Ask Packer - No Seriously, Ask Him Anything (AHA)!

[Packer16]

That is a great primer.  There also are sections of The Five Rules of Successful Stock Investing which talk about the competitive landscape (moats) in Telco. 

 

Packer

[tombgrt]

That is a great primer.  There also are sections of The Five Rules of Successful Stock Investing which talk about the competitive landscape (moats) in Telco. 

 

Packer

 

 

Yes. It's only a few pages long but does a decent job giving the basics I guess.

 

I also have 2 older related primers. See attachments.

 

Broadband_Wireless_Industry_Primer_-_Near_Earth_LLC_2007.pdf

Global_Telecom_Primer_-_Morgan_Stanley_1999.pdf

[Packer16]

Some other nice materials.  I remember reading the Morgan Stanley piece back in TMT boom days.

 

Packer

[yadayada]

What is a good start to learn the telecom industry? I am looking into GNCMA, but feel no where near qualified to make a judgement so far. I am reading Malone's book, cable cowboys. Just start with reading 10k's? Found a book on amazon, but it seemed v technical, and had 800 pages :) . So that seems a bit too much for just one stock pick.

 

I've got an industry primer from 2007.

https://drive.google.com/file/d/0B7ZQujnVzj_9ZDNoWXZsbi16VzA/edit?usp=sharing

 

I've found it useful to Google "telecom industry primer" or whichever sector you're looking for. Sometimes it's easier to search by filetype in google as pdf.

Some are outdated like one from 1999.

 

There was one site that had 99 primers (a torrent file though)

thx, v helpfull. Didnt think of that.

[phil_Buffett]

packer would be interesting to hear from you books you can recommend.  :)

[fareastwarriors]

What is a good start to learn the telecom industry? I am looking into GNCMA, but feel no where near qualified to make a judgement so far. I am reading Malone's book, cable cowboys. Just start with reading 10k's? Found a book on amazon, but it seemed v technical, and had 800 pages :) . So that seems a bit too much for just one stock pick.

 

I've got an industry primer from 2007.

https://drive.google.com/file/d/0B7ZQujnVzj_9ZDNoWXZsbi16VzA/edit?usp=sharing

 

I've found it useful to Google "telecom industry primer" or whichever sector you're looking for. Sometimes it's easier to search by filetype in google as pdf.

Some are outdated like one from 1999.

 

There was one site that had 99 primers (a torrent file though)

thx, v helpfull. Didnt think of that.

 

 

Not sure how useful this is but I have a primer on Banking.

 

Banking_101_Handbook_DB_May2011.pdf

[Packer16]

The latest book I read and am giving to the folks who work for me for Xmas is "The Manual of Ideas".  The other greats are "The Most Important Thing Illuminated", "Intelligent Investor" w/o Jason Zwieg's notes, The Little Book the Builds Wealth, How to Make Money in Junk Bonds, The Little Book of Behavioral Finance and You Can Be a Stock Market Genius.  There are also nice histories like The Great Wave, Devil Take the Hindmost, Benjamin Graham on Investing and The Crash and Its Aftermath.

 

Packer

 

 

[one-foot-hurdles]

What is a good start to learn the telecom industry? I am looking into GNCMA, but feel no where near qualified to make a judgement so far. I am reading Malone's book, cable cowboys. Just start with reading 10k's? Found a book on amazon, but it seemed v technical, and had 800 pages :) . So that seems a bit too much for just one stock pick.

 

I've got an industry primer from 2007.

https://drive.google.com/file/d/0B7ZQujnVzj_9ZDNoWXZsbi16VzA/edit?usp=sharing

 

I've found it useful to Google "telecom industry primer" or whichever sector you're looking for. Sometimes it's easier to search by filetype in google as pdf.

Some are outdated like one from 1999.

 

There was one site that had 99 primers (a torrent file though)

thx, v helpfull. Didnt think of that.

 

 

Not sure how useful this is but I have a primer  for Banking.

 

tx fareastwarriors

[MrB]

What is a good start to learn the telecom industry? I am looking into GNCMA, but feel no where near qualified to make a judgement so far. I am reading Malone's book, cable cowboys. Just start with reading 10k's? Found a book on amazon, but it seemed v technical, and had 800 pages :) . So that seems a bit too much for just one stock pick.

 

I've got an industry primer from 2007.

https://drive.google.com/file/d/0B7ZQujnVzj_9ZDNoWXZsbi16VzA/edit?usp=sharing

 

I've found it useful to Google "telecom industry primer" or whichever sector you're looking for. Sometimes it's easier to search by filetype in google as pdf.

