Gregmal

Earnings out today continued to show improvement in the financials. Also been a lot of rumoured activism going on here behind the scenes. Considering Dolan really wants the Knicks to himself, and this trading at a big discount to SOTP, one would be hard pressed to find a safer investment in today's market.

Cruising, up 12% from 5 weeks ago. Software biz being integrated. I'm anticipating a 25% rise in pre-tax earnings and at least 10%+ dividend growth for FY18. Chairman's Letter can be found here http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01906725

Figured i'd update here. We now have 72% of land under contract and likely to close within a two year window. The company has finally, and begrudgingly put out a NAV sheet in their latest presentation and you essentially have a conservative value of $80 a share plus over 1,000 acres and a lot of free call options. Additionally, it was said that a potential REIT conversion would ignore the 1031 deferrals on a pass through basis and eliminate them after a 5 year holding period. This is a massive plus as the tax implications for shareholders on a $36 distubtion would be far higher than on a $7 distribution. The company still seemingly wants to do this with 80% stock; something that IMO is very anti-shareholder. Stop the selfish kingdom building crusade and pay some of it back to shareholders. Nonetheless I see a worst case downside here of maybe $5-$8 a share and only on a temporary basis versus what looks like a fairly straight forward 35-40% return over the next 24 months or so. The end game is and always has been that Albright sells most if not all of the land and then flips this to a REIT if there is still a big discount, or in the event the discount fades, gets to run his own personal REIT while being the king of Daytona.

I think this is still overvalued. It may be inaccurate, but I just don't see CMG's long term moat. I think your CAKE thread is a much better example of a high quality brand with staying power. CAKE is a sit down restaurant, viewed as high end to many middle/upper middle class folks; ie when I was in high school this was a premier place to take a date if you didnt want to look like a cheap schmuck. It's menu seems catered toward everyone, and it's a pretty decent overall bang for your buck. Basically PF Changs but serving white/Italian(what's also now called modern American) people food. CMG is a dying millennial brand. I am not short, but think this has over $100 a share of downside from here.

I'll extrapolate a tad just to narrow the scope as the comments already have touched on some good points. For less liquid securities it's obviously a little bit trickier. One must also be aware of unique market conditions. Obviously Ackmans GGP trade doesn't turn out the way it does if it's sold because of a quick gain. But one had to have been aware that 2008-09 was a unique circumstance. On the other hand, something like FNMA has similar characteristics and a crazy high IV if the thesis plays out. Yet if you had taken the approach to sell FNMA after every 30% short term pop since 2011 you'd probably already have your $20 a share in gains. So as has been said, it's hugely challenging. I'd use for shit's sake, today's environment as the basis. Most securities are fairly priced. Many see big downside in the market. It also may go up more but nonetheless it's a pretty ho-hum environment. If you bought DVA at $53 a week or two ago or whatever, isn't it kind of a no brainer to take the $9 gain and free up cash?(FD: I own a small DVA position at $58, have held for a few months, and am not looking to sell but just using this as an example being it's a liquid large cap stock)

I was having an interesting conversation with someone who had recently bought GM. I've owned GM for years. Only recently has it been paying off. On the other hand, if you bought GM in June or whenever at $33, your IRR is insane. I still love the thesis, and the inherent value, but looking at it from strictly a mathematical perspective, this sort of short term return(50% or so in 4 months) is clearly unsustainable. Thus it got me thinking. Would there be a scenario where one uses set investment parameters to dictate sell decisions based off of statistically abnormal price movements on a short term basis? This would seemingly come down to a clash between one's dedication to the long term thesis and one's faith in statistics. Outside of trading around the core of a long term holding, wouldn't it kind of being a given that one should capitalise on a short term aberration? The odds that the performance will continue and you will never see your selling price again are rather slim. On the other hand, is there anything to lose really from taking a crazy IRR and wait for a pullback, consolidation, or more compelling idea? This may also depend on whether one is trading with leverage; I do quite frequently. The example I guess I'll give is that you own stock XYZ. 4 weeks after buying it at $10, it is trading at $13. 30% in a month is crazy. Maybe you think the shares are worth $20 longer term. Or CoBF favorite SHLD. You bought the other day at 5.75 and see your shares sitting at 6.60 a few days later. Berkowitz tells you it's worth $150 though. Do you sell or hold a 15% 4 day return? Be curious to hear people's thought from a mathematical perspective as well as the obvious fundamental one.

