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Alexander J. Poulos

 
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  • My Expectations For Citigroup In 2015 [View article]
    dieuwer,

    Actually the market thinks status quo will prevail which is worse than bankruptcy. In this scenario, the bank will continue to accrue excess capital that is trapped on its balance sheet. The bank due to a "denominator" problem is precluded from generating a meaningful return on equity. At that point C becomes a value trap. I suspect the Fed will allow them to reduce the excess capital trapped on their books in March however there are no guarantees.
    Jan 15, 2015. 02:21 PM | 2 Likes Like |Link to Comment
  • My Expectations For Citigroup In 2015 [View article]
    Tony,

    Hopefully we will get a meaningful dividend in March if not expect Corbat to be yanked and replaced, he said as much himself. Thank you for reading and commenting.
    Jan 15, 2015. 02:03 PM | 1 Like Like |Link to Comment
  • My Expectations For Citigroup In 2015 [View article]
    Ric500,

    To generate some income I have sold covered calls against the shares a couple of times with a modicum of success. At some pint the value will be recognized, more than likely after March especially if the market stabilizes. Watch WFC, the shares are down over 6% ytd. They are the best run bank if they are trading off the whole sector is under siege.
    Jan 15, 2015. 02:01 PM | 2 Likes Like |Link to Comment
  • My Expectations For Citigroup In 2015 [View article]
    dieuwer,

    With c trading meaningfully below TBV it is the equivalent of paying roughly 80 cents for $1. TBV is the value of the shares at liquidation excluding goodwill, lots of pessimism here, the concept of a value trap doesn't apply. Thank you for reading and commenting.
    Jan 15, 2015. 01:58 PM | Likes Like |Link to Comment
  • My Expectations For Citigroup In 2015 [View article]
    all on board,

    That is the inherent beauty of being undervalued, a small change causes a sudden change in perception, leading to a higher valuation. As outlined above, the major catalyst is the CCAR process with results that will be announced in March. The banking sector has sold off quite sharply this month, no surprise here. If they are denied a significant capital return in March expect a new catalyst to emerge, ie the removal of management. The shares are trading at far less then liquidation value, I will patiently wait for the value to be realized. Thank you for reading and commenting.
    Jan 15, 2015. 01:34 PM | 4 Likes Like |Link to Comment
  • Are Housing Stocks Ready To Rock Or Roll Over? [View article]
    Doc,

    Excellent article as usual. Housing as we know is very dependent on interest rates son on the face of its, the low rates offered currently should stimulate demand. I suspect it won't for one of the reasons you briefly alluded to above. I suspect "this time will be different " based on tow distinct factors.

    The first factor is the lack of meaningful wage growth in the Us over the past decade. If a prospective buyer was reasonably confident of say 3-5% annual raises combined with a vibrant job market it would be lolapalooza for housing stocks. Instead we have stagnant wages and contrary to popular belief a relative stagnant job market. These are hardly the conditions that would propel a would be first time buyer to take the plunge and take on a 30 year commitment.

    The second factor plays a bit of the stagnant job market theme that needs to be examined. A house is a comforting piece of mind yet it also essentially "ties" a person to a particular area. With a stagnant job market the need may very well arise where a prospective buyer would have to leave the area on short notice to take on a new job. The housing market is vibrant, this concern diminishes yet now it is in my view a factor that makes most a bit gun shy.

    The third point is the lack of meaningful appreciation in real estate in large parts of the country. Outside of NYC and SF, large metropolitan cities that are simply out of the affordability range of virtually all first time buyers, the rest of the country has seen scant appreciation. In my particular case, my home was purchased in early 2004 at a fair price (needed work). The house was recently appraised for the same amount it was purchased for before renovations were completed! Looking back it would have been more advantageous in my case to have rented in the area. I have no doubt there are countless others out there with similar experiences that they are sharing with the younger first generation home buyers.