Some are outdated like one from 1999.

 

There was one site that had 99 primers (a torrent file though)

thx, v helpfull. Didnt think of that.

 

 

Not sure how useful this is but I have a primer  for Banking.

 

tx fareastwarriors

 

http://equity-research.com/reports/

[phil_Buffett]

The latest book I read and am giving to the folks who work for me for Xmas is "The Manual of Ideas".  The other greats are "The Most Important Thing Illuminated", "Intelligent Investor" w/o Jason Zwieg's notes, The Little Book the Builds Wealth, How to Make Money in Junk Bonds, The Little Book of Behavioral Finance and You Can Be a Stock Market Genius.  There are also nice histories like The Great Wave, Devil Take the Hindmost, Benjamin Graham on Investing and The Crash and Its Aftermath.

 

Packer

 

 

 

thanks packer  :) :)

[Guest valueInv]

What is a good start to learn the telecom industry? I am looking into GNCMA, but feel no where near qualified to make a judgement so far. I am reading Malone's book, cable cowboys. Just start with reading 10k's? Found a book on amazon, but it seemed v technical, and had 800 pages :) . So that seems a bit too much for just one stock pick.

 

I've got an industry primer from 2007.

https://drive.google.com/file/d/0B7ZQujnVzj_9ZDNoWXZsbi16VzA/edit?usp=sharing

 

I've found it useful to Google "telecom industry primer" or whichever sector you're looking for. Sometimes it's easier to search by filetype in google as pdf.

Some are outdated like one from 1999.

 

There was one site that had 99 primers (a torrent file though)

thx, v helpfull. Didnt think of that.

 

 

Not sure how useful this is but I have a primer  for Banking.

 

tx fareastwarriors

 

http://equity-research.com/reports/

 

Nice!

[yadayada]

What is a good start to learn the telecom industry? I am looking into GNCMA, but feel no where near qualified to make a judgement so far. I am reading Malone's book, cable cowboys. Just start with reading 10k's? Found a book on amazon, but it seemed v technical, and had 800 pages :) . So that seems a bit too much for just one stock pick.

 

I've got an industry primer from 2007.

https://drive.google.com/file/d/0B7ZQujnVzj_9ZDNoWXZsbi16VzA/edit?usp=sharing

 

I've found it useful to Google "telecom industry primer" or whichever sector you're looking for. Sometimes it's easier to search by filetype in google as pdf.

Some are outdated like one from 1999.

 

There was one site that had 99 primers (a torrent file though)

thx, v helpfull. Didnt think of that.

 

 

Not sure how useful this is but I have a primer  for Banking.

 

tx fareastwarriors

 

http://equity-research.com/reports/

http://www.youtube.com/watch?v=zuognicaN04

[wknecht]

Hi Packer - Thanks for taking the time to answer so many questions on this thread.

 

I was wondering, do you still own LICT?

 

I started a position in this recently, but reading through the FTR thread has raised my skepticism quite a bit. Granted, LICT has less debt, and is not increasing leverage by paying huge dividends like FTR. Reading the LICT reports though, I found myself making similar arguments as those on the FTR thread. But LICT seems to be doing a pretty decent job of stabalizing revenue by diversifying away from wirelines. So I guess I'm wondering how they've performed as a business relative to your expectations and competitors, as well as your thoughts on their prospects of continuing to replace wireline revenue?

[Packer16]

I do.  They have done a good job stemming the decline it is about 0% now on a revenue comp basis.  The only other competitors with positive revenue comps are ALSK, GNCMA and HCOM.  So on a relative basis they are doing well.  However the 3Q numbers versus the YE 2012 numbers do show a deterioration from an increase in revenue to flat and from a flat EBITDA to a declining EBITDA of 8% annually.

 

It sells for less than 3x EBITDA but this is really a private company where the exit event timeframe is unknown.  I have not increased my position due to its illiquid nature, the lack of revenue growth versus other comps and finding other more liquid names to invest in.  If your timeframe is LT (over 5 years+) this will be a good investment (if at some point they can increase revenues) but if you need any liquidity I would find something else.

 

Packer   

[wknecht]

Thanks I see.

 

Another very general question - how much do the USF and ICC reforms concern you from the perspective of LICT?  There doesn't seem to be too large of an effect so far ($1.4mm in revenue for 9q ended 9/30), but the implementation period is pretty extended. Do you hear first hand perspectives around the impact of these on RLECs generally?

