Spekulatius

I agree Ackman does make a lot of waves. His "Agenda" of course is to get the AGN - VRX deal done, if the deal falls apart, he will loose a lot of money, at least on paper. My personal opinion is that he is a crook. Just read up on Gotham Golf and the Union Real estate estate merger attemp, where he tried to save his failed Golf course company with other peoples money basically. This and other things lead to him closing Gotham Partners. He does good research and likes to make big bets. He is either spectaculary right or very wrong.

I am not sure that the increases in cost reverse themselves either: FullFillment: Prime and other initiatives lead to smaller order size, which will have higher fullfillment costs. Unless they are willing to give up on this business, this will likely stay high and probably rise more. Some of their service/cloud business probably has higher gross margins but also higher expenses than the core retail business, I think the change in AMZN business mix very likely is responsible for the changes in the income statement ratios. I see no evidence that anything reverts back to where it was a couple if years ago.

I would discount Ackman, because he got a sweetheart deal buying his AGN stock options for a huge and instant return. Of course, he would love to do more deals like that, who wouldn't! Ackman has been very wrong before, just read about his leveraged Target hedge fund and of course HLF. He also has been spectacularly right of course. In any case, I would never like to depend on somebody else's homework, in particular if they have their own Agenda.

ALLY has negligible exposure to the subprime market and that is where the money is made right noe. ALLY NIM is only ~2.5%. FWIW, I like ALLY and have been building the position. It's cheap based on tangible book, but the main thing is that earnings are bound to improve, because they replace high cost unsecured debt with ~5.6% interest rates, with cheap deposits costing ~1.2% currently. They still have almost 30B$ in unsecured debt. Since they are growing their deposit base nicely, it is clear that replace this high cost debt with cheap deposits will improve ALLY's bottom line. This story will become even better, if interest rates go up moderately. In a way, one could regard this as a nicely growing and low cost internet bank (with excellent customer service reputation) that just choose to put most of their assets into car loans. On top of that, we have headwinds from the resolution of the mortgage business (currently in liquidation and breakeven, but still with ~8B$ in assets) and headwinds from cost reduction efforts (controllable expenses trending down). I think this is a nice medium term (12-18month) balance sheet restructuring story and while I don't know how long it's going to take, i can easily see north if 3$/share in earnings.

This is true, but is AMZN the right vehicle to play this trend. There are already companies that benefit from this trend and are very very profitable. GOOG to find stuff online, MA and V to pay for stuff online and FDX and UPS to ship it. All these stocks have GAAP earnings, good growth and a decent valuation even by traditional metrics.

I don't get is. Why is the real cash that they spent on prime members or on HBO considered an investment by some? It's money that goes out the door to deliver a certain service. There is nothing tangible left after that spending, or do you believe that spending let's say 100M$ in cash for HBO creates higher profits in the future? I agree it will entice members to sign up for the service as long as they offer it, but if they drop the service, the same members that like it for their very reason, would be likely to drop amazon prime. If anything, offering something like HBO to Amazon prime members creates a liability to offer it in the future. I think the beneficiary of deal is HBO which likely get's a 100M$/year annuity.

Yes, LUK for me is an investment bank with some mostly mediocre business attached to it, trading at 1.1 x tangible book. That is roughly the same multiple than GS is trading at, but GS has a lower PE and probably is a better franchise than Jeffries. I own a little GS and I think it is the better deal relative to LUK.

Yes, Hanover Foods is in a very competitive business. I compare them to SENEA (canned food etc) which has gross margins of ~10% (a little more in a food year and less in a bad one) and very lumpy earnings. SENEA also trades below tangible book. Economies of scale in these business appear somewhat elusive.

AMZN does not own much real estate but they lease a lot. if I remember correctly, they lease about 94M sqft of real estate. I think that WMT has ~10x AMZN real estate (much of it is fully owned, at least in the US) but they also have 5x AMZN sales. AMZN business is not really that capital light, if you include all the leased hard assets. In fact, I think WMT owning their real estate at a low average cost basis is a strong advantage, at least relative to leasing it.

