Spekulatius

1) Sounds like the real moat is in the landlord business. If an gym operator would own the real estate, this would result in an insurmountable cost advantage over time. 2) 25M$ in maintenance capital (to pick the higher number) spread over 162 gyms is about 150k$ in maintenance Capex/year. Probably enough to replace broken gym equipment or furniture, but is that enough to keep the interior refreshed? I feels too low to me, if you assume and refresh is necessary every 10 years or so.

But remember, xazp, JPM has Chase bank under its belt. It can take market share from BAC and WFC and create a sticky deposit base that is equivalent to those guys' deposit base. I myself have been a long time BofA customer, but I am seriously considering switching everything to Chase. Because only JPM was smart enough to give me a mortgage when I needed it, and I also have a credit card with them. Things I love about JPM: -The upside of building a BAC- and WFC-like deposit base in the US -Credit card franchise that is becoming a real rival to AXP's (though it's not close looped) -Outstanding IB ops -Best corporate banking biz? -Payments system growth that can take away from C's franchise -Global ops that are much better run than C's -Strongly growing asset management biz that can rival BX, AZ, etc. -Opportunity to remake/simplify biz portfolio and re-allocate to higher return ideas (e.g., selling commodities biz) -Outstanding management JPM is the banker's bank and the type of bank that I would go to if I ran a big multinational corporation. It's just a fantastic company with outstanding management. I think it is well worth paying up a little for better management. The neat thing about JPM and BAC are that they are very similar in terms if size, balance sheet etc. JPM is just a better bank. A few example's from the latest 10-q: - JPM's NIM is 2.66% and BAC is 2.33%. JPM 's compensation expense is 2B$ lower than BAC (~8B$ vs BC ~10B$ and has been falling faster). Both have now very similar credit card earnings, but JPM's has taken quite a bit if market share. JPM's deposits were 1.2T$ vs BAC's ~1.1T$ (there may be structural differences in the deposit base, I have not checked). At least in CA, Chase has taken huge market share in deposits from BAC via the Wamu takeover and organic growth, while BAC has been licking their wounds. Morgan's bank is better than Merrill Lynch, imo. I also think that Chase wealth management is better and has grown stronger than BAC. I have been Credit card customer with both BAC and Chase and I can say that Chase is way better (offerings and customer service are better). All the above are structural advantages that have nothing to do with BAC legancy issues (which come on top of that). The 2B$ in compensation expense alone is 8B$/year in earnings power. Can BAC close that gap? They probably will close some of it, but it will take many years and most likely some of JPM's advantages will remain in place. That said, I agree it's more of a case that both JPM and BAC (and C while we are at it) are cheap. I would be inclined to buy BAC at tangible book (~13.8$ if they accounting is correct ), but I think the relative bargain is JPM more so than BAC.

I am not sure why the peak price 2 month ago is relevant. 7 month ago or so, BAC was priced at 14$ and less than a year ago, it could be bought for 12$. I think that relative to better stocks like JPM (direct comparable) and GS, BAC is currently fairly valued, if not overvalued. JPM and BAC are pretty comparable in terms if size and business mix and tangible assets and JPM's market cap is 1.3x BAC, but has structurally higher profitability, better management, not much legal issues. Now consider that JPM has a dividend and can do stock buybacks, while BAC is still battling legacy issues, I can extrapolate that in 2 years, JPM will look cheaper than BAC. I personally would not be a buyer of BAC above tangible book currently.

Just looking at the balance sheet, this business looks very undercapitalized. If credit markets shut down, or they are shut out of the credit markets due to accounting issues (not that unlikely given the nature of the business and the accrual accounting), they could go under again in a hurry. At least it looks to me that way, based on the 20x nominal leverage the sums flowing through, relative to the small amount if cash available.

Actually, it seems to me that content distribution is a better business than content generation. Running a film studio is a tough business - the actors are expensive, hard to retain, movies may flop etc. Likewise with sports, ESPN does not really create the content - the sports team and leagues create the content, although ESPN does shape it via production and commentaries. But for the most part, ESPN is just a heavily branded content distributor. The sports leagues could decide to go elsewhere, if they wanted to, so I don't think it's all that different from AMCX. However likewise, the sports teams itself are mostly a crappy business but ESPN if course is a great business. Discovery does more and more scripted stuff and has evolved more into a mainstream channel. If you look at original programming, probably the channels from SNI (Scripps - Travel and Food network come closest to being a wholly owned model). The content distribution business is the one that needs little capital, has less risk (they just cancel shows that don't work) and high ROIC. They need some control over the content and they need competency to select the right content for their audience, but I don't think there is too much benefit in owning all off their content (unless it can be produced cheaper internally). They just buy the content, mark it up, and collect an annuity stream of cable fees as well as advertising $. At least for the time being, that appears to be the sweet spot in the entertaining business.