    The last point is the traditional amount of new supply needed is far below levels seen over the past 30 years. when I was actively invested in XHB it was based in the theory of mean reversion coming in off a major trough. Luckily for me the play was quite successful yet the theory didn't play out as expected. I suspect the better play is those that supply the field such as SHW an absolute monster of a stock. I came aboard quite late here, yet have now come to realized the power of the company. If we ever see a sizable pullback in the shares count me in.
    Jan 15, 2015. 10:14 AM | Likes Like |Link to Comment
  • Gilead Sciences' Recent Trading Pattern Is Much To Do About Nothing [View article]
    SPA,

    The recently announced deals fail to validate the fear many had that ESRX would set the trend in the industry. ESRX move to exclude Harvoni is now looking more of an outlier than a trend setter.

    As for my revenue projections, 2015 may indeed prove to be a peak year as far as treatment goes yet I remain skeptical. The sheer cost of the treatment will stretch virtually all government payers. A triage system will be set up where those who are deemed the most "ill" will be treated first. Under this scenario, the HCV franchises will exhibit revenue and growth patterns similar to other traditional meds that offer "treatment and management" of a particular disease state.

    I have no doubt competition will remain fierce, there is quiet a large pot of gold to be had here. The key for GILD is to ensure there treatment remains "best in class" which will ensure they retain the lion share of the market. We will have to wait clinical data from MRK candidate to gauge its potential. As of now, my suspicion is ABBV treatment is at more risk that GILD. Assuming MRK treatment is proven to be as effective as ABBV without the use of Ribavirin, usage of ABBV product would fall dramatically. MRK and GILD would then be locked in battle for market supremacy.

    The upside for GILD is the strength of their clinical pipeline. i fully expect to see additional new novel treatments emanate from the lab over the course of the next two years. I am particularly interested in Simtuzumab for the indication of NASH. A breakthrough in NASH would solidify GILD and propel them towards becoming the most valuable pharma company in the world. If you look at the calucaltions in the model, revenue growth slows rather dramatically in 2016 down to 7.5%. The model is quite fluid and will be updated regualrly once material info is disseminated from GILD. Thank you for reading and I appreciate the comment.

    For those interested in the MRK compound, the following link shows phase 2 results.http://bit.ly/1y1t2Bi
    Jan 15, 2015. 09:11 AM | 1 Like Like |Link to Comment
  • Portfolio Changes For The Fourth Quarter Of 2014 [View article]
    grox01,

    There has been no change in my stance towards them. I recently submitted an article detailing my expectations for C this year. The shares are simply very inexpensive. As for VIAB, I like the entertainment space yet they have under performed. Viab is inexpensive and will continue to aggressively repurchase shares here which should pay of in the longer term. I may actually add to my VIAB shares if funds become available. My recent purchase was to increase my GOOGL stake which is simply ridiculously undervalued.
    Jan 14, 2015. 11:41 AM | Likes Like |Link to Comment
  • Verizon: Headwinds Priced In - Long-Term Value Play [View article]
    Siwanoy,

    I kid you not, just examine the evidence especially in light of the continuing collapse in crude oil. The move is very deflationary and will put a lid on prices.

    As for the question of VZ, the telecom industry has under performed once S initiated a price war. S simply does not have the staying power to outlast VZ or T nor the network to satisfy their newly acquired customers. Take a look at coverage maps widely available on each companies respective website. In my particular area, S signal was quite weak and would be an unsuitable trade. The cost savings offered pales in comparison to the annoyance of the no service or weak signal strength found in various parts of S coverage map. I suspect S and TMUS will begin to ramp down the aggressive promotions and begin to digest the new clientele they have acquired. Once this becomes apparent, the telecom sector as a whole will rally. A reasonable case would be for VZ shares to rally 10% from here, when combined with a 4%+ dividend you have an outstanding gain here with very little risk. Patience will be rewarded.
    Jan 13, 2015. 08:10 AM | 1 Like Like |Link to Comment
  • Verizon: Headwinds Priced In - Long-Term Value Play [View article]
    Siwanoy,