It is not the amount of looting that matters… it is the looting per se… because it tells you a lot about the people you were dealing with in Tyco. From that everything else follows. The same thing is true for leverage: I agree that leverage in the wrong hands might be extremely dangerous… in the right hands, instead, it might turn out to be a useful tool. When you invest in a business for the long term, you must judge the people you are partnering with, their motives and skills. There is no getting around this simple truth. Therefore, do you think Mr. Pearson is a good and reliable entrepreneur or you basically don’t trust him? Gio The discovery of looting started Tyco's downward spiral, but the looting itself was not substantial enough to endanger the company, it was the lack of trust due yo all these discoveries. Pearson is no Kozlowski and I don't think he would loot VRX. I think VRX GAAP earnings and balance sheet is correct, I just believe that the many adjustments that VRX does and their interpretation of economic earnings is misleading, not because I can fingerpoint , where they are wrong, but because they are not plausible to me. So, in that, I don't trust him. It looks like VRX bumped up their bid for Allergan quite a bit and I think they will get a deal done. I think they should offer Allergan's shareholder a choice of cash or stock, instead of the cash heavy deal - that would probably seal the deal. Those that like VRX, can take stock, those that don't, take the the cash. Seems simple to me and that is what Buffet has done buying Burlington Northern, but I think VRX may not be able to do that, because debt load of the combined company could be too high, in case most Allergan shareholders take the cash.

I think the Jeffries reverse takeover made the stock less interesting. I owned some LUK but sold when the Jeffries merger was annouced. National Beef did not work out. I don't know how to value Lake Charles and the Oregon LNG terminal and my concern was and still is, that these could become huge money pits, because I think that LUK does not have the expertise to really manage such huge projects. I know the idea is to partner but even though, I still think they are risky and current NPV us close to zero. If these projects come to pass with good economics, they could be a gamechanger.

correct, tyco was looted. tyco became tyco international $20b te connectivity $25b adt $3.5b covidien $33b Tyco stock went from more than 100$ to 7$ at the low. The problem was not the looting persay, which may have been to the order of 200M$ or so, which is not significant for a company with 35B$ in revenue. The problem was that Tyco had Billion $ in charges, some where for Goodwill (noncash), other were real restatements for accounting misrepresentations. The accounting irregularities caused a chain reaction where TYCO lost access to the commercial paper market and had difficulty accessing credit markets (ratings tumbled too of course) and this was very precarious for the then TYC owned CIT sub. Many feared bankruptcy but the new management stabilized the company and later spun off the various parts (CIT, COV, TEL, TYC, ADT etc). FWIW, TYC was considered heavily indebted then, but their debt load was only ~1/3 of their revenues or ~2.5 x EBITDA back then - compared to VRX now this looks extremely conservative.

Maybe that works for you guys: https://www.proxydocs.com/0/000/776/544/hanover_foods_corp._fs.pdf

I have mentioned the analogy of VRX with Tyco a while ago, but it has nothing to do with the CEO's lifestyle. 1) Both were rollups and made acquisitions at a breakneck and accelerating speed. 2) Both TYC and VRX had a heavy debt load as they used partly cash to do acquisitions 3) Both had heavy and repeating adjustments to GAAP and convinced many that they Non-GAAP numbers based on "cash earnings" are the correct ones. It later became evident that TYco used merger related expenses ad a cookie jar to reduce Opex expenses, which made the non-GAAP earnings appear much better than they were. 4) Most strikingly (for me) is the fact that both Tyco and VRX dramatically reduced R&D spent. I vividly remembered Kozlowski stating that he could "buy R&D" or developed products, "when he needed them" (or something very similar). Later, when the medical business from Tyco was spun off as COV , their R&D spent was a mere 2.5% of revenues, which is totally unsustainable, imo. You could see that the lifeblood was sucked out of this company, even though they had many products in stable markets and it took management a while, to get the company going again. Now they have R&D spent of 5% of their revenues and do fine. None of the above means that VRX= Tyco, but for those that have been around, there are just a lot of similarities between the two companies.

S&P credit rating is rating the security of the bonds, not the upside for the equity. Those two a very different things. TSLA has significant risk in terms of execution and a substantial debt load (~2B$ although they have an equally substantial cash hoard). One single thing (Gigafactory) going wrong could derail this thing. While they have shown strong execution in the past let's not forget that they are still loosing money. Something like GM may not have TSLA growth and upside with the equity, but I would rather own GM bonds than TSLA bonds just to name one example.

