Spekulatius

EXO.MI, FCAU, FRA.DE

Enron‘s balance sheet almost doubled in size from 1999 to 2000 from ~34B to $65B, while profits were relatively small. they had huge balance sheet items from trade receivables and assets from risk management activities showing up on their balance sheet (~12B and going up more than 5x). Value investors would have never touched this, because it was just to expensive. I do know a few of them got sucked in on the way down though.

Interesting, in CA, I could simply get my tax bill lowered, when I filled out a form, that was backed up by an appraisal that I received when I refinanced my property) and which was lower than my tax appraisal at that time. NY has dedicated companies that fill out grievances for you in exchange for part of the tax savings for one year.

The basin ( SCOOP/ STACK) where the assets are located is decent, but it’s no Permian , as the geography seems more difficult. A bigger concern is that they work with Roan resources ( their Twin from before the Linn separation ) which appears to be on its way to become a penny stock. Disclaimer: no expert on E&P’s, but I have been following and investing in midstream for a long time. I think this will eventually become a midstream play.

The results from the Jeffrey Investment banking business are subpar. I think last year, they made $410M pre tax with $6.5B stated book value. Why should a business earning 6.3% ore tax on their equity be worth book? This business needs to be restructured and shrunk to size and perhaps liquidated, if that’s even possible. It's not worth book, but it probably is worth tangible book. And while the transfer of Berkadia into Jefferies doesn't change the reality, it may change the optics. Potentially a smart move, that. Re disclosure, I suspect direction of travel is more important than current location and it's improving materially with the investor days and biannual valuation of the merchant bank portfolio. I don’t think JEF Is bank businesses worth tangible book. They made $410M in ore tax income on tangible book $4.5B last year and that was a relatively good year for IB. How is this worth tangible book with an after tax ROE of 7% maybe? Look at OPE, MS and GS - they are all doing way better than that and most of them trade at tangible book or below (GS, OPE). The IB Bank needs to be restructured and drastically shrunk into a more profitable core (if such a thing even exists for JEF) , but they are doing just the opposite, so I think the bad capital allocation will continue to destroy value.

I didn’t think of this angle and sold my few shares recently. Worked out OK. I keep this on my watch list , as I think it’s a secular growth play.

I don’t think that saving on CEO comp is the desire here, but paying a huge salary and signup bonus would be bad optics and probably lead to another round of bashing. WFC may not be able to get the CEO they want with the resume they are looking (which minimizes the reputational risk for the board in charge of search) for because of the above. Bashing a company when it’s down is a fun sport for politician or those aspiring to become one. It’s just noise though.

Sector needs more competition. At least they should block these guys from future acquisitions and they should probably encourage bids from smaller competitors. I think they have all the tools they need to get this done, they just need to execute on this. The purchasing managers of the army/navy/air force often don’t exercise their power, because they are looking at a 2nd career Job in the same industry. It’s a clubby business.

I looked at this and bought a few shares. I agree that the midstream operation should be worth more than $377M, the gas cryogenic plant alone should be worth more. It is also favorable that management aggressively manages capital with asset sales and buybacks. I think most E&P give a hoot about Pv10 valued unless management validated them by either generating FCF or monetize them when the discrepancy is too large. We will see how his goes, but I like the setup.

I would argue that ADS right now is recognized by Mr Market correctly. Mr Market has stripped off the premium from phony cash earnings and values the company based on GAAP earnings, just like its peers.

The results from the Jeffrey Investment banking business are subpar. I think last year, they made $410M pre tax with $6.5B stated book value. Why should a business earning 6.3% ore tax on their equity be worth book? This business needs to be restructured and shrunk to size and perhaps liquidated, if that’s even possible.

I agree ODFL is best in class. I have had positions in them in the past. WERN is on my list of companies I was looking into. Did you have an opinion on KNX? Or is it simple WERN is the cheapest so no others are worth looking at? It’s always worth looking at all the competitors, so I was just throwing out a few tickets of companies I know out their. I have trouble seeing US trucking as a very attractive sector right now. As you know, I owned a slug of FDX, but bailed due to cash flow concerns. The AMZN Damocles sword should be underestimated either, but they may be a larger threat for the brokers (CHRW).

Not my idea, but on another board a smart poster mentioned one thing that makes sense to me: it is interesting that the headquarters of the combined company will move to MA, despite RTN being the junior company, in terms of size. I believe UTX may consider moving out of CT (a basket case in terms of taxes) to MA as a very nice side benefit. Perhaps the same applies to management The head honchos May just like the idea of moving to the greater Boston area from Hartford, CT. I am sure they will get a nice relocation package.

The problem is they JEF is a terrible business and they keep building it up, even though it clearly isn’t earning its cost of capital. What good does it do to slowly liquidate non-core assets, when the core operation isn’t a good business. The $25 value/sharemay be correct, but I think it is going to still be $25 in 5 years.

Book value is meaningless, since most of it is goodwill from acquisitions. I follow ODFL (best in class, owner operator) and Werner (WERN), very conservatively managed trucker who grows organically and distributes special dividends from time to time.. I have no position. Right now WERN seems to me the cheapest and it isn’t a bad outfit. I do wonder about the impact of Uber freight, Amazon and FDX/UPS gaining market share.

Just buy GS, if you want to have a stake in an investment bank. Better ROI and trading below tangible book. Why bother with these also rund that arn‘t even close to earning their cost of capital in a great economic environment? What do you think will happen, if the economy turns down?

Yes, the concentration in the defense sector is quite concerning. Also, the sector isn’t exactly hurting right now.

“We believe high-growth companies have to double in size every five years, and so our plan always keeps us on that path,” Miller says. When a CEO of a financial company says that, it’s not very encouraging to me. She said the same thing 4 years ago. https://www.columbusceo.com/content/stories/2015/12/qampa-melisa-miller-of-alliance-data-card-services.html

I agree with above. A 30 year time horizon is too fear of a stretch. I believe Buffet uses 10 year time horizons for a selected few businesses that he believes he understands well, based on the writings in the book “The Warren Buffet way”. I think we can all do very very well just looking ahead 5 years and reiterating as time goes by.

Thanks, very helpful. I have followed CNQ and I believe, they are one of the better operators and capital allocators.

I hope everyone has fun tonight. I will be going to the shareholders meeting tomorrow morning to make sure that the capital of my one share gets properly allocated.

I think the price is going much higher. They're going to have excellent subscription numbers for the Disney+ channel. More Blockbuster movies on the way including Toy Story 4, Star Wars Episode 9, Frozen 2, and Lion King. Possibly true. I am mostly worried about ESPN.

Thats how a beach house in St John becomes camping trip.

Sold DIS. I think it is fully valued.

Looks sort of cheap ( ~ $4/ share in earnings ) but top line has been shrinking ( I prefer waist line shrinking ;D) and there is ~$1B or3x EBITDA in debt. Looks a bit toxic to me.