BUR.L - Burford Capital

[Liberty]

https://drive.google.com/file/d/1oYQy8AEF0f-3nDk5VV1O8HogxnIJCGy1/view

 

Via

[peterHK]

https://drive.google.com/file/d/1oYQy8AEF0f-3nDk5VV1O8HogxnIJCGy1/view

 

Via

 

Worth reading the Artem Fokin piece on Sumzero as well.

[no_free_lunch]

Burford has a link on their site with detailed investment returns.  I recommend that anyone planning to invest take the time to have them send you the results and have a look.  The link is here:

 

https://www.burfordcapital.com/investors/investor-information/burford-capital-investment-data/

 

Based on that document, it becomes clear that calculating their investment returns is quite complicated.  There are essentially 3 categories of returns: completed / partially realized / ongoing.  In order to calculate the returns you need to consider the amount in each bucket and use some type of multiplier for the ongoing and part realized.  It will make more sense if I just give some examples.

 

2011

 

$123.5m committed capital, $95.4m deployed, $86.7m recovered. 

 

Based on this information alone, 2011 is a loss.  However, they still have $15m partially realized and $20m ongoing cases.  How much value do you assign to these on-going investments?  It is still possible that they hit it out of the park with some of these but for now they are actually running a loss for the year and perhaps these cases will require additional capital deployed to complete them.  It is interesting that they are 8 years in and they still have almost 40% in progress.

 

2012

 

$63.5m committed, $57m deployed, $119.3m recovered.

 

This was a straight-forward year and it shows what they are capable of.  There is only $0.5m deployed to ongoing cases so this might be it.  Roughly double their total investments, I don't have a summary ROIC but the results seem robust.

 

 

2015

 

$326.1m committed, $243.9m deployed, $274.1m recovered.

 

They have $95m partially realized and $74m ongoing.  They are already in the black and 2/3 of their cases aren't concluded.  This year looks ok.  It starts to give you a sense of the length of investments, 4 years in and only 1/3 of the way through.

 

 

2017

 

$776.2m committed, $410.6m deployed, $77.4 recovered.

 

The document only lists $32m of cases as concluded.

 

[Jerry Capital]

The longer a case goes on the higher the probability that it becomes a win, so factor that into your calculation.

[Jerry Capital]

Also:

 

"When matters settle, they typically conclude more rapidly, and for less than total damages – so IRRs are higher

than the portfolio overall and ROIC is lower. Matters that proceed to adjudication are more profitable but take

longer and thus generate somewhat lower IRRs"

[peterHK]

Burford has a link on their site with detailed investment returns.  I recommend that anyone planning to invest take the time to have them send you the results and have a look.  The link is here:

 

https://www.burfordcapital.com/investors/investor-information/burford-capital-investment-data/

 

Based on that document, it becomes clear that calculating their investment returns is quite complicated.  There are essentially 3 categories of returns: completed / partially realized / ongoing.  In order to calculate the returns you need to consider the amount in each bucket and use some type of multiplier for the ongoing and part realized.  It will make more sense if I just give some examples.

 

2011

 

$123.5m committed capital, $95.4m deployed, $86.7m recovered. 

 

Based on this information alone, 2011 is a loss.  However, they still have $15m partially realized and $20m ongoing cases.  How much value do you assign to these on-going investments?  It is still possible that they hit it out of the park with some of these but for now they are actually running a loss for the year and perhaps these cases will require additional capital deployed to complete them.  It is interesting that they are 8 years in and they still have almost 40% in progress.

 

2012

 

$63.5m committed, $57m deployed, $119.3m recovered.

 

This was a straight-forward year and it shows what they are capable of.  There is only $0.5m deployed to ongoing cases so this might be it.  Roughly double their total investments, I don't have a summary ROIC but the results seem robust.

 

 

2015

 

$326.1m committed, $243.9m deployed, $274.1m recovered.

 

They have $95m partially realized and $74m ongoing.  They are already in the black and 2/3 of their cases aren't concluded.  This year looks ok.  It starts to give you a sense of the length of investments, 4 years in and only 1/3 of the way through.

 

 

2017

 

$776.2m committed, $410.6m deployed, $77.4 recovered.

 

The document only lists $32m of cases as concluded.

