Alex Rasmussen

Long only
Alex Rasmussen
Long only
Contributor since: 2011
Thanks Peter I've liked reading your work in the past and the note on CRM today.
No worries thanks for reading and commenting.
I've taken a good look at all except PBF. I don't hold any of those positions personally but think if you're gunna be in tobacco the guys with big smokeless platforms (MO, RAI and Swedish Match) are preferable, but given my view on the USD for 2016 I'd rather be in PM. In fact the MO:PM pair is highly positively correlated with the USD and is one of the best ways to express that trade. The relative performance on that pair looks toppy to me and is one point of evidence (potentially) that the market is sniffing out a short-term top in the USD (which would obviously be quite contrarian right now, hence why I like the view!). Currency moves can be decades long but strong counter-trend rallies could last a year or just on that MO pick I think for 2016 PM is worth looking into.
UPS and FDX didn't work this year but whose to say 2016 won't be different. I hold FDX personally (negligible amount vs. my initial position) and think it's interesting to see how much AMZN wants to work on express and potentially the finale mile. After this peak season, the bull case for strong pricing growth at ground may come in and that would continue to put pressure on the stocks. UPS has so many advantages, a great yield, and is cheap on a FCF basis as well (same can't be said for FDX...yet?), so still a lot of reasons to be positive.
The DIS I could write an essay on. Long story short, there is too much negative uncertainty at ESPN, that trade is starting to work, and I don't want to be long (Star Wars be damned) unless the shares are at a meaningful discount to a more conservative DCF. In my model that's looking at it below $110 but only really getting interested below $100.
Thanks for the picks! Alex
Hey thanks for the comment. I have definitely heard less than stellar reviews of IB's customer service. When I look at their offering relative to everything else though, I think you as a client would agree the positives trump the negatives, and the value prop is massive compared to the competition. So for that reason it's not something I worry about a ton.
I do worry a bit about cat risks but they carry a lot of excess capital and seem culturally risk averse. Compared to a lot of the money centers or big insurers, I actually feel much more comfortable with IBKR's existential risk in any given year. In retrospect the SNB fallout was a good time to initiate in IBKR, and future damaging events could be good buying opportunities as well.
Hey thanks for the comment. Personally I look at AAPL as more of a short opportunity (caveat being I don't short sell, just like thinking of them!). I'm in the "what's going to move the needle" law of large #s camp more than the "low p/e, brand, and look at the buybacks!" camp. That's oversimplifying it but the point for me is this; there is a very good reason the market is obsessed with their development of software/OS for a car. Mobility is the hot trend and though he's known for his futurist/out-there thesis, I really enjoyed meeting Adam Jonas at MS and hearing about how he thinks about the future of this industry. The network effects of an Uber, how astonishingly far head TSLA's cars are, and the massive financial and intellectual capital being put to work at GOOGL on autonomous driving technology are all very real reasons to be excited about this. It only goes to show how big they've gotten that the iPad is in "decline", the iWatch has been a relative "flop" (in its on right, a massive business success), we're still waiting to see the full implications of the TV, but by and large they need a bigger market like mobility to make the next splash with their dominant ecosystem.
The world thrives on diversity and capitalism thrives on change, I see AAPL as uniquely positioned to be most threatened by those fundamental realities. That said, when and where would you take a shot at a short and is it possible with their massive balance sheet giving them so much optionality (massive risk for a short)? I don't know, maybe not. That said do I want to be long? Probably not either. The company hasn't managed capital allocation well imo and pales to firms like AMZN and GOOGL that reinvent themselves constantly and continue to reinvest within their moats and generate superior flywheel economics within their businesses. I find those 2 much more compelling longs than AAPL, and the market currently agrees with that view given the returns we've seen in the past 3 years.
Just my 2 cents! Alex
Fair enough that is frustrating. Hopefully SA editors will take note of it!
dunkmaster was this on one of my articles? Sorry to hear that, though I assure you I'm never offended by any of these comments. Also sorry to hear you felt the article wasn't publishable - obviously I disagreed but clearly in retrospect enough people felt that way so point taken. We'll see in 12 months if I can exceed your expectations.
