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Adam Xiao

 
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  • Carbonite Is An Overlooked Tech Company With Upside Potential [View article]
    I'm shocked that this has no comments yet. Very attractive thesis and well reasoned.

    A few questions -
    1. How competitive do you think this space is from (a) large players like Google and Amazon who offer enterprise solutions, which include security (b) VC-backed ventures who are attempting to bring better technologies into the marketplace
    2. Does Carbonite occupy a niche that would protect it from (a) and (b) type competitors
    3. Are there switching costs involved for customers beyond the obvious ones

    Thank you for the idea
    Feb 19 05:06 PM | 1 Like Like |Link to Comment
  • Northeast Bancorp Using Cheap Leverage To Buy Distressed Mortgages [View article]
    Excluding nonrecurring items, mostly related to lawsuits regarding events that happened 8 years ago, and severance charges relating to exiting a side brokerage business, they grew earnings again this quarter.

    They improved in every metric, not aggressively, but still solidly - and the big change is the change in regulation regarding owner-occupied commercial real estate that they were under, which frees them up to own more commercial real estate loans.

    Solid performance in my book with no red flags - yellow flag from listening to the investor call that the competition for purchasing discounted loans is heating up, which can be seen in the smaller discount they have this year, but i believe more discounted loans will be unloaded later in the year when tax selling occurs for entities with impaired loans on their books, who want to realize losses.

    NBN looks to be on a good road to achieving operating leverage by increasing the size of their deposits, and especially their loan book
    Aug 13 06:16 PM | Likes Like |Link to Comment
  • Northeast Bancorp Using Cheap Leverage To Buy Distressed Mortgages [View article]
    It seems CLNY is trading at a 1.5X P/B, and their cost of debt is a fair bit higher (5% convertible senior notes and 8.5% preferred shares) than NBN's. They are only operating with a 1 to 5 leverage ratio, so their gains will not be as leveraged as NBN's.

    There seems to be a limited margin of safety buying in at such a premium, especially with so many senior claims to the equity (debt and preferred shares that are not FDIC insured like deposits and therefore have higher interest rate). Upside is also limited because the convertible debt has a strike price of $23.60 a share. With the current price at 23.30, it seems that the stock faces a dilution hurdle before it can break through the 23.60 roof.

    Thanks for the idea though. I am always interested in businesses with unique business models and will be happy to take a look at different ideas.
    May 16 04:12 PM | Likes Like |Link to Comment
  • Northeast Bancorp Using Cheap Leverage To Buy Distressed Mortgages [View article]
    Thanks for the lead Fibonacci. Sounds interesting, I will do some digging.
    May 15 04:46 PM | Likes Like |Link to Comment
  • Northeast Bancorp Using Cheap Leverage To Buy Distressed Mortgages [View article]
    There are no earnings transcripts, but the earnings call itself and presentation slides are on the investor website. Check out NBN's investors relations page.

    The 40% limit was instated in 2010 when FHB acquired NBN in order to begin the LASG program. It was put into place by the regulatory bodies: Maine Bureau of Financial Institutions and the Federal Reserve Bank of Boston.

    I believe that this was put into place to ensure the stability of the bank when pursuing an activity which is considered risky and unproven. This may be relaxed in future years if NBN's loan default rates are favorable. I would not expect it being relaxed within the next year though.
    May 8 01:55 PM | Likes Like |Link to Comment
  • Northeast Bancorp Using Cheap Leverage To Buy Distressed Mortgages [View article]
    Operationally, they have been doing pretty well.

    The LASG Portfolio of Purchased and Originated loans is now at 148.4 million and returning over 15%.They can purchase 40 million more loans before they need to start originating more other loans to keep their regulatory purchased loan ratio correct.

    They didn't purchase as many loans this quarter, management indicates because availability of attractively priced loans are cyclically low in the first quarter. This logically fits with the fact a lot of selling happens year end (tax loss selling) so I am satisfied with this explanation.

    They paid off TARP - Which is good because after a while the interest payment on those would have gotten bigger.

    Their total deposits might actually be the most impressive thing, having increased from $422M to $505M, and as a result they have plenty of cash in the bank to buy and originate more loans. They used part of this to repay FHLB borrowings - which has a higher interest cost. Soon, I believe they will move to all deposits as the deposit grow from AbleBanking (Their online banking, which has shown impressive ramp, growing almost 30 million this quarter to currently being at 70.8 Million)

    The interest rate spread at NBN has increased to over 5%, and this business is one that becomes more valuable the more it grows, as they become better able to leverage the abilities of their loan purchasers/servicers, and the incremental cost of each loan decreases. Assets grew about 4.5% this quarter even after paying back TARP and FHLB borrowings, so they are growing at a good clip.

    On a macro side, interest rates are still low. NBN can take advantage of the interest rate arbitrage to buy discounted mortgages and encouraging the debtor to refinance at lower cost - accelerating the gain realization of the original discount they bought as.

    In summary, I am still long. NBN has tailwinds pushing it forward, and is ably run by managers who have skin in the game.

