Spekulatius

Writser, thanks for keeping this active. It is indeed an interesting situation. One problem with the German takeover law is that the Gewinnabführungsvertrag typically stipulates just a fixed payment, so what you own after that is essentially a preferred share. The pundits in wall street online.de seem to think that the shares will continue to trade in the dark market in Hamburg, but I don’t think Interactive Broker can trade on this exchange. Also it appears like the owners want to pivot this business to real estate and I am not sure this is a good idea. They seam hell bent not to distribute anything to owners though. This is in the too hard pile for me.

I think it is a bit disingenuous to say that this was just bad luck. While it is true that the COVID-19 crisis was unforeseeable, it was at some point clear that this bet had a substantial risk of permanent impairment. RR was wounded before COVID-19 - the Trent 1000 engine troubles, years of weak cash flow, manufacturing issues, widebody exposure. When you read this thread here for example, there were pretty clear indicators even for a somewhat casual observer, that this could go seriously or the rails. So in my opinion, the main mistake was not making the bet, it was failing to recognize when things we’re likely to go downhill and bailing out. Turnaround plays are just hard.

One thing about SUN and CNQ that they will outlast shale with the possible exception of the Permian. I do agree they are cheap and decently managed. Their breakeven cost seems to be lower than even the oil multinationals like CVX, XOM , RDS and BP and the Long asset live makes it easier to survive long periods of low crude prices. No position yet.

Mannesmann in Germany is one example. They were in steel pipe tubes and machinery business and then were able to get the license for the second mobile phone network in Germany, which totally transformed the company.

As of 2019, about 10B and they've been shedding it at a rate of about 3B/year. from 2014-2019 their exposure went 35, 28, 21, 16, 13, 10B +/-500M. Source? I see a net risk in force in mortgage insurance of about $2.6B at EOY 2019 and $2.3B at end of Q2 2020. That puts risk-to-capital at < 5 I see the same thing, 10-k, P.44.

Yes, W-2 income mostly. Closing on 10/9. It’s the third time I have used this mortgage broker.

SUMO seems to be a busted IPO, trading around its IPO price of $22 with very little buzz compared to SNOW etc. Their products seems to compete with Splunk and Datadog, I think. Growth has somewhat slowed down and that why it has a lower multiple in terms of P/S. Anyone here has an opinion on this company and their products? I don’t understand this market well, but I know that busted IPO’s can be worth owning. I guess a P/S of 10x isn’t exactly Graham style value investing, but it could work out if their products are good and they can keep growing.

The NYT is one of the few newspapers with national (and in some respect global ) reach left, as most city newspaper have hollowed out. So who is left is NYT, Washington Post and the WSJ and not much else. I think it’s a little bit like the music industry where the cheese was moved due to changes in distribution, but now we have a few survivors that can thrive and use digital distribution to their advantage. No position.

As of 2019, about 10B and they've been shedding it at a rate of about 3B/year. from 2014-2019 their exposure went 35, 28, 21, 16, 13, 10B +/-500M. There is ~480M in equity at risk in the sun, which is $1.6/ share. It is significant, but it won’t break the bank. I don’t think the holding company would be required to jump in. I believe the sub operated without equity in 2010-12 and wasn’t shut down. There is some disclose in their last 10k around P44. It is certainly cheap and some parts like Title insurance and, Automotive breakdown and Home protection (similar to FTDR) which insure small claims and are really more like a service business than insurance with tail risks. The stock is little followed even though it was a stealth compounder prior to 2002 but then fell out of favor. So right now you are buying a decent business with low risk yielding 6% and a long track record a very low valuation. I like the odds that this works out.

ORI goes into detail on their mortgage insurance runoff business. It is correct that it has now small underwriting losses in the last quarter ($4.9M) , but there only ~$440M in equity and $120M in reserves. So there isn’t much risk left and what is left is too small to matter. https://s2.q4cdn.com/382431122/files/doc_presentations/09/ORI-Investor-Presentation-2nd-Qtr-2020.pdf