Happy turkey weekend, Alex
That's also to say, if I saw the fundamental trends reverse (primarily good ol fashioned traffic growth!!!) and the market didn't rerate it higher, that + lower volume, lower newsflow (out of the spotlight), then I'd be positive like before. When the facts change, change your mind!
It may very well be. A big thing for me has been trying to "fight in the shade" or just have a preference for ideas that aren't front page. If it's on the first page, it's probably pretty efficiently priced by the market. Given the risks and the massive deterioration in fundamentals at both M and JWN, I don't see them as being drastically undervalued; cheap yes, but not mischaracterized or with any hidden optionality.
We've had the REIT discussion come and go, we've blamed weather multiple times, and we've seen not only topline shrink but margins pressured all while inventory has gotten out of control.
When the facts change, change your mind. All those facts have changed in the past year. That's why I thought it was worth a shot last year but why I have no strong opinion (up or down) here. If investment decisions were based off price alone this would be a pretty easy job eh Sam? A little harder than how you buy your socks!
Thanks Chris. On IBM - agree to disagree I guess. Until recently I would be in your camp, but there's a price for most things, and I like being a contrarian on IBM with sentiment this poor.
Conversely on AIG - yes they are still very cheap, but the ability to close the gap has been limited by exploring close to the full extent of capital return/optimizing structure/m&a, while during that time they made very little headway on improving loss (ok on expense). I agree that they still have a long way to go on expense, but I don't want to own this while Icahn is making a fuss - when people stop talking about it I'll probably be interested again - when ACE and CB close in Q1 and starts trading as new Chubb, the boring insurance sector is going to be obsessed with that story and could contribute to fund flows out of AIG on profit taking to a newer story like ACE. If that trade pans out and goes too far in that direction then it will again likely be a good time to get contrarian on AIG, but right now it feels a bit played out. Alex
Yep I'm seeing it as the 4th highest yield. That said obviously that strategy has a lot to do with the power of reinvesting dividends - all else being equal over time with enough securities that is going to power higher returns, but needs to be with more than 1 stock (10) and over more than 1 year.
Also I do think dividends are a really interesting subject right now, because in a ZIRP world they've rightfully been sought after and written about by investors more than ever. If you look back to the earlier days of public markets, most of the listed equities and the analysis that went into them was all about the dividend (railroad stocks being a huge part of the index for example). That higher payout ethos was actually maintained throughout most of the 20th century (higher in the 60s, lower in the 70s, rising in the 80s, falling in the 90s). The 21st century payout (using medians as the averages get skewed in recession years) is noticeably lower than the 20th century median payout.
Further, div yields carried a massive spread over the 10yr for example only 12 months ago, and we're now much closer to even. I don't know what bonds are going to do but it's definitely a dynamic I've been thinking about a lot - in a ZIRP environment do you want to favour growth (higher reinvestment, minimize payout) or favour yield (for that spread which is so rare)? Increasingly I think equity managers should be managing that dynamic based off of the action in the long bond, considering that the role of equity income has changed with fixed income yields so low. All good stuff to think about, Alex
I'm using "fintwit" as the abbreviation for finance twitter, a collection of mostly anonymous hedge fund managers, analysts, and independent investors who share ideas and talk about current events. There are some businesses that have garnered quite a following amongst this group as well as on well known blogs and forums (think Value Investors Club for example). IBKR is one of those businesses. Another that is off the Wall Street radar but definitely has a strong cult following is Amerco (UHAL).
Below is a small list of people that have helped me a lot - there are dozens more than this. Some would own IBKR as well.
Sorry to clarify the "nearing 30" was in reference to the RSI 14 (relative strength index, 14 day). It all depends on how soon we get back to more normal inflation - if you assume quickly then this can be a $50-$53 stock, if you assume slowly something closer to $45 is more reasonable, and if you assume secular stagnation the high $30s is where the stock is relegated to. These are the levels I see when I'm looking at my model. So when we get freakouts below $37, barring any fundamental changes to the company, thats a decent place to take a shot at it imo.
