Spekulatius

A lot of grocer stocks are cheap, including the National ones. What makes SPTNa better buy than UNFI, VGMEA,WMK or IMKTA? SPTN may be cheaper then some, but generally speaking, all ththe grocery stocks , including even boutique stores like Sprouts are generally trading a near the low end of their valuation range. So why is SPTN a better bet than all the above mentioned stocks?

Actually, increasing government debt is not a problem when negative interest rates persist. I believe the QE in the next downturn will include unprecedented purchases of corporate debt and probably equity purchases as well. It’s the only thing left to do when the risk free interest rate approaches zero. That’s already the case in Japan where their treasury buys selected equites like Reits. In a way, is a smart thing to do, when the cost of capital approaches zero or becomes negative. Strange new world.

I don’t see any deflationary economics in Europe, the ECB is run by an Italian right now anyways. The negative interest rates should be deeply inflationary, they just don’t seem to work, except creating elevated valuations for assets like real estate. Same seems to be the case in Japan, partly due to shrinking population. It’s difficult to create a boom in real estate prices, when the population is shrinking and there is a surplus in houses in many areas except selected population centers. Same with other things where demand is waning. If we want to create inflation, we need to bump up immigration in a great way. immigration alone is probably responsible for a 1% better GNP growth rate in the US vs Europe.

The cost floor for shale depends on the progress in drilling productivity, which had been quite impressive. I think it is well, possible that the cost floor moves down further over time, as productively improvements outrun cost creep.

Is there a reason you are purposely ignoring the bitcoin = gold thesis? Yes, there is. I don’t like gold. I don't either. I do like gold at a 95% discount though. To be fair, the fact that I don’t like gold isn’t negating the thesis that crypto = gold. I am sure for some people it is and that may be good enough. I don’t know where the 95% discount is coming from - the market cap of gold vs crypto?

I hope you are correct. I am not sure I can predict the future though. I think there is a real risk that the Line 3 is going to be in court limbo for a long time and Line 5 will get shut down without repayment. it’s a shame, but that s what it may come down to. When I have no way to handicap the risk, I am not playing. ENB used to be a huge position (15% for me is rather large) when I played the odds and ends of the EEQ and SEP simplification. I made some money there and it’s payed good dividend, but maybe wasn’t worth the “brain damage”. I can buy WMB yielding 5.7% right now without all that baggage, so why play?

I suggest a thread to consolidate spinoff stock discussions in the strategy section. I believe that any thread for a single ticker won’t get critical mass.

Is there a reason you are purposely ignoring the bitcoin = gold thesis? Yes, there is. I don’t like gold.

The way I’m looking at ADS, it’s valuation all comes down to the receivable growth. If the card business earns $16 cash/share this year than the question remains if they can plow back this cash towards receivable growth? Historically, they reinvest, I think around 50% of earnings to support 15% receivable growth by keeping financial leverage at around 13. However, I think, the easy receivables days are gone. 2019 earning is likely to go back to buyback or debt reduction and not much to support the portfolio growth. Les say, 2019 EOY BV is $50 and net leverage multiple compress by 30%. Starting 2020: case 1) let’s say, receivable starts to pick up with ~7-10% earning, 25% ROE and 20% BV CAGR for the next 5 years. 50% earning goes towards portfolio growth by maintaining existing leverage ratio. what’s the value for this model? I think, at 12% earning yield today (or 2.7 times EOY BV), I expect to get 15 to 17% IRR just with the card business alone. Expected share price = $280 to $300 within the next 2 to 5 years (12 PE multiple or 2.5x BV). Case 2) However, if the receivable slows or drops and the company decides to liquidate in 2021, what’s the liquidation value? I think $16Billion receivable should ask for a 30% premium i.e. ~100 cash/share (It’s just my guess estimate based on 25% yield, 7% default on 10Q receivable data matrix). With 2019 EOY BV around $50, I think the current share price is less than this future card business liquidation value. However, market is likely to push this to 2 times BV if receivable shows sign of weakness. Yes, receivables are the key growth metric and delinquencies the key profit metric. Receivables are flatfish as the runoff from failing retailers now is counter the growth from new customer wins. Delinquencies are flatfish to rising, but at a measured pace. ROE isn’t really all that relevant until they can invest new capital in growing receivables. Overall, I see the valuation getting quite attractive. Now if we get a market correction and we really could get in an interesting setup.

