Spekulatius

I agree on NVR being best in class, due to their unique business model not owning any land. FWIW, decently managed home builders TOL and LEN trade around tangible book and PE‘s ~ 7x. I don’t recall them ever being that cheap, except during the financial crisis, when they were bleeding losses. We are far from that. Mr. Market hates cyclicals right now.

re AAL - trashy BB- credit 9 years into the recovery after a $10B buyback binge. Not my cup of tea.

and just a quick look shows that PAG's net income took a big jump and dont believe that 2017 represents their true earning power, i could be wrong tho. And if u look at operating income AN looks much cheaper The 2nd thing I do when I research a stock after looking at the companies financials is looking at a competitor. PAG is one I know and have followed a bit and it looks like they are also hitting on all cylinders, perhaps more so than AN: https://seekingalpha.com/article/4190591-penske-automotive-group-inc-2018-q2-results-earnings-call-slides It looks like they will make $5.3/ share this year, and an even higher number next year. This is cheaper than AN actually. PAG buys back less shares than AN, instead seems to prefer organic growth. Both AN and PAG and perhaps the whole sector is cheap. Having anything to do with cars appears to be a leper touch right now.

PPG spoked sector a little here. But that will give Axalta breathing room to increase prices too, if they haven’t already. If you look at PPG release their issues were very similar to what Axalta faced the last year or so. So that will be interesting to see if that occurs again... PPG ‚issues seem to be driven by crude prices, which are going to affect AXTA as well. Apparently, Mr Market thinks likewise - stock is down 7%.

How is AN different than PAG? It looks pretty much like the same business to me and PAG May be even cheaper. I don’t own any, but had it on my watchlist and it looks like well managed. Maybe they are both buys?

^ and if it doesn’t work, you get a GE. Apple was a more straightforward case than GM, because of their profitability and the clean balance sheet.

Failure to buy back stock doesn't look like that bad of a decision in hindsight, the stock hasn't moved in 5 years, the opportunity still exists... The bigger capital allocation miss was not acquiring FCAU when they had the chance. FCAU's market cap when Sergio did the Capital Junkie presentation was I think around $18Bn. Now it's worth 2x that and the synergies would be massive. Sergio's estimate was $5B+ per year... They laid out the case very clearly, there is so much capital waste with every OEM developing the same technologies. But GM didn't even entertain the thought because they were "busy merging with themselves." Which is code for "we have no stock so no upside if this works out and all downside if it doesn't, plus it creates extra work for us." Every day that GM does not buy Fiat and recognize these easy synergies is a complete failure of capitalism. It's an obvious move and GM can use cheap leverage. For some reason, there's no boldness from management. I miss Sergio. The $10B synergy between GM and FCAU seems exaggerated. It would be roughly 5% of the combined revenues. I also think there is a high risk that the merger wouldn’t go though.

Not sure what $6.8 Billion you are talking about. Debt is around $3.9 billion as far as I can see. You are correct. I have no idea what SEC numbers I was looking at last night. Debt is ~$3.8B and they have roughly $700M in cash. $900M in EBITDA. Still not cheap, but this makes more sense. FWIW, PPG just warned on earnings and stock looks like it will go down 10%. This does not bode well for AXTA. I probably would take a swag at PPG at $90 or lower.

^ Good comments. the way I see it, you get the free Cruise Option and a business that itself is cheap when buying GM. My sense is that Cruise has the advantage of being car company and less aloof than the GOOG folks. I think a company like Apple may actually better a bring an autonomous driving system to market than GOOG. This isn’t just a software problem. I don’t think that Waymo is even close to being worth $175B. FWIW, these LIDAR systems need fairly high spec optical/ sensor sytems. It’s will be a major challenge to bring the prices down to mass market level.

I think the HFT are the true customers of the exchanges. That may be all one needs to know.

How did these guys manage to borrow $6.8B and only pay $147M (Y2017) in interest rates? Their main loan carries a 3.75% interest rate, which I consider graciously low, considering that they are leveraged to the hilt, but how does this translate into just an apparent effective interest rate of 2.2%? I am clearly missing something, but can’t figure out quickly what it is. FWIW, stock seems to be an hedge fund hotel. Capex is very low (1/3 of depreciation) is this sustainable?

Above is true. The counter to “Outsiders thesis “ is that it suffers from survivorship bias. I don’t really disagree that GM could lever up, but I think they aren’t by far the worst, since they bought back considerable amount of stock. My thinking is that if the business makes a decent amount of money and management generally does the right things, the business should become more valuable - no heroes moves required. Sometimes, the market goes cold on certain business and it can take years. just look at DISCA ( I know it’s up recently, but it’s still a crappy stock when held for 5 years, despite copious buybacks). I personally kind of like investing in value traps where IV is higher than market cap and goes up nicely and Mr. Market doesn’t notice. If course often one is wrong one way or another, but even then, the losses are mostly opportunity cost and winner can work out very nicely. Sometimes, years of patience is required. FWIW, thr Capex in 2017 appears elevated in in prior years, Capex was $6.X, so maybe it’s and outlier? Capex should go down now that Opel is gone, even with Cruise picking up (which is probably consuming more R&D than Capex $ right now).

So i don't really know that much about these mutual conversions.... but couldn't they use the cash for an acquisition or buyback the shares once the conversion is complete? And if they never get to the second step does it really matter? I mean if they are waiting for a next generation CEO wouldn't we be waiting a while on that? Yes that is definitely possible. many thrifts are buying back stocks, but they would need to buy back like 80% of their shares after a 2nd step, just to get the bank being as overcapitlized than it is right now. I think there have been larger thrift conversion, CFFN is one example. Most are just a few hundred million in market cap and many even sub $50M

Why would the second step be an issue? Raising capital is going to be a piece of cake given second steps are usually done at $10 and at a discount to book. They could do it, but then the bank would be ridiculously overcapitalized and almost resemble a cash box, with a small bank attached. They kind of boxed themselves in buying back so many shares and still end up overcapitalized.

