Best Ideas For 2019

[Gregmal]

Long time favorite MSG. Whether Silver Lake gets serious w/ Dolan or not, it won't matter. With split occurring and $1B cash heading to the entertainment company, this leaves the sports teams and other assets floating at about a $4B valuation. Which won't last long. $325(~7.5B total asset value) is probably my worst case y/e target.

[shalab]

I would also consider PDH run by Sanjeev and MPIC funds. I think if Sanjeev writes more often about the business and the investment thesis, I am certain more people will consider it.

 

I'm still doing my DD on these companies, but given the massive losses they've taken in just the last 2 months, I think that US Natural Gas upstream producers are undervalued. I'm bullish on NatGas breaking out of its 2.50-3.00 long term range to $4+ in 2019 or 2020, which would be a significant tailwind for these companies. And right now most of them look as cheap as they've ever been.

 

Biglari Holdings (BH, BH/A) is currently trading at 0.7x book value, but owns close to 50% of its own shares, so its really closer to 0.35x book. Of course its trading down there because Sardar Biglari controls over 50% of the voting stock and I might be the only living person remaining that still believes he will deliver long term out-performance.

 

Still, the value of the shares are significantly less than the value of their CBRL stake, a stake Biglari has started monetizing over the past few weeks.

 

Note that Biglari has been buying BH and BH/A shares in his personal accounts recently.

[wescobrk]

"Note that Biglari has been buying BH and BH/A shares in his personal accounts recentl"

 

Are you sure they are in his "personal" accounts? I thought the filing showed it was from Lion Fund 2 which is owned by BH shareholders.

[SharperDingaan]

The 600,000 bpd is oil, not gas.

 

Like any miner, oil-sand profitability is primarily driven by through-put; to drive the fixed cost/unit down as low as possible. Hence the bigger you are the lower your cost/unit, and the more 'clout' you can apply over allocated pipeline space. If you also refine (IMO), whatever you 'lose' on the upstream you make back on the downstream refining. Your growing monopoly/oligopoly can be 'controlled' a number of different ways; but ultimately there will need to be a new 'arrangement' - once pipeline constraints ease.

 

There's lots of o/g in NA, and no need to develop the Alaskan North-Shore any time soon. Alberta bitumen will be pelletized and shipped west in open railcars well before Alaskan oil starts to flow. Japan and China also have material reserves of near-shore methyl-hydrates (substitute for natural gas), severely limiting what the North-Shore could export.

https://www.theglobeandmail.com/business/article-cn-pushes-ahead-with-puck-sized-bitumen-for-rail-transport/

https://www.scientificamerican.com/article/should-the-world-tap-undersea-methane-hydrates-for-energy/

 

Politicians will do whatever neccessary to get, & stay, elected - for the least amount of ongoing effort. Sadly, until the Alberta 2019 elections are over, we aren't likely to see any significant 'change on-the-ground'. Lots of kissing babies, and stealing lolly-pops, but no new pipeline construction.

 

Alberta has tremendous long-term opportunities, and the forced 're-set' has been a long time coming.

But it will be to Albertans to decide. Nothing wrong in that.

 

SD

 

 

 

[rolling]

 

 

My best ideas for 2019 is Lisbon real estate (focusing on buildings with fiber optic connections and lots of power) to take advantage of their being future Silk Road ports and the increased demand for data. Portugal will also get Irish corporate tax rates when Ireland joins the UK in Brexit. 

Could you please explain better this point? I am portuguese and never heard anything of it (as far as I know Lisbon real estate is in a quite bubbly territory). Didn't understand also the irish part: maybe there is some irony in your post I didn't catch?

Thank you

[Spekulatius]

My best value ideas (risk adjusted) are preferred and selected bonds. You can buy lower grade investment quality or high grade junk with good coverage and pot. forcredit upgrades with around 9% yield. Upside potential is about 20% plus whatever you earn in interest until they recover.

Which issuers/CUSIPs fit your description?

 

ETP PRC ( a floating preferred) is one that fits my bill and which I own in small quantities. Yielding close to 9% when I bought it. BB+ rated and metrics are improving. The bonds are BBB- rated, I think and also due to for an upgrade.

