rhodes159 Posted June 30, 2014 Share Posted June 30, 2014 Dear All. Would appreciate thoughts/ideas on cyclical industries (or stocks) which are currently experiencing very depressed end-market conditions. US Homebuilding and the shipping industry come to mind. Any other thoughts on cyclically depressed areas in the market to look at? Link to comment Share on other sites More sharing options...
jschembs Posted June 30, 2014 Share Posted June 30, 2014 Implying what, upside surprise as fundamentals recover? There are too many variables in shipping for me to have any valuable insight, although I imagine any Chinese slowdown would have some significant impact on rates. Additionally, I wonder how much impact the growth of American domestic energy production has hurt demand for liquid carriers. Vis-a-vis housing, in my mind it's scary to consider that with 5 years of (likely) the cheapest mortgages we'll ever have, the housing market isn't going gangbusters - particularly with Blackstone and other institutional investors having sopped up the excess inventory 2-3 years ago. Both in my opinion continue to suffer from debt deflation side effects of the previous cycle. Might've been better to just let the systems flush themselves and find the true market clearing price. Link to comment Share on other sites More sharing options...
yadayada Posted June 30, 2014 Share Posted June 30, 2014 ACW and EHL come to mind. Link to comment Share on other sites More sharing options...
Danger Zone Posted June 30, 2014 Share Posted June 30, 2014 Some banks that use long term funding and lends short term are seeing their earnings depressed. JPM comes to mind here, but I am no expert here, so don't take my word for it. (shameful cop out, I know) Link to comment Share on other sites More sharing options...
randomep Posted June 30, 2014 Share Posted June 30, 2014 In scanning various countries I find that the steel industry consistently has some of the lowest PE's Link to comment Share on other sites More sharing options...
LC Posted June 30, 2014 Share Posted June 30, 2014 Well, for those who have read the shipping man, there's a great conversation in there about how the veterans of the industry won't allow newcomers to come in at the bottom of the cycle and buy up claims on the asset for pennies on the dollar and then wait for the cycle to turn. Link to comment Share on other sites More sharing options...
yadayada Posted June 30, 2014 Share Posted June 30, 2014 globus is my favorite shipping stock now. Link to comment Share on other sites More sharing options...
randomep Posted June 30, 2014 Share Posted June 30, 2014 globus is my favorite shipping stock now. Ya and I read through shipping man, I don't remember the part where the old-timers stop newcomers from buying ships on the cheap, but really what is stopping us from buying GLBS on the cheap? nothing right? Link to comment Share on other sites More sharing options...
ukvalueinvestment Posted June 30, 2014 Share Posted June 30, 2014 Australian mining services companies. Lots of them trading at big discounts to tangible book. Link to comment Share on other sites More sharing options...
yadayada Posted June 30, 2014 Share Posted June 30, 2014 globus is my favorite shipping stock now. Ya and I read through shipping man, I don't remember the part where the old-timers stop newcomers from buying ships on the cheap, but really what is stopping us from buying GLBS on the cheap? nothing right? yeah +1. Once they paid off some debt, they will start paying dividends again. ANd even with through FCF those dividends will be massive vs the market cap. I think timing is key with cyclicals. You want to be in a situation with not a lot of risk and that even if it picks up only somewhat nowhere near a full recovery you will make a killing. You have to be very risk adverse and have high standards basicly. Schuff was a really nice one at 10$. These guys were making money even in the worse times. And even if it picked up somewhat you made a killing with that one. But at 20-30$ it is no longer interesting. I want them at less then 1x peak FCF. Link to comment Share on other sites More sharing options...