 

What we do know is that they have never written down a case they have marked up, and they generally don't write up a case until it's very obvious it's moving in their favor. They have gone to great great pains to talk about how conservative they are in their accounting.

 

Can't comment on 2011, but IIRC it was a lower IRR year and they had some issues with a case there: https://fortune.com/2013/01/10/investment-fund-we-were-defrauded-in-suit-against-chevron/

 

For 2017, it's so early it's fairly meaningless to look at realizations because it's so early.

 

ALso worth considering some years have cases like Petersen where they invested $17 million, have realized $230-something million in proceeds AND at the last mark to market have a 60%+ stake remaining worth $600 million AND the case is not concluded. Some estimate it would be worth $2.5bn if Burford wins, so it's a case of tails, Burford has made multiples of its money, and heads, their 60% stake is worth almost 1/2 the market cap today. THey don't carry it on the balance sheet anywhere close to what it's worth (which is one reason that BV is understated, so using P/B is a conservative measure if anything for valuing BUR.).

[Spekulatius]

Burford has a link on their site with detailed investment returns.  I recommend that anyone planning to invest take the time to have them send you the results and have a look.  The link is here:

 

https://www.burfordcapital.com/investors/investor-information/burford-capital-investment-data/

 

Based on that document, it becomes clear that calculating their investment returns is quite complicated.  There are essentially 3 categories of returns: completed / partially realized / ongoing.  In order to calculate the returns you need to consider the amount in each bucket and use some type of multiplier for the ongoing and part realized.  It will make more sense if I just give some examples.

 

2011

 

$123.5m committed capital, $95.4m deployed, $86.7m recovered. 

 

Based on this information alone, 2011 is a loss.  However, they still have $15m partially realized and $20m ongoing cases.  How much value do you assign to these on-going investments?  It is still possible that they hit it out of the park with some of these but for now they are actually running a loss for the year and perhaps these cases will require additional capital deployed to complete them.  It is interesting that they are 8 years in and they still have almost 40% in progress.

 

2012

 

$63.5m committed, $57m deployed, $119.3m recovered.

 

This was a straight-forward year and it shows what they are capable of.  There is only $0.5m deployed to ongoing cases so this might be it.  Roughly double their total investments, I don't have a summary ROIC but the results seem robust.

 

 

2015

 

$326.1m committed, $243.9m deployed, $274.1m recovered.

 

They have $95m partially realized and $74m ongoing.  They are already in the black and 2/3 of their cases aren't concluded.  This year looks ok.  It starts to give you a sense of the length of investments, 4 years in and only 1/3 of the way through.

 

 

2017

 

$776.2m committed, $410.6m deployed, $77.4 recovered.

 

The document only lists $32m of cases as concluded.

 

It’s interesting they several years into this, some vintages are still cash negative. A lot depends on the residuals being correctly market. As the balance sheet mushroomed, it may just be too convenient to cover bad vintages with new business. That’s what kept me from investing after I looked at it a while ago

[peterHK]

Burford has a link on their site with detailed investment returns.  I recommend that anyone planning to invest take the time to have them send you the results and have a look.  The link is here:

 

https://www.burfordcapital.com/investors/investor-information/burford-capital-investment-data/

 

Based on that document, it becomes clear that calculating their investment returns is quite complicated.  There are essentially 3 categories of returns: completed / partially realized / ongoing.  In order to calculate the returns you need to consider the amount in each bucket and use some type of multiplier for the ongoing and part realized.  It will make more sense if I just give some examples.

 

2011

 

$123.5m committed capital, $95.4m deployed, $86.7m recovered. 

 

Based on this information alone, 2011 is a loss.  However, they still have $15m partially realized and $20m ongoing cases.  How much value do you assign to these on-going investments?  It is still possible that they hit it out of the park with some of these but for now they are actually running a loss for the year and perhaps these cases will require additional capital deployed to complete them.  It is interesting that they are 8 years in and they still have almost 40% in progress.

 

2012

 

$63.5m committed, $57m deployed, $119.3m recovered.

 

This was a straight-forward year and it shows what they are capable of.  There is only $0.5m deployed to ongoing cases so this might be it.  Roughly double their total investments, I don't have a summary ROIC but the results seem robust.

 

 

2015

 

$326.1m committed, $243.9m deployed, $274.1m recovered.