What is insensible about it? I did not know that VRX relies on heavy price increases to keep revenues even. This does not look sustainable to me. I also did not know that moving the IP into offshore tax havens had a significant upfront cost, Of course VRX can book this as a one off charge, but if it indeed takes a decade to get even in terms if cash flow it seems like the tax deal is not that great. Many other good points (regarding R&D budget versus forecast, feasibility to cut 74% of the SG&A etc ). They also brought up the Tyco rollup analogy that I mentioned before in this thread. It will be interesting to see VRX rebuttal.

There was no recession in 98 in Europe or the US per say, but there was a severe and short lived bear market in many tech stocks. Of course there was a severe bear market with asian stocks and even quality companies could be bought for a song. This was similar to 2010 (Europe crisis) or 2011/2012 (Japan, Fukushima). Bottom line is that there are buying opportunities at least every 5 years in major stock markets.

Adidas' market cap is ~22B$ vs UA's ~10B$, so even if UA catches up to them, it's not going to get you far. I think it is pretty far fetched to find a stock that makes you rich based on buy and hold right now, given, extended valuations and a pretty extended economic cycle (5 years into a recovery). Once we head into a recession and the market turns down 30% or more and some baby's do get thrown out with the bathwater, things will get easier. Yes I get excited just thinking of that day..... someone once said, you make all your money in the bear market, you just dont realize it at the time. HOWEVER, we can spend our lives waiting for the bear, Warren Buffett has said if he was starting over with 1 million he'd be fully invested..... Bear markets in average occur every five years or so. I have seen 1982, 1987, 1990, 1998, 2002, 2008,2010 and there were some pretty good opportunities in between. I have experienced all the above (started out in 1982 with 600 DM then) The key is not to lose too much going into the bear markets. Guy Spiers Aquamarin (just to name one example) lost ~47% in 2008, this is just too much. I lost a great deal too in 2008, but not 47%. So getting more defensive towards the end of a bull market cycle is key. Problem with value investing is that many value investors are starting to stretch at the end of the cycle and growth stocks simply become unaffordable. Just take SAM at 20x EBITDA and 30x earnings . It just does not make any sense to own these things from a risk/reward perspective, since they can loose 50% in a bear market, even if fundamentals stay intact and even more if they don't. I am not claiming to have a solution to this as there are issues with market timing and opportunity cost, but I do like to keep a healthy cash buffer around in times like this (20%, preferably more)

They could fill them easily but before that, they need to go down 5-10x in price.

Adidas' market cap is ~22B$ vs UA's ~10B$, so even if UA catches up to them, it's not going to get you far. I think it is pretty far fetched to find a stock that makes you rich based on buy and hold right now, given, extended valuations and a pretty extended economic cycle (5 years into a recovery). Once we head into a recession and the market turns down 30% or more and some baby's do get thrown out with the bathwater, things will get easier.

I just tried it, google then hit images. That is odd. What does google think BH stands for? Big Hooters? in dutch it stands for bra BH=Buestenhalter (german=Bra)

When did you receive the report? I received it 5/21 via email (scanned paper docs) from Interactive brokers.

Very good presentation. The improving demographics (more younger customers) are quite impressive. China has a huge potential as an ecommerce market - I did not even know that they are in there (via a 49% partnership with CNR).

Earnings came out, but they weren't good. Sales were down a few %, but more importantly earnings were down to ~6.5M$ for the March quarter (down from 10.2M$ last year). ON the positive side, the balance sheet looks better because inventory was reduced. It's still a cheap stock based on book value and to a somewhat lesser extend earnings, but the business does not seem to go anywhere and that is putting things kindly.

Where is the basis for these numbers. I feel they are just made up. AMZN itself states the FCF as ~1.5B$ and even that includes 1.2B$ in proceeds from stock based compensation. While I agree that AMZN cash flow would be higher in a steady state, you cannot do better than adding back the complete Capex, which is 3.8B$ during the last 12 month, more realistically add back 1/2 that. So 1.5B$ nominal FCF-1.2B$ ( stock expense) +0.5x 3.8B$=2.3B$ in steady state cash flow. Not a great deal for a 140B$ market cap company, imo.