What are you buying today?

[plato1976]

why? sprint can still go to 0, and their recent VC investment may turn out to be a disaster?

 

Softbank

[Voodooking]

Idorsia

 

Altaba

 

DXC Technology

 

Cabela's Inc

 

Berkshire Hathaway B

 

Tesla

 

Solar Company SA

[Nebraska]

why? sprint can still go to 0, and their recent VC investment may turn out to be a disaster?

 

Softbank

 

Why not? Everything has a chance to go to zero.

[John Hjorth]

why? sprint can still go to 0, and their recent VC investment may turn out to be a disaster?

 

Softbank

 

Why not? Everything has a chance to go to zero.

 

Your post does not qualify, Nebraska.

[Nebraska]

Sorry John. That's just my sense of humor. Plato did post valid concerns that anyone investing in Softbank is aware of. Obviously I have to be comfortable with these risks if I'm owning the stock.

[John Hjorth]

That's OK for my part, Nebraska,

 

All the best to you with this investment. I was not trying to be condecending here. The rest can go to the particular topic in the Investment Ideas forum.

[John Hjorth]

Added to SPKSJF.CPH [sparekassen Sjælland-Fyn A/S].

 

In small drips during the whole day, sitting almost glued to my monitors, adjusting orders constantly in a game of blind chess with the market maker Sydbank A/S. Did not get anything near what I wanted to buy. I don't want to pay up.

 

I thought it would be a good day to add because of all the North Korea fuzz in the market, but no.

 

Note to self: Hopefully better luck tomorrow.

[John Hjorth]

Added more SPKSJF.CPH today. The rest of my orders filled today at my bid in one swoop, when some customer at Spar Nord Bank A/S sold a block. ~6% position.

 

I'm finished buying for now. I'm out of ideas. Prices right now on things I want to buy does not make sense to me.

[TwoCitiesCapital]

Increased my position in Exor by 50%. I estimate that it trades at the same 40% discount to NAV as it did before the massive runs in Fiat, Ferrari, and CNH. Rolled some profits from Fiat into the it to get a second bite of the same apple.

 

Still re-investing all dividends into battered retail names (LB, GPS, UA, RL, and COH)

[AzCactus]

I sold out of Bidvest (held for 8 years) and trimmed AXP. Added to TJX and bought a significant position in ADS. 

 

Short pitch for ADS:

 

Alliance Data Systems runs credit card and private label loyalty programs for brands. When a brand signs ADS, ADS handles the digital marketing and is responsible for customer service for those card holders. The card holder's are the brand's best customers so outsourcing these tasks, the loyalty program, and credit servicing makes switching costs from ADS extremely high. The major risk in ADS is credit risk from defaults on store cards and the company accesses credit markets for funding to finance card purchases, so their is interest rate risk as well. This is balanced by low available credit limits and low average balance of ~$600 on their cards and high interest rates that make paying the store card more advantageous than paying a bank issued credit card first.

 

Citron issued a short paper last year that argued the company should be valued as a financial company rather than a technology company. PE contracted from 30+ to 20. Forward PE of 12.4 and expected LT YoY of 18%. More of a GARP investment. ValueAct is a 10% shareholder (13.5% of their portfolio - $1.3B position) and has a board seat with an average purchase price of around $118. Glen Greenberg established a 10.5% position last quarter in the $230s.   

 

Ross, can I ask how you stablished that Valueact paid an average around $118?  I'm just curious here because my crude estimate would be a lot higher than that $118.

[Ross812]

I sold out of Bidvest (held for 8 years) and trimmed AXP. Added to TJX and bought a significant position in ADS. 

 

Short pitch for ADS:

 

Alliance Data Systems runs credit card and private label loyalty programs for brands. When a brand signs ADS, ADS handles the digital marketing and is responsible for customer service for those card holders. The card holder's are the brand's best customers so outsourcing these tasks, the loyalty program, and credit servicing makes switching costs from ADS extremely high. The major risk in ADS is credit risk from defaults on store cards and the company accesses credit markets for funding to finance card purchases, so their is interest rate risk as well. This is balanced by low available credit limits and low average balance of ~$600 on their cards and high interest rates that make paying the store card more advantageous than paying a bank issued credit card first.