 

They have $95m partially realized and $74m ongoing.  They are already in the black and 2/3 of their cases aren't concluded.  This year looks ok.  It starts to give you a sense of the length of investments, 4 years in and only 1/3 of the way through.

 

 

2017

 

$776.2m committed, $410.6m deployed, $77.4 recovered.

 

The document only lists $32m of cases as concluded.

 

It’s interesting they several years into this, some vintages are still cash negative. A lot depends on the residuals being correctly market. As the balance sheet mushroomed, it may just be too convenient to cover bad vintages with new business. That’s what kept me from investing after I looked at it a while ago

 

I'd look at the numbers differently.

 

Of completed cases: $59.7mn of investment, realizations were $85.3mn.

 

Of cases partially realized: $15mn funded, $1.4mn realized.

 

Ongoing: $20mn funded, $0 realized.

 

So of the completed investments, that's a 42% return. Even if the remaining investments are 0's, the loss isn't material.

 

Think of this like any other firm: it's not over till it's over. PE firms with 7 year lock ups/fund lives often go to 10 before seeing end of realizations or sales. Same here.

 

[Packer16]

Given the location of the internal portfolio (Guersey) is this considered a PFIC for US stockholders or are the any other non-standard tax issues?

 

Packer

[cameronfen]

Burford has a link on their site with detailed investment returns.  I recommend that anyone planning to invest take the time to have them send you the results and have a look.  The link is here:

 

https://www.burfordcapital.com/investors/investor-information/burford-capital-investment-data/

 

Based on that document, it becomes clear that calculating their investment returns is quite complicated.  There are essentially 3 categories of returns: completed / partially realized / ongoing.  In order to calculate the returns you need to consider the amount in each bucket and use some type of multiplier for the ongoing and part realized.  It will make more sense if I just give some examples.

 

2011

 

$123.5m committed capital, $95.4m deployed, $86.7m recovered. 

 

Based on this information alone, 2011 is a loss.  However, they still have $15m partially realized and $20m ongoing cases.  How much value do you assign to these on-going investments?  It is still possible that they hit it out of the park with some of these but for now they are actually running a loss for the year and perhaps these cases will require additional capital deployed to complete them.  It is interesting that they are 8 years in and they still have almost 40% in progress.

 

2012

 

$63.5m committed, $57m deployed, $119.3m recovered.

 

This was a straight-forward year and it shows what they are capable of.  There is only $0.5m deployed to ongoing cases so this might be it.  Roughly double their total investments, I don't have a summary ROIC but the results seem robust.

 

 

2015

 

$326.1m committed, $243.9m deployed, $274.1m recovered.

 

They have $95m partially realized and $74m ongoing.  They are already in the black and 2/3 of their cases aren't concluded.  This year looks ok.  It starts to give you a sense of the length of investments, 4 years in and only 1/3 of the way through.

 

 

2017

 

$776.2m committed, $410.6m deployed, $77.4 recovered.

 

The document only lists $32m of cases as concluded.

 

It’s interesting they several years into this, some vintages are still cash negative. A lot depends on the residuals being correctly market. As the balance sheet mushroomed, it may just be too convenient to cover bad vintages with new business. That’s what kept me from investing after I looked at it a while ago

 

I'd look at the numbers differently.

 

Of completed cases: $59.7mn of investment, realizations were $85.3mn.

 

Of cases partially realized: $15mn funded, $1.4mn realized.

 

Ongoing: $20mn funded, $0 realized.

 

So of the completed investments, that's a 42% return. Even if the remaining investments are 0's, the loss isn't material.

 

Think of this like any other firm: it's not over till it's over. PE firms with 7 year lock ups/fund lives often go to 10 before seeing end of realizations or sales. Same here.

 

This is the way I would look at it too. 

[gokou3]

Aside from lack of liquidity, any risk in buying BRFRF (grey market ADR) instead of the AIM-listed stock (BUR)?

[no_free_lunch]

Peter,. I am just questioning the high roe they claim. These investment results don't look that impressive and I think there's a bit of smoke and mirrors to calculate roe.

 

Without a high roe it is harder to justify 3x book.

[tol1]

How do bulls feels comfortable with the following? Just a few points that I have not liked so far.

