PKX - POSCO

[xtreeq]

Looks like Charlie sold most of his Posco holding

2014 Q3 64,600 shares

2014 Q4 9,745 shares

 

http://www.sec.gov/Archives/edgar/data/783412/000143774914019877/xslForm13F_X01/rdgit110414.xml

http://www.sec.gov/Archives/edgar/data/783412/000143774915002111/xslForm13F_X01/rdgit012915.xml

[deadspace]

I don't think he liquidated Posco shares because of valuation or because the business has deteriorated so much.  I suspect he sold posco to buy BYD !!

[alwaysinvert]

Groundhog day.

[mani2304]

groundhog day ??

[Jurgis]

Hey guys, do you know that Charlie sold most of his Posco holding?

 

 

 

 

 

just kidding... move along, nothing to see here.

[karthikpm]

LOL

 

Hey guys, do you know that Charlie sold most of his Posco holding?

 

 

 

 

 

just kidding... move along, nothing to see here.

[RadMan24]

I guess he is referring to Hyundai.

 

That and Chinese steel.  http://www.bloomberg.com/news/articles/2015-02-08/china-s-steel-exports-rise-as-new-taxation-regime-yet-to-bite

 

Last year, exported almost 94 million tons, a 51% increase, and hasn't been slowing down. 

 

It's putting strain on global steel makers and Posco is doing its best to increase its revenue from higher value steel products. 

[txlaw]

Hey guys, you might be interested in this:

http://www.sec.gov/Archives/edgar/data/783412/000143774915002111/xslForm13F_X01/rdgit012915.xml

 

Guess who just dumped Posco stock!

[txlaw]

Jk, jk.

 

But, seriously, I didn't see any posts about the Economist article that just came out re: the possibility of a new steel alloy being able to replace titanium.  The new alloy -- the result of manipulating steel on a nanometer scale --  purportedly has the strength and the lightness of titanium alloys but costs a tenth as much. 

 

That research came out of Pohang University, and Posco is going to be testing the new material out.  I put the story up on Twitter, but didn't see anything here.

 

http://www.economist.com/news/science-and-technology/21642107-alloy-iron-and-aluminium-good-titanium-tenth

http://www.businessinsider.com/a-new-alloy-is-as-good-as-titanium-at-a-tenth-of-the-cost-2015-2 (for those who can't access the Economist)

http://www.nature.com/nature/journal/v518/n7537/full/nature14144.html (academic article)

 

Also, not sure if anyone posted anything about the South American lithium extraction tests.  But apparently the Demo Plant is actually producing lithium in excess of expectations.  Not bad.

 

Munger's been selling.  I've started buying.  Go figure!

[jason]

Lots of speculation as to what Munger has done after essentially closing out his position.  He may have purchased the security directly on the SK exchange or more shares in BYD.

 

It will be quite concerning is Pabrai and Spier have a large drop as well. 

[frommi]

Lots of speculation as to what Munger has done after essentially closing out his position.  He may have purchased the security directly on the SK exchange or more shares in BYD.

 

It will be quite concerning is Pabrai and Spier have a large drop as well.

 

Why should it matter? Do they have a crystal ball? The CEO has stated that they want to get to 2T Won earnings next year, thats a PE of ~11, for me thats now more worth than anything a "guru" may have done 3 month ago.

[jawn619]

I think everyone's freaking out a little too much about the sale. By selling, Munger is not saying that Posco is going to go straight down from here or predicting the price of steel dropping 25%. He's not an insider who knows some info that we all don't know. He once said that POSCO was more of a high tech business than a steel company and maybe he's changed his mind about that.

 

With that said, My perceived Margin of safety on this one is decreasing with time. I no longer think it has a huge moat when it comes to margins. These "one time" losses from write-downs and taxes every quarter are getting old. The lack of positive cash flow and declining book value also has me worried. It doesn't mean they can't turn it around be it seems like they have a lot of things working against them.

[jawn619]

Pabrai sold posco!

[rsmehta]

If it's a bit deal that one of four stocks munger owned was PKX, than it should be an equally big deal if he has disposed of the position.

 

-------------------------

 

    On the other hand,

 

      1. Posco has gone from 74 affiliate companies in 2012 to 42 affiliate companies today.

 

      2. They are increasing the % of premium steel they are producing each year.

 

      3. The feed costs for steel have all collapsed.

 

   

 

      I do think it would be a big mistake to sell right now.

 

-----------------------------

 

    On a strictly steel operational basis, I think guidance is low-balled.

