What are you buying today?

[CorpRaider]

Started buying a starter position in LLOY at 30p today. Trading at nearly half of tangible book value now. Its dividend and buy back program has been suspended which has shaken out a lot of the income investors and removed some of the positive momentum. They have already taken a lump of covid related impairments in their Q1 results with more to follow in Q2 - even at that they will still be very well capitalised. Of all the British lenders, they would have one of the most conservative books and are probably akin to the likes of a WFC. If we get to a scenario where Lloyds is in trouble, that is the day when most of the rest of the UK banking system is in even worse shape and we're looking at mass nationalisation like we saw in 2007. If Lloyds can weather this crisis like I think it can, then it's trading about about 5-6x normalised earnings. My guess is that it could be a double in 2 years at these prices.

 

I was/am of the same opinion about the superior business mix/deposit base (following the Wells comparison) and agree they have done a good job simplifying and resisting questions about di"worsifying" into other businesses and continental Europe (so far).  I was mulling it over last year and listened to an appearance by the CEO and maybe it was the language barrier, but I was really turned off.  I think he was also really hawking insurance and/or investment management alliance?  I just put it in the no basket and now I can't exactly remember why.  I see he is stepping down so maybe time to take another look, but IDK; looks like new CEO is coming from Centerview Partners? Yikes.  Not sure what that means for the clean, simple banking business mix.

[rb]

LLOY is a wonderful customer focused retail bank in the mold of WFC and TD. Also one of the few FIs that didn't need a bailout in 2008. The reason i wouldn't buy it is the level household debt in the UK. I think that represents a large systemic risk.

[Lance]

Added to BTLCY and ESRT.

 

Thanks

Lance

[Ross812]

I bought a 10% position in WFC when earnings came out this week. I have been pretty active in selling puts on WFC (and now covered calls) and KMI which I think are two of the cheapest companies on the market right now. For the last few years I have been in fixed income using the proceeds to by long dated SPX options. With the VIX so high I have switched to selling options instead.

[Gregmal]

rebought a small position in BAM, added to ESRT, and added a little to ILMN.

 

Why did you sell BAM in the first place?

 

I sold along with BX towards the end of last year because I just didnt like the risk/reward anymore. For myself, I'll never be the guy to find the accounting errors or shenanigans with companies of this type of complexity, so position sizing and awareness of where we are at least perceived to be, in the cycle is important.

I still find the risk to be quite high, but I think we are starting to get a decent idea of where/how the current situation can play out, and without question, players like BAM, SPG, BX have both the expertise, and finial strength, to become large benefactors of such opportunities. So I'd say the risk is probably the same, maybe even a bit higher than 6 months ago, but at the same time, the opportunity for reward over a medium duration time horizon has increased significantly.

[John Hjorth]

rebought a small position in BAM, added to ESRT, and added a little to ILMN.

 

Why did you sell BAM in the first place?

 

I sold along with BX towards the end of last year because I just didnt like the risk/reward anymore. For myself, I'll never be the guy to find the accounting errors or shenanigans with companies of this type of complexity, so position sizing and awareness of where we are at least perceived to be, in the cycle is important.

I still find the risk to be quite high, but I think we are starting to get a decent idea of where/how the current situation can play out, and without question, players like BAM, SPG, BX have both the expertise, and finial strength, to become large benefactors of such opportunities. So I'd say the risk is probably the same, maybe even a bit higher than 6 months ago, but at the same time, the opportunity for reward over a medium duration time horizon has increased significantly.

 

Absolutely awesome post, Greg,

 

Food for thought.

[John Hjorth]

LLOY is a wonderful customer focused retail bank in the mold of WFC and TD. Also one of the few FIs that didn't need a bailout in 2008. The reason i wouldn't buy it is he level household debt in the UK. I think that represents a large systemic risk.

 

I've searched the Investment Ideas forum, and TD does not pop up in my searches. Why is it so? [i remember posts from CorpRaider and Uccmal about Canadian banks here on CoBF.]

[Gregmal]

rebought a small position in BAM, added to ESRT, and added a little to ILMN.

 

Why did you sell BAM in the first place?

 

I sold along with BX towards the end of last year because I just didnt like the risk/reward anymore. For myself, I'll never be the guy to find the accounting errors or shenanigans with companies of this type of complexity, so position sizing and awareness of where we are at least perceived to be, in the cycle is important.

I still find the risk to be quite high, but I think we are starting to get a decent idea of where/how the current situation can play out, and without question, players like BAM, SPG, BX have both the expertise, and finial strength, to become large benefactors of such opportunities. So I'd say the risk is probably the same, maybe even a bit higher than 6 months ago, but at the same time, the opportunity for reward over a medium duration time horizon has increased significantly.

 

Absolutely awesome post, Greg,

 

Food for thought.