 

- Founders having sold a chunk of their holding at the peak

- Mark-to-market accounting

- Difficulty of estimating future cash flows (simply applying a return on capital is as vague as it gets)

- Management being a married couple

- AIM listing

 

I have not looked into it in detail, but has the accounting become way more aggressive over time? Anyone who has looked into this?

 

[Jerry Capital]

Founders and directors own about 10% of the company (CEO CIO own about 3% each now). Originally Burford outsourced management to the CEO (Bogart) and CIO (Molot) the reorganization a few years back gave them 12% (6% each) in turn for no longer getting a a management fee, that was the start of the evolution from a fund that should trade at a discount to NAV to an operating entity that should be valued on FCF. The founders sold 1/3 of their 6% positions and still have a large majority of their net worth tied to the company. I would be more concerned with another reduction of 1/3, but taking some off the table after a 10 year 15 bagger is something I personally would do as well...

 

Mark to market accounting or not, what matters is the economic reality of their earnings. If you don't think it makes sense to mark up the Peterson case when they have sold on secondary market multiple times not marking to market would be MORE questionable. I'm not sure they would have a choice in some of these material matters.

 

 

It's not more aggressive it's a natural progression of their business.

 

How to you estimate the future cash flows for any firm? Why is this any different? They will win some, lose some, settle some, and if they do something similar to the last (just like a asset manager) they will create value.

 

Hopefully they don't get divorced?

 

AIM: they have a bond prospectus on the main market which requires them to have the more detailed audit that is required (my understanding), they will move up eventually I'd imagine.

 

 

 

[tol1]

Founders and directors own about 10% of the company (CEO CIO own about 3% each now). Originally Burford outsourced management to the CEO (Bogart) and CIO (Molot) the reorganization a few years back gave them 12% (6% each) in turn for no longer getting a a management fee, that was the start of the evolution from a fund that should trade at a discount to NAV to an operating entity that should be valued on FCF. The founders sold 1/3 of their 6% positions and still have a large majority of their net worth tied to the company. I would be more concerned with another reduction of 1/3, but taking some off the table after a 10 year 15 bagger is something I personally would do as well...

 

Mark to market accounting or not, what matters is the economic reality of their earnings. If you don't think it makes sense to mark up the Peterson case when they have sold on secondary market multiple times not marking to market would be MORE questionable. I'm not sure they would have a choice in some of these material matters.

 

 

It's not more aggressive it's a natural progression of their business.

 

How to you estimate the future cash flows for any firm? Why is this any different? They will win some, lose some, settle some, and if they do something similar to the last (just like a asset manager) they will create value.

 

Hopefully they don't get divorced?

 

AIM: they have a bond prospectus on the main market which requires them to have the more detailed audit that is required (my understanding), they will move up eventually I'd imagine.

 

 

I assume you have looked at the accounting change over time. How has it materially changed, if at all?

 

Taking money off the table is fine, but the timing is a signal to investors as they know the business' prospects (hopefully) inside out.

 

Regarding valuation: valuing Burford is certainly different than valuing most businesses. One essentially has to assume a forward IRR and the capital that generates the return. I.e., there is no way as an outsider/investor to triangulate the forward IRR.

 

 

[Pondside47]

Given the location of the internal portfolio (Guersey) is this considered a PFIC for US stockholders or are the any other non-standard tax issues?

 

Packer

 

Great question Packer. I’m surprised Burford hasn’t addressed this in their Investor FAQ section. KKR, which you can argue falls into a similar category, has openly addressed this issue. I’ve emailed the company but I suspect the response will be “talk to your own tax consultant”.

[Pondside47]

Founders and directors own about 10% of the company (CEO CIO own about 3% each now). Originally Burford outsourced management to the CEO (Bogart) and CIO (Molot) the reorganization a few years back gave them 12% (6% each) in turn for no longer getting a a management fee, that was the start of the evolution from a fund that should trade at a discount to NAV to an operating entity that should be valued on FCF. The founders sold 1/3 of their 6% positions and still have a large majority of their net worth tied to the company. I would be more concerned with another reduction of 1/3, but taking some off the table after a 10 year 15 bagger is something I personally would do as well...

 

Mark to market accounting or not, what matters is the economic reality of their earnings. If you don't think it makes sense to mark up the Peterson case when they have sold on secondary market multiple times not marking to market would be MORE questionable. I'm not sure they would have a choice in some of these material matters.

