Spekulatius

It seems that we have an more do of an issue with quality than with crude supply. i‘d rather own those companies that benefit from oversupply or equalizers of supply like pipeline companies, refineries, midstream or chemicals companies (processing Ethan and NG) than E&P‘s. Typically, these companies show better cash flows and pay nice dividends, unlike E&P’s that generally don’t generate FCF.

It’s a new game that VC wait until the valuations creep into the ten billion $ range before the IPO. With an $80B valuation, it is just not possible any more to get 10 bagger, so the upside probability is gone. What is somewhat surprising is that they even get turds like Uber and Lyft IPo‘d at this valuation. Some folks at home ask me about this new breed of IPO‘s and I typically tell them to just by Google instead and pay ~20x earnings ex cash. But then on the other hand, it’s good to keep an open mind. I have missed tech stocks before. i owned Microsoft when it was in the mid twenties, but sold when it hit 40‘s and wasn’t deep value any more so,I lost out on quite a few gains. Maybe Uber‘s business model will work out, but my guess is that one one has a chance to get in at a way risk reward than what is currently available.

Ubers core platform grew 10% YoY, so it looks like we are plateauing here. I guess Uber eats is needed to keep the growth story alive, because otherwise, nobody is going to pay much for a platform that grows 10% YoY and loses 33% of their revenues. Core platform is still losing a lot of Money and now they are starting new business that is bound to loose a growing amount of money. The whole thing looks pretty desperate to me.

Transcript of Breen‘s presentation of the new DuPont Company. Some really interesting tidbits about Dupont’s end markets (automotive, cell phones), capital allocation, management incentives, benchmarking etc. Pretty low key and makes a lot of sense to me. was with him on some of the Tyco spinoffs and I like this setup even better. I added to CVTA WI and even bought a first of DOW today. I pen already DWDP, which will disintegrate into CVTA and DD next week. I like them all. http://s21.q4cdn.com/813101928/files/doc_downloads/transcript/2019/Bernstein-Conference-Transcript.pdf

Several value funds own this and some think it’s a great business. I don’t like the higjly levered balance sheet. Their properties generate $406M in NOI and supposedly have a NAV of $7.7B, implying a 5.2% cap rate. Seems pretty rich, but a lot of it is residential RE, which is richly valued right now. $5B in net debt or 12x NOI make me cringe. They do have a RE asset management business that generates cash flow, but still. based on above posts, I assume that management is incentivized to grown the company fast and not so much to reduce debt. I can get comfortable that this is a safe stock too hold due to its leverage. Credit rating is BB+.

I need to cycle back into refineries again. I bailed from MOC (at a small profit) and like Buffets former pick of PSX better, as it is better run (imo) with better capital allocation. It’s not cheap enough me to buy though, so I got some DOW instead. CLF‘s dividend raise is supposedly trying to bolster confidence, but the yield is too small to matter and won’t support the stock, imo.

Bought a starter in WAB, DOW, a bit more CVTA WI, GOOG and DXC today. Fun times.

This is a good summary, and at $182 GS looks good here. I added today. I sold my position build last year, but I agree, at these levels, it starts to become interesting again. I do think it is quite interesting in terms of watching how they go from Wall Street to Main Street and consumers (Marcus etc) in their business model, to make their earnings more predictable. They are still early in this transformation, but if this gains traction, then the GS in 10 years will look liquide a bit differently than it does look today.

Buffet buying is a much stronger factor than Buffet selling. For once, it indicates his assessment they it’s is a quality company within its industry. He is usually correct about this, especially about industries he knows a lot about and banking is one of them. Anyways, I typically use buys from other investors as a starting point for research, not as a decision factor.