Their last guidance implied $575M in FCF ($1.375B operating cash flow -$800M in Capex). Even that looks like a stretch, given first quarter results. http://pressreleases.davita.com/2019-05-07-DaVita-Inc-1st-Quarter-2019-Results They need to turn the business around. Increasing leverage now with falling cash flow is risky.

Arnt you concerned about Line 5? looks like it may get shut down. Another nail in the coffin for Canadian crude. FWIW, I sold my ENB position, as risks are way above my comfort zone. Time for the Canadians to come up with their one solution. I don’t think relying on the big brother south is going to work out unfortunately.

In the past 9 months we've had a 20% correction and a 6% correction (with some sub-sectors moving a lot more than that), bond yield curve is inverting and everybody is talking about a recession... Agreed, not 1999 euphoria at all. Actually increased volatile and sideways movements re often signs of a very late stage bull market. Overall, this does not feel like 1999 however. 1999 had many bubbles they went parallel and were feeding on each other (IT hardware/software for the Y2000 bug, commercial real estate, high end housing, Internet stocks, telecom stocks, semiconductors etc). We have a bubble in tech stocks perhaps, but I don’t see much other bubbles yet. In any case, while boom/bust cycles tend to have some similarities, I don’t think any of them are exactly alike. So 2019 may be a bubble, but I don’t think it will work out exactly like 1999, not like 2008 or 1987.

Market cap to GDP strikes me as one of the poorest metrics I can think of. The reason is simple, in some countries a lot of companies tend to stay private, in others they are owned by the government. The market cap to GDP would be lower, just because these companies don’t trade on the stock market. i would ja it stick with simple valuation metrics, EV/EBIT, EV/ Revenue etc, but market cap to GDP strikes me as a very poor metric.

Reasons why ai thought this trades at a discount: 1) I assumed that cap rates were higher than what they are 2) unclear value of undeveloped land 3) tax inefficient structure (c-Corp) 4) corporate overhead a bit high 5) unclear outlook for real estate in Windsor, CT (I am sometimes in this area and economic outlook doesn’t look that great) Son in law or not, they seem to have done a decent job creating value. Much of it is due to tailwinds, but part of it is that they do seem to know what they are doing.

Anyone has an opinion on SLG, the NYC focused office and retail REIT? They are buying back stock aggressively. Implied cap rate according to their last IR presentation is 7.27%, while NYC real estate of comparable quality goes for 5% it less. I am not bullish on NYC real estate, but this discount is quite large. https://slgreen.gcs-web.com/static-files/8e49a27c-5167-43f8-97e3-656c06eef5fb

FRFHF, ENB and DVA. I sold ENB due to Line 3 and now Line 5 troubles. DVA was stub position and was sold due to poor fundamentals are. FRFHF will be converted into BRK.B eventually. I also trimmed WFC a bit as I was way too overweighted and I am getting concerned about earnings power at lower interest rates. I would buy it back if shares fall back a little again.

