Spekulatius

EUK3.F (Eurokai). Shipping berth/ port operator operating harbors in Germany, Italy and a few other countries. Very solid balance sheet, cheap and illiquid, the way I like it. IBKR - bought a few shares in today’s selloff. Might just be trade. I continue whittling down my pipeline holdings as they march towards fair value.

The US' much lower population density than South Korea/Japan/UK/Germany/France/etc almost certainly plays a role. http://statisticstimes.com/demographics/countries-by-population-density.php IMO it's more useful to talk about local monopolies (ala regulated utilities) than "giant duopolies" when discussing US cable industry. Cable companies aren't generally directly competing with each other like Coke and Pepsi are. The anecdotal evidence seems to suggest that the lack of competition is in major population centers like NYC. Again, I lived in 3 location during the last few years and in each suburban location there were 2-3 competitors for high speed Internet connection. I can also attest that there are rural locations in Germany for example that are still underserved. I believe the reason for the divergence in the US vs Europe is that each European country had a former state Telecom covering 100% of the country and pretty much any service (fixed phone, wireless, internet) for a fairly low price and its difficult to compete against those. The US had a patchwork of local telecoms after the ATT breakup.

The revenues # are driven by their e-commerce business. It was mostly international growth slowing down, while NA still grew around 25% YOY. AWS wasn’t as big of a revenue driver back than, due to smaller size. Revenue growth in NA has to slowed down, due to the Whole Foods acquistition adding ~$16B in 2017. I doubt that this business by itself grows much, but I do think it’s synergistic. On another note, AMZN made close to $40 in FCF/share in 2018, so it trades around a 2.5% FCF yield. It’s not cheap by any means, but not outrageously valued either. Going forward, they probably really need to dominate large countries in terms of e-commerce to keep growing faster than ~15%.

I believe this is correct. Same with cable/ satellite TV and wireless/ smartphone though. That’s why LILA and LBTYA aren’t doing as well than their US counterparts. I think even Malone missed this when he went global.

The revenues # are driven by their e-commerce business. It was mostly international growth slowing down, while NAnstill grew around 25% YOY. AWS wasn’t as big of anrevenue driver back than, due to smaller size. Revenue growth in NA has to slowed down, due to the Whole Foods acquistition adding ~$16B in 2017. I doubt that this business by itself grows much, but I do think it’s synergistic. On another note, AMZN made close to $40 in FCF/share in 2018, so it trades around a 2.5% FCF yield. It’s not cheap by any means, but not outrageously valued either. Going forward, they probably really need to dominate large countries in terms of e-commerce to keep growing faster than ~15%.

It really needs a “Brexi dump”, hopefully neglecting that the bulk of its business is in the US.

How can they make 12% unlevered returns. Their cap rate, based on invested capital looks to be around 6.66% (~$400M NOI / $6000M invested capital ) and lease escalation are < 2% annual. That’s gets at most an 8.5% total return, neglecting certain costs (renovations etc.)

Hmm, what is a 15% grower worth, 30x earnings maybe, or 20x EBITDA at most?

Interesting stock. looks like net debt is increasing and EBITDA is falling. It’s supposed to be the other way around. I am always surprised to see companies raising their debt in USD and having their revenues in emerging market currencies (BRL etc). I know that borrowing in USD is cheaper, but it’s also risky, if the local currency goes down against the USD making credit metrics worse. Why don’t these companies just pay more interest in local currencies and forget about gambling with the exchange rate? I guess these currencies shifts causing losses every couple of years can be discounted as extraordinary events losses and it’s all good?

Cause he can’t take them where he will be going eventually.

^ Sounds great. I will be guy with a green bag looking for the bald guy with a beard. ;D

^ I agree, it’s like the Wild West- Grab the Land first, then figure out what to do with it. That’s why they build data centers to enable good connectivity in Asia for example. They know already that the eyeballs can be monetized, based on experience in NA and Europe.

