Gregmal

Yup another one, but this one is different. Spinoff of DDR, this company is a REIT and its sole purpose is to sell off its interests in the owned properties, pay down the mortgage, and distribute whats left to shareholders. The ugly side, yes again, is they own retail shopping centers throughout the US and Puerto Rico. Perhaps most will stop there. The opportunity IMO is rather clear. Immediately following the spin off, the company owned maybe 3 dozen US located centers and a dozen in PR. Fast forward a year and a half and those numbers are down to 14 in the US and still a dozen in PR. The math on this one is fairly straight though. They started with somewhere around 1.4B in debt and have cut this figure down to about $500M. The dispositions can be seen on their website but generally speaking, the valuations have been at significant premiums to implied figures imbedded in the stock, and as other operators in the space have noted, in line with private market sales. In other words, you are taking advantage of the private/public arbitrage current plaguing many public real estate companies. Book Value, which is understated, is roughly $39. It is worth noting that the MBS documents listed the appraised value of these assets prior to the 2018 spin at roughly $62 per share. You also get dividends along the way once a year. So, yea no one likes retail and la di da da, but you've seen the asset base dwindle by 22, or 45%, in the past year and a half. and the outstanding debt basically halved. Last figures on remaining assets indicated a 91% occupancy rate and current FFO puts this sucker at a bit more than 5x based on $28 closing price. The PR assets are often where people go sour, but those I think are probably accounted for in the current share price. They're 80%+ leased and include several Home Depot/Walmart type anchors; these IMO are manageable and may have some upside if PR ever gets back on decent footing. If you figure 2-3 more years to wind down the remaining US assets(shopping centers are liquid and trade easily at solid valuations). I know many here play the liquidation games and often you have to deal with the typical hair. Delisting, non trading, etc. Ive been keeping tabs on First REIT on NJ which fits this box as well, but this one seems like a straight shot discount with a rather defined liquidation strategy and the added benefits of a public listing and active ability to trade and/or adjust your position as we go. disposition-list-02262020.xlsx

Two takeaways 1) How can this be? Driving and fuel consumption during past crisis periods indicate that people still got on with their lives! They just find other ways to get around 2) The travel industry definitely got hit a lot worse with 9/11 and then SARS a back to back double whammy. And still recovered. Triple whammy if you want to include the market bubble bursting in 2000.

Re listening, Ill add a few more things both from the call and inferences from dealing with a few folks quite close to this. Future acquisitions will be of the ilk shown in their presentations which largely consists of companies doing <$20M USD in revenue. An adj. EBITDA multiple of probably 8x or less would be the preferred range. From this, I can confidently deduce two things. One, which is a major, major risk with these types of companies, is that there WILL NOT be any sort of merger of equals or merger with significant integration risks. More so just bolt on type stuff with synergies and cross sell potential. Further, these companies will not be money losers. If we can eliminate those risks, to me, this is significantly safer as an investment. Second, looking at the cash position, LOC, and the current run rate EBITDA, these will be fully funded and there is not likely to be any more dilution from acquisitions. Further conversations Ive had about the benefits of uplisting and the company's views of the subject seem to support this and that is why the company is not rushing on that front.

Its high, but "its high" has always been a reason to not purchase this wonderful company for me. As such, Im leaning towards making an exception to personal thought on valuations as previously thats been a losing strategy with this one. Rather, I think Ill just be hoping that the broader market is moderately efficient and that the sell off is whats inefficient, and at least grab a few shares soon. Maybe $275 or so on Monday assuming like 2-3 more people get corona in the US. Either way this is one of the companies I think people should be circling like a hawk.

Good general info on past "issues". https://www.marketwatch.com/story/heres-how-the-stock-market-has-performed-during-past-viral-outbreaks-as-chinas-coronavirus-spreads-2020-01-22 Seems like we get one of these every few years. Also seems to have been blown hugely out of proportion due to the unfortunate timing of the Chinese New Year and all travel surrounding that, coupled with the fact that reports are the Chinese government knew about this in December and tried covering it up to prevent hysteria around the festivities. There would also IMO, be a race amongst all drug companies to come up with something for no reason other than to showcase the necessity for their pricing models as they fund R&D necessary to save the world....or so the pitch Id imagine would go.

Anyone eying this? Fits the mold of everything that is getting its shit pushed in right now. And exactly the type of business I finally want to be looking at picking up. $240-260 or so would be nice. 15-20x EBITDA or so but that may be optimistic.

