Liberty

I saw 'Knives Out' (2019, Rian Johnson) and really liked it. It was pure delight.

Interesting. I didn't know they had trouble with the manufacturing transition (if this writeup is true.. doesn't seem to cite much evidence for the claim).

Few response can also mean much smaller companies that are familiar to very few people. Doesn't mean the ideas can't be appreciated by those few that found them, though (lots of lurkers on this forum, more numerous than posters, I'm sure), even if that's not critical mass to spark a lot of discussion. Doesn't always mean that smaller companies do better, though. AAPL up almost 80% this year, f.ex., and up a fair bit since the thread was created. Same for GOOG and others..

Only a small subset of people post on those, though, and there's probably some self selection (more chances of posting about good ones than bad ones), so it doesn't solve much.

Is it soapy with exaggerated overacting? I've recently watched, again, Ken Burns' The Civil War. Fantastic, as always. The Expansion season 4 and The Witcher are coming soon, looking forward to both. I don’t think “The Crown” has any overacting, I found the acting exquisite. It’s a bit like Downton Abbey in a way, except all the characters and events are real. The season 1 was slow at times and I almost thought I would skip and look for something else, but Season 2 and especially Season 3 got better and better. Speaking of the UK, I just finished watching all 3 seasons of "Harlots" on Hulu. Good show. If you like UK stuff I would highly recommend "Endeavor" and "Inspector Lewis." Excellent acting, great character development. Endeavor tends to have a little bit too complicated plots, but the best characters and acting. Fleabag is great too, on Amazon Prime Video.

I gave up on Killing Eve on episode 4 of season 2. Season one was really good, the first couple of S2 showed some promise, but I think writing took a dive... Makes sense I guess since P.W.B. wasn't involved with S2. Saw the first two episodes of The Crown and am liking it so far. Quality production all around (acting, photography, direction, costumes, locations, etc).

Their cost of capital is way higher than the players that have a real advantage doing this kind of thing. ALS isn't BAM..

So severe the SEC never pressed charges or pursued investigation after a cursory look? I agree that Sokol's actions probably aren't the model for an executive of a company. Nor do I necessarily say it's right, or wrong, that Berkshire sacked him or that I wouldn't have done the same. It is what it is. Berkshire lost one of the best managers in the world over a $3 million gain that was achieved shadily - but not illegally. Buffett determined that loss was worthwhile to stay above reproach. Maybe it was worthwhile. Maybe it wasn't. But I view at a form of greenwashing and marketing - maintaining teh public view of the company, the culture of the company, etc. all come with a cost that is not captured in IRR. When you don't trust someone anymore, what does anything else matter? At that level of the company, either you trust someone, or you don't, and they're out. Especially important in a decentralized company that runs on trust, where people don't have a ton of process and people looking over their shoulders.

What's your edge in valuing those assets? Hasn't management changed at least once, maybe twice, in recent years? How much are the assets worth if oil goes down some more? Who's to say a new management might not be even worse? Speculation is the right word. Someone could buy it, or it could keep burning cash until the equity is worthless... and then someone buys it and the equity holders don't get a penny.

I think that's naive. Someone who doesn't know much about markets and business might think that reversion to the mean works reliably for single companies, and that the more down something is, the more it's bound to go back up, but if you're a practitioner, you know that if a business has evaporated 99% of its market value in a few years, the overwhelming chances are that most of the coming things will be negative. You can speculate on it--I already posted about how volatile the equity stub is and how anything can happen in the short term--but I have a hard time seeing how you can invest in something when the commodity price could do anything and is out of control of management anyway and time is your enemy because ROIC is terrible or negative.

$420 secured

I totally agree Sokol had to go. However, I think ALS thought they might not be able to renew their credit facility again if they were viewed as a coal company. The increase to their cost of capital from that would be a serious if not existential risk for what is at least partially a spread finance business. I think the greenwashing takes that risk off the table. Maybe that's what it is, I just don't think it's comparable with Sokol situation. And if that's what it is, it shows how precarious their credit situation is, no? If they have to dilute themselves in mediocre deals just to avoid being cut off..?

Sokol committed a pretty severe ethical breach, front running a M&A transaction for personal gain with his insider (and advisory on the deal) knowledge. He had to go, however good he was. I don't think it's a good parallel.

Buybacks are not a cause, they're a symptom. Symptom of lots of cash on the balance sheet that can't be reinvested at good returns right now, so returned to shareholders. If it didn't come out as buybacks, it would either be higher dividends (which also tend to increase valuations as they rise), or more investments which would probably lead to higher growth, which also has an impact on valuations (unless the ROIC is under WACC or generally destroys value).

