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Alex Trias

 
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  • Is American Realty Capital Properties' 8% Dividend Yield Built To Last? [View article]
    There is a huge amount of short interest piling up in this stock - up 18% I just read. From a contrarian standpoint, that's probably a good sign. The sentiment around this stock seems to be wretched, which is rarely the case when a stock price hit's a market top.
    Jun 1 01:01 PM | 2 Likes Like |Link to Comment
  • Is American Realty Capital Properties' 8% Dividend Yield Built To Last? [View article]
    This is an excellent point. I think that your observation is often true with companies that build things or offer services, and can think of many examples. What I'm less sure about is that the ultra fast growth from acquisitions is a bad thing when it comes to a triple net lease REIT, where there's far less issues of operating synergies. The CEO of ARCP made an interesting comment that the time to grow the portfolio is now, while interest rates are low, rather than years from now when rates are much higher. I speculate that one of the main motivations behind all these acquisitions is the desire to make hay while the sun is still shining.
    That said, shareholders of ARCP need pretty solid faith in the company management if they're going to be able to hold on for the long term. I am long ARCP.
    May 30 03:20 PM | 7 Likes Like |Link to Comment
  • American Realty Capital Properties: Rapid Growth At A Cheap Price [View article]
    This is a terrific article - thanks for writing it.
    May 24 10:15 AM | Likes Like |Link to Comment
  • Schorsch Hooks A Big Lobster [View article]
    I hope you get some insights and write up a new article about your conversation - assuming Nick's willing to go on the record with anything he discusses with you.

    If I could ask him just one thing, it would be this. Bear with me because the question is a bit lengthy. Suppose I own 50% of a company's stock, and the company has a $100 piece of real estate. Simplistically (setting aside control premiums and such) you could say my stake is worth $50 (half the $100 book value of the company). Then, the company decides to issue 100% more stock, and use the proceeds from the offering to purchase another $100 piece of real estate. My equity stake has been diluted to 25%, but the book value of the company is now $200. Simplistically, my stake is still worth $50. In this case, I'm not hurt if the company issues new stock. Now, if the company decides to issue 100% more stock and instead of buying a new building worth $100, it buys one worth $125, I the shareholder benefit from this dilution. Dilution is great - PROVIDED the company is using the money to grab a bargain. Now, if the company is going to sell shares and use the money to buy a building worth only $80, then the dilution is a disaster for me, the shareholder.

    My question to Nick - is he buying a new building worth $80, $100, or a new building worth $125? Can Nick explain his thinking along these lines? Is it simply that he's grabbing properties at an 8% cap rate? Or, is the idea that by simply creating scale, buying new buildings worth $80 is still a good deal for shareholders because one day, the scale will enable the company to buy new buildings for $125?

    I'm not advocating which model makes the most sense. If Nick was Warren Buffett, he'd be issuing new stock for $100 to buy buildings worth $125, and if Nick was Sam Walton, he'd be happy to just buy the $80 buildings, take it on the chin, and in 20 years force out all the competition. My question is simply, which model is Nick pursuing (or is it an entirely different model than the ones I describe in my hypothetical).

    If you plan on asking Nick any questions along these lines, I will be glued to Seekingalpha looking for your next ARCP article.

    I actually read all your articles anyway - not just those about ARCP.

    Thanks!

    May 22 09:47 AM | 4 Likes Like |Link to Comment
  • Schorsch Hooks A Big Lobster [View article]
    Any views on why the company decided to float more shares today? More acquisitions seems likely, as well as the company's stated desire to pay down debt. However, if management believed that the stock is priced irrationally low, it seems odd they'd opt to sell new shares now.

    It does seem like a good opportunity to buy shares with a one year trailing yield of 10%. Equity per share seems pretty cheap compared to some other triple net lease REITs. Still, the stock is down so hard that I wonder what my analysis is missing that the market's analysis appears to not be missing.

    Looking forward to Brad's next article on ARCP.
    May 21 04:38 PM | Likes Like |Link to Comment
  • Why Does Mr. Market Fear American Realty Capital Properties? [View article]
    If the market valued ARCP fully, why bother buying it? We'd all just buy low cost, passive REIT index funds like VNQ and IYR and not bother reading your articles!

    Fortunately for you and your readers like me, the market hates uncertainty - short earnings track records, recent mergers that completely change the fundamentals of a business, etc. Mr. Market says "sell first, ask later." And his friends the traders jump onboard the momentum wagon, and eventually, you find yourself staring at a bargain stock. It is very easy to second guess yourself - does the market know something I don't?