     

[AzCactus]

Pabrai sold posco!

 

It would be VERY interesting to hear Pabrai's thoughts on the reasoning for selling Posco especially since he likely broke even or lost a little bit.  He held less than a year---so this seems quite puzzling.

 

 

[jason]

Lots of speculation as to what Munger has done after essentially closing out his position.  He may have purchased the security directly on the SK exchange or more shares in BYD.

 

It will be quite concerning is Pabrai and Spier have a large drop as well.

 

Why should it matter? Do they have a crystal ball? The CEO has stated that they want to get to 2T Won earnings next year, thats a PE of ~11, for me thats now more worth than anything a "guru" may have done 3 month ago.

 

Regardless of what the CEO "wants" it appears that certain individuals with excellent track records dont see that happening.  Pabrai certainly didnt make anything of significance off this trade. He likely lost money.

[KCLarkin]

Pabrai sold posco!

 

It would be VERY interesting to hear Pabrai's thoughts on the reasoning for selling Posco especially since he likely broke even or lost a little bit.  He held less than a year---so this seems quite puzzling.

 

It looks like he swapped Posco for Google. He has been raving about Google for a long time and it sold off in December.

[tylerdurden]

It seems to me Mohnish thought he'd have more potential with Google so he sold like 2/3 of Posco and bought Google with proceeds. Overall he is a guy that I admired and followed closely so far but this move does not really fit into what he preaches all the time (buy and hold for at least 3 years with the hope of doubling your money or not investing in IT companies because of fast changing competitive dynamics etc.). Of course everybody has the right to adapt his views into changing conditions but for me it is frustrating to see him going against his own principles. Anyways, I am a Posco investor and with or without Munger, Pabrai etc. I still believe in this stock's high potential for next several years...

[Max Alpha]

I couldn't get past long term head winds in the industry.

 

There is probably an opportunity to pick Posco up and make a few bucks on a few positive quarters before steel prices fully adjust to raw materials prices and margins are hit again.

 

I have been doing some reading and trying to get my head around the steel industry but some of the mid to long term trends in the industry are quite disconcerting.

 

I don't see a demand-side fix coming any time soon and there are major structural impediments to supply-side fixes such as consolidation and production cutbacks.

 

Several hundred million tonnes of capacity need to be removed from the market for sustainable profit margins by bringing utilisation up to a reasonable level. This is unlikely because of the high debt load in the sector and the need for many to maintain full load production, as well as the high level of state involvement and the political risks of destroying jobs.

 

China have mandated the removal of 80mt of capacity however this won't offset the growth in production capacity that has and is occurring.

 

The cost curve in steel has been flattened as the lower raw materials prices has reduced the costs for those without integrated Iron Ore operations and the high cost inflation i.e. labour cost increases have pulled up the low end of the curve.

 

This has the effect of increasing the sensitivity to movements in currency e.g. removing Posco from its position as the lowest cost producer due to the devaluation of the yen and rouble. It also reduces the likelihood of supply being removed from the market in response to lower prices.

 

It seems that historically steelmakers have not benefited that much from lower raw material prices as the spread between steel prices and raw material prices remains relatively constant. Although Posco have clear technological advantages they are not the only company looking increasingly to move away from the commodity products and into high margin niche products.

 

I am also concerned about consolidation occurring in isolated parts of the industry, e.g. China improving its competitive position without a major net reduction in capacity and placing additional pressure on producers in other geographies.

 

There may be an opportunity for Posco to divest non-core assets and capture sufficient market share in high margin products for the growing needs of China such as automotive components. I don't see a margin of safety in the price just yet however, I think it might look cheap on predicted FY15 numbers but I am not convinced the windfall from arbitraging low raw material prices won't close in FY16 as steel prices rationalise.

[TwoCitiesCapital]

Pabrai and Munger selling changes nothing -

 

1) The company's value relative to the book value of assets is unchanged and still appealing

2) The company is refocusing on it's core business, disposing of assets to generate cash, and moving to higher margin products to regain profitability

 

I don't mind holding a high quality company with extremely valuable assets valued at a 50% discount while I wait to see if #2 works out. I can't pretend to know why Pabrai and Munger sold, but I won't be joining them unless if something changes my thesis on the company's performance.

[RadMan24]

Pabrai and Munger selling changes nothing -

 

1) The companies value relative to the book value of assets is unchanged and still appealing

2) The company is refocusing on it's core business, disposing of assets to generate cash, and moving to higher margin products to regain profitability

 

I don't mind holding a high quality company with extremely valuable assets valued at a 50% discount while I wait to see if #2 works out. I can't pretend to know why Pabrai and Munger sold, but I won't be joining them unless if something changes my thesis on the company's performance.