This is a stodgy and relatively cheap diversified insurer. Trading at 0.74x. tangible book ($19.7) and ~8.5x earnings. They pay a generous dividend, yielding 6%. They are different in terms of capital allocation than most other insurers that they don’t do buybacks, but rather pay dividends, which they pride themselves to increase every year. ORI got into trouble during the GFC because they had an insurance sub underwriting mortgage insurance. That sub is now in run off and there is still ~400M in equity tied up, it at some point this will be gone. Before that, the stock was actually a good performer, with steady growth in book value and dividend. After the GFC, they recovered, but when COVID-19 happened, the stock slumped and never really recovered. Concerns are low interest rates reducing investment income, which it shares with other insurance cos, but they do generate ~40% of their income with title insurance (#3 market share in the US), which isn’t affected at all by low interest rates and even benefit from falling rates (higher refinance activity). I don’t really find a reason why it is as cheap as it is, it trades at a similar P/B than FFH, but in my opinion, is a much more straightforward value proposition with less risk. There is some embedded equity exposure (Just like FFH), but they just own a portfolio of dividend stocks a d don’t do anything fancy with it. https://s2.q4cdn.com/382431122/files/doc_downloads/2019/2019-Annual-Review-Total-Returns-Comparison-(1).pdf I own a decent position and recently added to it.

The people leaving tend to be poorer and get replaced by immigrants. That’s why CA’s population doesn’t shrink, despite outmigration.. That’s also why the often cited cost of Uhauls outbound CA is do much higher than inbound ones because immigrants ( and richer people) don’t use Uhauls for moving.

I wish it had your conviction on binary bets like TIF and BMYRT. BMYRT is interesting when looking at baseline probabilities, but when I think that a hourly paid tech could “save” BMY more than $6B by “forgetting” a moldy 6 month old sandwich or a dead mouse when the FDA inspect the area, I think baseline approval rates may not quite apply here.

5-7% return is realistic. I also want to point out that my post was in no way directed towards COST stock, but only to the absolute statement they valuation doesn’t matter. I see this more and more as a recent narrative and when you think about it, it just can’t be correct in an absolute sense. But since we are at COST, I took a look at the really long term valuation metrics, like EV/Revenue, Costco is interesting because their business model essentially is the same and moot of their metrics pretty much staid the same too over time (Gross margins etc.) . Business wise, it’s pretty much the same company it was 20 years ago. So here we are in terms of EV/Revenue ((EV/ EBIT would look very similar): So basically over time, you COST has seen a 2.5x valuation multiple expansion with exactly the same business model. Now, if you unwind this (as a mental exercise) and think that this could reverse and Costco could go back to. 0.44 revenue multiple (which is well above lows) in a decade, than this would be roughly a 7% headwind a year. Eyeballing the numbers that’s essentially COST revenue growth rates over the long run. This means that fundamentally, you could end up with the same share price in 10 years assuming all the fundamentals ands growth stay exactly as they are just by means of multiple compression to a 2006 level (which was hardly a stick market bottom). It’s not quite as bad as MSFT did in 2001, but not great either.

Here are the results of the antibody study mentioned in the newspaper. It looks like the sampling is done on dialysis patients, so I wonder how biased this sample is. I would guess that dialysis patients have a higher odds of being COVID-19 positive than the general population (due to socioeconomic factors and minorities being over resented in dialysis patients) , but perhaps the authors corrected for this. https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(20)32009-2/fulltext Anyways, at less than 10% positivity rates, the herd immunity is a long way off.

^ Speaking of opening schools, our school notified us about an “ exposure case” for our son at school (meaning that a student with a seat close to him tested positive ), so now he needs to stay at home for the next 2 weeks and go to fully remote during this time. Based on how this works (4-5 classes/student and typically 4-6 surrounding students in each), it means about 20 students might be quarantined for 2 weeks for every student testing positive. I don’t think that schools are going to remain open when a second wave occurs with this setting. Luckily our state (MA) has pretty good testing setups, my son and I went to a testing station yesterday and the result came back negative this morning. It won’t change anything with respect to quarantining though. A work in progress indeed.

given2invest, I just have to say, it's beyond me, that you've put a large part of your capital on the line on this bet [[as far as I understand your bet, from the video linked to by you] like 20% long TIF]]. As always, some fare well, some don't. You may end up being right, though, personally, I simply can't in any way process the odds here, - too much "noise" etc. Hi John I've been doing this for literally decades so I think I kind of know what I'm doing. I actually think 20% is quite conservative here. The opportunity is precisely your view, that there is noise, that it might involve government risk, etc. I see none of it anymore. Regards Matt Downside, if deal falls apart :$80 (worst case) - $100 (bull case), let call it blended $90, so $25 downside Upside, if deal executes: $125 (worst case, $10 discount). $135 (bull case, no discount), so $15 upside. Expected outcome =x*15-(1-x)*25>0 (x= probability of deal going though ) Looks like the breakeven point is when you see a 62.5% chance of the deal going through. Of course the haircuts are mine and there are possible scenarios out of the $ range above. Seems reasonable, but I would better odds. (Edited math)