Seems like a good strategy. You could add IBM or HPE if you wanted to diversify away from the retail and healthcare sectors. Both Dow and DuPont are probably worth their own allocation. Dow is a bit different than the others, since it is more cyclical. Not sure that Newell fits as a stalwart. But if you want to add some ugly, you could add GE to the list. I personally would avoid NWL and KHC, as I think they got structural issues and a lot of debt. I was wrong on WBA before, but this business has really become cheap. It is possible they structural issues will become more evident, but it seems like a lot has been priced in. I would rather deal with business that have some cyclicality like Dow, CVTA or DD ( the DuPont fragment) than business that have a high chance of becoming melting ice cubes. The market has a whole looks certainly expensive, but there are a lot of sectors where stocks have become very cheap. Take for example the packaging industry (containerboard), steel/ scrap stocks, virtually the entire chemical sector, automobile, banks, real estate, refining and many many more. looks like a very similar setup than Y2000 to me. I have run into several groups of people who are casual investors (some of which are the stereotypical Robinhood Type) and none of them has a clue about value. They don’t know how much the companies they buy stocks in earn, competition, valuation metrics and quite frankly even if you mention it, they don’t think it matters. They are buying basically a story that they heard about in TV or from colleagues (Beyondmeat is a favorite right now) and basically trade newsflow or in a roundabout way momentum. The other part of folks don’t deal with stocks at all and just buy index funds mechanically. The way I see it, it explain pretty much why value right now is in the tank and it probably takes a pretty cataclysmic event to change, I envision an environment similar to the bear market in 2001. Even that isn’t certain, it is quite conceivable that in a bear market, value continues to underperform.

The Trust Banks like BK and STT trade at 52week lows, WFC is just a hair from it. Distributors MSM, GWW Pharma Distribution: MCK, CAH, ABC Pharma : BIIB, BMY, GILD Chemicals ( besides DWDP): Dow, BASFY, EMN Defense: BAESY I think most of the above are actually quality business.

One typical problem though - they made high returns with relatively small sums of capital and lousy returns with large sums. BUD and KHC are both turds.

Yes, but who invests for survival? If he wins it will take bear market bottom multiples to tempt me, and only in sectors where he doesn't plan expropriations or interventions. The only good thing that can be said for Corbyn is his policies likely lead to elevated inflation so that Britain has a chance of emerging from the inevitable crisis with less debt. Mind you British politics is fragmenting, and I think the process might accelerate. That may make it less likely that a Corbyn government wins power. The logical consequence of electing a man like Corbyn your leader in a centrist country is that the party gets marginalised. That takes time to play out but it may have started. The same may happen to the Tories if Johnson is the new leader. I wonder if we are heading for a three-bloc parliament: 1) BoJo Tories + Brexit Party (hard Brexit, economically right) 2) Lib Dems + Change UK (hard Remain, economically centrist) 3) Labour (confused on Brexit, nutjob left). The biggest bloc could well be (1), but it probably won't have a majority. 2+3 would likely govern in coalition, but that dilutes Corbyn's idiocy. Many commentators here are in despair. Personally I think it's fascinating and actually quite uplifting to watch a democracy reshaping itself as the will of its people shifts. It looks chaotic in close focus, but I think in time the big picture will look clearer. The big parties need to adapt or be replaced, and it will be interesting to see which happens. Britain is welcome to nationalize BCS at book value. ;D. I don’t really understand what’s going on in Britain, but fragmentation is going on everywhere in Europe. In Germany for examples, the Green Party is now strong than the traditions large parties like SPD ( left leaning) or CDU (conservative) and instead of 3 parties there are now 5 or six to content with. This means that anything in politics will be watered down by having multiple stakeholders and governments will become less stable and will be rearranged more often.

Distance and time a huge deterrents. It is quite likely that most advanced civilizations wipe themselves out, or that life disappears due to naturally occurring cosmic events. I believe at some point the earth was at risk to permanents disappear under a huge I ice cap, which could have destroyed life on earth or at least stalled the development for a huge cosmic timespan. If an alien civilization for example come around earth in a 100M years (a comparatively short timespan in the cosmic picture) are we still around here on earth? We might have destroyed ourself, moved on somewhere else, or our civilization became so advanced that we have moved on or are in a state that is unrecognizable to an outside civilization.

Same with Tesla. Tesla’s Model 3 introduction and sales provided a huge boost to SSS for some malls where Tesla had a presence. Of course now Tesla (which is on shaky financial ground anyways) wants to reduce their mall presence and go online as well, which represents a future headwinds for these malls. Malls are fighting back and they are putting gyms, movie theaters and restaurants etc in mall space, but those are all discretionary spending categories too and might get hit hard in a recession. As far as MAC’ redevelopment yields are concerned, the 6.5-8% yields are unlevered, which means that levered equity ROI may be 10% or so, but they imo isn’t that great either. I had small holdings of Retail Reits in the past, but sold them at somewhat opportune times. I believe there are easier ways to make money in real estate stocks.