The key problem for investors right now is ‘headline risk’. Fundamentals are not going to matter for a while. Everything i am reading right now tells me the US is failing badly in how it is handling this developing crisis. And the key factor in how severe the outbreak gets is how it is handled in the initial stages. This tells me the ‘headlines’ are going to get much worse in the US. And political leadership are going to make it even worse. We may ge at the early stages of a slow moving train wreck.... Equity investors are going to see their resolve severely tested as we see 1,000 point swings (both ways) in the coming weeks and months. True, but is this not one of, if not the biggest argument in favor of active managers and astute capital allocators outperforming? The saying "fundamentals dont matter" is valid on the way up and on the way down if you are rationalizing cash yielding zilch. But on the way down, how is people not caring about fundamentals not a huge advantage? The worst thing that can happen, when people dont care and fundamentals dont matter, is multiple contraction, however history has plainly shown us that this only really sticks to things that deserved it. IE who suffered long term from 08? Probably only the financials. Everything else went back to normal and received healthy multiples. Here? Its probably retail and travel stuff. Except retail already carries a shitty multiple, unlike say, financials did in 06. I think if we talk about bias, the big one here is a lot of people who have thought valuations where out of line for a long time see the market crashing and think "I was right, and its about time" and then anchor to that in assessing how much more it "should" go down. But the two are totally unrelated. I mean theres people in that crowd who have thought valuations where out of line since 2013.... Its similar in thought to what I experienced in YE 2018. Everyone I talked to about why the market crash there made sense, at least the ones with semi intelligent rationalizations, gave some kind of derivative spiel about "the Feds been propping things up and oh we were in a bubble all this time", but at the end of the day the market didn't just wake up in November 2018 and go "shit, today we're going to abandon everything thats mattered for the last decade or so and now only consider "this"...thats just not how it works. Further, as far as spread goes, I am curious to see how many cases are found in warmer weather regions. Typically these are much lower. Which could create opportunities in those areas. Particularly places like Florida and Texas. And then for the rest of us, Spring is 3 weeks away, which may bring on some weather related relief, but who knows. Its not hard to see, if say containment is successful at least until warmer weather, there being a vaccine by October/November of next year. Thats often more time than it takes to generate one for the annual flu.

First US death https://www.nytimes.com/2020/02/29/world/coronavirus-news.html Should take another 1,000 off the futures when they open tomorrow.

As always, good stuff Cigarbutt. Thanks

Interesting, but the more interesting tweet I found was a couple below posting a link to this. https://www.stlouisfed.org/~/media/files/pdfs/community-development/research-reports/pandemic_flu_report.pdf Guess what happened next in the 20's? But again, I can see how it is human and market nature to always assume the worst and then work backwards. As a historian myself, my application of understanding in situations like this, has always been to bet against the worst case scenario. If nothing else, you have the entire populations of politicians and bankers and experts working on your side. Similarly, how many people, even in a scenario like 2008, bet on failure and ended up losing? Getting squeezed out of shorts. Having insolvent counter parties? Seeing the Fed take actions that wiped out their bets? People like Peter Schiff who "called it" and still lost 80% that year. People who bought at the highs in 2007 and held tight in fact, did better than most of the doomsdayers. The other arm of analysis, is, how far should this drag things down. People have mentioned a liquidity crisis, but as long as the Fed is where it is, I dont see that. Further, company profitability is not being zapped to 0, so couple this with the insanely low rates, and that debt markets certainly arent "closing". Demand in fact, should increase for issues from qualified borrowers, especially if the bond guys deem an economic seize up to be temporary. Basically just a bridge loan. If you are a shitty E&P or mining company, sure, but I'd gander 95% of S&P companies would have zero problem issuing debt. So if we can eliminate liquidity induced plummet, then we have what? Just a recession to worry about. Is it possible we see Great Depression type stuff. I suppose, but probably not. Quantify what a temporary recession should do to the broader market... maybe comparable to something in the 70's or early 90s... but, most of those were greatly enhanced by energy/oil related issues and inflation, neither of which are really on the horizon here. https://en.wikipedia.org/wiki/List_of_stock_market_crashes_and_bear_markets Which one prior haven't we recovered from? Most were really just temporary shocks, similar to this, and exacerbated by program trading. Further, at least here, plenty of investors prior to February, were cautious or paring down their exposure because of "valuation" concerns... in November, December, January, etc. We can call the recent rise a "blow off top", but I think thats silly considering that a 10% rise over a half year stretch isn't really a blow off top, nor did it take us anywhere that extreme compared to market levels back in 2018 or 2019. From late 2017 S&P ~2650. So from that point to today that "market" has blown off a whopping 5% annually? An 8% return would take us back to roughly were we were in January. Just because people have been crying about valuation for a long time doesnt mean it was true. Generally speaking, the "broader markets" are relatively efficient. I myself have had plenty of stocks where Ive pounded the table and said the valuation didn't make sense, but was ultimately just WRONG. Same can be said here. The biggest issue I see right now is that the smart guys cant really calculate/model the impacts here so they're just throwing everything away. Still yet, I haven't really seen any of the fear driven people say where exactly the market should crash to or what levels it should now trade at. In fact, dare I say the value guys now just sound like momentum investors because "the trend is down". Again indicative of the above, and that fear is blinding.

