Rabbitisrich

Great, thanks you two for sharing.

Perhaps the comment above is missing the point of the recent thread. It seems like debate is over how to measure dividend yield? You could measure it by the yield from future dividends to the common purchaser at the moment of purchase. But you could also judge yields by the moment of investment, AND every subsequent dividend issuance. With respect to the BAC warrants, the latter yields make more sense because the comparison is between levered common reinvestor and warrant holder. Regardless of the magnitude of future dividends relative to the initial purchase price, you end up with initial stock quantity + future stock quantities purchased with dividends. That gets you somewhere close to the A Warrant.

Are you guys talking about the BAC A warrants with the adjustment feature? In that case, the cost should be pretty close to (cost of carry + div yield - div adjustment). If you calculate the div yield in the same manner as the div adjustment, then they should cancel out, so you just have the negative carry. Think about a warrant trading exactly at fair value (stock price - strike). There is no charge for leverage, so if the company issues a dividend, your warrant return should be neutral for that time frame. This is assuming that the stock price moves only to adjust for the dividend issuance. Hmm, that looks more confusing than it sounded in my head. Appreciate any different viewpoints.

They can't make a cogent argument, so they resort to outright deceit (not for the first time) like the above. I suppose the voting shareholders aren't reading the footnotes. Neither are the proxy advisory firms. Best, Ragu Yeah, an astonishingly clumsy manipulation. They must have thought that readers would accept the % change figures without being shocked by the difference in levels between CBRL and SNS figures. Ironically, Biglari does something similar on the annual report by reporting 5 year operating profits per store, comparing full operating profits to only company-owned stores.

Perhaps, but the problem is stereotypes is less about their usefulness in a given situation, and more about the way they embed in the mind as a bias. Maybe you have seen such a situation again and again. Or maybe you saw it a couple of times, formed a quick and rough heuristic, and manufactured the other half dozen times that you think you saw. I think that I would be annoyed as an older man, or a younger women of non-threatening attractiveness, if people took a glance, and then made up their minds before the glance was done.

Discounted cash flows are generally a measure of business values. When you start looking at per share DCF, you are mixing up business results with your actions as an investor. A shareholder may choose to hold during a buyback, or choose to sell. Similarly, a dividend recipient may decide to reinvest, or not. That is not right or wrong, but such choices result from expectations that should already be included in your discount rates. You stumble across a company that yields FCFE, pre-buyback, equal to your discount rate. But they announce that 100% of FCFE will go towards repurchasing shares. Management has not suddenly caused DCF to plummet to 0. Every moment your percentage ownership increases is another moment that you have reinvested in the firm. The growth rate of FCFE is unchanged. Your FCFE per share increases because of your reinvestment choices, just as if the firm changed course and announced a 100% dividend option. The same logic that compelled you to maintain shares in a buyback program, would cause you to purchase shares in a dividend program.

I'm not yet up to date on this thread discussion, but it seems like you are using two definitions of cost of leverage. In the case of the puts + margin rate, the cost of leverage is the hurdle rate to make money. From your early thread posts, warrant cost of leverage refers to the hurdle rate to beat the common.

Another way to think of it is to remember that you can borrow against your impeding dividend to finance a stock buy back. So a dividend program is related to a buyback program by your financing costs and the value of your trade execution. The valuation of the stock is not a direct factor.

I don't clearly remember Buffett's discussion, but didn't he compare repurchase decisions to the whole universe of alternative capital allocation? If so, that's very different from a buyback vs. dividend argument. A dividend gives you the same % ownership + pile of cash. Given a buy back, you can return to your same % ownership by exchanging your excess shares for a pile of cash. So claiming that a dividend is better than a buy back at overvalued prices is the same as claiming that your Pile Of Cash will be greater in one case than the other. Maybe, but it would be due to trade execution and market volatility issues rather than directly related to over/under valuation. In fact, valuation aside, you can see how an upward market would give you a greater Pile Of Cash in the buy back scenario if you simply defer your sale. The buyback vs. dividend debate is not a valuation issue except to the extent that valuation affects price volatility.