 

 

It's not more aggressive it's a natural progression of their business.

 

How to you estimate the future cash flows for any firm? Why is this any different? They will win some, lose some, settle some, and if they do something similar to the last (just like a asset manager) they will create value.

 

Hopefully they don't get divorced?

 

AIM: they have a bond prospectus on the main market which requires them to have the more detailed audit that is required (my understanding), they will move up eventually I'd imagine.

 

 

I assume you have looked at the accounting change over time. How has it materially changed, if at all?

 

Taking money off the table is fine, but the timing is a signal to investors as they know the business' prospects (hopefully) inside out.

 

Regarding valuation: valuing Burford is certainly different than valuing most businesses. One essentially has to assume a forward IRR and the capital that generates the return. I.e., there is no way as an outsider/investor to triangulate the forward IRR.

 

The way I became comfortable buying the stock at this price is to consider the downside. I think it is fairly certain in 5 years the book value will get to the current market cap. Consider the Petersen case, and consider the momentum of the industry. Also consider Burford didn’t raise capital for 8 years between 2010 and 2018. The book increase in between was due to internal cash generation. If this industry turns to a 7~10% return on equity after 5 years, which I think is a fairly aggressive and pessimistic assumption, AND it stops growing, what kind of multiple will people pay for a dividend stream that is 100% uncorrelated with the market? I think we as value investor tends to disregard what the rest of the world thinks but keep in mind we are only 5% of world. How many assets are out there in the world that is uncorrelated with the market that institutional investor can get their hands on?

 

Also I think the management is very important. Bentham IMF actually started way earlier than Burford and they are nowhere as successful as Burford. Why?

 

I wouldn’t say the management knows the industry prospect inside out so their selling 1/3 stake is a negative sign. I would say nobody knows the exact prospect of the industry 5-10 years out. The only way to you can get a sense of where this is going is to talk to the partners at Amlaw 100 firms. I don’t have access to those people unless I got to events such as litigation dispute week London 2019. However, consider the institutional investor who are giving tons of money to Burford. They do have access to those partners. Why are they putting so much money into these funds? Is it soely for diversification?

 

 

 

[cameronfen]

Founders and directors own about 10% of the company (CEO CIO own about 3% each now). Originally Burford outsourced management to the CEO (Bogart) and CIO (Molot) the reorganization a few years back gave them 12% (6% each) in turn for no longer getting a a management fee, that was the start of the evolution from a fund that should trade at a discount to NAV to an operating entity that should be valued on FCF. The founders sold 1/3 of their 6% positions and still have a large majority of their net worth tied to the company. I would be more concerned with another reduction of 1/3, but taking some off the table after a 10 year 15 bagger is something I personally would do as well...

 

Mark to market accounting or not, what matters is the economic reality of their earnings. If you don't think it makes sense to mark up the Peterson case when they have sold on secondary market multiple times not marking to market would be MORE questionable. I'm not sure they would have a choice in some of these material matters.

 

 

It's not more aggressive it's a natural progression of their business.

 

How to you estimate the future cash flows for any firm? Why is this any different? They will win some, lose some, settle some, and if they do something similar to the last (just like a asset manager) they will create value.

 

Hopefully they don't get divorced?

 

AIM: they have a bond prospectus on the main market which requires them to have the more detailed audit that is required (my understanding), they will move up eventually I'd imagine.

 

 

I assume you have looked at the accounting change over time. How has it materially changed, if at all?

 

Taking money off the table is fine, but the timing is a signal to investors as they know the business' prospects (hopefully) inside out.

 

Regarding valuation: valuing Burford is certainly different than valuing most businesses. One essentially has to assume a forward IRR and the capital that generates the return. I.e., there is no way as an outsider/investor to triangulate the forward IRR.

 

The way I became comfortable buying the stock at this price is to consider the downside. I think it is fairly certain in 5 years the book value will get to the current market cap. Consider the Petersen case, and consider the momentum of the industry. Also consider Burford didn’t raise capital for 8 years between 2010 and 2018. The book increase in between was due to internal cash generation. If this industry turns to a 7~10% return on equity after 5 years, which I think is a fairly aggressive and pessimistic assumption, AND it stops growing, what kind of multiple will people pay for a dividend stream that is 100% uncorrelated with the market? I think we as value investor tends to disregard what the rest of the world thinks but keep in mind we are only 5% of world. How many assets are out there in the world that is uncorrelated with the market that institutional investor can get their hands on?