 

6 months ago we had predators, pretend predators, and even some prey out hunting for scant fish. The tide has gone out quite a bit, and even some predators currently sport flesh wounds. The prey is superfluous, and in some aspects, the nets are closing in, forcing those vulnerable into their demise, one way or another. Not a bad time to bet on the ultimate apex predators. Just my opinion of course. My industry contacts seem to think that valuations may improve somewhat over the next 6 months, but the worst is yet to come in terms of companies "fighting the good fight", as their will to fight diminishes and they ultimately yield to the forces of nature, figuring energy is best spend on new ventures. So if I'm BX or BAM.... well, come to papa! We already know they are ruthless and predatory, and these are the environments in which they thrive.

[valueinvestor]

I agree - they’re sharpening their teeth.

[CorpRaider]

LLOY is a wonderful customer focused retail bank in the mold of WFC and TD. Also one of the few FIs that didn't need a bailout in 2008. The reason i wouldn't buy it is he level household debt in the UK. I think that represents a large systemic risk.

 

I've searched the Investment Ideas forum, and TD does not pop up in my searches. Why is it so? [i remember posts from CorpRaider and Uccmal about Canadian banks here on CoBF.]

 

Good question.  If I ever buy any I will post.  Canadian banks and rails sure are fine bidnesses.

[fareastwarriors]

LLOY is a wonderful customer focused retail bank in the mold of WFC and TD. Also one of the few FIs that didn't need a bailout in 2008. The reason i wouldn't buy it is he level household debt in the UK. I think that represents a large systemic risk.

 

I've searched the Investment Ideas forum, and TD does not pop up in my searches. Why is it so? [i remember posts from CorpRaider and Uccmal about Canadian banks here on CoBF.]

 

Good question.  If I ever buy any I will post.  Canadian banks and rails sure are fine bidnesses.

 

At a high level, which Canadian bank is most conservative ?

[longlake95]

BNS, just based ontheir leverage compared to the others.

 

 

[rb]

LLOY is a wonderful customer focused retail bank in the mold of WFC and TD. Also one of the few FIs that didn't need a bailout in 2008. The reason i wouldn't buy it is he level household debt in the UK. I think that represents a large systemic risk.

 

I've searched the Investment Ideas forum, and TD does not pop up in my searches. Why is it so? [i remember posts from CorpRaider and Uccmal about Canadian banks here on CoBF.]

I honestly couldn't tell you John. Maybe because it's just a really boring Canadian company that just keeps making money but nothing really exciting is happening. It's been a long time holding of mine and I've made a lot of money with them going from the #5 Canadian bank to the #2 Canadian bank (very close to #1). Mind you during this time they had a Jamie level CEO. They're not just a bank, but a monster financial institution. #2 investment bank in Canada, #1 or #2 P&C insurer in Canada (think GEICO). #1 or #2 asset manager in Canada.

 

As I've mentioned on another thread I've stopped adding to it due to several reasosn:

1. The level of Canadian household debt - similar worries as they regard to LLOY as well

2. A lot of other banks have copied its policies/model.

3. They have developed massive operations in the States. I think they are the #6 bank in the US. But as a Canadian bank they are premium priced. So it doesn't make as much sense to me to pay Canadian bank multiples for US bank operations when I can just buy WFC and BAC at (much?) lower valuations. [i actually remember meeting with a Danish board member in Toronto near the TD headquarters (they have a massive office campus) and he was confused about all the TD signs around. He was convinced it was an American bank. I had to explain to him that TD stands for Toronto Dominion.]

 

All that not-withstanding it is still a great company and still one one of my largest positions. But probably one with lower forward potential than it had back in the day.

[John Hjorth]

Thank you for the explanation and elaboration, rb,

 

-Great "flyer" & "teaser"!

 

- I'm personally quite heavy [still!] in three of the four major US Banks [JPM, BAC & C]. BAC has been a great investment for me so far over many years, all the way back to "the early days" for me. [i'm now almost 8 years into this non-zero sum game called investing.] I have had a good experience over some years with WFC, too, but exited about one year after the account scandal surfaced [i think it was about about one year, I haven't checked it while posting this] - I couldn't stomach the hair on WFC back then.

 

That basket of three US banks is still a large position for me - and then I have to add on a look-through basis what I own indirectly through my monster position in Berkshire. Some days I actually think I must be out of my friggin' mind doing this. I can't stomach more shares in US banks as of now because of the overall actual situation in USA.

 

I think I'll start taking a look at all the major Canadian banks on a cursory level, trying to take some notes about them individually, and get some understanding of their history and evolution individually, plus doing some reading to understand on overall level the Canadian economy.

 

It's a great exercise to study great companies, whether one engage in them or not [, based on price etc.].

[Gregmal]

Started some MRTN, and bought a few more BRK as I had cash freed up from other sales.

[jschembs]

Started some MRTN, and bought a few more BRK as I had cash freed up from other sales.

 

Curious what interests you about MRTN? TL trucking is a pretty rough and tumble industry.

[Spekulatius]

Started some MRTN, and bought a few more BRK as I had cash freed up from other sales.