Liberty Global wouldn’t make sense, sine there wouldn’t be any synergies. Other than Verizon, I don’t see many natural merger partners. I don’t think that ATT can handle another acquisition and Comcast would not pass antitrust. I don’t even think that a merger with Verizon would pass antitrust. Maybe T-Mobile/ Sprint in a few years based on convergence of cable and wireless?

Looks like stock is trending upwards, despite what looks like horrible results: https://finance.yahoo.com/news/general-electric-swings-small-profit-113647216.html Expectations must be really low.

I believe the thesis that TSLA adds a Q to it’s ticket within a short period of time is broken, so in that sense, the short thesis is broken. I would touch the stock with a ten foot pole long however. I agree that the employee turnover is worrisome. For me, puts are simply too expensive to make a play here.

In your Coke comparison, when coke started going into foreign markets, wouldn't most of those have shown extraordinary growth, in percentage terms, versus the (mature) US market? As you say, the entire crux here is the foreign revenue potential; under normal circumstnaces, using US ARPU as a baseline, and income-adjusting it for other geographies would make the most intuitive sense to me. But we are being reminded every single quarter that there is something unusual/unique about the US market. We just aren't being told explicitly what it is. My guess is in US people have more money to spend + they actually spend it. As other countries use Facebook to get information/entertainment but don't actually willing to spend much money. In Asia, TV and even print etc may still work better at this point. I don’t think small business have the sophistication to do ad campaigns in FB or Google yet. I don’t really know. Europe does not have the same penetration with respect of social media. Just as an anecdote , most of my friends from Europe aren’t on FB. I was invited in a pretty active Whatsup group of school friends recently and joined. I still haven’t seen any ad there. Also on another note, if I recall the CC correctly, the price per ad in NA was actually down this quarter a little, so the increased revenue must have come from more impressions.

Malone’s XM Sirius now ventures into the streaming music space by taking out Pandora: https://finance.yahoo.com/news/pandora-stockholders-approve-transaction-siriusxm-210500114.html

FB’s ARPU was ~$35/quarter in NA, ~$11 in Europe and ~$3 in Asia. Think about the potential , even if you adjust for income differences! This is better than buying KO in the late eighties , when their NA market was basically getting saturated but Growth in emerging markets was just getting started.

It’s not going broke any time soon.

T has a storied history of incinerating capital with acquisitions - Direct TV being one example. While I agree they got Warner at a good price, I am not sure they are good at running it. I would rather own CMCSA at a similar valuation (EBITDA/ EV) but with a better business (cable vs wireless) and better management. In fact I believe right now CMCSA is a much better buy than T.

I have yet to see my first ad from a venture capital / upstart company. I typically get ads from subscription services (NYT) or credit card companies etc. I guess it depends what they figure you. Of course things like the data scandal matters to some extend, but if the coreusers don’t care much, than it’s just a “Salad Oil scandal”, regardless of what the WSJ or Engadget writes. FB has grown revenue by 39% YoY and trades at the same multiple than MSFT, which is growing in low teens. While MSFT is safer due to diversified revenue streams, such a huge valuation gap simply does not make much sense.

^ “ Salad oil scandal”, imo. You couldn’t tell all these negative headlines, if you just look at the business numbers. Customer/ users don’t care - user numbers are up and revenues are up 30% YoY. That’s what matters.

Yes you can, as long as the shareholders you screwed and the new shareholders are different. It happens all the time.

Verizon, ATT, CHTR and CMCSA have their own fiber network that is probably going closer to the homes than Zayo. I think providing bandwidth, which is what Zayo does, is a commodity business ( and has been for a long time) and I don’t see how a company can make excessive returns in it. Nate is correct, the cost of adding more bandwidth is with the equipment, not with the fiber. When fiber is laid down, typically multiple strands are laid down for future capacity or reduncy, because the incremental cost is low. Then there is the choice if additional capacity is refer to either multiplex on the same strand or light the dark unused strands, based on what is cheaper.

Cant believe how many times i see mgmt's aggressively buy in their stock at higher valuations (where the price is somewhat close to intrinsic value) and then slow down when the stock is obviously cheap. Just off the top of my head Appl, Ads, and Aal are guilty this year. As are the master capital allocators at most major banks and specifically GS.