[LowIQinvestor]

VIVHY

 

catalyst within 6 months ( sale of 50% of UMG)

UMG worth $23 billion-$35 billion

Vivendi current market cap about $30 B

 

Mr market is asleep on this one!

[sleepydragon]

WFC

[NoCalledStrikes]

My best value ideas (risk adjusted) are preferred and selected bonds. You can buy lower grade investment quality or high grade junk with good coverage and pot. forcredit upgrades with around 9% yield. Upside potential is about 20% plus whatever you earn in interest until they recover.

Which issuers/CUSIPs fit your description?

 

ETP PRC ( a floating preferred) is one that fits my bill and which I own in small quantities. Yielding close to 9% when I bought it. BB+ rated and metrics are improving. The bonds are BBB- rated, I think and also due to for an upgrade.

 

Does ETP PRC generate a K-1?  If so, does it have any UBTI - just checking for the IRA. Thx.

[Spekulatius]

My best value ideas (risk adjusted) are preferred and selected bonds. You can buy lower grade investment quality or high grade junk with good coverage and pot. forcredit upgrades with around 9% yield. Upside potential is about 20% plus whatever you earn in interest until they recover.

Which issuers/CUSIPs fit your description?

 

ETP PRC ( a floating preferred) is one that fits my bill and which I own in small quantities. Yielding close to 9% when I bought it. BB+ rated and metrics are improving. The bonds are BBB- rated, I think and also due to for an upgrade.

 

Does ETP PRC generate a K-1?  If so, does it have any UBTI - just checking for the IRA. Thx.

 

I believe it does generate a K-1. It should not really create UBTI, so should be Ok to hold in an IRA on reasonable amounts.

 

[Hielko]

I really don't have anything that I'm very enthusiastic about... I think I have a portfolio with decent idea's, but wouldn't want to call one of them my best idea for 2019...

[NeverLoseMoney]

I like Legend Corporation (LGD.AX) in Australia. They are active in three segments: electrical, power and infrastructure, innovative electrical solutions and gas and plumbing.

 

Market cap is ~$64m AUD. Net profit guidance for H1 of fiscal 2019 is $3.6-$3.8m. The true "owner earnings" are higher, because there is ~1m a year in amortization expenses that, in my view, are purely accounting charges. If they manage to make around $7.5m for the year (fiscal year ends in June 2019), the company is trading around 8.5x reported earnings.

 

The CEO (Brad Dowe) owns almost 30% of the shares. He has a history of making bolt-on acquisitions. Acquisitions have been structured with earn-out targets. They have not used stock. In the last acquisition, the company disagreed with the sellers about the near term expected results of the business being acquired. They insisted on putting a $2m clawback in place. They were right and got their $2m back. The CEO is not an empire builder, but focused on buying cash flow generating businesses and buying them cheap.

 

I've owned shares for a while and it was obviously a lot more attractive last year when results where a bit depressed, but it still looks cheap to me. The company pays a nice dividend (I think 5%+) as well. It's certainly not a multi-bagger or anything, but I think a solid company with good capital allocation at a cheap price.

[Viking]

Have cash to take advantage of market dislocations. It looks to me like the easy money has been made from the 10 year bull market in stocks and 30 year bull market in bonds. If Druckenmiller is right and liquidity matters (and is contracting) we should see continued volatility in stocks and bonds (perhaps similar to 2018). Having cash to take advantage of fire sale prices would be ideal.

 

To keep this strategy working it will also be important to rebuild cash reserves on strength. Rinse and repeat.

[KJP]

Have cash to take advantage of market dislocations. It looks to me like the easy money has been made from the 10 year bull market in stocks and 30 year bull market in bonds. If Druckenmiller is right and liquidity matters (and is contracting) we should see continued volatility in stocks and bonds (perhaps similar to 2018). Having cash to take advantage of fire sale prices would be ideal.

 

To keep this strategy working it will also be important to rebuild cash reserves on strength. Rinse and repeat.

 

In your view, is anything at a "fire sale" price right now?  If so, which companies?

[Guest ajc]

 

Stitch Fix (thesis below).

