what are you selling today?

[wabuffo]

Where was the last time that they did the secondary offer? 

In 2017.   History repeats because in late 2015, early 2016 - everything oil-related collapsed in price (KNOP included - down to single-digits, IIRC).  Mgmt waited for the stock to recover in price and did a couple of secondaries in 2017 (at ~$22) for a few dropdowns.

wabuffo

Edited May 12, 2021 by wabuffo

[benchmark]

6 hours ago, wabuffo said:

Where was the last time that they did the secondary offer? 

In 2017.   History repeats because in late 2015, early 2016 - everything oil-related collapsed in price (KNOP included - down to single-digits, IIRC).  Mgmt waited for the stock to recover in price and did a couple of secondaries in 2017 (at ~$22) for a few dropdowns.

wabuffo

Thanks. Looks like that the secondary offering in 2017 caused the stock to drop from $23 to ~$20?

[lnofeisone]

sold LMND puts and all ETH. 

[Broeb22]

WFC and CIGI

[RichardGibbons]

On 5/12/2021 at 10:56 AM, RichardGibbons said:

Bought some YALA. It's a Middle-Eastern voice-centric social media company that grew the top line by 40% since last quarter and 240% YoY.

And now sold YALA a week later after fraud allegations arose. Regardless of valuation, I have no tolerance for fraud allegations, particularly when those allegations are hard for me to disprove.

[Spekulatius]

Reduced BABA on Thursday at a loss (few %).

The main reasoning was that I did not like the last earnings report, not matter how you slice it. The reduction in core market profitability is the most bothersome to me. I expected a blowout quarter due to economic recovery and similar to what we saw with GOOG, FB and AMZN and this was nothing like this. I know, I know, paper hands.

@LearningMachine also asked some good questions regarding GMV and there aren’t really good answers. One can question how much it matters, but it‘s just another incremental negative. BABA’s accounting always was murky (which deterred me in the first place ) and I would never make this a huge position, not matter what.

Now it‘s a smallish starter position which I intend to keep.

[LearningMachine]

DISCK.  I was able to get out 100%.  In all the excitement, I had made a mistake in forgetting my long-term principles.

Edited May 24, 2021 by LearningMachine

[Spekulatius]

22 hours ago, LearningMachine said:

DISCK.  I was able to get out 100%.  In all the excitement, I had made a mistake in forgetting my long-term principles.

What long term principles exactly did you forget buying DISCK?

I can easily see pot. value as many others here as well. I just think there is way more risks here than those that put money in it.

[LearningMachine]

5 hours ago, Spekulatius said:

What long term principles exactly did you forget buying DISCK?

I can easily see pot. value as many others here as well. I just think there is way more risks here than those that put money in it.

It didn't pass my principles around debt, valuation, and historical price.

I got flak for it here last year, but because @Spekulatius is asking, I'll share again: debt situation must be such that the company can survive disruptions without impacting shareholders, including possibility of interest rates shooting up to 10% anytime.  The current situation is such that very few companies end up passing that bar. At debt of ~5X EBITDA and terms to-be-known on debt, Discovery wouldn't pass that bar.

I understand many here believe that interest rates will not go up much and they might be right. I'd like to make reasonable returns weather it happens or doesn't happen. 

Edited May 26, 2021 by LearningMachine

[Gregmal]

Its funny but I always think of 3 things when I see LearningMachine post. Interest rates, stock compensation, management shenanigans. 3 super important things and it often seems like 95% of the posts on this site concerning those subjects, are his. Keep it up.

Also reminds me of the Big Short scene where the rabbi is freaking out because "he's trying to find inconsistencies in the word of God!"...

[LearningMachine]

17 hours ago, Gregmal said:

Its funny but I always think of 3 things when I see LearningMachine post. Interest rates, stock compensation, management shenanigans. 3 super important things and it often seems like 95% of the posts on this site concerning those subjects, are his. Keep it up.

Also reminds me of the Big Short scene where the rabbi is freaking out because "he's trying to find inconsistencies in the word of God!"...

This made me smile :-).  I had to go look up that scene.  Gotta add re-watching Big Short to my list :-). 