 

Very true, they could easily have found better ideas. Guy Spier recently touted Posco as recently as September.  Besides Chinese competition, I have yet to find anything material to give a warning sign. 

 

They did sell Posco E&C to Saudi Fund for 1.5 trillion won ($1.36 billion), a 38 percent stake

http://in.reuters.com/article/2015/02/13/posco-saudi-idINL4N0VN01720150213

[txlaw]

I've been going through all the usual suspects' 13-F disclosures.

 

With respect to Pabrai, Munger, and PKX, the more I think about it, the more likely it seems they swapped ADRs for ordinary shares traded in Korea.  If POSCO does end up listing or spinning off subsidiaries, these guys will likely want the company stakes rather than the cash that I think you'd get with the ADRs. Also, it's possible that there was a favorable ADR arbitrage moment at some point in the last 6 months, given the shares' trading down to financial crisis price levels, which would minimize the tax consequences of initiating a swap.

 

I'm hoping that someone will ask Munger if his thoughts have changed on POSCO at the DJCO meeting.

[afloridian]

There's some additional info in the 10Q/Ks.  Differencing the two most recent reports:

 

Also, as of September 30, 2014, the Company’s investments were concentrated in just six companies and included one investment based in a foreign currency.

 

changed to

 

As of December 31, 2014, the investments were concentrated in just seven companies.

[tylerdurden]

I've been going through all the usual suspects' 13-F disclosures.

 

With respect to Pabrai, Munger, and PKX, the more I think about it, the more likely it seems they swapped ADRs for ordinary shares traded in Korea.  If POSCO does end up listing or spinning off subsidiaries, these guys will likely want the company stakes rather than the cash that I think you'd get with the ADRs. Also, it's possible that there was a favorable ADR arbitrage moment at some point in the last 6 months, given the shares' trading down to financial crisis price levels, which would minimize the tax consequences of initiating a swap.

 

I'm hoping that someone will ask Munger if his thoughts have changed on POSCO at the DJCO meeting.

 

To me, if there was a solid reason to change adrs into Korean shares, they would have done that change with all posco adrs. As of year end both had some adrs on their portfolios. Mohnish does not seem to me a guy who would try to arbitrage between adrs and Korean shares; he is more of a big picture guy I think but who knows. My feeling is that he just simply sold posco and bought Google with the proceeds. Perhaps Munger gave him a tip or something  :P

[txlaw]

I've been going through all the usual suspects' 13-F disclosures.

 

With respect to Pabrai, Munger, and PKX, the more I think about it, the more likely it seems they swapped ADRs for ordinary shares traded in Korea.  If POSCO does end up listing or spinning off subsidiaries, these guys will likely want the company stakes rather than the cash that I think you'd get with the ADRs. Also, it's possible that there was a favorable ADR arbitrage moment at some point in the last 6 months, given the shares' trading down to financial crisis price levels, which would minimize the tax consequences of initiating a swap.

 

I'm hoping that someone will ask Munger if his thoughts have changed on POSCO at the DJCO meeting.

 

To me, if there was a solid reason to change adrs into Korean shares, they would have done that change with all posco adrs. As of year end both had some adrs on their portfolios. Mohnish does not seem to me a guy who would try to arbitrage between adrs and Korean shares; he is more of a big picture guy I think but who knows. My feeling is that he just simply sold posco and bought Google with the proceeds. Perhaps Munger gave him a tip or something  :P

 

Well, when I say ADR arbitrage, I'm really talking about taking advantage of price discrepancies between the ADR and local shares on a long term basis.  Apparently, it's quite difficult to do a traditional arbitrage with ADRs.  (See Damodaran presentation on arbitrage, at 38, http://people.stern.nyu.edu/adamodar/pdfiles/invphiloh/arbitrage.pdf)

 

It is a bit weird to see both Munger and Pabrai still holding a small amount of ADRs.  Who knows, though, the next filings might show them completely out of the ADRs.  I find it difficult to believe that both Munger and Pabrai had such drastic changes in view on POSCO.  WEB even once said that he should have bought more shares during the financial crisis.  It will really be interesting to see if WEB's changed his views and if not, whether he has added to the position.

 

I think it's safe and cheap (a la Martin Whitman), and if those guys don't, there's a disagreement of opinion.