I'll admit I should strive for more than "fuzzy" but thanks for backing me up in any case. Alex
Bently I agree, there is a lot of art to it - probably more than science you're right. There's an interesting book called "Investing: The Last Liberal Art" - you may find that useful if you want to read more along those lines. Cheers, Alex
Thanks for the hat tip - I agree that it can be frustrating personally when the market seems to go against you (or for you) for reasons that seem out of your control. Predicting the future, whether in investing or in any other discipline, is obviously inherently difficult. That said, as a species we get smarter globally every year, and sharing best practices and learning from people that have been successful seems to be worth it regardless of your discipline. Thanks, Alex
It's the ticker that SA allows you to link too. As a Canadian investor I actually own MRC on the TSX in my personal account. It is also highly illiquid. You need to have patience and a long-term time horizon, but also unless you're trading millions, I suspect you'd be able to build an alright position with some time and effort. That said you're totally right that liquidity is a big part of the story with MRC. Thanks! Alex
Thanks GD, it's not too much of a bother don't worry about that. Thanks as well for the feedback on my performance. What's the Bucks reference too? Alex
The Canadian real estate market is definitely something I think about a lot, especially with my Morguard position. That said, if Morguard were to sell off even more on a deteriorating market, I would be happy to buy more if a) book value was still well about market value and b) Rai is still guided by the same value philosophy. If one of those two conditions change, I will be the first to sell and don't pretend that the RE market isn't a risk factor. Thanks for pointing that out, Alex
Thanks for the feedback millerleila! Alex
Thanks for the awesome comment. I have not taken a close look at Mainstreet and will definitely heed the advice of a fellow Morguard shareholder. On the IBM I'm also waiting for a bottom - again that may require more of a gut/technical analysis, or it may just be as simple as waiting for that first positive revenue quarter - though I think the market will be swift in rewarding that and being in it ahead of that would be ideal (just not too early!). On AIG a lot of smart money is still in the warrants, I still think you're right to be there, I just have increasingly felt that while this was a hedge fund favourite with overlooked potential, it is now transitioning to a sell-side backed institutional favourite with insurance. Besides ACE, there is not a lot of excitement in P&C, so it makes sense that people are talking more and more about it every year. A big idea for me has been looking for ideas that are "in the shadows" or less talked about, all else equal. AIG has had its fair share of the spotlight since the crash, but I do feel like some of the bull thesis has matured and management has been lacklustre on the core fundamental business (as opposed to the buyback and divestiture story, which seems a bit played out by now). Alex
The different facets of IBM are definitely what make it interesting, especially when the market seems to have written off that they will ever grow that top line again. Thanks for reading!
Thanks for the comment Scoot. In terms of industries defense, financials and housing are all interesting. Defense obviously more recently, and financials and housing have had well supported bull theses throughout this rally.
In terms of financials though the sector is very diverse and imo, there are areas that look expensive and areas that still look cheap. Depending on whether you're talking brokers, IBs, money centers, insurers, or real estate, I would have a range of opinions and you would likely would to. Part of the reason I bring it up is because SPDR just split it's XLF into XLF, XLFS, and XLRE to distinguish more of those industries with the financials. I think it's indicative of the rate environment and could be something investors want to be attention to. Cheers, Alex
Thanks River, glad it was useful!
Thanks Rose appreciate it.
I do want to say though that CMI and FAST are much different companies as you probably know. I know far more about FAST than I do about CMI, but I definitely find the former to be one of the highest quality companies out there. The entire company is organized with amazing incentives, and their ability to move strong performers up the food chain is a cultural advantage. They also are blessed with an underlying business with strong economics behind it. When you get A+ mgmt and A+ business, I don't mind investing in a tough environment for them (short term) when I think the long-term outlook is so promising. Alex
Thanks Timmies - I would really suggest doing some reading on Rai - when you invest in Morguard you really do invest in him and his discipline. Saying you're a value investor is easy, but actually doing it is much harder. Rai has been doing it for a long time and has made himself very wealthy along the way. I think you can do worse than partnering with a guy like him, and the majority of his wealth is in MRC.