LC Posted July 1, 2014 Share Posted July 1, 2014 When the main character goes to Hamburg looking to buy up cheap debt on some shipping assets to gain control of the asset, the German banker pretty much tells him that the entire industry is aware of the cyclical nature and nobody is willing to sell them any debt at anything resembling a bargain. Link to comment Share on other sites More sharing options...
yadayada Posted July 1, 2014 Share Posted July 1, 2014 yeah it is all about reputation and having connections I think. The guys at star bulk got some really good deals on some of their ships in the down cycle. So it does happen. Just not as easy as outsiders think i guess. Link to comment Share on other sites More sharing options...
jouni1 Posted July 1, 2014 Share Posted July 1, 2014 many things related to offshore oil look pretty cheap. not "very depressed" though. paper & pulp are very depressed but maybe in a secular decline. Link to comment Share on other sites More sharing options...
Patmo Posted July 3, 2014 Share Posted July 3, 2014 I would have said (gold) mining companies at the beginning of the year, but panic has already been priced out of those stocks. Of my two picks, one is up over 50% since then and the other is up 45%. Pretty freaking good annualized return, but not sure if it's worth buying into anymore, certainly not if your goal is to take advantage of sell-offs. Link to comment Share on other sites More sharing options...
HJ Posted July 3, 2014 Share Posted July 3, 2014 Domestic coal? The difficulty in getting involved in this theme is how do you know where you are in these long cycles, and when has the cycle exhausted itself? I had the experience of buying Frontline, FRO at around $2 in '02-'03, collecting some healthy dividends, selling it around $6, only to see it subsequently go up to $70, spin out SDRL, Ship Finance, and all the offsprings, and crash back down to $2. By price metric alone you may be tempted to say it's the bottom, but last time it was here was after the oil tanker industry has consolidated from the late 70's Middle East oil induced boom to late 90's Asian crisis induced low, a 20 year experience. Where are we now along this 20 year time frame this time around? Link to comment Share on other sites More sharing options...
txitxo Posted July 3, 2014 Share Posted July 3, 2014 Australian mining services companies. Lots of them trading at big discounts to tangible book. Exactly. And not only that, some of them look pretty solid, and make a significant fraction of their money outside mining. You can find very low EV/EBITDAs in the sector, <3 (WDS) or even <2 (Structural Systems, Brierty). Link to comment Share on other sites More sharing options...
yadayada Posted July 3, 2014 Share Posted July 3, 2014 EHL has a decent amount of operations in Chile and Canada. If the LNG boom takes off, that one is a multibagger. And coal and gold doesnt even need to recover. Link to comment Share on other sites More sharing options...
shan Posted September 4, 2014 Share Posted September 4, 2014 Sectors currently in decline/distressed states: 1. US based coal companies 2. for profit eduction (esp with closing of Corinthian campuses) 3. Steel companies worldwide 4. Shipping 5. Gold stocks 6. NAtural gas Link to comment Share on other sites More sharing options...
Gilp Posted September 7, 2014 Share Posted September 7, 2014 Interesting topic. :) I would also add uranium mining companies, however it's pretty tough to find a descent company there as Cameco is overvalued and Paladin is in pretty unsustainable financial condition unless prices recover soon. All miners says that current prices are unsustainable and the demand will outpace production somewhere in the future(they say around 2017-2018), and it takes a several years to add more capacity. Link to comment Share on other sites More sharing options...
dolce far niente Posted September 8, 2014 Share Posted September 8, 2014 For profit education by, yours truly, John W Oliver. When they did a check on an engineering course: 115 enrolled, 27 graduated, 13 employed within the relevant industry. And other dirty practices. Link to comment Share on other sites More sharing options...
flixil Posted September 8, 2014 Share Posted September 8, 2014 What about POSCO? After lots of other less strong producers quit for too much loses, he margins are going to come back. Link to comment Share on other sites More sharing options...
Travis Wiedower Posted November 21, 2014 Share Posted November 21, 2014 For profit education by, yours truly, John W Oliver. When they did a check on an engineering course: 115 enrolled, 27 graduated, 13 employed within the relevant industry. And other dirty practices. Is for profit education really cyclical? I love a hated company/industry as much as the next value investor but for profit education is hated for good reason. I went through all the public for profits this summer and just never got comfortable with any of them. STRA seems to be the only half decent one. Link to comment Share on other sites More sharing options...
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