dorsiacapital

I'm a big Apple bull but I do admit the most recent quarter was the first legitimately disappointing quarter I can remember Apple having in a very long time, even though I think it's somewhat to be expected because of the 6 Upgrade cycle and China weakness. (For context, I thought the trip down from 700 to 400 pre split was one of the craziest cases of market hysteria I've ever seen). Nonetheless, I do think it's funny to go back and read some negative quotes from January 2011 that appear on the very first page of this very long thread. The song largely remains the same, and Apple has done well since then (past performance no guarantee of future results....) "I am not sure how many new devices Apple can produce now that their theme is out. Integrated computers, phones, tablets and TV's. How about integration with video? There is no easy way to link my kid's videos into an Apple format that I know of (recorded on a Sony)." "3) If I was Apple and wanted to buy back stock, I would have done it at $90 and not $350. Come on." "I have a friend who made good money on 300 2012 leaps. Now he is concerned about his profits and health of Steve Jobs. If he sells it will be a short term gain. Can he do a offsetting transaction and clear both transaction in June for long term gain. Any suggestions from experienced traders welcome. PS I agree with his assessment of Steve Jobs. If he has recurrence, he is highly unlikely be able to come back. I am considering some long term puts" and then of course this comment represents bulls nicely (of course now ex cash p/e lower, growth rate negative) "I don't own Apple but it's currently trading at 11X 2011 earnings (ex cash) growing like crazy. Some very smart value investors own the stock."

I am concerned that the (bottom?) tranche of the Quorum debt priced at 11.625 percent (http://www.nashvillepost.com/business/area-stocks/article/20493167/quorum-prices-big-debt-offering) Does make me wonder just how much value the Quorum equity stub will have at that level of debt pricing. Still even if Quorum goes bust, the 1.2 billion in cash for Community Health will be helpful. Will be curious where the quorum stub starts trading...

I actually think this letter is a great example (and there have been others recently) of how hedge fund guys are extremely susceptible to non hedge fund guys who "talk the talk" regardless of whether they walk the walk long term. More than anything else, I think it explains how Hinkie was able to convince them to do the "process" for years and years. The walking the walk of being an NBA GM is actually drafting/acquiring good players. Hinkie has totally failed at that. Only Embiid, arguably, has potential but seems almost certainly headed down the Greg Oden path. I thought comparing himself to Buffett was particularly rich. Buffett shut down the partnership after over a decade of amazing returns. So far, Hinkie has lost a ton of games and acquired potentially 2 very high draft picks and that's it.

Very nice post. Would love if you post your property by property analysis once completed.