 

Citron issued a short paper last year that argued the company should be valued as a financial company rather than a technology company. PE contracted from 30+ to 20. Forward PE of 12.4 and expected LT YoY of 18%. More of a GARP investment. ValueAct is a 10% shareholder (13.5% of their portfolio - $1.3B position) and has a board seat with an average purchase price of around $118. Glen Greenberg established a 10.5% position last quarter in the $230s.   

 

Ross, can I ask how you stablished that Valueact paid an average around $118?  I'm just curious here because my crude estimate would be a lot higher than that $118.

 

Dataroma:

 

Q1 '16 - 540k shares - $200 - $220 say $210

Q2 '16 - 2.8M shares - $195 - $230 say $210

Q3 '16 - 1.7M shares - $205 - $230 say $215

Q4 '16 - 250k shares - $225 - $235 say $230

Q1 '17 - 620k shares - $230 - $250 say $240

 

Comes out to about $215. I eyeballed $218 earlier.

 

Edit: I see! sorry i mistyped $118 should have read $218.

 

[NewbieD]

Bought some more Aimia, the preferreds this time.

 

Added to Ferronordic machines, DDM Holding and XBrane. Also Danske Andelskassers Bank.

 

[John Hjorth]

Bought some more Aimia, the preferreds this time.

 

Added to Ferronordic machines, DDM Holding and XBrane. Also Danske Andelskassers Bank.

 

NewbieD,

 

I have made a topic split with regard to Danske Andelskassers Bank A/S to here in the Investment Ideas forum, and I sicerely hope, that you are willing to share your thoughts - just short - about this Danish bank - just a bit -, because I'm interested.

 

Thank you in advance. [ : - ) ].

[Aberhound]

Etherparty ICO for easier smart contracts. Hedges me against my risk of losing income preparing contracts as many won't need lawyers anymore and the contracts are going to be way cheaper. One of the big law firms in Vancouver is putting their precedents on smart contracts on a subscription basis.

[Cardboard]

V.POE and T.CQE

 

Crazy valuations, crazy upside potential.

 

Cardboard

[DooDiligence]

Apple Watch 3

[writser]

Small block of PERF. Somebody wrote a nice blog post about it here.

[valcont]

Small block of PERF. Somebody wrote a nice blog post about it here.

 

Just curious how do you size your positions? In this case you are risking a complete loss for a 9% return. There is no arbitrage here so this is a binary bet based on the founder's stake . Is that the right way to think about it? I look at your posts but have never pulled the trigger since I just can't justify the risk/return.

[Lance]

MGTI (MGT Capital Investments Inc)

 

Thanks

Lance

[writser]

Small block of PERF. Somebody wrote a nice blog post about it here.

 

Just curious how do you size your positions? In this case you are risking a complete loss for a 9% return. There is no arbitrage here so this is a binary bet based on the founder's stake . Is that the right way to think about it? I look at your posts but have never pulled the trigger since I just can't justify the risk/return.

 

That's correct. This position is <1%. The market is currently pricing in a 10% chance of failure. I'm willing to bet that that is too high - this is a strategic bankruptcy to take the company private and renegotiate leases. Owners want to preserve NOL's. The cost of throwing a bone to minority holders is relatively low compared to what's at stake for the Nussdorf family yet very nice for minority investors. This should be a done deal (famous last words). What else is going to happen? A trench war between landlords and the company seems like a bad deal for both parties. All the incentives are aligned as far as I can see.

 

Also, especially because the risk/reward seems so terrible I think there is potential for a mispricing. Who wants to risk $180 to make $20? It reminds me of the Mayweather bet. Hard to stomach but if you make 200 uncorrelated bets exactly like that your should do great (assuming you are correct about the odds .. ).

 

In a vacuum, with no money on the line, how would you estimate the chances of the package deal going through?

[valcont]

 

Hard to stomach but if you make 200 uncorrelated bets exactly like that your should do great (assuming you are correct about the odds .. ).

 

 

That's the key. And since the positions are small enough, less research. I am fascinated by this approach but you need a certain type of personality to do this churning. I am more like a home run type. If I don't see a lot of potential , I am not interested.

 

In a vacuum, with no money on the line, how would you estimate the chances of the package deal going through?

 

Well I would first try to find out why is there a 10% discount? Most likely it is reflecting the time to get the restructuring plan approved. The exhibit only refers to the opt in date which is next month. Not sure if this is a pre pack where the leaseholders are  already agreeing to the terms or the company will try to cram up. Either way it'll need a judge's approval.