I tend to agree. I was looking at these this week. Im not doing anything more because theres easier fish to fry IMO from the perspective of my core portfolio investment. But the basket of BUR, LIT, and IMF look decent here(granted only one thats done well as an investment is IMF). Perhaps even if you want to stretch it, eventual benefactors as Ive heard some chatter amongst a few attorney friends that corona related liability lawsuits are laying in wait should things progress further. I dont know if any of these firms plan to take these up, but you can connect dots to see that this may be fertile grounds for picking off easy settlements.

We're at the "cant avoid it" phase where every time you go to a website. pick up a paper or turn on the news it is in your face and that is scary(notice ever since Trump has made the remarks about the media using it to bring him down, CNNs website is reformatted and Corona is the overwhelming topic blasted everywhere? I found that funny). But at some point people should become practical again just like with Ebola a half decade or so ago. Or H1N1. Every 2000 cases or whatever cant translate to 10% selloffs for the market, otherwise we'll be at zero pretty soon with people still alive and an economy that is still producing things and all of a sudden the machine trading will reverse and we'll notice companies with buybacks and dividends are still there and oh yea, maybe even some of the shitty ones too considering they can borrow at low single digit rates. If you're scared use your brain to find some easy money shorts if your fears play out. PRTY, STNG, AAL, CBL, MAC, LYV, RCL, and others. Except, oh, these things are all down 20-50% already because of this, and you cant say you arent aware of the snapback potential because we've got a decade plus of instances to fall back on where that happens to be the end result, just about every time. I am starting to agree with some of the Democrats though. I think there should be some sort of lifelines established for small businesses. The real coronavirus effects will obviously be on travel and retail. Its a key cog to the economy, but at the same time, not in theory all that different in terms of deriving an assistance program, than what we saw in agriculture during the trade war.

HTL- pre released FY 2019 numbers were outstanding and held an investor day the week. This is a gem PCYO- currently building out last real developmental area in Denver MSA. Own all the water to service that area. No debt, valuation still doesnt factor in much more than it did a couple years ago. Their only assets are in this area. FRPH- why are we at $45 again? Who cares. Disciplined capital allocators and great select group of assets here. Also think GRBK is grown into a real solid company here. Mainly sunbelt real estate developer. Sure, economic constraints could hurt housing, but I dont think so. Mortgage rates are extremely low and you dont even need money or job to get a mortgage anymore. Greenbrick also exercises quite a bit of discipline with respect to where and how they build. Comcast- just cheap and not going anywhere. These types of businesses arent going to 0. AYR Strategies- just delivered strong results and probably would have been up 30-40% if the market wasn't getting obliterated. They basically own the pot markets in MA and Nevada Yup, Im talking my book.

So, just to understand where people are coming from, and despite the internet muting my tone Ill say in advance that I am not being sarcastic or rhetorical, but... we have a pandemic that may temporarily dislodge tons of very significant economic variables. We just had, arguably one of the most hellacious and sudden market declines in decades, and both a President, who clear as day can not be deemed reliable, nor a media that can be trusted; people are surprised that the Fed is stepping up and willing to take action? Isn't this what they have continually demonstrated that they will do? In who's interest, besides that of greedy investors, is it to have everything implode? And again, as I said before, if we are talking valuations, we have a 1.2 10 year. Where should stocks be trading? Lets say you have a 30% cut to corporate earnings this year like some are modeling, ands then a 30-50% rebound the year after, should we be gapping down to 15x? Or is 20-25x depending on the business at least justifiable?

Whisky and perhaps something to smoke(old habits...). What a fucking week. Felt like I grabbed a lot of good stuff. Just have to get all the shards of glass out of my hands.