It looks like most of the programming expense is directly running through the income statement (my guess is those things like transmission rights), but some are capitalized, as evidenced by the " programming rights " asset on the balance sheet. This asset is slowly increasing in size, so that would reduce FCF somewhat, but we are probably talking about ~ 50M$/ annual adjustment. The 111M$ number I mentioned is the operating profit (after depreciation and amortization and interest expense but before tax). Tax is in the 39M$ range, which get's you you to the net income of roughly 70M$ (and change). I looked at SNI income and cash flow statement and it looks like they do this in a similar way, so I don't think that AMCX accounting is funky. It's not dirt cheap based on present numbers, but if they continue to grow revenue and income at double digit rates, it will look very cheap in 1-2 years. This is a fairly easy to understand business, with good organic growth boosted hopefully by the recent international acquisition, which might have a long runway.

The 110M$ in FCF was generated during the last quarter, so if you annualize this (multiply by 4x) , you get a roughly 10% FCF. Thanks for pointing out my error, I correct my initial post to make it clear that these values are quarterly results.

AMC. Networks is a cable network, which has produced a string of hit series like "Mad Men", "Braking Bad" and "The Walking Dead". Financial results have followed. The recent earnings miss gives an opportunity to buy into this great business at a very reasonable price: 71M shares outstanding for ~4.1B$ market cap @58$. Add about 2.3B$ In net debt and the EV is 6.4B$. The business generates ~ 146M$ in operating income or 110M$ / quarter after interest expense, so it yields 10% yield (annualized) on the market cap (before taxes). There is pretty minimal Capex , so this is an almost 10% pretax FCF yield. The concern is obviously, that their string of hits comes to an end, which would affect their ratings and over the long run their growth. However, I think it is very likely that at team that has produced a string of successful cable series, will come up with something new. Besides that, there is upside from the newly acquired international business, that is just breaking even now. I see AMCX ,as a GAARP stock, where the upside far exceeds the downside.

The problem with the outsider approach is survivorship bias. For every Liberty Media, General Cinema etc. there are probably 5x companies that looked good for a while but then withered or imploded. Tyco for example claimed the same thing. They cut the fat (or so they claimed, but acquisition charges turned out to be real operating expenses and the charges itself were cookie jars to boost earnings) and they sure cut R & D to the bone claiming they can always acquire products cheaply. They also acquired a mountain of debt etc. Many similarities are there. For me, it's really hard to tell the difference between a successful rollup and a fraud or failing one. With respect to VRX, the jury is still out, imo and I am on the cautious sides there. VRX is not a consumer product company, but it's R&D spending is comparable to consumer stables companies. Anybody knows which percentage of VRX products are under patent protection and will eventually become generic? That is key number, and I haven't seen it in the -10K. Every dollar of revenue from patent protected product will eventually go away (except for maybe a 10-20% residual) will eventually need to be replaced. This is not true for consumer stables, where the brands are essentially annuities.

The Alfa presentation seems like a joke to me. I agree with Chalk Bag that this LT plan does not look that great - just too heavily backend loaded. Great if they can pull it off, but I think there is a 50% chance that this is going to be a zero.

If you have not, I think it would be worth checking the "same store sales" and "pro-forma" organic growth rates that are provided in the 8K filings for the earnings releases. Further, you should review the earnings call slide decks where management reviews the earnings growth rates of previous acquisitions (e.g. 2Q13). As I recall, when you put out your "ballpark numbers" you were assuming much lower EBIT margins than the VRX model. You are obviously skeptical (as are many in the industry) that running a pharma business with 20% SG&A and 3-5% R&D is a sustainable business model. I understand the skepticism and would encourage you to review the extensive disclosure that VRX management provides in the aforementioned 8K filings. I looked at the presentations, but I don't think there is much value doing so. Presentations always show the things and numbers that management want's you to see. I think there is much more value going through the 10q's and 10k with a fine comb and form your own opinion, based on the numbers and your own interpretation. Look for example in the following excerpt from VRX 10k: The important part is highlighted in bold. My take is that if you exclude everything that shrinks from you calculation, it's easy to show growth. Your take may be different. Maybe there is a good explanation to do and calculate the number the way management does, maybe not. I have a hard part deciphering this.

I guess simply by getting 4-7% in most of their products, and 11-12% in aesthetics, and 10-13% in emerging markets. Listen, you and I simply don’t know the so called Val-gan business as well as Mr. Pearson… Would you argue with that? I hope not. Therefore, is Mr. Pearson a reliable manager? I mean: does he usually under-promise and over-deliver? My answer is: Yes! Yours, instead, might be: No! Any answer you give to that question, I would keep it as simple as that! ;) Gio I'd say trust but verify, especially when you deal with rollups. I don't think it's possible to verify the organic growth rates from VRX numbers. I did note in the 10K that they lost roughly 300M$ in revenue due to reduced Zovirax sales (I assume this is patent expiration related). I wonder if this kind of stuff is included in the 6-8% growth rate or not. I can say for sure that a business that has 27B$ in assets and a 8B$ revenue run rate cannot make a 20% ROI. I would also argue against assuming the the rest of the industry is run by dummies. The LT track record of AGN is actually quite good, even prior to the takeover boost.