    And the analysts have been dead wrong for the last few years and will more than likely be wrong again. Inflation moves bond rates, the world is awash in Deflationary forces that will keep rates down. We have scant wage growth here is the States and our economy is doing far better than Europe or Japan. Low rates will be with us for quite a while which will be a boon for companies such as VZ.
    Jan 12, 2015. 07:58 PM | 2 Likes Like |Link to Comment
  • Citigroup 4th Quarter Earnings - 5 Key Issues To Focus On [View article]
    IP,

    C is one of my top 5 holdings and would love nothing more than an aggressive share reduction over the dividend as I look for overall returns. I suspect C management is cognizant of the need to raise the dividend a bit to "fall into the good graces" of the funds who have the power to meaningfully move a stock. Great article, lets see how the story plays out from here.
    Jan 12, 2015. 06:37 PM | 1 Like Like |Link to Comment
  • Verizon: Headwinds Priced In - Long-Term Value Play [View article]
    Musings,

    Thank you for the positive mention. I very much agree, VZ is setting up as one of my favorite type of plays. An equity investment in VZ currently offers a patient investor the potential for above average gains with below average risk.
    Jan 12, 2015. 06:31 PM | 2 Likes Like |Link to Comment
  • Verizon: Headwinds Priced In - Long-Term Value Play [View article]
    Siwanoy,

    The commentary that interest rates will rise is one that has been bandied about quite a bit yet here we are in 2015 and rates are near the levels seen during the height of the recession. VZ has been very aggressive in taking advantage of lower rates by refinancing high priced debt and replacing it with far more attractively priced notes. I would not be at all surprised if VZ takes advantage of the deflationary trend and issues additional notes denominated in Euros in an attempt to lock in lower rates. Take a look at bond rates in Europe, they are pitiful.

    Once the higher priced debt has been replaced, VZ steadily rising cash flow will allow them to service the debt. The shares are very much undervalued here. I doubt they will raise the dividend more than 2% per year going forward yet the overall risk adjusted returns are well above average making VZ an exciting low risk/ high reward play.
    Jan 12, 2015. 06:28 PM | 1 Like Like |Link to Comment
  • Illustrating Why McDonald's Is Underpriced At Its Current Price [View article]
    Cory,

    There is no doubt the problems are compounding yet a solution may be close at hand. At some point his year, I expect to see pressure for significant change whether brought about by an activist or the board via displacing the executive team. As for my individual investment, the position is down 2%, certainly not a success. Lets see how the shares progress from here.
    Jan 12, 2015. 08:19 AM | Likes Like |Link to Comment
  • Citigroup 4th Quarter Earnings - 5 Key Issues To Focus On [View article]
    Investor Psyche,

    Well done once again. I would like to add a few points to the article and would appreciate your comments. You mentioned you were surprised by the continued acquisition of the commodities business yet I am not. It is a very wise move in light of recent political moves. With a Republican controlled House/Senate expect to see additional repeals of the Dodd/Frank bill such as the recently signed Omnibus bill that prevents the banks from having to spin out their commodities trading division. http://huff.to/1sm8mTX The easiest way to tell if the legislation is favorable to the big banks is to watch Elizabeth Warren, if she is screaming its a rip-off/give away its great news for the TBTF banks.

    As for Chancer's point concerning patience, the worm has begun to turn for C. The legislative opposition has gone form a strong headwind to at minimum neutral and a potential tailwind. They are aggressively disposing of assets such as OneMain and are beginning to consume the DTA's held on the books. The consumption of the DTA will meaningfully lower their tax bill and allow for additional capital build.

    You are correct, the key is the CCAR process, yet I can't help but think the FEd will be slightly cautious here. 10-15 billion return is reasonable yet it may disappoint hose who wanted more. They key here is a reduction in the float and a meaningful bump in the dividend. I actually believe the dividend is more important as it will allow additional funds to hold C shares, especially those with a income mandate. C token dividend excludes it form being held by many funds. If additional funds are allowed to purchase C (mandate restriction), I expect the discount to BV to disappear over the course of the year. Next year especially once the divestitures are 100% complete, you will see the FEd allow them to return an even greater amount of capital. Patience is needed here to allow the story to play out.
    Jan 11, 2015. 11:01 AM | 2 Likes Like |Link to Comment
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