It depends on how you incorporate property sales. It shouldn't be confused with recurring operating earnings, which Burd may have been implying (I haven't seen the context). When you sell the property as a real estate business, you are adding an expense to your operations, or reducing revenues and expenses. Burd's statement is frankly confusing as it seems to begin as a defense of incorporating cash from dispositions as a contra to capital expenditures, but then it ends as a defense of the strategic value of holding real estate. These are related, but different topics.

Those figures are in the expense segment so they add to income.

Do you know which organization under the Hyundai banner he was referring to?

It's not a dumb article, although the writer uses hyperbole. If you measure "ownership" by distribution of wealth as an indicator of effective control then you can see where he is coming from. The principal-agent problem shows the limits of law-based ownership. Agents can divert wealth if, for example, equipped with an information advantage and facing a diffusely incentivised shareholder base. Or there might be situations, like in some buyouts, where shareholders can't trust each other, so you have the potential for intermediaries to control assets. Or there could be a union with major political clout, or a shareholder with special voting rights. Martin Whitman controlled for this absence of control by valuing companies from the perspective of an outside passive minority investor. It's a good way of cutting through the semantics, and focusing on what you get for what you pay.

Check out the link below. It's a good retelling of Lampert's attitude when he was trying to buy the company on the cheap. I don't know the technicalities for SHLD minority owner rights, but Lampert's respect for minority shareholders probably isn't relevant.

I think that FCF should add cash from asset dispositions to the capex figure. Those cash flows are not recurring from core operations. There should also be some adjustment for the pension gap in either the FCF calculation, or when comparing it to EV. The higher contributions in 2012 and 2011 are partly repayments of the 2010 deferral. Using the company's method of calculating FCF mixes in some financing activities.

Are there any Empire shareholders on the board? Here are the financing plans: Financing of the Transaction The acquisition of Canada Safeway’s assets will be paid for in cash in Canadian dollars. It is Empire’s and Sobeys’ intention that financing for the acquisition will come from a combination of the following: (i) a $1.5 billion Empire equity offering; (ii) a planned $1.0 billion sale-leaseback of acquired real estate assets (the “Sale-Leaseback”); (iii) a $1.825 billion term loan and the issuance of $800 million in unsecured notes by Sobeys; (iv) other real estate and non-core asset sales; and (v) available cash on hand. As some of these transactions may not be completed by the time of closing, Scotiabank has provided Empire and Sobeys with fully committed credit facilities for the full purchase price plus transaction expenses required to close the transaction. Crombie REIT has a right of first offer in respect of any real estate sales undertaken by Sobeys.

No, it was my misreading.

A low discount rate means a higher PBO, all things equal. The more questionable estimate is the 7.75% projected return on assets.

Valueline one-pagers are great, but they are cumbersome to download. Is there anyway to update one-pagers automatically, or to create a list and download them in groups?

One cautionary about SCC is Lampert's 2006 bid at $16.86 CAD. At the time, Bill Ackman led the counter charge. The OSC's ruling showed how Lampert played hardball with Genuity, the provider of the fair value opinion, and with Pershing Square: http://www.osc.gov.on.ca/documents/en/Proceedings-RAD/rad_20060808_searscanada.pdf

Thanks for the link. Man, he looks younger than me despite being older in that clip. I am going to be a horrific looking senior.

If anyone gets to ask a question, it would be interesting to hear how Buffett would incorporate Brown-Vitter into his banking valuations. Even though the market doesn't seem to be pricing Brown-Vitter's passage, it could reveal a lot about how Buffett looks at banks.

That was a speculative element of the article anyway. It was a clear explanation of a previous attempt to pass the 25% hurdle. The Whalen and Mayo articles skipped that issue.

I believe that he posts as the Inoculated Investor.

Great, thanks for linking and thanks to Ben Claremon for writing and sharing.