 

Also I think the management is very important. Bentham IMF actually started way earlier than Burford and they are nowhere as successful as Burford. Why?

 

I wouldn’t say the management knows the industry prospect inside out so their selling 1/3 stake is a negative sign. I would say nobody knows the exact prospect of the industry 5-10 years out. The only way to you can get a sense of where this is going is to talk to the partners at Amlaw 100 firms. I don’t have access to those people unless I got to events such as litigation dispute week London 2019. However, consider the institutional investor who are giving tons of money to Burford. They do have access to those partners. Why are they putting so much money into these funds? Is it soely for diversification?

 

Again the reason Burford is bigger than everyone else is mainly due to figuring out the profitabilty of the whole raise a lot of capital when your trading significantly above book value strategy and not because they are more skilled underwriters than anyone else. Bentham IRRs are in the 80-90% range.  It is untrue that Burford didn't raise capital between 2010 and 2018.  In fact they rasied capital very ofter during that time (750m usd worth of capital actually during that time).  Raising capital is also the smart move in Burford's situation anyways.  You can go to the news section of their site and search "capital raises": https://www.burfordcapital.com/newsroom/?q=capital+raises&type=all .  Burford will be a profitable investment I think, but they don't have any magic that everyone else doesn't have.

 

[Jerry Capital]

"Taking money off the table is fine, but the timing is a signal to investors as they know the business' prospects (hopefully) inside out"

 

It may be a signal, or it may not be a signal. I guess we will know in the future if their sales were foreshadowing something. Do you think it was foreshadowing two of their major cases being revaluated upward in the last two months? Burfords CEO and CIO DO NOT KNOW THE PROSPECTS of specific cases, or the timing and because of this they dont give guidance. What they do know is the EXPECTED VALUE of their bets after multiple trials (like the amount of times a fair coin should land on "heads" versus "tails").

 

Their business is extremely lumpy throughout the two year average duration of their each portfolio. They would not know a good time to sell in any given month or even year, but have better insights looking further out into the future, with prudent underwriting of their bets.

 

"Regarding valuation: valuing Burford is certainly different than valuing most businesses. One essentially has to assume a forward IRR and the capital that generates the return. I.e., there is no way as an outsider/investor to triangulate the forward IRR."

 

This does not make any sense. Valuing Burford is the same as valuing any other cash generating business. You estimate the potential future free cash flows with a wide range of possibiliites, you apply your probablistic judgement to the infinite decision tree and then you decided if you are paying a reasonble valuation given the quality of the business and the growth potential. For some reason because this business is just slightly different than most businesses that people evaluate many are simply saying this company doesnt smell right, or something is off.

 

Well of course something is off and doesnt smell right... IT IS DIFFERENT. The fundamentals of finance do not disappear because of a smell...

 

I may lose money on Burford, and to be honest I kind of expect this to be an underperforming asset, but the expected value IMO is very high looking out five to 10 years. Size the position accordingly for the prospect of 30ish % downside with a multi-bagger potential.

 

 

 

[tol1]

"Taking money off the table is fine, but the timing is a signal to investors as they know the business' prospects (hopefully) inside out"

 

It may be a signal, or it may not be a signal. I guess we will know in the future if their sales were foreshadowing something. Do you think it was foreshadowing two of their major cases being revaluated upward in the last two months? Burfords CEO and CIO DO NOT KNOW THE PROSPECTS of specific cases, or the timing and because of this they dont give guidance. What they do know is the EXPECTED VALUE of their bets after multiple trials (like the amount of times a fair coin should land on "heads" versus "tails").

 

Their business is extremely lumpy throughout the two year average duration of their each portfolio. They would not know a good time to sell in any given month or even year, but have better insights looking further out into the future, with prudent underwriting of their bets.

 

"Regarding valuation: valuing Burford is certainly different than valuing most businesses. One essentially has to assume a forward IRR and the capital that generates the return. I.e., there is no way as an outsider/investor to triangulate the forward IRR."