Yeah, I'm also quite intrigued by it. I posted my thoughts in another thread on Burry. Cut and pasted below. I think we should start an official investment idea thread. I think my major concern is that the business has struggled quite a bit over the last year, missed estimate by a lot. They've also got some problems with bad debt, and I wonder if there are concerns that the problem has not been addressed by the last set of writeoffs. Would be curious to hear more about the changes in reimbursement/payment models. I would actually think that there is the possibility of a very significant positive long term trend - increasing medicaid coverage as states slowly, slowly, slowly take that Obamacare money. CYH is disproportionately in states that have not yet accepted the trend. As is perhaps typical of Burry investments, I don't think that this is one to make a core part of the portfolio for the next 10 years (http://y0ungmoney.blogspot.com/2014/06/value-or-mean-reversion.html) - I think this is more of a mean reversion than anything else. If it gets to 40-45 ish I would sell out because the debt does worry me. But not everything has to be Coca Cola in 1989. --- So Community Health is kind of a piece of crap, and management badly missed their targets. They also are deeply in love with adjusted ebitda as a metric, but of course the adjustments never include their very high annual capex needs. But, here's my very rough breakdown - They currently have an enterprise value of 19 billion, which is 2 billion of equity and 17 billion of debt. Their adjusted ebitda last year was 2.8 billion. Their actual cash flow from operations was about 1.05 billion last year, and they had capex spend of about 950 million - so real cash flow of about 100 million. Not great! But, they did have 1.8 billion of cash flow from operations in 2014, and they had a sort of kitchen sink year last year with writing off delinquent accounts and various other problems. They're forecasting ebitda improvements of about 500 million this year. Who knows if that will come through. But I'm particularly interested because they are spinning off a small group of rural hospitals called Quorum in late April. Quorum has They delayed a bit when the HY market seized up, but they finally got the funding. Quorum has proforma adjusted ebitda of about 237 million. They're loading it with 1.2 billion of debt. If Quorum trades with an 8 ev/ebitda, then Quorum will have an equity value of about 400 million. Meanwhile CYH is getting 1.2 billion in cash. They've said that they'll use it for debt repayment. If they do, then that should lower their interest costs by about 100 million a year. Quorum's CFO was about 40 million a year, so that should add 60 million to cash flow from operations. Their cash flow from operations is then up to 150 million without any improvements. If you believe that they can even add another 50 million of cash flow from operations through 2016 improvements, then they'll have a 200 million dollar free cash flow for the equity stub. At that point, it seems reasonable that Community Health equity should be worth 2 billion (at a 10% fcf yield) and Quorum should be worth 400 million, which is about 20% higher than today. At that point, if they are successful on any of their various synergies, the equity stub that is CYH should increase in value quite quickly (it was trading at 60 early in 2015 and is now at 18). For example, pre 2015, the cash flow from operations from CYH/HMA (their 2014 merger) were consistently above 1.5 billion, with capex in the 1-1.1 billion range. If they can get back to that, then the free cash flow should be about 400 million, the equity stub should be worth 4 billion, which would make CYH a double. There's also at least one nice long term trend. Community Health's biggest problem is self payers. Currently, only 43% of their patients are in states with medicaid expansion access (they're primarily located in southern states), but slowly, slowly, republican states are becoming more willing to accept medicaid. (i.e. even Alabama is taking it more seriously - http://www.montgomeryadvertiser.com/story/news/politics/southunionstreet/2015/11/14/medicaid-expansion-alabama-next-big-battle/75738568/) And 2016, a presidential year with presidential turnout, could make state legislatures, like Florida, quite a bit more blue. Here's a decent, albeit promotional presentation, from last Q - http://www.chs.net/wp-content/uploads/2016/02/Q4-2015-Investor-Presentation.pdf. I do like that they're relatively honest about CFO / capex even with all the ebitda talk. I think the LEAPS options provide some very nice potential - the 2018 25s are at a mark of about 2.70.

You guys! I just found this super obscure pharmaceutical company called Pfizer - anybody heard of it? Okay sorry, (do think it says something wonderful/slightly disturbing about value investors that there appears to be no thread on Pfizer), been trying to think if there's an interesting play amidst this AGN/PFE mess. I think most people are now looking at AGN, but what about Pfizer? It's sporting a 4% dividend yield, it has no net debt (39 billion in cash, 38 billion in long term debt, admittedly I think that cash is mostly off shore). It's OCF last year was 15 billion. It's OCF has declined a bit over the last few years (17 billion in 2013, 16 billion in 2014) but I think is stabilizing. (Revenues, perhaps helped by Hospira acquisition, grew 7% q/q in q4.) The pipeline appears to be reasonably promising with Ibrance, Eliquis growing and although Pfizer still has patent issues, the Lipitor loss is behind it. They're forecasting 5% growth in 2016 fwiw. So it's a fine blue chip company but nothing too special. But my real interest is in how cheap the call options are on Pfizer. Pfizer bumped up about 3% post market when AGN news came out, but before that, Sep 16 30' calls were trading at 1.40, 33' calls at .40; Jan 18 30 calls at 2.70. What happens if HF arbs have to cover their PFE short, and dividend hungry investors start believing that the dividend is real (in my experience, very rare in this yield environment for a blue chip stock to trade at a 4% dividend yield for long - had similar experiences with INTC and KRFT). If it rerates to a 3% dividend yield then the stock would trade around 39. (JNJ is at 2.75%, Merck at 3.5%). And, for reference it was trading between 34-36 for most of the year before the AGN merger happened. What do people think?