CTO

Pretty remarkable if you extract some of the numbers. His longs outperform generally, so his short book must be running -30% or so in 8-9 months. Pretty brutal.

Nets rumored to be going for 2B+ WITHOUT the arena. There's starting to become enough evidence to say the Knicks are worth 4B+ by themselves.

From my experience, around 2x EBITDA. The restaurant business is a shitty business to be in. That's a direct quote from somebody I know who has started from scratch dozens of restaurants and currently owns several very high profile restaurants in NYC. For LPs or private investors, you generally look to recoup your initial investment in about 3 years.

$130+ bull case from Citi

South/Central American food has limited success outside of the U.S. for whatever reasons. Europeans are all about Turkish food and, to a lesser extent, Asian food. Very few seem to gravitate towards South/Central American quisine. I don't know why - but that is the preference and experience of other chain operators. Taco Bell, for instance, has 7000 locations in the U.S. alone, but only envisions being able to grow to 1000 outside of the U.S. from the current 300. That means Taco Bell envisions that the rest of the global will have 1/7th of the taco bell density the U.S. has. - that's a pretty significant impediment to those expecting Chipotle will have massive success in international sales growth. I don't blame the Central/South American countries. What CMG puts out there is basically a mockery of their authentic food, which is basically everywhere. CMG is essentially a hipster draw, much like the Frappacino is to coffee. Compare that to what those people are used to eating and you have an over priced, millenialized version of food that is supposed to be replicating the types of food these people eat and make at home all the time anyway.

Spot on. The banks were so obvious the past few years. Don't know how anyone missed it. Same goes for the autos. Same probably still true for some of the airlines. But the slam dunk obvious value investments list keeps dwindling.

I prefer using ITM options. You can put on the same size positions for a fraction of the cost. For years I was rocking Citi $40 calls while selling $40 puts. Much cheaper than buying the same amount of the stock outright. You can also use a simpler version where you only buy the ITM call, which essentially provides you with a stop loss. But my thoughts were always that if my work was right there is no way in hell I'd want to get stopped out at those prices, if anything I'd add, thus the put selling as well.

Cheesecake Factory opening soon at Rockaway Mall in NJ. Should do very well there. There is essentially nothing comparable to CAKE there. At best maybe Red Robin.

Not to the same degree. Chipotle is particularly vulnerable because such a huge part of their brand was built on the idea that they existed in a special/mystical healthier fast food tier. There’s a greater-than-normal schadenfreude involved when the annoying faux-hippies that have been implicitly attacking their industry over hocus-pocus bullshit like GMO corn have repeated problems keeping fecal remnants out of their tacos. That, on top of the fact that it’s already been well-discussed that certain aspects of Chipotle’s supply chain design plausibly increase these risks over the industry standard, mean that it’s a sort of vacuous statement to simply assert that everybody faces the risk, therefore it’s a non-factor in valuation. That's pretty much the issue with their brand. It's not authentic Mexican/TexMex cuisine. It also doesn't have nearly the offerings of a Qdoba or Moe's. It's basically just a place that sells burritos(that IMO aren't even that good) and idk, I would have to think that after a while people may want a little more for their money and a little more variety. I mean how does Chipotle not even bother to have nachos on the menu? SBUX has defined themselves by expanding their offerings. Catering to millennial and the upper middle class. It's not really a coffee place. CMG to me is trying to be SBUX of fast food. The difference is all offer are burritos. And they don't even sell breakfast burritos.

This varies but more often than not the fund managers not willing to talk about stocks are just self absorbed schmucks who don't want to waste their time unless it's something they can get publicity out of. I've actually had decent luck with this, although hands down the best place to approach them is shareholder meetings.

I would be shocked if we didn't see a dividend increase with the ER.