    May 7 01:14 PM | Likes Like |Link to Comment
  • Body Central Cheap For A Reason: Isn't That Always The Case? [View article]
    Thanks for well thought out reply. I do agree that BODY looks more attractive now than it did at 30 because of the stumble. The stumble was originally why I started following the stock and I was watching when Beth Angelo resigned.

    I might have a bigger position now if they had more reported historical earnings, and a management team that had been around for longer and had demonstrated good comps in the past. I do believe in mean reversion, but the mean in my mind is now a shot in the dark because the business model and management team of this company keeps changing.

    I will keep my small position and root for this stock. Good write up and thank you for sharing your thoughts.
    Apr 10 01:39 PM | Likes Like |Link to Comment
  • Body Central Cheap For A Reason: Isn't That Always The Case? [View article]
    Having looked at this company for a while, and while still maintaining a small position, I do have some concerns.

    My main concern about BODY, which is the same as GMAN is that these are stocks that were stumbling along and were then bought by private equity firms. Somehow, during the years the PE firms owned the business, the numbers went miraculous. Stagnating businesses becoming high powered growth monsters.

    This could be of course, because of the operational improvements created by the PE partners, but it bothers me that PE investors are masters of financial engineering - both in changing a company's capital structure, and in "managing" the books. In both cases, the PE firms sold out of a large part of their position after the companies went public again.
    Apr 9 08:17 PM | Likes Like |Link to Comment
  • Texas Hold 'Em Tournaments And Value Investing [View article]
    Haha makes sense.

    Gotta mix it up some time after exercising so much discipline when fighting the market. Also makes sense not to reveal your hand. Good article!
    Apr 2 05:44 PM | Likes Like |Link to Comment
  • Texas Hold 'Em Tournaments And Value Investing [View article]
    I agree there are many parallels between poker and investing, in terms of the adversarial nature of the sport, and the goal of making positive expected value decisions in the face of imperfect knowledge and uncertain outcomes. I've always associated poker more with trading than investing though - especially tournament play vs. cash games.

    Chris, as a value investor, do you favor a tight aggressive play style?
    Apr 2 05:04 PM | 1 Like Like |Link to Comment
  • Tandy Leather Factory: A Great Company Selling At A Normal Company's Price [View article]
    But to respond more seriously. The only thing I can speak to that is that Tandy is a fairly illiquid stock, with only a few block trades occurring through the day (observe the volume chart in the 1 day charts in either yahoo or google finance).

    As Google reports closing prices in its historical charts, if the last trade of the day is one dollar below the normal price because of an overly eager seller, those spikes will be witnessed.
    Dec 6 08:14 PM | Likes Like |Link to Comment
  • Tandy Leather Factory: A Great Company Selling At A Normal Company's Price [View article]
    Buying opportunities?
    Dec 6 08:10 PM | Likes Like |Link to Comment
  • Tandy Leather Factory: A Great Company Selling At A Normal Company's Price [View article]
    Hi Duke1,

    Glad you enjoyed the article. It is a very valid question whether Tandy will be able to deliver an average 20% return on tangible equity over the next decade.

    Historical results do not dictate future results, but a company's performance should be evaluated based on the its long term performance over a period of several years. Different opportunities and challenges will cause results to vary either up or down, but by looking at results over a long period of time, one can gauge the quality of a company's economics and management.

    Because the economics have not changed - the Tandy name remains as strong as ever - and because the management has not dramatically changed - Jon Thompson, Shannon Greene, and Mark Angus have been with the company throughout the period - the quality that generated the average 20% over the past twelve years remains intact. This does not mean that the future will equal 20%, but it will approximate it, varying with the different overall conditions that the company operates within. If the economy is horrible for a decade, then the company may do worse. If the economy is amazing for the next decade, the company may do better. I try to avoid predicting the behavior of the entire economy.

    As to your question below about inventory. As for why management believes that building up inventory improves sales:

    "Chief Financial Officer and Treasurer, Shannon Greene, added, 'We have significantly increased our investment in inventory this year, although it is not as severe as it first appears. Our stores' inventories are up approximately 30% from the end of last year in order to eliminate lost sales due to a lack of product availability. Our central warehouse inventory is up 80% during that same time. However, we ended 2011 with our warehouse being out of most leathers, so the increase this year is simply to get it back up to a reasonable level to support the stores. Further, with the positive sales trends at the stores, it is important that we have sufficient stock to carry us through the rest of the year.'" - Q2, 2012

    It appears the main way having higher inventory increases revenue is by reducing lost sales through less out of stock issues.
    Dec 5 08:52 PM | 1 Like Like |Link to Comment
  • Is It Time To Upgrade Your Portfolio? [View article]
    Great write up. Just added to my position today as there does not seem to be a fundamental reason for the recent drop in price. The hefty dividends have served me well in the past and it doesn't look to be running dry any time soon.
    Dec 5 01:33 PM | Likes Like |Link to Comment
  • The Seductive Warren Buffett [View article]
    This is perhaps the most disturbing article title I have ever seen.
    Dec 4 08:39 PM | 5 Likes Like |Link to Comment
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