Doesn't this suggest that we are more likely to find 10-baggers in energy over the next decade? WTI is above $60, bad hedges is gone. OBE can make plenty FCF (relative to its current market cap) and deleverage if WTI stabilize at $60. Oil does not even have to go to $70 to make OBE a 10-bagger from current price level. Is there any reason not to get in now, other than this is a hated stock? What kind of logic is this? 10 baggers have mostly occured in tech and will continue to mostly occur in tech. 10 baggers are almost NEVER a result of multiple expansion and almost always a result of real economic growth (rev, eps, fcf). So no, OBE is not likely to be a 10 bagger. Nor is any other company that doesn't have massive reinvestment opportunities in high margin, high ROIC projects at scale. Energy does not offer massive reinvestment opportunities at near infinite returns on capital over long periods of time and never will. It can offer high jackpot wins in a short period of time, but when that happens the market attracts drilling and margins and prices get smoked. This is a commodity business. You think OBE will ramp revs by a factor of 5-10? You think any energy company will be a 10 bagger given the ease of entry, and ease of locking in economics over frack well life-cycles? If so, you need a damn good reason why that would be true. If you want 10 baggers focus on things that scale up with high ROE, high margins, and high marginal ROIC. Multiples rarely go up by a factor of 10. They can add juice to returns, but to get a 10 bagger you need more than a 50% uptick in a multiple. You need growth. If we’re long-term investors, the ultimate source of our return will be the growth that the company generates in its business over a long period of time. Multiple expansion is just gravy on top. I think the path to a 10 bagger in energy probably involves buying subscale competitors at low prices (plenty of those around now) and cutting costs. CNQ is an example of a company that has used accretive acquisitions and capital discipline to generate great returns for many years. IMO the path to a 10 bagger in energy is either having geological knowledge that is superior to almost all market participants and identifying small opportunities that will be big, or being lucky speculating on highly leveraged plays (either with debt leverage, or high operating leverage). I call it speculation because the main factors are outside of the companies' control (the price of the commodity, how volatile it is, etc), so they could do everything right yet be crushed by an oil crash--though the reverse isn't as likely, it's also possible to have rising oil prices and have companies do so many stupid things that the stock barely profits from the tailwind, as we've seen.

https://www.vox.com/recode/2019/12/18/21010108/larry-page-philanthropy-foundation-donor-advised-fund-christmas

Doesn't this suggest that we are more likely to find 10-baggers in energy over the next decade? WTI is above $60, bad hedges is gone. OBE can make plenty FCF (relative to its current market cap) and deleverage if WTI stabilize at $60. Oil does not even have to go to $70 to make OBE a 10-bagger from current price level. Is there any reason not to get in now, other than this is a hated stock? No. Not all sectors are created equal. The average ROICs in energy and mining and other commodities are pretty low, and nothing says that the normal is up -- maybe the previous highs were abnormal and now we're hovering around more normal levels.

If this is greenwashing, isn't this as big a red flag as if it's just a mediocre investment? Do you want management to use a big chunk of shareholder capital to do things for these reasons? Doesn't it show lack of better opportunities even if it's greenwashing? I tend to think that they really like the space, but I also tend to think that they probably won't get great returns there because of the dynamics of that industry (wind farms and electricity are fairly commoditized, and the things to be known about the "wind resource" at a specific location are probably known equally to all players). Agreed they probably don't have an edge in this. This isn't exploration requiring very niche geological expertise or whatever, this is big capital intensive projects that can be financed by many other people, which is probably why the IRRs are that low.

Interesting factoid about energy investing in the past decade: "There have been 42 10-baggers in the S&P 1500 this decade while 1 out of every 8 stocks in the S&P 1500 Energy sector is down 90%+ over the last decade." Via

This is part of their original tri-global deal I think. Basically, they estimated they would get ~10-13% cash on cash. Irr will be lower, because the cash flow doesn't start for a few years after they make the investment (project startup) and while the project lives are long they aren't perpetuities. There was some limited disclosure here: https://www.triglobalenergy.com/news/altius-announces-first-renewable-energy-royalty-transaction Basically, I think this is a low risk way to earn mid to high single digits irr. I'm not too excited about that, I think the biggest potential upside would be building a full portfolio and selling it to a low cost of capital investor (pension/sovereign wealth) based on a low single digits IRR. Who goes to Altius for mid-single digits IRRs? I don't understand why they're doing this... seems like they have few good opportunities and have to go into these mediocre deals just to redeploy capital and avoid it doing nothing on the balance sheet. You'd think that they'd be able to find better things in their sector, since commodities have been so beaten down for so long.

Video of the 50-min interview here: https://www.bloomberg.com/news/videos/2019-12-18/druckenmiller-on-2020-outlook-monetary-policy-u-s-election-video

https://www.cnbc.com/2019/12/18/stanley-druckenmiller-says-he-couldnt-have-been-more-wrong-this-year.html

https://www.latimes.com/business/story/2019-12-18/amazon-delivery-machine

New renewable energy royalty: http://altiusminerals.com/uploads/2019-12-17-Altius-Tri-Global-Energy-Announcement-FINAL.pdf I kind of skimmed the release, but seems to me like there's not much detail on the economics of the deal. There's not a single dollar-amount in the whole thing.

That’s why analysts have held CSU for the past decade, because they’re great at valuing it!