    And the answer is, maybe not. Mr. Market simply has a profound distaste for the unknown, whereas value oriented investors live on taking risks of the unknown. In fact, it is precisely and exclusively why value oriented investors get paid for doing what they do - buying cheap companies surrounded by myriad question marks.
    May 9 12:54 PM | 4 Likes Like |Link to Comment
  • Lorillard: A Growth Opportunity From A 254-Year Old Company? [View article]
    I guess you can complain to Fidelity and Google since that's where I got the balance sheet numbers and EPS. Thanks for your reply!
    Apr 1 09:11 PM | Likes Like |Link to Comment
  • Lorillard: A Growth Opportunity From A 254-Year Old Company? [View article]
    I'm long RAI and MO as well. But I'd rather poke myself in the eye than short any stock - my number one rule is never to put myself in a position where I could be either a forced seller or a forced buyer. Plus, the whole thing about limited upside and unlimited downside kind of turns me off shorting stock as a concept. The only way I'd follow my conviction is to just not own the stock - which I no longer do.
    Apr 1 06:52 PM | 1 Like Like |Link to Comment
  • Lorillard: A Growth Opportunity From A 254-Year Old Company? [View article]
    Nothing subjective about the balance sheet, but make your own choices.
    Apr 1 06:50 PM | Likes Like |Link to Comment
  • Lorillard: A Growth Opportunity From A 254-Year Old Company? [View article]
    LO has been drawing down shareholder equity in a pretty steady way over the last few years, and hiking debt. Basically, they're borrowing money to pay dividends and repurchase shares. Shareholder equity per share is now about NEGATIVE $6. Earnings have been declining over the years, from $4.1 in 2010, to about $3.39 in 2013. Assume the company halts the steady decline in earnings, and earnings level off at $3.39. At the current stock price of $60 per share (plus the negative equity of $6 a share), it would take almost 18 years for your investment in LO to pay for itself!!!! That's over twice the time it would take for an investment in a straight up S&P500 fund at today's prices. Look at it this way, and LO is at least 100% overpriced.

    Don't be a sucker for the high dividend yield and the dividend growth - the company's just been funding this by going further and further into debt. It's very much like a homeowner mortgaging his house well beyond the market value of the house, and giving the money away to friends (in LO's case, these "friends" are the shareholders). If you are one of the "friends" in my example, would you assume these "gifts" of money borrowed from the bank could last? Of course not. And would you want to invest your money with this debt-happy homeowner? I wouldn't.

    Borrowing more money than your assets are worth is rarely a recipe for success - ask anyone who remembers Lehman Brothers. It's not ethical either, but hey, this is a cigarette company. Judge for yourself how trustworthy you think management is.
    Apr 1 03:58 PM | 2 Likes Like |Link to Comment
  • How Much Dividend Income Growth Do You Need? [View article]
    Great article. The only thing I'd point out is that you can generate CAGR on your own with stocks that produce zero dividend growth. If you can live off a 2% yield on your portfolio, then it makes perfect sense to invest in a portfolio of stocks like Disney, Smucker's, and CSX that have lengthy track records of increasing dividends each year and that currently yield 2%. Do so, and you stand a good chance of generating portfolio income that should stay ahead of inflation. Your other alternative is to invest in higher yielding assets, stocks like AINV or BKCC, that produce a 10% yield. Reinvest the extra 8% yield you get above your 2% living expense requirement, and your income next year will be 8% higher - well ahead of inflation. Obviously I'm ignoring the impact of taxes, and assuming you'd be able to reinvest in assets that yield 10%, but my real point is that zero growth assets can produce income that keeps pace with inflation - provided your saving's rate is sufficiently high.

    Personally, I subscribe to the view that you should not rely on any single approach when it comes to generating portfolio income that keeps pace with inflation. I overweight dividend growth stocks - many of which have somewhat low yields. At the same time, I also invest in higher yielding assets - MLP funds, BDCs, or preferred stocks with low (or nonexistent) dividend growth histories. I collect the income from these high yielders throughout the years, and whenever I see a great investment opportunity (like this week, for instance, when Smucker's missed earnings estimates and dropped 5% in a morning), the higher yielding portion of my portfolio helps ensure that I have plenty of dry powder waiting so I can capitalize on the opportunity. Not only can I use the high yield portion of the portfolio to generate income growth from reinvesting, but I can do so opportunistically whenever I see the market over-reacting to some piece of news or another. Waiting for Pepsi to raise it's dividend can't accomplish that.
    Feb 16 07:11 PM | 4 Likes Like |Link to Comment
  • Recent store closings only a taste of the future [View news story]
    Seems like good news - getting all the big deadwood anchor tenants out (like Sears, JC Penny), with their low, locked-in rental contracts, and replacing them with newer, fresher tenants at higher rents. I mean, really, who goes to a shopping mall to buy goofy sweatpants and a low quality lawn mower from Sears? Nobody, right? That's just wasted space, subject to a twenty year old rental contract. If I ran a large shopping mall, I'd be looking to rent out the space that JC Penny used to occupy to Whole Foods, Louis Vuitton, Apple, or a bunch of smaller retailers that offer products people actually want to buy. I'd know that would increase foot traffic at the mall, and I could raise the rents.
    There's a long-overdue roll over in the retail space. It could spell doom for shopping malls, but I doubt it. More likely, it spells "out with the old, in with the new."
    Jan 23 09:09 AM | Likes Like |Link to Comment
  • Why You Should Dump Whole Foods Market [View article]
    I take the point about the high PE, but WFM has high growth, both in the USA and increasingly abroad. The thrust of this article is that the high growth rates WFM has enjoyed in the past might not persist in the future due to competition from places like Safeway.

