idUSKBN21I3AN

UK banks halt dividends due to gov pressure. They are reasonably capitalized so not sure if US banks will follow

 

2. I think more importantly, there is some worry about mortgage impairment recently that's getting intense. Seems we need to regulator to lighten up some regulation so banks don't need to take a big hit to their capital when they provide some relief to borrowers in temporary difficulty (like 3 months) -- without it banks may dive

 

 

WFC

[chrispy]

Bought back my MA position and more which was sold about 15% higher

[Gregmal]

Bought a little more MSGN at 8.85. Who the f knows here anymore.

[JRM]

backing up the truck on KMI.  I'm going down with the captain.

[LC]

Dipped the toe twice in WFC yesterday and today; Bought some T today as well.

 

My assumption is the SP500 will eventually hit 2000. I am averaging my cash position down to that point, so that's the plan I guess  ;D

[CorpRaider]

SLG

[gjangal]

Looking to buy ANET, PAYX, BKNG. Haven’t sold anything yet, but I feel this is going to prolong for a while, so buying slowly and in small quantities .Especially valuations may not return to where they were as markets have to price in second wave and 3rd wave scenarios in the absence of a vaccine. Good time for people with substantial cash as they can accumulate slowly

 

SQ and TTD look risky to me as small businesses and ad budgets return slowly. Better to buy stronger players. Thinking about that

[LC]

I have also been looking at Paychex but the industry does have low-ish barriers to entry. It does not seem like a large value-add although I will admit there is stickiness.

[wescobrk]

Dipped the toe twice in WFC yesterday and today; Bought some T today as well.

 

My assumption is the SP500 will eventually hit 2000. I am averaging my cash position down to that point, so that's the plan I guess  ;D

 

That is the question of the day (S&P hitting 2k). Gundlach thinks we will retest the lows. Marks thinks we are headed lower.

There is already talk of another infrastructure bill of $2 trillion.

 

I guess it all comes down to if the country "reopens" in May. If we do, then we may not get down to 2k but if we don't reopen by mid May then it will probably go south of 2k and south of 1700.

The market is probably discounting a May reopening is the only reason why we never went lower than 35% from the peak.

[gjangal]

I have also been looking at Paychex but the industry does have low-ish barriers to entry. It does not seem like a large value-add although I will admit there is stickiness.

 

PAYX I am still going through the numbers, they still have low double digit growth, good roic and looks like they are using their balance sheet well, cons are obviously they are skewed towards small and medium sized businesses which are going to take a hit. Maybe stock already reflects that.

 

I do a general check of numbers and take a judgement call as to whether the business can maintain competitive position, market opportunity. .Growth/fall in revenue usually reflects that. Asset light business models are very attractive .  I also willingly will pay up to 40 pe for good growing businesses in this rate env

[valueinvestor]

SHOP, AER, RCL, TSLA, PK, STNE, AEO, FB, HEI, ROKU, TDG (Keep in mind I have 30% in cash)

[Lance]

BAM

 

Thanks

Lance