[bergman104]

Just added to my position of PRAA which I've owned for 2 years now. I'd be happy to give my thesis in more detail but they basically have a duopoly in the credit card debt buying market. With credit cheap, banks have little incentive to sell charged off debt but during the next economic downturn pricing should improve. Until then they are trading at ~12x earnings with plenty of upside when the market turns.

 

I can't seem to get anyone else on board with this one so maybe I'm missing something.

[writser]

 

Hard to stomach but if you make 200 uncorrelated bets exactly like that your should do great (assuming you are correct about the odds .. ).

 

 

That's the key. And since the positions are small enough, less research. I am fascinated by this approach but you need a certain type of personality to do this churning. I am more like a home run type. If I don't see a lot of potential , I am not interested.

 

To be fair, most of my large positions are bets that are exactly the other way around: risk nothing, gain a little, i.e. cashboxes with a little bit of optionality. I hate losing money! In fact I think a lot of the 'home run' growth stocks are far more dangerous in the sense that if the growth story collapses you are actually losing your capital. See Valeant, Fortress Paper, Horsehead Holdings, etc. But yeah, I think it comes down (at least partially) to personality. I'm a skeptic.

 

In a vacuum, with no money on the line, how would you estimate the chances of the package deal going through?

 

Well I would first try to find out why is there a 10% discount? Most likely it is reflecting the time to get the restructuring plan approved. The exhibit only refers to the opt in date which is next month. Not sure if this is a pre pack where the leaseholders are  already agreeing to the terms or the company will try to cram up. Either way it'll need a judge's approval.

 

Frankly I think it is dangerous to use market prices as a starting point for your analysis - you are creating a situation where it is extremely likely your analysis is biased. I.e. if PERF trades at $1.96 you think "that's a juicy return for a few weeks" but if it trades at $1.80 your starting point is "let me find out what is wrong with this horribly risky bet". That's why I asked you to estimate the chances of the bankruptcy package deal going through in a vacuum. How would you handicap it if you read it in a newspaper, without any stock prices?

[valcont]

Frankly I think it is dangerous to use market prices as a starting point for your analysis - you are creating a situation where it is extremely likely your analysis is biased. I.e. if PERF trades at $1.96 you think "that's a juicy return for a few weeks" but if it trades at $1.80 your starting point is "let me find out what is wrong with this horribly risky bet".

 

Well this is not my style of investing but for an argument sake , will I be interested in it if its closer to fair value and I can get a nice IRR? Well that will be determined by my position size and the time that I will spent on it. At closer to fair value , I have to have a decent position size and spend a lot of time since I am risking a dollar for a penny. So not worth it. But if I bet multiple times on similar situations, than I am betting on the deal flow which in this market is pretty guaranteed. So a good strategy in this market. Not sure if you have tried it around 2008,09,10 but there were fewer deals then and a lot more diligence.

 

That's why I asked you to estimate the chances of the bankruptcy package deal going through in a vacuum. How would you handicap it if you read it in a newspaper, without any stock prices?

 

As I have said before, if its a pre pack in which all parties agree to the deal then the only risk is buyer walking out. So a good chance that it will go through.

 

 

[compounding]

Frankly I think it is dangerous to use market prices as a starting point for your analysis - you are creating a situation where it is extremely likely your analysis is biased. I.e. if PERF trades at $1.96 you think "that's a juicy return for a few weeks" but if it trades at $1.80 your starting point is "let me find out what is wrong with this horribly risky bet".

 

Well this is not my style of investing but for an argument sake , will I be interested in it if its closer to fair value and I can get a nice IRR? Well that will be determined by my position size and the time that I will spent on it. At closer to fair value , I have to have a decent position size and spend a lot of time since I am risking a dollar for a penny. So not worth it. But if I bet multiple times on similar situations, than I am betting on the deal flow which in this market is pretty guaranteed. So a good strategy in this market. Not sure if you have tried it around 2008,09,10 but there were fewer deals then and a lot more diligence.

 

That's why I asked you to estimate the chances of the bankruptcy package deal going through in a vacuum. How would you handicap it if you read it in a newspaper, without any stock prices?

 

As I have said before, if its a pre pack in which all parties agree to the deal then the only risk is buyer walking out. So a good chance that it will go through.

 

It's not your style of investing to estimate intrinsic value without using price as an anchor? Because that is exactly what he asked you to do.