How does a business that barely spends anything on R&D get 6-8% organic growth? JNJ has a great portfolio of durable products, but they don't get 6-8%. Pharma peers that spend 3x on R&D don't get it either typically. How do you know what the "organic" growth rate is anyways with VRX?

Has anyone sanity checked the numbers that management is giving out? on a steady state run rate, I see roughly 8B$ with 27B$ in assets. The 8B$ in revenues are probably good for 2-2.B$ In EBIT, so that is an earnings yield of 7-8% (ballpark) for every dollar invested. It does not look like VRX buys their assets cheap enough to get a good ROI, even after all those adjustments and cash charges from acquisitions. If VRX is harvesting assets like some suspect, it is downright expensive. Also, it is almost impossible to get a steady state picture because VRX is constantly acquiring assets.

>> To get a conviction you also have to prove a breach of fiduciary trust<< That is my understanding too, however it is not just fiduciary trust to the directly related party (in this case VRX), it could be any other party whose trust is considered breached (AGN's for example, depending on what information has been exchanged). To me, it seems like Ackman is clearly crossing boundaries. I think the SEC should put this deal on ice and investigate.

It's mindboggling how this is not insidertrading. Ackman is clearly trading on non-public information when he bought the the shares. Personally, I think the downside should be the SEC looking into this, shutting the deal down and jail time for Ackmann.

Germany --> North Bay, CA

The insiders are looting the company and reducing the loot, by buying back shares,is not going to help them.

At 5$/share, buying back stock would have done wonders for BAC, at current valuations, I think they are better off paying some dividends. BAC trades at almost the same price/tangible ratio than JPM and JPM is arguable a much better managed bank.

Almost nobody buys LE cloth at full price, since there is always a sale around. I agree that quality for some items has gone down (Squal jackets), for others it has stayed the same. I think their. Peruian Polo's are a good value (I bought quite a few) and some kids cloth are good. I have been buying LE cloth for 12+ years, but in the last few years, I have been buying more LLbeans (more expensive, but consistent and better quality). I think LE is an OK brand that has seen better days and under good management could do very well. I don't own it as the valuation is not compelling.

HSBC trades around tangible book, a 10x PE a 5% and increasing dividend and is a much better bank. I would argue that it is cheaper on any metric but tangible book/share price.

Correct. SYW is here to stay at LE (at least for a couple of years). The costs wont go away. But, if Eddie is successful at substituting traditional discounts and marketing with SYW points/promotions and SYW marketing, LE will see better EBITDA and margins. That's a big 'if', but I think it's possible. So it looks like LE is tied to the mast if the sinking SHLD ship via SYW just like SHOS. As a customer of LE, I don't think that this program makes much sense for LE, but it may make sense for SHLD. This is certainly a big negative for the LE spinoff. Thanks to this thread for bringing this up, as I was jot aware of the extend of LE cost exposure to SYW.

The 5.5x EBITDA multiple seems too low for LE, given the relatively asset light business model. I also agree that SHLD has mismanaged LE and there is a good chance, that they can perform better on their own. I like the LE brand and have bought their products for more than 10 years. They are reasonably priced (especially when purchased on sale, durable and very comfortable. I do think they have stagnated ever since Sears bought them and also I cannot confirm this, I believe LL Bean has successfully attacked their market (I find myself buying more LL. Bean and less LE products recently). What is nice about LE, is that their brand image is completely separate from Sears, unlike the SHOS spinoff, which carries the same brand and is part of the dying Sears ecosystem. The above is the reason why I think the LE spinoff could be a success.

That is why: http://www.forbes.com/sites/prospernow/2014/01/09/sears-slumps-in-appliances-as-kenmore-fails-to-attract-millennial-shoppers/ Sears an Kenmore are not relevant brands any more for younger folks. Samsung and LG have agressively cornered the high end of the appliance market and Kenmore does not have the necessary resources to compete with them. Even GE is under pressure. Likewise, the Sears brand is damaged as well and the bad Sears brand image radiates out to SHOS as well. My concern is that SHOS is quickly becoming a melting icecube. Franchises working their but of won't suffice, since they neither have the product, nor a good brand themselves to compete.

What makes you think that the puck is going in the right direction for SHOS? HD had double digit growth in appliances in the last reported quarter, SHOS is down 4.5%. The environment is great for appliance sales right now, so if they cannot make a decent profit right now, what makes you think that they can in the longer run? I think the competitors are eating SHLD and SHOS breakfast, lunch and dinner.