"Cowboy hat from Gucci, Wrangler on my booty." I need to read that S-1, but I am lazy AF. Yes, KTB’s results were weak, a continuation of trends that have been persistent since at lest 2014. Posted a deep dive on this yesterday: https://lowtideinvestments.com/2019/06/18/kontoor-brands/ Enjoyed reading that. Thanks for sharing. I suppose my similar, sort of opportunity cost for a KTB position might be CPRI or TPR. Thank you for sharing your research. I have been working on KTB as well. I was far from impressed with the Q1 results KTB released today. Not a total surprise that Q1 was weak though, since VF's Q1 earnings still included Kontoor. I have looked quite a bit into this stock too, as it indeed looks cheap. I have decided against investing for a simple qualitative reason: If a very smart management team like VFC can’t fix KTB, what makes us think that standalone company can do better? This was not a business that was badly managed, imo. It is a business that even a very strong management team decided to get rid off. I don’t think I am smart enough to go against their judgement and it is quite likely that this business will continue to struggle. I would be more inclined to invest in KTB, if I consider VFC’s management subpar, but that far from being the case, imo.

I think your take is actually pretty close to the Fed’s baseline forecast, namely the economy does fine and they don’t cut during 2019. The reason they’re slightly more dovish than what you think is appropriate is that they now see some negative economic indicators showing up and inflation is undershooting their target. What I find pretty strange is the extreme confidence with which the bond market is predicting multiple rate cuts this year and how happy Mr (Stock) Market seems to be about all this. The Fed has pretty much indicated that rate cuts are not forthcoming this year unless the economy starts deteriorating. So if the bond market is right and rates are going down big time that means the economy is going to do pretty badly. Will stocks do great under such circumstances? I don’t think so. Either everything is good news or everything is bad news. Right now it’s a former.

Othe then perhaps boosting asset prices, I don’t think the level of interest rates matter much at this point. 2.25%, 2%, 1.5% why would anyone care? What did Europe or Japan get for lowering interest rates to basically zero?

Cost pressure are relentless. It seems like costs are raising faster than reimbursements, maybe due to labor market tightness? the smaller players are probably sucking air through a straw. Fresenius on the other hand seems to be doing better, due to being more diversified.

I am not buying anything. I understand the difference between an average house in a city and a beachfront luxury house, but ai think if the luxury housing market really gains traction’s, the people that live there to run the economy will need 250k houses and buying those would tear more risk. With luxury homes on the fringes, my experience is that they can run cold very quickly in a recession. This area is far out there and without doubt, in a housing decline, these types of areas are the first to hit the skids. I have seen this happened two times on the fringes of the Bay are for example in 2002 and in particular in 2006-2010. Those areas were in the dumps long after he Bay Area core had recovered.

I look at the records from my old message board and it was clear to most of us, that first ENE was overpriced, but also risky. The derivatives and trading shenanigans were sort of known (Pg&E bankruptcy). Proving fraud is very hard, but yellow and red flags were quite possible to detect. Same is true for many other frauds that came up later. Just avoiding stocks with similat traits that show yellow flags will not get you into this mess, but you will miss some opportunities to make money as well of course.

Hmm, mean housing in Panama City ~200k vs beach front property ~$1M. Seems that the real Smart play would just be to buy an average house ins Panama City. If the high end gets traction, prices for are average housing can’t stay at $200k, if not 200k is probably ok. Heads I win, tails I don’t lose... I know it’s naive...,

Spekulatius, I've - with great interest - been following your moves for years. [However I do not understand some of your moves, to me basically because your investment universe is much larger than mine, based on that you have multiples of investment experience & stock picking knowledge compared to me.] This move by you is a surprise to me with regard to EXOR.MI & FCAU [i'm unopinionated with regard to FRA.DE.] If you would take the time to elaborate just a bit on your line of thinking here, I would personally appreciate it very much. As far as EXO.MI is concerned, I made the decision to reduce cyclicals, especially automotive in my portfolio. EXO via FCAU and CNHI (the latter may be overvalued actually) is quite exposed. I have not changed my opinion on management. I only sold my position in tax deferred account and keep my position on a taxable account. FRA.DE simply has reached my valuation target. I am surprised it rerated that quickly, because they will have negative FCF due to an investment in Capex for the next few years.

HHC and VNO come to my mind.