Packer16 Posted April 17, 2014 Share Posted April 17, 2014 As to rules I initially buy either a 1% or 3% depending upon price then wait to see what happens. Sometimes appreciation will cause some positions to grow then if some fall further I will be buy more. I have bought up to 15% if the price is good and the business is a good business. I have used the Kelly formula to make sure my positions do not too big. What drives my buy and sell is valuation (the pitch that is thrown). I usually sell something and replace it something cheaper or safer. No science but mainly art here. As to short/mid term trading that is where is know I am below average so I am the wrong person to ask. Packer Link to comment Share on other sites More sharing options...
yadayada Posted April 17, 2014 Share Posted April 17, 2014 Packer, what are your thoughts on Emeco holdings? The mining equipment leasing company. And if you dont like it (if you looked at it), what is the main reason? Link to comment Share on other sites More sharing options...
Packer16 Posted April 17, 2014 Share Posted April 17, 2014 I still like it. The main risk here is a default but as they were able to refi recently that risk has been reduced quite a bit. Packer Link to comment Share on other sites More sharing options...
ukvalueinvestment Posted April 17, 2014 Share Posted April 17, 2014 Refi was expensive though - 10% coupon. I think it's probably cheap but risk/reward isn't as great as one might think. Link to comment Share on other sites More sharing options...
Packer16 Posted April 17, 2014 Share Posted April 17, 2014 If they refi the debt which they should be able to do once they lease up more equipment. They have written down the equipment in Indonesia to 0 and still sell at a nice discount to BV. The only way this will not go way and only up a little is if the mining business has a long downturn. From the looks of the some of the mining equipment manufacturers like Joy Global, I would bet against a long-term mining downturn. Packer Link to comment Share on other sites More sharing options...
yadayada Posted April 17, 2014 Share Posted April 17, 2014 oh and something that might be in your street is lombard risk. Software company that looks cheap already with 5 year average contracts providing software for banks. Havent made a thread yet because im still trying to buy it and it is a micro cap :) . Link to comment Share on other sites More sharing options...
cobafdek Posted April 17, 2014 Share Posted April 17, 2014 Thanks for the above, Packer. It confirms what I suspect, that value investors don't dwell much on "trading strategies" (if that's what we should call them). Your last statement was reminiscent of Jim Rogers in Jack Schwager's "Market Wizards" book on traders, where in the interview Rogers insists that Schwager is interviewing the wrong man because he is an awful trader (or words to that effect). Another question: what is your batting average? Using baseball parlance, your quoted 10-year track record is about 27% annually. Let's consider this statistic more akin to "slugging percentage" or something similar. But of the number of times you've pulled the trigger and bought a stock, what percentage do you get a positive return (anything from a measly 1% to a 10-bagger or more). Perhaps this stat could be called a batting average, or maybe on-base-percentage. Richard Pzena (in an interview from a book by Kazanjian, I think) says that even with all the extensive research he does, his batting average is about .600. So was your CAGR achieved with a similar "batting average." Link to comment Share on other sites More sharing options...
Daytripper Posted April 27, 2014 Share Posted April 27, 2014 Hey Packer and the rest of the board, I've read the contents of this topic 3 times now, and many thanks to all of you for your contributions. I have a couple of questions about ALSK. ALSK is one dirt-cheap stock, based either on earnings or pps. They also made a significant dent in LT debt last year. Any thoughts on why the insiders are continually selling their shares? Those shares cost them zilch, and they are giving them away for not much more than zilch. Am I wrong to assume that the in-flows from the AWN agreement could leave this company debt-free in 4 years, if management chose to pay-down the debt? My last question is this: I'd like to own some cable or telco in Alaska. If you didn't have either company in your holdings, would you prefer ALSK or GNCMA, and why (price/earnings/CF/EBITDA/management/industry). I'm leaning towards ALSK because I can see GNCMA eventually buying them out. Thank you. Link to comment Share on other sites More sharing options...
Packer16 Posted April 27, 2014 Share Posted April 27, 2014 I think between GNCMA and ALSK, GNCMA is the better positioned company. They have the big pipes and customers and control AWN. This even get better with the new FCC proposal of folks paying the cable cos for fast access and GNCMA are the fast access guys in Alaska. Although ALSK is cheaper by 0.2x EBITDA turns in my latest calc, I still like GNCMA because I think it should trade at a larger premium to ALSK and the other RLECs. I do not think the regulators will allow ALSK and GNCMA to merge as it would reduce competition significantly. Getting AWN approved was based upon having both AT&T and Verizon as wireless competitors. I don't know why they are selling you may want to see if they have a pre-planned selling program. If so this allows management to monetize some of their stock for living expenses and things like kids education. Packer Link to comment Share on other sites More sharing options...
gary17 Posted April 27, 2014 Share Posted April 27, 2014 another uncertainty with cable cos though is this whole aereo lawsuit - it's now gone to the supreme court... i agree it's nicely priced but i still think it has some risks attached to it... on the other hand...... AIQ seems quite attractively priced..... probably the same as GNCMA? But the 'long term picture' seems clearer than GNCMA.... that's just my take....... Gary Link to comment Share on other sites More sharing options...