[SwedishValue]

Packer, I am very impressed with your approach and long-term returns.

 

I was wondering how much of your portfolio is SHLD and how do you go about estimating intrinsic value in the business?

 

Greetings from Sweden.

[tombgrt]

I think he meant he owns AIQ, which is like SHLD in terms of volatility.

[Packer16]

Yes I do own AIQ, I don't own SHLD except through ownership of Fairholme.  I really don't understand SHLD and how the RE value can be realized in part because I have never seen anyone in the past do this.

 

Packer

[Packer16]

As to USF and ICC, I have seen declines with all RLECs.  I don't have first hand knowledge but in my mind the winners will be the ones who can grow the new services business (internet, TV, wireless, broadband) faster than the USF and ICC revenue declines.  The ones who appear to be doing this are ALSK, GNCMA and HCOM and possibly LICT and FRP if they can go from negative comps to positive.

 

 

Packer

[gary17]

Hi Packer

Not sure if this question has been asked before.... for certain type of capital intensive businesses you've indicated that it's more appropriate to look at EBITDA instead of EPS... so in this case is there an equivalent of "ROE" figure that you look at to measure profitability... and if you think it's worth looking at this figure for the past several years. Thanks!

[racemize]

Hi Packer, you have kind of answered this already, but I was hoping for some more specific numbers, if you don't mind:

 

1) How often are you wrong? (e.g., thesis was not correct, and had to exit at break-even or loss)

2) How often are you wrong and it causes significant loss, e.g., >50% permanent loss?

3) How volatile are is your yearly performance (e.g., lows and highs)?

 

[Packer16]

As for alternative RoE factor, I like FCF (Firm)/(FA+NWC) or EBITDA/(FA + NWC).  The former when the firm is not investment mode and the later when it is.  I think the cash flow based return on assets formulas are more appropriate than the earnings formulas when you are dealing with high cash flow types of businesses. 

 

If you look at the radio/TV firms they will have very low RoEs but high FCF/(FA+NWC) because they generate alot of cash on small asset base.  These are hidden the actual earnings due to amortization expenses.

 

Packer

[gary17]

Thanks - much appreciated.

Part of the reason I ask is I was talking to a friend of mine whose family runs a publicly traded company... and to avoid their distributors thinking that they are too profitable, they get the company accountants to use different accounting rules to make the EPS / ROE smaller - that led me to think about EBITDA you've been telling us about on this board...  sure enough, they hide it through D and A.

 

I assume FA = fixed asset and NWC = net working capital.

 

cheers

[LC]

That is fascinating garychen17. Another interesting thing to look out for, thanks for that information.

[Packer16]

I make alot of mistakes.  As to losses, I think the best way to think about them is pre-2008/2008 losses and post 2008.  The pre-2008/2008 losses where primarily in subprime finance, options on sub-prime finance and small oil and gas companies.  I guess I was the guy who ran though a dynamite factory with a match and only got a burned hand.  What preserved my capital at the time was Fairfax, Berkshire, Western Sizzlin and some larger RE finance firms like Redwood.  I was down 51.4% in 2008.  My loss rate (losing positions) was pretty high close to 100% on sub-prime finance and oil and gas.

 

After 2009, the losses can from LEAP ideas that did not work out (FTR, NRG and EXC calls), LNET (30% loss), FRE/FNM Preferreds (this was a panic mistake - now I am in at higher price), Oi (got out with a 3% loss) and Oil and Gas (I recently sold SD to buy a better prospect).  I did not invest much in the LEAP calls (they were a 100% loss) however I did take about a 25% loss on about a 3% position (SD) and a loss on and a 50% on about a 4% position in the FRE/FNM pfds.  Note that these were losses generated in bull market and if the market declines I expect much higher losses.  So lets say 4 errors out of maybe 25 top holdings so that is about 16% - but this is in a bull market.  Only one had a loss of greater than 50% (FRE/FNM preferreds). 

 

As to volatility here are my returns since 2003:

 

2003        58.4%

2004        30.1%

2005        20.4%

2006        49.3%

2007          56.2%

2008          -51.4% (ouch)

2009          108.9%

2010          26.7%

2011          8.3%

2012          63.6%

2013 (YTD) 140.3%

 

It looks alot more like Munger's/Guerin's partnership returns than Buffett's in term of volatility.

 

Packer