Ships passing in the night, just pitched Community Health to you in the short thread, but this IS the appropriate place to pitch it. So Community Health is kind of a piece of crap, and management badly missed their targets. They also are deeply in love with adjusted ebitda as a metric, but of course the adjustments never include their very high annual capex needs. But, here's my very rough breakdown - They currently have an enterprise value of 19 billion, which is 2 billion of equity and 17 billion of debt. Their adjusted ebitda last year was 2.8 billion. Their actual cash flow from operations was about 1.05 billion last year, and they had capex spend of about 950 million - so real cash flow of about 100 million. Not great! But, they did have 1.8 billion of cash flow from operations in 2014, and they had a sort of kitchen sink year last year with writing off delinquent accounts and various other problems. They're forecasting ebitda improvements of about 500 million this year. Who knows if that will come through. But I'm particularly interested because they are spinning off a small group of rural hospitals called Quorum in late April. Quorum has They delayed a bit when the HY market seized up, but they finally got the funding. Quorum has proforma adjusted ebitda of about 237 million. They're loading it with 1.2 billion of debt. If Quorum trades with an 8 ev/ebitda, then Quorum will have an equity value of about 400 million. Meanwhile CYH is getting 1.2 billion in cash. They've said that they'll use it for debt repayment. If they do, then that should lower their interest costs by about 100 million a year. Quorum's CFO was about 40 million a year, so that should add 60 million to cash flow from operations. Their cash flow from operations is then up to 150 million without any improvements. If you believe that they can even add another 50 million of cash flow from operations through 2016 improvements, then they'll have a 200 million dollar free cash flow for the equity stub. At that point, it seems reasonable that Community Health equity should be worth 2 billion (at a 10% fcf yield) and Quorum should be worth 400 million, which is about 20% higher than today. At that point, if they are successful on any of their various synergies, the equity stub that is CYH should increase in value quite quickly (it was trading at 60 early in 2015 and is now at 18). For example, pre 2015, the cash flow from operations from CYH/HMA (their 2014 merger) were consistently above 1.5 billion, with capex in the 1-1.1 billion range. If they can get back to that, then the free cash flow should be about 400 million, the equity stub should be worth 4 billion, which would make CYH a double. There's also at least one nice long term trend. Community Health's biggest problem is self payers. Currently, only 43% of their patients are in states with medicaid expansion access (they're primarily located in southern states), but slowly, slowly, republican states are becoming more willing to accept medicaid. (i.e. even Alabama is taking it more seriously - http://www.montgomeryadvertiser.com/story/news/politics/southunionstreet/2015/11/14/medicaid-expansion-alabama-next-big-battle/75738568/) And 2016, a presidential year with presidential turnout, could make state legislatures, like Florida, quite a bit more blue. Here's a decent, albeit promotional presentation, from last Q - http://www.chs.net/wp-content/uploads/2016/02/Q4-2015-Investor-Presentation.pdf. I do like that they're relatively honest about CFO / capex even with all the ebitda talk. I think the LEAPS options provide some very nice potential - the 2018 25s are at a mark of about 2.70. Also, on the Burry 13f, I like Nexpoint. 6% reit yielder with multi-unit apartment buildings. From what I've read, it appears 50% underrated versus peers (http://clarkstreetvalue.blogspot.com/2016/02/nexpoint-residential-trust-update.html). Seems like management is quite smart. Agree with winjitsu's comments. Still don't understand the financial institutions though.

+++++++++1 And thanks for your very thoughtful feedback on my shorts. I figured CAT/DE were the shorts most in line with your sensibilities. I totally take your point on the idea that some of these (MNKD in particular, also VRX) are priced with incredibly high volatility. I've been playing a bit with the idea that in some cases, option pricing lags underlying reality. Like for some of these E&P companies, bankruptcy in <6 months seems like a very high probability, and even if the implied volatility is very, very high, it's still not high enough to fully reflect just how horrible their situation is. Or, for example, the VRX $5 Oct 16 puts are selling for about 50 cents - they'll give a near 10 to 1 return if VRX goes bankrupt. If VRX has a 20% chance of going bankrupt in the next six months, then the option is mispriced. Or BTU seems totally screwed, but the $3 Jan 2017 puts are at about $2 - I'd say BTU has more than a 66% chance of going bankrupt by then. Curious to hear your thoughts. Also, this is the wrong forum for this, but as a Burry head, have you checked out CYH? One of his under-commented on holdings in the new 13F. Interesting upcoming spinoff and I particularly like LEAPS options with spinoff catalysts....(like many Burry holdings, more of a mean reveresion than a "good" company, but CYH is highly levered, (like 19 bil enterprise value, with 17 bil debt) and unloading 1.2 billion of debt into their spinoff, if at least some of that unloaded debt becomes equity value (from somewhat reduced interest payments if nothing else) then there's some nice potential. Trading at about 18 right now but it was at 60 at the beginning of last year.