It's a good point that making your picks for next year at year end (when most institutions are doing likewise) is probably not ideal. It'd be interesting to see the results of a study taking a broad sample of stock pickers being forced to lock their picks in during Q1, Q2, Q3 or Q4. I think you may be right that shopping the market for value when others generally don't is probably better.
In terms of the one CDN pick in both years - pure chance. I try to pick what I think is worth a shot at any given time; not macro driven per se but it is always worth considering. My personal opinion is that when you look back at history, strong currency moves in a given year are not generally followed with strong moves in the same direction the following year. That said, currency moves on a longer wave can last decades, so as many have stated, this could be the beginning of a longer term bull move for the USD.
Personally, I'm operating under the assumption that currency drove a lot of the total return in capital markets in 2015, and that it won't in 2016. Hopefully that answers your question and thanks for the insightful comment.
If the story (and study) goes that even a monkey picking stocks can earn decent returns, maybe the real lesson is good things happen when you stay invested? Thanks for the post, Alex
Totally agree that most don't beat on a regular basis - that said I think most take away from those stats the feeling of "don't bother" whereas I look at "regular basis", look at the people with longer time horizons, and still see the potential to win long term.
Hard work and an entrepreneurial spirit can be rewarded in starting up a business, and I believe the same applies to investing - you just have to think about it in those terms.
Thanks for commenting.
Not sure if you're promoting something or lecturing me but in either case rest assured I do a LOT***** of research. You'd be the 3rd person now who has commented on the lack of detail, I'd assume again on WRK.
I'd just throw in another thought - I started picking stocks as a kid before the recession and during it - I had only just started taking accounting/economics/f... courses, joining clubs, reading books, looking at charts, reading the business section, etc. That said, I knew jack all relative to "the professionals". I can tell you this: I absolutely spanked them and the market using some common sense + low turnover in 09 through 11 by buying stuff that was obviously cheap (mostly financials) and letting them work. A pro would say I did too little due-dil and took massive underpaid beta relative to the risk premium in the market...all I knew as a kid was that buying solid big banks/insurance companies that the government has told you they will NOT LET go under at a fraction of book value was probably going to work out pretty well.
My point being this; this is a game of skill and luck (read Mauboussin "untangling skill and luck", phenomenal), and I increasingly think that having an emotional edge is much more important than having an intellectual edge.
So the amount of research, as you would probably characterize as hours spent reading, or pages read, is probably not going to be all that correlated with investment success. You don't need to know all the pieces of the puzzle - in fact in this game it's impossible/illegal to do so. There is always a leap of faith required and there is usually real risk of "analysis paralysis". Also, some of the best investment theses are actually the simplest - they pop out at you right away.
So I wouldn't say it defies logic, I would just say you and I look at this game through very different lenses.
It definitely screens well and I think the market is giving you a decent betting line on the quarterly synergy update game (for the foreseeable future this will trade on how they're progressing on the cost side of the equation). Once we mature past that it will again be about revenue but hopefully their timing and the cycles will lineup nicely there (not sure it will, but that's the bull case!). Regardless, you can do worse buying a cheap stock in a boring and necessary industry with very little disruption potential.
Thanks for putting it on my radar, Alex
No worries Lazy. Full disclosure I do this full-time so I guess the lack of details was more fatigue based than anything. SA used to be a more serious hobby, now more of a fun anniversary for me. Going forward it's a good reminder I can't expect people reading these articles to want the same conversational analysis as I'm willing to write - they expect some detailed work.
Glad you're a fellow FAST shareholder. I think 2016 is an interesting setup for them and as I said - it's rare you get dealt the same hand back to back years in equities. With global macro you do all the time but in equities you've got much more stable 6-12 month flows of buying dips, selling rips, vice-versa and in sector rotation. Industrials are a waste-land of O&G exposed companies right now, but most actually are much higher quality than their multiple suggests. As we comp easy 2015 compares all the major customers of FAST are going to look strong, and that could ultimately (hopefully!) funnel to them. Even though "paid to wait" is probably one of the most dangerous statements you can make about a stock, the 3% dividend +/-1 15bps is really quite nice from this too.
Thanks for the follow, Alex