I think e-commerce is a much stronger opportunity than international expansion. International is tricky because every country has its own idiosyncrasies and what works in the US may not work in another country. Europe for example has already it‘s own Costco, it’s Metro and they haven’t done well. They used to do well into the 80‘s, but lately, the concept hasn’t resonated and perhaps Metro got into too many adjacent business and didn’t execute. I don’t really have an idea. I do think e-Commerce is an big opportunity and over time, it might become as big than their warehouse business, but issues are: 1) The don’t seem to focus on e-commerce and maybe don’t have the right talent in place to grow this business. For example, their Costco app is rated 2.5* in the App Store and it the lowest rated retailers app I can find. 2) As a customer, their Website isn’t really streamlined, shipping is slow and sometimes free and sometimes it isn’t. We mostly used it for OTC drugs (where Costco is hard to beat in pricing). It is also unclear, if Costco‘s moat with it’s warehouses translates in a moat with their e-commerce business.

Valuation always matters no matter what you buy. Investing is about getting more than you pay for. MSFT and CSCO and many other companies were great business in 2000, but their multiples were unsustainable. MSFT was trading at 70+ PE‘ and went to < 10x PE‘s 10 years later. Their fundamentals weren’t even bad 10 years later, although the narrative followed the stock price down of course. Mr Market had been very generous with multiple expansion for some business lately and of course there is a narrative to go along with it. We will find out if this time is different.

Interesting, electricity in Germany is so expensive, that charging up an electric car can be more expansive than fueling with Diesel. And Diesel is heavily taxed in Germany... https://www.spiegel.de/auto/elektroauto-vs-diesel-und-benziner-strompreis-als-kostenfalle-a-6d8f929e-d742-439e-8de5-0f5bda3f5ecc This is probably coming to California too.

Agreed, I made the point more so because I think there's a very clear trend of underdelivering, and so it would seem logical to incorporate that into one's forecasts... The stock is driven by narrative more than any other stock that I have seen. 80%+ of it’s value is in Elon‘s personality and the narrative. I bet if VW brings in a car equivalent to Tesla, it still would trade at the some crappy valuation. They can’t compete, because they don’t have the Tesla mystique. Elon could (and should) raise $20B right now and the stock would probably rise because they could spent the money to R&D everyone else into the ground.

Of course they are suing. This deal is done for, but TIF probably will get a little bit of cash out of it to settle. The undisturbed, pre COVID price of TIF is ~$85/ share if I see this correctly. Hi, why do you think this deal is done for? Because the positions seem hardened and I don’t think Arnault is someone who flip flops. My assessment that the deal doesn’t happen may well be wrong, based on the input here. The letter from the french government is a joke anyways, it does not even sound like a binding order, more like a recommendation and of course it was solicited from Arnault. I do think Arnault is stalling here and either waits for Situation to improve or just get a few bucks off and consummate the merger and call it a day. Or perhaps he has an ace in its sleeve that we haven’t seen yet.

Thailand is also an example of a not so rich country that had managed VOVId-19 well: It is not mentioned here directly, but Thai people in the City often wear masks anyways. Thailand also has subsidized Basic health care affordable even for poor people. While I doubted some numbers, my wife is from Thailand and she told me that numbers are definitely low, based on what she is hearing from her friends living there. People have taken this seriously since February when cases from Chinese travelers propped up.

Well, if the battery is a structural element, it means it likely gets damaged in a car crash. Batteries can’t be repaired, so would need to be replaced by removing it from the structure and putting a new one in. Sounds like a major surgery which probably means very costly to do and often leads to total loss as it is cheaper to buy a new car then to totally replace the guts and straighten the frame. With a regular car, straightening the frame using CM! Equipment isn’t cheap either , but is cost effective in most cases. I doubt that is the case If frame and battery are fused together. Tesla‘s already have a reputation of being very difficult and expensive to repair and it looks like this will make it worse.

MF wrote about this stock a few times. Their operating numbers are quite horrible - their SG&A cost ($1.16B) exceeds their Gross profit ($1.02B). This includes SBC but still. They needed to get a $750M cash injection from Bain Capital o find the SAAS transition. I don’t think their revenues/share have increased at all since the IPO, due dilution and muted revenue growth. It’s cheap, if you believe they can increase their revenue faster while reducing the costs at the same time. https://www.fool.com/premium/coverage/investing/2020/09/09/should-you-buy-nutanix-after-its-latest-spike/ I would love to hear about their technology. VM Ware is highly profitable, but not a fast grower either.