What I was trying to convey: that they possibly want to get rid of the HVAC business isn't odd at all. But if HVAC is a disaster then I believe our great value investing hero WEB would say just that in his shareholder letter. I'd expect the same from these guys. But maybe there are some (legal) issues with that that I am not aware of - explaining the 'stay tuned for more details' in the shareholder letter. You don‘t state that a business is a disaster before you sell it obviously, but they will probably more frank regarding their assessment, once the business is sold. BG2008 hit the nail on the head, imo.

It’s not odd. If it doesn’t get mentioned, it means it get sold off. It’s implied ,the way I read this letter. I have been in the corporate world long enough to read the tea leaves, and this seem as clear as they come.

I looked through some annual reports from car makers and I don’t really see GM Capex (~$8B on $120B on revenues) sticking out. Even thread favorite FCAU has been investing $8 B Euro with 110B revenues. Ford seems to spent less, but they are struggling more than GM. Just because some hedge fund armchair CEO think they it’s too much doesn’t make it so. Just look at their track records with Chrysler or Macy or Sears. a gleaned over this quickly, maybe there is some detailed research looking at Capex levels and how it correlated with LT performance in the industry.

I like what I see and have started building a position. I agree on management, but as long as they continue and just keep doing, what they are doing, it should work out fine. Because if management, you are buying this for less than 50c on thr $ ($33 book value). They keep buying back shares and now thr MHC owns 81%, so there is more than 4 “phantom” shares for every share one owns. Yielding 6.7% now. It looks like they could bump up the yield to 10% at current share prices and earnings levels. It’s true they the stock has done nothing during the last 4 years, but IV has increased, as has the dividend. So, this is now cheaper than ever. I can live with that if I get paid to wait.

This is an area of significant current research. Here, for example, are recent thoughts from someone researching this question: http://www.latimes.com/opinion/op-ed/la-oe-singh-food-deserts-nutritional-disparities-20180207-story.html Lazy and stupid don't appear to be the reasons. Instead, the reasons appear to be deeper and, in my view, profoundly sad. At the end of the day, I think the poor are essentially the same as everyone else -- same hopes, same dreams, same love for their children, same fallibilities -- they just have a lot less money. If I was working two minimum wage jobs while taking care of a few kids, and the only respite I could find was a bit of nicotine, maybe I'd smoke too. A lot of the poorer people have very little time to prepare meals, because they work several jobs. I got aware of this because my wife worked and heard what the techs were doing at her facility. Most of them were working two jobs, some of them 3 jobs. There are other reasons and they were undoubtedly wasting money too, but they was one factor that was evident.

To me, it always looked like SYTE had many (perhaps too many) lines of business, and now they are trimming those that don’t work out or don’t have a future long term, I don’t know if this doesn’t make sense, what does? Should Berkshire have stuck with the textile business?

My guess is that real estate will fall under the asset management and SYTE will become a mini version of BAM. I think HVAC and the Internet operations will be disposed off. I predict that there are significant write offs with HVAC. The internet ops have been shrinking, but they generated nice profits covering a lot of the overhead. it will be interesting how the financials look, after the restructuring is done. I felt that the HVAC in particular looked like a bad investment and didn’t seem to be working as envisioned.

So, what’s GM’s FCF? I get $13.9B cash flow - $8.4B = $5.5B FCF. That is with the current $48B market cap a 11.5% FCF yield. I think there are car suppliers that are actually trading at an even higher FCF yield (LEA being one example, I think they trade at a 12% + FCF yield). My thought is that it may not trade as much out of line with the rest of the companies in the same space than people think.

^ RB hit the mail on the Head, especially with respect to the saving face part. The Trump negotiation style does not lead the leaders in China to save their face, so they have no option but to fight tooth and nail, even if it’s costs them. Xi sold himself internally as a strongman and has a lot to lose if he gives in with a tail between his legs. I also think that within the above restraints, Xi is going to be rational, most likely more rational than Trump. I think the Chinese play is to wait out for a change in leadership in the US. The US holds the better cards in this conflict, but at least politically speaking, the Chinese probably have more time. I think both China and the US would need to get allies to strengthen their positions. With Trump’s style, it’s not really that easy to work with him, even if you agree with some of his goals (like IP protection, opening some of China’s closed markets). The Chinese have been opening up a little toward the Europeans, but it’s hard to read a trend here. In any case, it does not seem that the potential outfall from a protracted trade Cold War is build in the share prices in the US. It’s has been partly build in Europe and China already, but most likely not enough yet.

^ Great Posts above and I agree with everything they has been said here. As an investor , it is important to look at inefficient markets, which can allow for extraordinary profits for a long time. I think various parts of Pharma (insulin, rare disease treatments) but also alcohol and tobacco are in these buckets. I am less convinced about tobacco going forward, due to competition from smokeless cigs, but I am long CUERVO.MX in decent size. Whatever kills people ever so slowly while they are having fun, or extends live for people suffering from chronically diseases seems to work best.

I suspect that John hit the nail on the head and FB ( and GOOG ) want to keep control of the design and hence likes to do own what they use. They can at some point decide to spin this business off, but right now, they have a ton of cash and are not capital constraint, so i think it is the right decision. AMZN is capital constraints and they have been leasing warehouses and data centers,which makes sense for them. FB is currently investing a lot in Capex, especially Asia, where the market is still in its infancy (per ARPU metrics), but thrthat nwany to first mover advantage andnthe best user experience. I have personally noticed a lot more activity in FB marketplace (with craigslist still being the lead) and video.