[Monsieur_dee]

17 hours ago, Gregmal said:

Its funny but I always think of 3 things when I see LearningMachine post. Interest rates, stock compensation, management shenanigans. 3 super important things and it often seems like 95% of the posts on this site concerning those subjects, are his. Keep it up.

Also reminds me of the Big Short scene where the rabbi is freaking out because "he's trying to find inconsistencies in the word of God!"...

+1 thank you. 

[Spekulatius]

 

Sold my ABEV in my tax deferred accounts today.

[fareastwarriors]

Trimmed some VNO at $49. 

[CorpRaider]

Similarly, sold my $JBGS yesterday.  Thinking of cashing in my AIRC and EQR for some useless fiat.

[fareastwarriors]

1 hour ago, CorpRaider said:

Similarly, sold my $JBGS yesterday.  Thinking of cashing in my AIRC and EQR for some useless fiat.

I've trimmed many of my REIT names, especially office, but I have a hard time letting more go. The way I see it is even if the "easy" money has been made already, these REITS continue to offer mid-high digit yields at "reasonable" valuations. I'm not sure where to deploy the new capital. 

Yeah, I know I could just hold cash but I don't think I can  trust myself to "time" the market that well. 
 

 

Edited June 2, 2021 by fareastwarriors

[thowed]

31 minutes ago, fareastwarriors said:

I've trimmed many of REIT names, especially office, but I have a hard time letting more go. The way I see it is even if the "easy" money has been made already, these REITS continue to offer mid-high digit yields at "reasonable" valuations. I'm not sure where to deploy the new capital. 

Yeah, I know I could just hold cash but I don't think I can  trust myself to "time" the market well. 
 

 

+1.

I have a bit of cash, and REITs seem to be the place where valuations seem more reasonable than most other things.  I'm looking more at Europe as I know the market better, though I'm increasingly fascinated reading about STORE, as the culture seems so impressive.

I'm also looking for inflation-linked long lease stuff, as I've thrown in the towel on TIP$ for now, CPI doesn't seem the best way to play things (thanks to Horizon Kinetics for inflation-related thinking).

 

[CorpRaider]

Yeah I ended up using the bigs to buy another smaller REIT, definitely cheaper on current metrics, but definitely not an Amazonian land bank either.

[fareastwarriors]

1 hour ago, CorpRaider said:

Yeah I ended up using the bigs to buy another smaller REIT, definitely cheaper on current metrics, but definitely not an Amazonian land bank either.

Care to share more?

Edited June 3, 2021 by fareastwarriors

[Spekulatius]

Sold some more ABEV and the remainder of my GD.

(I am keeping my defense exposure in LHX, NOC and LMT)

Sold off my few shares in OGN (MRK spinoff)

 

[DeepSouth]

On 5/25/2021 at 7:55 PM, LearningMachine said:

It didn't pass my principles around debt, valuation, and historical price.

I got flak for it here last year, but because @Spekulatius is asking, I'll share again: debt situation must be such that the company can survive disruptions without impacting shareholders, including possibility of interest rates shooting up to 10% anytime.  The current situation is such that very few companies end up passing that bar. At debt of ~5X EBITDA and terms to-be-known on debt, Discovery wouldn't pass that bar.

I understand many here believe that interest rates will not go up much and they might be right. I'd like to make reasonable returns weather it happens or doesn't happen. 

 

If you're building a portfolio around what stocks work well with 10% interest rates, you are narrowing your universe down to a handful of companies that benefit from extreme moves in rates up and/or runaway inflation. Equities would likely reprice down materially to the 10% risk free rate, punishing valuations on great companies. So, you are making an explicit directional bet on an event that the market believes has very low probability.

If that's your bet why not buy deep OTM interest rate options or leveraged futures position to get max direct exposure? They'll write a book about you if you're right.

[LearningMachine]

1 hour ago, DeepSouth said:

 

If you're building a portfolio around what stocks work well with 10% interest rates, you are narrowing your universe down to a handful of companies that benefit from extreme moves in rates up and/or runaway inflation. Equities would likely reprice down materially to the 10% risk free rate, punishing valuations on great companies. So, you are making an explicit directional bet on an event that the market believes has very low probability.