Glenfiddich Fire & Cane best bottle under $100 Ive ever had. So I buy them all when I see them at the store given its a limited release. Very similar to, and smoky like the Lagavulin.

a few FRPH as well. Couldn't help it. Stocks are expensive!

Here we go. Who's ready for the last 2 hours of trading? Any guesses where this goes into the weekend? -1500 seems about right

+1 American Airlines is the worst. No, Doug Parker is the worst. I have literally watched this thing crush earnings and be up 10% pre market, only to see Doug open his fat mouth and have the stock trading 5-10% in the red by the end of the call, more times than I can remember. Guy is a total putz. If there is a will there is a way. If there is a Doug, there is a drop is my saying on this one. Only thing they had going for them was the unhedged fuel and the buybacks. Sincerely, Someone who made a small fortune buying the bankruptcy shares and then gave most of it back seeing it through as a buy and hold investment.

Lot of misinformation and stupidity out there https://nypost.com/2020/02/27/americans-are-avoiding-corona-beer-amid-coronavirus-outbreak-survey-finds/

BRK, little bit of PCYO although volume is low, and starter in long time favorite that Ive never actually pulled the trigger on, INFO.

I too hope you are wrong. I will say, on the other side of the argument: COVID 19 does not change the underlying cause of high asset prices: very low interest rates globally. It may hurt the productivity side of the equation - low activity, low top and bottom lines. But (if things work out for human society - an optimistic view) this is a temporary problem until normal activity resumes. It has historically paid better to be on the optimistic side of human progress. The alternative is we hole up in bunkers with canned foods and burn worthless paper certificates for heat. I am hoping we somehow make it through this - globally. That is essentially it. Who knows where it finds calm, but at the end of the day, theres a bunch of cheap stocks right now and theres a bunch of still expensive ones. "The market" as in the S&P is currently trading a few percent over 2018 levels. Obviously, "the market" consists of different things and some dont make a whole lot of sense. But the baby is getting thrown out with the bathwater. Income Realty for instance, which basically tracks with bonds, off 8% today. Its indiscriminate. Amazing how a week ago everyone(generally speaking) loved stocks, and today everyone hates them(although again, after basically 3, separate 1000 point drops in 4 days, its understandable). But rates are low and only getting lower. People will recoup from the PTSD, and then be faced with a dilemma of where to put their money. As has been the case prior, with every market meltdown Ive ever witnessed, people find a way to figure shit out. And if not, the government fixes the problem with stimulus or backstops. Its incompatible that people will put their money in negative rate instruments or bonds yielding 1%, but they won't touch stocks with significantly greater profiles because the next 6-12 months might get disrupted before it goes back to normal. Whatever the fear is, its more likely than not temporary, especially given the fact that China is already heading back to normal. I think the market just got out of hand the past few months, and as ERICOPOLY stated, just needed a reason to adjust. Good assets will remain such unless its armageddon. In which case there are definitely better doomsday kamikaze trades out there to make a fortune betting on failure. Its really just panic. As I wrote this Dow futures just dropped 200 points....

After some review of the results and subsequent market action, Ive taken a small trading position in here with the intent to load up if we see sub $50. https://seekingalpha.com/pr/17789121-dillard-s-inc-reports-fourth-quarter-and-fiscal-year-results Share Repurchase During the 13 weeks ended February 1, 2020, the Company purchased $36.7 million (approximately 0.5 million shares) of Class A Common Stock under its $500 million share repurchase program. During the 52 weeks ended February 1, 2020, the Company purchased $138.3 million (approximately 2.2 million shares). Subsequent to February 1, 2020, the Company has purchased $52.8 million (0.8 million shares) of Class A Common Stock. Total shares outstanding (Class A and Class B Common Stock) at February 24, 2020 and February 2, 2019 were $23.4 million and 26.3 million, respectively. As of February 24, 2020, authorization of $215.9 million remained under the program. Another squeeze brewing. EDIT: and oh yea, in case anyone gives a shit(I dont) theyre actually opening a couple new stores too, so business cant be that bad.

I will give you some props. Your reasoning in a thread not long ago(maybe a few months) actually helped me quite a bit with the decision to part ways with some GOOG and a few other holdings not too long ago. Stuff originally stubborn me convinced myself were never sell items because gee buy and hold is where the real compounding/returns are! Your timing was pretty friggin good on DD sale too...

Yea a few contacts of mine with the labor Unions repeated similar stuff. Ironically they are having hold ups because no Home Depot in town has face masks. Granted, they really need them, they do commercial drywall jobs.