Is there not a chance that Chipotle itself was kind of a fad? I've personally never been particularly impressive with their offerings. For the money, there's a case to be made that Qdoba or Moe's is better. Between the gristle and 100 pounds of rice they stuff each burrito with, I've always thought it was poor value and very unhealthy(although they did a tremendous job marketing their food as healthy/quality relative to other fast food). For the $12 meal at CMG, I'd rather doing a soup and salad at PNRA, pre-packaged from WFM, or some kind of sushi lunch. That's just me though. I've long thought of them as maybe a Starbuck's lite, in terms of how to view them as an investment. So with a lot of their market value stuffed into "the brand", I think the way they continue to respond to food safety issues should be the top concern for investors. I haven't been particularly impressed so far.

lol. This thread reads like a bill of rights of managers of opm. If you read some of the comments, it's all the fault of the investor. Not leaving the money in the hands of the manager for a long time, being fickle minded, demanding annual performance for paying annually etc. Them poor souls need saving from selling and buying the index at the wrong times. The biggest joke is name dropping Buffett partnership from 50 years ago. It doesn't matter that Buffett wound up the partnership for some of the same reasons as Tilson today. Buffett was early even then. His investors would have lost money had the partnership continued. Denial does last a long time. ;) I just have never seen a fund manager who is beating the market say that investors shouldn't compare them to the market. Is investing in a hedge fund less risky than a index fund? who knows I guess. I think that's part of the problem of the modern day fund manager. Marketing is probably even more important than performance. Look at Paulson. The guys had a handful of years since the crash of -20% up to even -45% type years. He's still "The guy who made a fortune shorting the housing bubble". When guys can literally pull in assets worth hundreds of millions in fees after a few years of beating the index, I'd guarandamntee that guys marketing material is guys to start calling him "The guy who beats the market". Which is why it's dangerous to rely on a manager. Very dangerous to be lazy in your vetting of a money manager. Guys that are humble and honest are rare. So I'd say it's moreso up to the individual to find a manager or a strategy that is a good fit.

If your job(the one I am employing you to do) is to responsibly manage my money, your performance against the index is irrelevant for 1 year, 3 years, 5 years, 20 years. Because I am not paying you to simply chase some collection of assets that I may or may not want exposure to. If a manager returns 50% vs 10% for the index but I found out he did it by concentrating in out of the money options, I'd probably either send him packing or allocate a much less meaningful percentage of my assets to him. If I have a guy who consistent buys low risk value securities and can consistently return me high single digits-low teens with little market correlation, I'm there all day. If I have a couple income properties that are generating 8-10% years returns for me I don't really give a hoot what the S&P is doing. Finding a good manager is much more like finding a wife than finding a stock to buy. You need to be able to trust them, and they need to be skilled with the things that are important to you. If my money is with somebody I know is talented, trustworthy, and patient, I sleep well at night knowing my money should do ok. The index syndrome to me is really just indicative of where we are in the current cycle, the prominence of ETF's, the ease with which one can make outsized returns for taking huge risks, etc. Someone mentioned earlier the lost decade; good comparison. Surely in 2011 and 2012, none of the S&P fan boys had wished the owned the almighty index. This is all very much cyclical and part of the psychological element that make markets efficient over time.