Sure, my response was totally childish. I just thought saying my comment didn't make "any sense" was a bit rich considering your prior attempts at prognostication. But neither of us have earned super forecaster status. And again, you're ignoring my point that it is difficult (albeit not impossible) to believe both 1) Valeant is delaying the 10k because internal controls have broken down, and 2) the eventual 10k will only involve the Philidor revenue restatement. Yes, you can square that by saying internal controls have broken down BUT turns out things were fine except for this revenue issue despite the lack of internal controls (and senior leadership setting unrealistic performance expectations). And if that proposition seems logical, then you should buy more. Sorry - I tend to be blunt and to the point on forums / Twitter. Just more efficient communication; not trying to offend / belittle anyone. I keyed in on the PwC would be finished with their audit by March 15. I am very familiar with auditing. That is not true. Typically auditors are still working the day before the company files (and on the day tbh). Whether or not that means there are more restatements, I have no idea and wasn't trying to guess. Just trying to provide more color on the audit process. In the interest of intellectual honesty, I will say recent news in Fortune and elsewhere about how the BoD is very reluctant to sign off on the 10k without the ad hoc committee finishing because they're worried about their own potential civil/criminal liability does seem like a very plausible explanation for the delay that does not raise a going concern issue.

Let me take a stab: If Valeant indeed needs to liquidate to pay back debt, the "real life terminal values" of the businesses will, on average, be greater than the "zero" Hempton, feeling the need to masquerade as AZ Value, put on them - in the analysis he felt the need to twist in order to support his short case against a company he claimed was twisting their reported financials no less. I'm sure right for assets like B&L but their biggest on the books asset is Salix and that's going to have a terminal value of basically 0 depending on your timeframe.

I can believe it. Why should we believe that this new management, which contains neither Ruane nor Cundiff, would have some special skill in identifying the next Berkshire. Their last pick was Valeant. (Last 10 years - Sequoia has returned 14%, the S&P has returned 56%. If you add in management fees of 1% a year, they're basically flat for 10 years- http://bit.ly/1Y014jz). They've also seen the light now, but I think it was remarkably dysfunctional that two board of directors members resigned over the Valeant position and they still didn't trim/reduce their position. In fact, they added more. Sure, now they're doing something once the cow is out of the barn but so what. If you want a value oriented mutual fund, I'd just buy Berkshire. No management fees and a probable discount to nav. Otherwise, follow Buffet's advice and buy an index fund or maybe a smart beta fund.

Sort of funny you say this considering one of the most vocal Chanos bear positions has been on China for the last 5 years. I agree that Chanos hasn't always been successful, running a short only book is just incredibly difficult and probably makes you stretch on deals, but I do think many of his calls (like Enron) have been damn impressive. I haven't done the work on LNG, although so far Chanos results have not been buffoon-ish (published short position in October / price around 47, now around 32). Don't know your entry point however. If you're looking for a cartoonish short, I think Left may be more promising...

This short list is anything but short. Here are some names I'm either short or itching to short at the right price. ATHN PFPT MNST SC (still hasn't filed their 10k, but I'm sure subprime auto is fine) CAT DE Offshore drillers like NE VRX (much reduced from before, now just using 17/18 otm puts as a bankruptcy play) INSY MNKD MNK/HZNP DRII Last legs oil companies (UPL, LINE, EXXI) if the hedging can be worked out I must say I'm intrigued by your AGN idea b/c of what a hedge fund hotel it has become. If the merger doesn't go through and I don't think it's a sure shot, I'd be very curious about the price action. The big drops in LNKD and VRX over the last few months show how messy it can be when a HF trade becomes much less appealing. (Basing this on unfounded speculation that there was some margin calling/abrupt selling in both cases). Haven't done a real study of the company though.

I stole this from Glenn Chan, but this article makes me very, very nervous about OnDeck (http://www.bloomberg.com/news/articles/2014-11-13/ondeck-ipo-shady-brokers-add-risk-in-high-interest-loans) No idea if these practices are still going on but I think it says something concerning about a company's DNA that it was ever used to fuel growth. I tend, however, to be far too moralistic in my investing. I would say that I am sure the model both looks and is fancy but it has not been tested in a true credit cycle. Moreover, I understand small businesses face financing charges, but I am concerned that any small business that is willing to borrow at interest rates well over 50% is either a small business on its very last legs or run by a not particularly astute business owner. For short term, relatively small financing needs, credit cards would generally be a much better source of financing. I understand that careful loss provisioning can make up for this To be honest, I think this is more interesting as a short play on a fintech p2p lending bubble because OnDeck, unlike LC/Tree, keeps some of the loans on the books. Obviously a less appealing play at this low price though.

I'm a taker. I love the spinoffs!