 

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/sfix-stitch-fix/

 

 

 

[KJP]

 

Stitch Fix (thesis below).

 

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/sfix-stitch-fix/

 

I was intrigued by that write up when I read it, but my own personal experience with the service is that the curation is poor and the clothes overpriced.  I've asked a few other people and they've generally had the same experience.

[bbarberayr]

Many Canadian companies are very cheap right now.  Take a look at the Power Corp companies which are pretty much at their lowest valuation in the last 20 years (see the TD report if you can).  It has been beaten down by tax-loss selling (I believe) and also the general aversion to life insurance companies with rates following, but their primary asset is Great-West Life which is probably the best run life and health insurer in Canada and doing fine.

 

Small industrials like Hammond Group HMM.A is at a sub-5 p/e and 40% of book value.  They just completed a major expansion, so debt if in the high side, but business is very good, so this should be worked down.

 

Another idea is wood distributor Goodfellow - GDL.  It had a bad year a couple of years ago when it put in a new IT system and it gave wrong prices (too low!), but that has been fixed and profitability is being restored.  Has never traded at a cheaper valuation in at least 25 years.

 

 

I'd also take a close looked at European stocks for those have the interest.  You can look at the big banks like ING, which is well run and at 70% of Book and an 8 p/e.  But also the small caps - companies like blind manufacturer Hunter Douglas HDG, which is at a sub-8 p/e for a successful worldwide company, making things people need (at least my wife says we do!)

 

You have to buy stuff when its on sale.  And unless we do get a ful-blown recession, a lot of stocks are looking pretty good.

[clutch]

Many Canadian companies are very cheap right now.  Take a look at the Power Corp companies which are pretty much at their lowest valuation in the last 20 years (see the TD report if you can).  It has been beaten down by tax-loss selling (I believe) and also the general aversion to life insurance companies with rates following, but their primary asset is Great-West Life which is probably the best run life and health insurer in Canada and doing fine.

 

You fail to mention their secondary asset, which is IGM (Investor Group + Mackenzie Financials). Do you really like those businesses? They basically make money off financially illiterate people with ridiculously high fees on their funds. Not the kind of business I'd want to be in going forward...

[kab60]

I think Linamar is stupid cheap both short term but espescially if one expects to hold for the long term (they have a 100 year plan...). As for next year, who knows, but something like Spectrum Brands and Alliance Data might work out better as they delever, buyback and clean up their stories a bit (but Christ do I suck at making short term predictions).

[Spekulatius]

Wells Advisors has an article for income stockideas for 2019. EPD and DWDP and PKG look interesting to me. Link is for customer only:

https://www.wellsfargo.wallst.com/EBrokerageDesktop/Report/2303-f93fdf5576c8400faf98347ebadd353e-40

[bbarberayr]

I think Linamar is stupid cheap both short term but espescially if one expects to hold for the long term (they have a 100 year plan...). As for next year, who knows, but something like Spectrum Brands and Alliance Data might work out better as they delever, buyback and clean up their stories a bit (but Christ do I suck at making short term predictions).

 

Agree, all the auto companies are extremely cheap  - I think this may be some bad analysis by the market.  It seems to be saying now that the US has hit the 17 million level in auto production, there is nowhere to go but down, but with employee wages going, this would be an area I would think extra spending would go to.  And if we do get the self-driving car cycle going, there is 350 million cars in the US that will need to be replaced by say 150 million new cars, so auto production would be be strong for the next decade.

 

If we do get a recession, then this logic won't work, but if we don't (and I don't think we do), then these auto stocks should do well.

[investmd]

AAPL is trading at a forward P/E multiple of 12. Cash reserves in excess of debt is over $150Billion. If you subtract the cash excess from market cap, you arrive at a P/E of approx 8 for a blue chip large cap with a dividend yield of 1.8%.

Valuation metrics look a little like a bank. However, this is a company with a history of bringing ground breaking innovation to market: iPod, iPhone, iPad are 3 in the past 15 years. Reasonable chance are there will be more innovations in the next 15 years. In addition, compared to other tech or banks, the apple ecosystem is a "moat" of sorts.

Apple stores across the world are consistently full. Assuming an effective business plan, they are making a profit.