muscleman Posted May 12, 2014 Share Posted May 12, 2014 Hi Packer, I've been looking into a few cable companies recently, but couldn't understand the industry. How do they upgrade their cable bandwidth? Is it possible to do so with very minimal capex, or do they have to dig up the ground and relay new cables? I think if they can increase the bandwidth significantly by minimal capex, then it will definitely provide a lot of FCF. Otherwise I wonder if they will have to keep spending a lot of capex to stay in the game? In addition, could you please tell me why P/E is not as great a valuation metrics as EV/EBITDA? I think one reason is that different companies have different leverage and that must be considered. The other factor is how frequent the cable companies must upgrade in order to compete? How would you factor that? Link to comment Share on other sites More sharing options...
Packer16 Posted May 13, 2014 Share Posted May 13, 2014 The cable cos do not have to dig up their lines but can put more powerful switches and routers at each end to enhance bandwidth. Some of telcos and cable overbuilders (RCN, etc.) have built out fiber connections to the curb and to the homes. This is the ultimate bandwidth solution but is only economical in dense urban areas. I think a good part of the cable profitability issue is more with increase access charges for content. P/E includes both amortization (not a real economic charge) and depreciation which may be greater than cap-ex if a build-out is completed. I like P/FCF better as it removes theses accounting distortions. EV/EBITDA allows for comparison across firms of different debt levels and also does not include the amortization distortion. Packer Link to comment Share on other sites More sharing options...
muscleman Posted May 15, 2014 Share Posted May 15, 2014 The cable cos do not have to dig up their lines but can put more powerful switches and routers at each end to enhance bandwidth. Some of telcos and cable overbuilders (RCN, etc.) have built out fiber connections to the curb and to the homes. This is the ultimate bandwidth solution but is only economical in dense urban areas. I think a good part of the cable profitability issue is more with increase access charges for content. P/E includes both amortization (not a real economic charge) and depreciation which may be greater than cap-ex if a build-out is completed. I like P/FCF better as it removes theses accounting distortions. EV/EBITDA allows for comparison across firms of different debt levels and also does not include the amortization distortion. Packer Thank you Packer. I heard some telecos are allowed to depreciate much faster than their actual towers' lifespan. Is this true for cable companies as well? The trick with P/FCF is how would you adjust the D and A and assign the proper level of D and A to it. It is certainly not zero. It is confusing to see why GNCMA would want to build fiber across Alaska. Isn't it better if they just upgrade their cables and squeeze more FCF for now? Link to comment Share on other sites More sharing options...
Kiltacular Posted May 16, 2014 Share Posted May 16, 2014 http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/inlot-at-intralot/180/ Packer...any interesting insights from the Intralot quarter? Link to comment Share on other sites More sharing options...
Packer16 Posted May 17, 2014 Share Posted May 17, 2014 Not very much. The increased revenues and EBITDA was either slightly up or down depending upon whether you include FX. Assuming FX over the LT is a net neutral, the results are slightly positive and the valuation still compelling (it is getting cheaper as we speak). I get a net FCF of Euro56m based upon the Intralot 2103 FCF less interest expense. There is some good upside if the 9.75% debt can get re-fied. It is selling at a premium to par so this could add Euro12m to FCF if it is re-fied at 6%. Packer Link to comment Share on other sites More sharing options...
WolfOfMainStreet Posted May 17, 2014 Share Posted May 17, 2014 Hello Packer, I'm not an investor yet (mainly because college is eating up a lot of time) but I'm still trying to learn as much as I can from the forum. I was just reading your comment on the 400% man post regarding VPRT and RRD. You said that when a business is having a lot of acquisitions or when it has a lot of intangibles you like to use FCF/(WC+FA) instead of ROE. I can see how ROE wouldn't apply in an acquisition situation because sometimes the SE changes (in stock swap deal) and the NI can be distorted due to different expenditures. In my notes I also defined the formula components as: FCF = Net operating CF - Capex - Dividends (received or paid?), WC = Total current assets - total current liabilities (should I take out liabilities?), and FA = buildings, real estate, equipment (PPE). Conceptually I see this as measuring how good the capital cash generating assets are at generating cash (Free cash flows). I also called it "Cash return on capital". Does that seem right to you? I'm only finishing my first accounting class in college so I apologize for any silly mistakes. Also, using the above definitions I applied the formula FCF/(WC+FA) to the TTM numbers of VPRT and RRD. VPRT came out to be 0.26 and RRD was 0.11. Maybe my numbers are wrong but it looks like VPRT is better at generating cash with its capital cash generating assets. When I took out liabilities from WC VPRT was 0.15 and RRD was 0.11. Thanks, Wolfie :D Link to comment Share on other sites More sharing options...