Personally I think the excuse that Tilson uses about holding too much cash because of Trump is bullshit. First, hardly anyone expected Trump to win. Literally no one. So why would you be all in cash as if it was a given? If you did think Trump would win, how in the world would you think it would be bearish when his entire platform were things like tax reform, deregulation, and pro-business? Icahn saw it right away, as did many investors. I think it's just the latest round of justifying his inability to invest in the current market. Certain people have spent almost a decade being scared of their own shadow when it comes to the market, or blaming the Fed for their inability to take advantage of a very robust market. Not just being wrong but then compounding that by being short and not knowing when to throw in the towel. To me, investing is a lot like fishing. Sometimes the conditions are right and you can pull in walleye all night. Other times you throw 100 casts and maybe pull in one. Sometimes you can go days and even weeks without catching anything. But patience is a necessity and knowing the landscape/environment is a huge plus. Having a passion for it also helps. And when catching fish is your job, and the walleye are not there, maybe it's time to go to the shallow end with a worm and catch bluegills. With Tilson, and quite a few others, "the market" isn't an excuse. Your job is to find ideas. Finding ideas is not necessarily dependent on "the market". If ideas aren't plentiful, you can always do fixed income, merger/arb(which for the past 2 years has been filled with great opportunities), and easier, lower return strategies to at least do something for your investors while you wait for the environment to be better. What's interesting about Tilson though, and why the more I think about this, the way he closed his fund almost comes off somewhat sanctimonious, is that he was ALWAYS out there pitching his ideas. It wasn't that the environment wasn't right, it was that HE WAS WRONG. The thread is about Tilson although the same applies to plenty of others. Guys like Tepper and Loeb are so dynamic because they are constantly adapting. One minute Tepper was "balls to the wall" levered, the next he's short Europe, then going activist, then he's squeezing currencies and short bonds, etc. Granted those two are probably some of the best ever, but the contrast that with some of these slugs who just consistently get it wrong and then make excuses and you can see the difference. I also think there is a certain type of investor, the academic type, usually the ones from families with money who give them seed money straight out of Harvard are way too textbook in their approaches. They've never had to grind it out on a trading desk or get their hands dirty. They just use metrics and analytic skills they learn at business school and that only goes so far. So when presented with a market that is kind of unique, they don't know what to do. Guys like Pabrai(BG too) sit back and wait for a fat pitch and when they get it their batting average is great. Meanwhile other guys are coming up with new ideas every few weeks, not getting the results, and then blaming the market. Massive difference.

From experience, it's usually easier to exercise it. It's not a huge thing either way, but the options, depending on security, can sometimes be less liquid and result in a worse execution price than simply selling the stock at market. If you're looking to lock in a price you can always short an equal amount of the underlying and then just wait for it to exercise.

Prasad, Mohnish, is certainly impressive in that he had the integrity to make his clients whole: + 6% / annum after 10 yrs. However, 6% return in 10 yrs is a 80% gain, the S&P 500 TR has return more than that in 10yrs, so as you said, he made a profit something like $8M above expenses, all for lagging the S&P500 TR. Just want to clarify things for real...... thanks I've mentioned it before but it amazes me how misguided the entire "he did/didn't beat the index" logic is. When someone puts their money in a CD, they'd be foolish to then say "darn, I under performed the S&P". If one buys a government bond, I'm sure they are not thinking about "beating the index". It is about risk adjusted returns and ultimately there are tons of different products out there that offering varying degrees of risks and rewards. There is a reason one puts money with, and pays a guy like Pabrai. Maybe it's just me, but at the forefront of the list would be the fact that he is both a talented investor, and a good, honest man, so he will be prudent with my money. There was a time when hedge funds were viewed as alternative investments with little correlation to the markets and security against big declines. I guess now a days there is sooooo much focus on this "beat the index" syndrome that the by-product is 90% of fund managers, guys like Ackman, are just gunslingers who redefine "value investing" so they can sell excessive risk taking as "safe" to the investors, and then swing for the fences with OPM. I have a ton of respect for guys who under perform the almighty index because they stick to their core investment philosophy and er on the side of caution with their investor's money. In relation to this thread, as nice a guy as Tilson was, he was not one of those guys. Pabrai is.

Hm, I would be careful about this. IIRC, Rick Guerin did something similar, and he ended up selling his Berkshire shares to Buffett @ $40 a piece to satisfy a margin call. Works until BRK falls 50% as it has done 2 or 3 times. And when it crashes 50% shift some of your non-equity assets into it and watch it rebound and make multiples on your money! Partially kidding. I guess my main point is that leverage in the right hands is extremely profitable. Ya, ya I know about the banks in 08 but they were levered 40x. Banks have historically been profit machines using leverage. Buffett himself is actually kind of a hypocrite regarding leverage(and derivatives for that matter). He's always used them. Heck his largest investments are WFC and AMEX which are levered. Yea there are different types and whatnot but provided you are buying real value assets(vs bull market fantasies like VRX where you have to tell a story to find some angle to claim "value") a successful investor/competent risk manager should be fine. Again this isn't some off the cuff endorsement of EXTREME leverage. But buying undervalued/ low beta names and being levered 2-1 or 3-1 is definitely not as risky as a lot of people think provided 100% of your personal assets are not in equities and should "the big one" happen you have the ability to add cash to those 50% declines in BRK, BAM, etc.