If that's your bet why not buy deep OTM interest rate options or leveraged futures position to get max direct exposure? They'll write a book about you if you're right.

Thanks@DeepSouth for sharing.  I do believe the probability of that event is higher than what market is believing it to be, but don't think the probability is 100% within the next few years.  Any particular multi-year-long cheap OTM interest rate options you'd look at?  The issue with options and futures positions is that it is very hard to predict the timing with high certainty.  Mr. Market can be irrational longer than anyone expects.  

I'm looking for stocks that do reasonably ok with both (1) low inflation & low interest rates, and especially (2) high inflation and high interest rates.   If I stick to only #1 as market is doing mostly, finding stocks can be easy.  If I stick to only #2, that gets a little harder.  Now, if I want to satisfy both #1 and #2, that gets even harder :-). 

Edited June 4, 2021 by LearningMachine

[Spekulatius]

50 minutes ago, LearningMachine said:

Thanks@DeepSouth for sharing.  I do believe the probability of that event is higher than what market is believing it to be.  Any particular long-term OTM interest rate options you'd look at?  The issue with options and futures positions is that it is very hard to predict the timing with high certainty.  Mr. Market can be irrational longer than anyone expects. 

I'm looking for stocks that do reasonably ok with both (1) low inflation & low interest rates, and especially (2) high inflation and high interest rates.   If I stick to only #1 as market is doing mostly, finding stocks can be easy.  If I stick to only #2, that gets a little harder.  Now, if I want to satisfy both #1 and #2, that gets even harder :-). 

10% interest rates are not a problem for the vast majority of the company if the inflation rate is 10% too.

10% interest rates with 5% inflation, now that is a problem. You need to go no further than Mexico to see what this looks like (also Mexico is not quite there, but was close enough a short time ago).

Edited June 4, 2021 by Spekulatius

[LearningMachine]

26 minutes ago, Spekulatius said:

10% interest rates are not a problem for the vast majority of he company if the inflation rate is 10% too.

If you are going to hold a broad-index for the very-long-term, maybe you're right over the very-long-term as S&P 500 ended up reaching its non-inflation-adjusted 1972 high in 1980 and again in 1982.  However, when adjusting for inflation, 1968 high took 25 years to recover in 1993.  Please see https://www.macrotrends.net/2324/sp-500-historical-chart-data.

The reason I said long-term is because 10% price increase every year will take more than 7 years for prices to double.  However, 10% interest rate will have an immediate impact on discount rate and also an immediate impact on cost-of-capital for some.  Someone neck-deep in debt at 5X EBITDA at 3% interest rates having to now renew debt at 10+% interest rates will have a hard time even if they were able to increase prices by 10%.

This video does a better job at explaining how market's discount rate is impacted by higher inflation and higher interest rate, e.g. risk premium goes up and risk-free rate goes up.  On top of that, margins go down for companies without a lot of pricing power.  Please see https://www.youtube.com/watch?v=AcQ0UlSzohA.  Also, as Buffett explained in his infamous inflation article, asset-heavy companies have to replace the assets at high-inflation cost, not leaving much for shareholders. 

That said, it is possible that Mr. Market might be irrational and not look at that impact on discount rate for some amazing companies, and not give us an opportunity like 1974.  So, we have to be prepared both ways.  However, I think it is likely that it will give us an opportunity for at least not-so-amazing companies.

Edited June 4, 2021 by LearningMachine

[Castanza]

1 hour ago, DeepSouth said:

 

If you're building a portfolio around what stocks work well with 10% interest rates, you are narrowing your universe down to a handful of companies that benefit from extreme moves in rates up and/or runaway inflation. Equities would likely reprice down materially to the 10% risk free rate, punishing valuations on great companies. So, you are making an explicit directional bet on an event that the market believes has very low probability.

If that's your bet why not buy deep OTM interest rate options or leveraged futures position to get max direct exposure? They'll write a book about you if you're right.

You could also short treasuries and  hold 3x Ultra Short Leverage 20 year t-bill ETF. I believe Burry took a position like this (they wrote a book about him ). But the SEC also made him shut his mouth a month ago and he had to delete his twitter

Edited June 4, 2021 by Castanza