Packer16 Posted May 17, 2014 Share Posted May 17, 2014 This is my take on cash return on investment. For VPRT you have FCF (CFO less cap ex - you do not subtract dividends because they are discretionary) of 58m divided by fixed assets of 380m less negative WC of 46m (I think the number is closer to zero because some of this is non-recurring) so the cash RoI is 25%. For RRD the FCF is $483m divided by $1430m of PP&E plus WC of $670m (current assets - current liabilities + ST debt + excess cash (notice cash balance increased last year by about $600 million and the requirements for cash, A/R and inventory, did not increase)) so the cash return on investment is 23%. This is being generous for VPRT because some the current liability levels going forward are not going to be so large (so the investment will be more) so its RoI ls less than RRD's. Packer Link to comment Share on other sites More sharing options...
Kiltacular Posted May 18, 2014 Share Posted May 18, 2014 Not very much. The increased revenues and EBITDA was either slightly up or down depending upon whether you include FX. Assuming FX over the LT is a net neutral, the results are slightly positive and the valuation still compelling (it is getting cheaper as we speak). I get a net FCF of Euro56m based upon the Intralot 2103 FCF less interest expense. There is some good upside if the 9.75% debt can get re-fied. It is selling at a premium to par so this could add $12m to FCF if it is re-fied at 6%. Packer Packer, Thanks for update. Link to comment Share on other sites More sharing options...
mbrock77 Posted May 21, 2014 Share Posted May 21, 2014 Hi Packer, Given that you’ve mentioned LICT before, I was wondering if you had any thoughts their recently released Q4 and FY 2013 numbers and/or the sale of their DFT subsidiary? http://www.lictcorp.com/press.htm Revenue is still increasing, although EBITDA is down 6% yoy. Guidance is good, though, and they are looking for increased revs ($100m) and EBITDA ($41m) for 2014. Not sure how to think of this DFT sale and what they may do with the cash, however much it may be. Any thoughts? It looks like from some of the old filings that DFT may have been about a fifth or so of their total lines. -Max Link to comment Share on other sites More sharing options...
Packer16 Posted May 22, 2014 Share Posted May 22, 2014 They are moving along nicely. As to the DFT sale this may have been the best way to exit. It looks they have looked at other MBOS and rejected them I assuming on price. They could pay down some debt. I was a little disappointed about the FCC auction however they are price conscience which is nice. Packer Link to comment Share on other sites More sharing options...
mbrock77 Posted May 27, 2014 Share Posted May 27, 2014 Well, in case anyone cares, LICT released Q1 2014 numbers on Friday and they look pretty good. Both regulated and non-regulated revenue increased and, post-DFT sale and assuming 2014 guidance is accurate, debt is down to 1.1x EBITDA and EV/EBITDA is around 3x (at current share price). Book value increased 6% q/q and to $4,220. http://finance.yahoo.com/news/lict-corporation-reports-first-quarter-193500308.html Link to comment Share on other sites More sharing options...
JAllen Posted May 27, 2014 Share Posted May 27, 2014 Well, in case anyone cares, LICT released Q1 2014 numbers on Friday and they look pretty good. Both regulated and non-regulated revenue increased and, post-DFT sale and assuming 2014 guidance is accurate, debt is down to 1.1x EBITDA and EV/EBITDA is around 3x (at current share price). Book value increased 6% q/q and to $4,220. http://finance.yahoo.com/news/lict-corporation-reports-first-quarter-193500308.html Was thinking of starting an LICT thread after the great Q1 results (slowing ILEC voice line declines and regulated revenue increases) and 10% higher EBITDA projected for 2014. Here are some recent highlights: Q1 EBITDA growth of 15% (versus down last year this quarter) Like I mentioned, regulated revenue increase of 4.2% for Q1 - last year Q1 was a 2.7% decline so this isn't a seasonal thing. This is the most significant recent fact for us Sold DFT to original family - hoping for 6-7X EBITDA but use 5.5 for below calculations. We can't see Gabelli selling anything cheaply Proforma for DFT sale net debt of ~$44M - about 1X EBITDA like mbrock77 mentioned EV/FCF (EBITDA - CAPEX of $15M) of only 4.8X Buying back 3% of company each year - wish it was more Is the cheapest stock we know of on a current earnings basis Link to comment Share on other sites More sharing options...
mbrock77 Posted May 31, 2014 Share Posted May 31, 2014 Ok, last LICT post (at least on this board), I promise. Fyi, from the annual: During 2013, the company repurchased 639 shares, or 2.8% of our outstanding shares, at an average price of $2,378 per share. During 2014, given our decreased leverage, we are planning a more significant acquisition of shares. Link to comment Share on other sites More sharing options...
yadayada Posted June 1, 2014 Share Posted June 1, 2014 Packer what are your thoughts on Softbank, since they should fall within your area of expertise right? It seems that merger could be very interesting, together with the added bonus of the alibaba stake. +future growth potential of 4g service in terms of RPU Link to comment Share on other sites More sharing options...
Packer16 Posted June 2, 2014 Share Posted June 2, 2014 Softbank is a little bit off my sweet spot. It is growing and the valuation appears to reflect that so I have not delved much further than that. Packer Link to comment Share on other sites More sharing options...
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