    Whole Foods is a very different shopping experience from almost every other grocery store out there. It is pleasant to spend time there, to grab some coffee and enjoy the free wifi. There are many prepared meals available, so it's a place where people go out for lunch or dinner. Hang out in a Safeway? It wouldn't dawn on me to do that. Eat a prepared meal at Safeway? Take a look at one of their salad bars. YUCK!!!! I like to chat with the people who work at Whole Foods - I find them educated and interested in their jobs, and plus, there's almost no turnover, so I get to talk to the same people year after year. It's like a neighborhood in our Whole Foods. The only reason I shop at Safeway is to buy plastic wrap and household cleaning products that are loaded with potent chemicals that get the job done. But all the people who work at Safeway look glassy eyed and bored. It is a sad place to go, where nobody cares about how items are presented. I never see the same people working behind the counter at Safeway. I feel like hey, if the people who work here won't stick around, I sure don't want to either.

    Comparing Whole Foods to Safeway is like comparing the Gap to Prada. Even though they both sell clothes, there's just nothing Gap could do - cut prices, offer better made products - to win over Prada customers. Customers who shop at Whole Foods are okay paying a bit extra because it's a totally different shopping experience and because the brand has far more credibility. If Safeway hasn't figured out a way to compete with Whole Foods yet, I don't see why you should assume they'll figure it out any time in the near future.

    Where I see Whole Foods really taking off is when they open up stores around London, Paris, Rome, Tokyo. The closest thing to Whole Foods you find in Paris is maybe the Bon Marche. That is an amazing store, and if you've never seen it, check it out if you are ever in Paris. It costs an arm and a leg to buy anything there, but hey, it's so beautifully laid out and every single item there looks so good, people are willing to do so. If Whole Foods opened up somewhere close by, they would basically be able to print Euros for their shareholders. Parisians will pay 25 Euro for a roast chicken, for Pete's sake. Find me a business that buys a chicken for $1, roasts it for $1, and sells it for the equivalent of $34, and I'm ready to pay a premium PE by golly. And you know, judging by how well Whole Foods is doing in London, the potential for Whole Foods to expand internationally is truly wondrous. Same demographic as in Paris - you get wealthy consumers who will pay a fabulous premium for high quality food in a pleasant, high quality setting. Safeway opens up a store next to the Bon Marche? Hate to say it, but I don't see the Parisians lining up to buy the wilted lettuces and lackluster cheeses.

    Here's the bottom line - don't be too quick to write off Whole Foods just yet. And really don't try to compare them to tired out bargain brand grocery chains.
    Jan 9 06:35 PM | 13 Likes Like |Link to Comment
  • Is The End Of Dividend Investing Coming? [View article]
    DGI - I take your point that rising interest rates could impact dividend paying stocks. After all, why invest in a stock that pays 4% dividends if you could invest in a US Treasury that pays 5%, if all you are concerned about is current income. But don't you think that rising interest rates can reflect stronger economic growth? And if so, then couldn't rising interest rates correspond to stronger corporate earnings? And if so, then couldn't rising interest rates correspond to higher levels of dividend increases?

    I hope that most investors do not agree that rising interest rates are possibly a pretty good thing for dividend stocks. It would be great if dividend growth investors could profit BOTH from lower prices AND rising dividend payment rates. If you're a real dividend growth investor, there'd be nothing painful about such a situation in the least. Like you, I eschew the prediction business, but it seems that economic growth is starting to look pretty favorable in the US and even in some jurisdictions abroad, which signals pretty promising things about corporate earnings going forward. If anything, I think there's a strong case that dividend paying companies may be a solid position to start growing their top line earnings and boost their dividend payments. So long as the pace of dividend growth stays on par with increases in Treasury yields, 2014 could be a great year for dividend growth investors - even if the nominal value of their portfolios drifts slightly lower.
    Jan 2 11:28 AM | 4 Likes Like |Link to Comment
  • Realty Income May Be Old School, But The Dividends Are Really Cool [View article]
    I'm buying O and NNN. The prices for these REITs may be dropping hard, but the dividends go up like clockwork each year. The yields are excellent at this price range. Nothing beats a high quality company that investors are willing to sell at any price.
    Nov 26 05:58 PM | Likes Like |Link to Comment
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