 

Curious what interests you about MRTN? TL trucking is a pretty rough and tumble industry.

 

Probably not as rough as owning shopping malls and NYC office space nowadays.

 

FWIW, I added a bit $LEVI today.

[Gregmal]

Started some MRTN, and bought a few more BRK as I had cash freed up from other sales.

 

Curious what interests you about MRTN? TL trucking is a pretty rough and tumble industry.

 

MRTN just posted outstanding results, and after following(like with a lot of names) for some time decided to use some cash to put it in the portfolio. They are incredibly well managed, have an impenetrable balance sheet, have refined the business to be primarily temperature controlled transport rather than competing for everything under the sun. As such they've been able to hold reasonable leverage on pricing and grow revenues much more consistently than the "peers". Theyre basically a trucking company that doesnt really have the problems most trucking companies have, and this has historically been the case.

[lnofeisone]

Pure gamble - OPK 6.5 calendar July31/Aug7th. OPK earnigns are Aug 5th. Looking to short it otherwise.

[Broeb22]

Started some MRTN, and bought a few more BRK as I had cash freed up from other sales.

 

Curious what interests you about MRTN? TL trucking is a pretty rough and tumble industry.

 

MRTN just posted outstanding results, and after following(like with a lot of names) for some time decided to use some cash to put it in the portfolio. They are incredibly well managed, have an impenetrable balance sheet, have refined the business to be primarily temperature controlled transport rather than competing for everything under the sun. As such they've been able to hold reasonable leverage on pricing and grow revenues much more consistently than the "peers". Theyre basically a trucking company that doesnt really have the problems most trucking companies have, and this has historically been the case.

 

Someone recently blogged on ODFL and how despite being in what is typically a "commoditized" business have earned very good returns on capital. Marten doesn't seem to earn returns on capital or achieve operating ratios similar to ODFL. Do you think their business is improving so that returns on capital and operating ratio continue to improve?

 

[KJP]

Started some MRTN, and bought a few more BRK as I had cash freed up from other sales.

 

Curious what interests you about MRTN? TL trucking is a pretty rough and tumble industry.

 

MRTN just posted outstanding results, and after following(like with a lot of names) for some time decided to use some cash to put it in the portfolio. They are incredibly well managed, have an impenetrable balance sheet, have refined the business to be primarily temperature controlled transport rather than competing for everything under the sun. As such they've been able to hold reasonable leverage on pricing and grow revenues much more consistently than the "peers". Theyre basically a trucking company that doesnt really have the problems most trucking companies have, and this has historically been the case.

 

Someone recently blogged on ODFL and how despite being in what is typically a "commoditized" business have earned very good returns on capital. Marten doesn't seem to earn returns on capital or achieve operating ratios similar to ODFL. Do you think their business is improving so that returns on capital and operating ratio continue to improve?

 

Marten and Old Dominion are not in the same segment of the industry, are they?  Old Dominion is primarily a "less than truckload" (LTL) shipper.  In that model, route density (i.e., local economies of scale) are key.  If you routes are denser, and thus your trucks are more full, than your competitors, then you will win.  I believe Marten, on the other hand, is much more of a specialized (temperature controlled) truckload shipper.  Truckload shippers can't exploit the benefits of route density in the same way as LTL shippers, so their potential competitive advantages, even when well managed, do not appear to be as large as the potential competitive advantages of the LTL model. 

[Gregmal]

Yea Marten is much more focused and if anything, a potential tuck in acquisition for an ODFL type. They've spent years shifting away from long haul and just in general, have the whole owner operator thing going on, which explains the consistency of their results over the years and aligns interests in a business that can definitely be challenging.

[Spekulatius]

Started some MRTN, and bought a few more BRK as I had cash freed up from other sales.

 

Curious what interests you about MRTN? TL trucking is a pretty rough and tumble industry.

 

MRTN just posted outstanding results, and after following(like with a lot of names) for some time decided to use some cash to put it in the portfolio. They are incredibly well managed, have an impenetrable balance sheet, have refined the business to be primarily temperature controlled transport rather than competing for everything under the sun. As such they've been able to hold reasonable leverage on pricing and grow revenues much more consistently than the "peers". Theyre basically a trucking company that doesnt really have the problems most trucking companies have, and this has historically been the case.

 

Someone recently blogged on ODFL and how despite being in what is typically a "commoditized" business have earned very good returns on capital. Marten doesn't seem to earn returns on capital or achieve operating ratios similar to ODFL. Do you think their business is improving so that returns on capital and operating ratio continue to improve?

 

ODFL is the class act in the industry. I owned it for a bit in 2007 and then sold because of the economic unrest with the upcoming recession back then. I wish I just stashed it in a coffee can. Today the trucking stocks are much much more expensive.

 

Edit, back to the topic, I bought some WFCF today. For whatever reason, there was a very motivated seller who hit every bid.

[kab60]

Ulta Beauty, Cambria Automobiles

[KJP]

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