 

This does not make any sense. Valuing Burford is the same as valuing any other cash generating business. You estimate the potential future free cash flows with a wide range of possibiliites, you apply your probablistic judgement to the infinite decision tree and then you decided if you are paying a reasonble valuation given the quality of the business and the growth potential. For some reason because this business is just slightly different than most businesses that people evaluate many are simply saying this company doesnt smell right, or something is off.

 

Well of course something is off and doesnt smell right... IT IS DIFFERENT. The fundamentals of finance do not disappear because of a smell...

 

I may lose money on Burford, and to be honest I kind of expect this to be an underperforming asset, but the expected value IMO is very high looking out five to 10 years. Size the position accordingly for the prospect of 30ish % downside with a multi-bagger potential.

 

 

Burford's cash generation cannot be estimated reliably by any means; how do you justify whether the forward IRR will be 10%, 20% etc? 

 

Again my question, as you stated the accounting has changed over time: how has it changed and what do the changes imply? Have you noticed the revenue recognition wording has changed? Why is that?

 

 

 

[cameronfen]

Burford's cash generation cannot be estimated reliably by any means; how do you justify whether the forward IRR will be 10%, 20% etc? 

 

Again my question, as you stated the accounting has changed over time and this seems to be they key argument of bears: how has it changed and what do the changes imply? Have you noticed the revenue recognition has changed? Why is that?

 

Can you explain what you mean by accounting changes?  How has revenue recognition changed?  I couldn't find that up thread, and I must have missed that looking at Burford. 

[tol1]

Burford's cash generation cannot be estimated reliably by any means; how do you justify whether the forward IRR will be 10%, 20% etc? 

 

Again my question, as you stated the accounting has changed over time and this seems to be they key argument of bears: how has it changed and what do the changes imply? Have you noticed the revenue recognition has changed? Why is that?

 

Can you explain what you mean by accounting changes?  How has revenue recognition changed?  I couldn't find that up thread, and I must have missed that looking at Burford.

 

 

Reading financial reports including the footnotes. I have not done the in-depth work, so DYOR please.

 

 

[Jerry Capital]

I believe the "bear" point re "Accounting" is about more of current earnings being unrealized gains flowing through the PnL... This is a natural progression as the business grows, which you can think through yourself.

 

The main takeaway with unrealized gains isn't that all unrealized gains are aggressive non cash earnings. Sometimes unrelized gains don't represent economic reality, sometimes they do.

 

They could sell all the Peterson case right now and they would have massive current year cash earnings, but they want to hold onto that asset to maturity, not optimize for short term cash flow smoothing.

 

[cameronfen]

Burford's cash generation cannot be estimated reliably by any means; how do you justify whether the forward IRR will be 10%, 20% etc? 

 

Again my question, as you stated the accounting has changed over time and this seems to be they key argument of bears: how has it changed and what do the changes imply? Have you noticed the revenue recognition has changed? Why is that?

 

Can you explain what you mean by accounting changes?  How has revenue recognition changed?  I couldn't find that up thread, and I must have missed that looking at Burford.

 

 

Reading financial reports including the footnotes. I have not done the in-depth work, so DYOR please.

 

I feel like that was unnecessarily snarky, but maybe that was unintentional.  You were the one who brought up revenue recognition changes and I'm curious what the facts are.  If you feel uncomfortable providing analysis that's fine.  Yes I can look it up and I will, but I figured since you brought it up to you, it would be nice if you explained what the revenue recognition changes have occurred. 

[tol1]

Burford's cash generation cannot be estimated reliably by any means; how do you justify whether the forward IRR will be 10%, 20% etc? 

 

Again my question, as you stated the accounting has changed over time and this seems to be they key argument of bears: how has it changed and what do the changes imply? Have you noticed the revenue recognition has changed? Why is that?

 

Can you explain what you mean by accounting changes?  How has revenue recognition changed?  I couldn't find that up thread, and I must have missed that looking at Burford.

 

 

Reading financial reports including the footnotes. I have not done the in-depth work, so DYOR please.

 

Right but you were the one who brought up revenue recognition changes.  So could you explain at least what you mean by that?

 

 

Read the financial reports across years, including the footnotes. You said that you looked at the company - without reading the reports? Maybe standards have changed over time, and hence the amendment.