A P/E of 10 seems dirt cheap for a company like this. I saw similar metrics when AAPL was trading at around $55/share ($350-400 before the 7:1 split).

Whilst not a 3x return over 2 years, there is a lot to like with a nice safety profile.

Thoughts?

 

[DTEJD1997]

Hey all:

 

I am surprised that nobody has suggested Fiat/Chrysler (FCAU).

 

FCAU is about to have a net cash position...potentially substantial net cash if they sell their robotics division.

 

They are also going to pay a special dividend early in the new year, which should be a bit over 10% of current price.  After that, regular quarterly dividends will commence.

 

FCAU has a lot of "levers" to push/pull to improve operations/profitability.  Two big things jump to mind...

 

A). I am going to suggest that with another decent quarterly earnings, sale of Marelli & robotics division, that FCAU will achieve an investment grade rating on their debt.  This alone will save them a bit of $$$$$$$, but even more import it will enable them to:

 

B). Start a captive in house financing division

 

If FCAU can enable A&B, that could easily be worth $2-$4 a share.

 

FCAU also has a strong possibility to improve operations/quality/styling/marketing at Maserati.

 

Add in some general corporate efficiency/cost cutting/modest sales improvement, and you've got a company making EVEN more $$$$ than today.

 

I would argue that FCAU is the best managed of the large auto manufacturers today.

[no_free_lunch]

Thoughts?

 

I think it's a good bet but many unknowns so I would need to size it fairly small.  Same with FCAU, which I do own. 

 

My concern with AAPL is there really hasn't been any dominating new tech since the IPAD.  What role did Jobs play in it all and can they innovate without him?  Didn't the IPOD/IPHONE/IPAD all happen within about 7 years?  Now it has been 8 years without anything comparable.  You can also throw in itunes I think.  The company really went to hell the last time he left, I am concerned it can happen again.  I am not really into tech so I might be missing something but this is how I understand the company.

 

That is the bear case and you have laid out the bull case succinctly.  I have a hard time deciding which side is correct but agree the market is not pricing much of the bull case in.  I think closer to 10x earnings and it's a 5% position for me.  That's about all I can do with this one.  What I would like to see is some new innovation that review sites are pumped about.  If that happens and the stock doesn't move I would make it a larger position.

[shalab]

I too like Apple - right after Berkshire.

 

Apple has introduced Apple Watch which is a huge hit and a fantastic device.

https://www.theverge.com/2018/9/4/17820290/apple-watch-sales-idc-report-best-selling-smartwatch-wearable-market

 

Apple Home is a very good device and has established some market share with room to grow

https://voicebot.ai/2018/09/12/amazon-maintains-smart-speaker-market-share-lead-apple-rises-slightly-to-4-5/

 

The new generation ipads and iphones are excellent devices and I am upgrading my old devices with newer versions.

 

With 72B in earnings and EV/EBITDA in high single digit, this is definitely attractive. Apple has already retired 1 billion in stock and may retire another billion in stock in the next 4 years. I expect the dividends to go up as well. This compares to Microsoft which sports a higher valuation than Apple, 30B in adjusted net income and EV/EBITDA of about 25. Apple pays about 20% of earnings as dividends whereas Microsoft pays out about 40%.

 

Thoughts?

 

I think it's a good bet but many unknowns so I would need to size it fairly small.  Same with FCAU, which I do own. 

 

My concern with AAPL is there really hasn't been any dominating new tech since the IPAD.  What role did Jobs play in it all and can they innovate without him?  Didn't the IPOD/IPHONE/IPAD all happen within about 7 years?  Now it has been 8 years without anything comparable.  You can also throw in itunes I think.  The company really went to hell the last time he left, I am concerned it can happen again.  I am not really into tech so I might be missing something but this is how I understand the company.

 

That is the bear case and you have laid out the bull case succinctly.  I have a hard time deciding which side is correct but agree the market is not pricing much of the bull case in.  I think closer to 10x earnings and it's a 5% position for me.  That's about all I can do with this one.  What I would like to see is some new innovation that review sites are pumped about.  If that happens and the stock doesn't move I would make it a larger position.