I really don’t care whether Buffet buys are sells WFC stock. He has bought and sold many stocks, some of which performed well or poorly after he bought and sold. Buffets buying a stock just means that there is something special about the company , that it’s cheap and that it’s not a fraud. Other than that it’s my opinion that piggy-packing on other investors never works, not even with Buffet.

I believe this to be correct. The QE in Europe has driven LT interest rate to zero and worse, which makes the 2.x% in the US a great deal now, comparatively speaking.

Occam‘s razor applies here - you don’t need a god or aliens to explain how life came to earth , you shouldn’t use them as your hypothesis. No, we can’t exclude it, nor do we have to. Anyone can believe what he wants- some things can be proven, some just plausibly explained, in the absence of hard evidence, the simplest solution should be the preferred one.

The technical knowledge will walk out the door before they go bankrupt. It’s pretty easy for engineers in the Bay Area to find another job.

That alone would justify the merger. LOL FCAU does pretty good in the US, but was never able to make Fiat reasonably profitable. I believe rationalization with Renault should be able to do the trick. Fiat is still a millstone for FCAU and the merger with Renault should be able to address this issue.

We know how life got started. At some point our planet had an atmosphere with plenty of organic and fairly little free Oxygen and plenty of lightning storms. It has been shown in lab experiments that this leads to the formation of fairly complex organic molecules which started to a accumulate. At some point, a molecule was created that could replicate itself (the Ur DNS) and things got started from there. Surely, the creating of a molecule (or several different molecules) that could replicate was a huge milestone they took many many rolls of a dice so to speak. It also recall, that we had a laboratory the size of planet earth and hundred of millions of years to the disposal. It is likely that something eventually will evolve. Once something works, evolution goes to work. We don’t know why the big bank happened, but it is sort of an irrelevant question. Before the Big Bang happened, there was no space/ matter or even time. Even the laws of physics as we currently know them didn’t exist. Since time didn’t exist, there is no beginning or end either. We do not know how likely other life is, but we do know that planets like our own seem to be plenty full in the universe, as are the elements they our life is build upon. It is also possible that life may develop based on other chemistries (Silicon can create macromolecules, but the bonds are not as stable than carbo, so this would likely develop at lower temperature and probably not water based. I am not an expert on this but the driving force of evolution (whatever works survives and multiplies, whatever doesn’t, ceases to exist) can lead to the evolution of complex, self organizing structures that are able to duplicate. That’s what life is.

I wonder how cyclical some highly valued tech business will be. Uber/Lyft/ Ubereats/ Airbnb is all discretionary spending. Pay for Dropbox (insert your favorite subscription service here ). - replace with a similar free offering. SQ - dependent on restaurant and small business which are highly vulnerable in a recession. GOOG and FB are all about advertising which moves with GNP. Then the whole tech startup economy - Wework- short term leases with long term lease liabilities. The list goes on.... A lot of things that are taken for grant in a long upturn really isn’t.

GE didn’t do much better. KMI fell from $35 to $15. When you look at banks, many of which were considered stalwarts and dividend stocks before the financial crisis, you will find plenty of them who did worse.

Good move. I think HVAC was bought for roughly $2M and I guess the royalty stream is probably going to bring in $0.5-0.7M (a cumulative of 0.275x revenues, but those have been dropping rapidly), so I estimate a $1.3M-1.5M writeoff. Still better than nothing and the company needs to cash.

Yep, these buybacks from SLB, HAL and others were quite nonsensical. I suspect is more benefiting management to push up stock prices on the top of a cycle, so they can sell at even better prices than would’ve possible without buybacks, then to buy back stock when it actually makes sense forma perspective of adding intrinsic value to shares. I recall SLB having an great balance sheet with net cash in the 80‘s and 90‘s - then they spent the dough on low margin acquisitions ( pressure pumping and similar) and stock buybacks and now this company looks like a low quality operation with a matching balance sheet. I will guess the will take some dividend investors with it when they finally cut, because it does not look like they cannot afford to pay they $2/ share much longer.