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Allen Cooke

 
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  • Genworth Financial: Making Sense Of The LTC Troubles [View article]
    Looking at the LTC I think that there is one main point : the increase in claims for assisted living. Currently the insurance enjoys a lower claims severity rate than actually the people who qualify for nursing home care. This is due to the stigma and realities of going into a nursing home. Most families treat this as a difficult decision leaving the person at home for as long as possible, Currently GNW has a claims rate that is similar to the national average of people over 65 who are in a home: 4.3% or about 50k of the 1.2 area mm people who have policies.

    In order to activate a GNW policy you need an impairment in 2 or more ADLs. Closer to 20% , of people over 65, or so actually have 2 or more impairments in ADLs or activities of daily living (there are 10 or so, cooking cleaning using the shower etc). However many of the GNW insureds will never activate the policy due to the fact that they and their family do not want to send them to a home (until it is too hard to care for them or they cannot continue on their own and do not have an alternative. Many have end of life type of illnesses. leading to higher mortality rates).
    The problem for GNW is on the newer blocks : Choice 1 through PC flex 1, the policy holders can access assisted living in the home and may have lifetime benefits. About 22% of these policy holders have lifetime benefits, or about 300k people. These policies have a max daily benefit ranging from 160 to 213. So it is possible that GNW could experience a higher claims rate due to the fact that it is much easier to make a choice regarding assisted living in the home versus going to a nursing home. Insureds are also possibly more likely to make the claim at an earlier age, resulting in a higher severity or cost in booking the claim. Based on a max daily policy limit of about $180, each claim can add costs of about 60k a year or 300k for 5 years. If the activated claims grow to 5% (from 4.3%)of the insureds the additional cash costs would grow to 510mm year, taking the LTC portfolio to a (cash)loss of 200mm annually. If the activated claims increase to 6% the insureds additional cash costs rise to over 1b annually.
    So I think that this is statistically huge for an insurance pool i am not sure that this is not possible. Also this would be treated in a much different manner due to actuarial accounting. Possibly a much higher booked amount (for the life of the claim not the annual cash costs) but reduced by re-insurance and returns on investments as well as the continuation of rate raises.
    On the last conference call there was a reference to a rise in the severity of the assisted living claims, so younger healthier insureds activating their policies. It is likely that the claims experience for contracts with assisted living clauses will trend higher than the traditional policies with nursing home only provisions....but by how much? It is probably too early to tell but the numbers for the reserves can get big fast. I would protect the position a little with short term puts until we get past the announcement.
    Thanks for putting up the article
    Aug 26 01:30 AM | 2 Likes Like |Link to Comment
  • Safeway: Numerous Challenges Suggest Avoidance Is The Best Strategy [View article]
    just to wrap up this thread the company is bought out 150% higher than the price at the time of this article as of March 2014..time to move on! whats the next one ?
    Mar 19 12:29 PM | Likes Like |Link to Comment
  • Time To Get Out Of Yahoo [View article]
    Ali Baba is worth about $25 + per share, Yahoo Japan is trading at aroung $10 per share and the Yahoo we know is worth about $15/ share. So at this time the shares are worth between $50 and $60 depending on the value of Ali Baba
    Dec 29 05:42 PM | 4 Likes Like |Link to Comment
  • Despite Prudent Acquisitions, Yahoo A Sell [View article]
    As of last Q, the 3 month and 6 month year over year comparisons on operating income were positive? Give the new CEO about another 6-12 months and I think that we probably will see some meaningful improvements. Meanwhile it seems that Ali is worth $25-35 per share, Yahoo Japan is about $11 ( it is publicly traded in Japan [sym: yahoy, US OTC]) and Yahoo is worth about $10-15, So you have about 40-50 for the share.
    Oct 3 11:51 AM | 2 Likes Like |Link to Comment
  • Safeway Inc.: Time To Check-Out Some Bonds? [View article]
    Donald, this is one of the most thorough articles I have seen on SA, probably the most. I would add that there could be additional risk from a leveraged buy out such as what happened with Dell. The senior notes and debentures which I believe are all equal but unsecured could find themselves subordinated to a oversized secured loan. This could explain why investors are possibly pairing the bonds with the CDS and the higher trading levels of Safeway CDS. Although not the most popular stock, pretty low default possibility with 5 times interest coverage from EBITDA. In the Dell situation the bonds dropped 10-30 %. another dimension of risk for the risk adverse investors
    Sep 28 12:14 AM | Likes Like |Link to Comment
  • Yahoo's Turnaround Not Progressing As Planned [View article]
    You should read the conference call transcript this will give you some insight into why the stock popped 10% the next day. Mainly the increase in year over year page views that will be monetized later in the year and the growth in mobile apps. The talk for the Ali IPO is around 75-100 billion. This adds as much as $24 / share pre tax and the company has around $4/share in cash. so essentially you get Yahoo Japan (Yahoy) and Yahoo for free
    Jul 23 01:53 PM | 4 Likes Like |Link to Comment
  • Safeway: A Look At The Numbers [View article]
    Thanks for the article, a few small corrections I would suggest. Safeway is guiding to $700 million in free cash flow after dividends for the remainder of 2013, has received about $220 million from the Blackhawk IPO and has about 295 million in cash as of the last quarter. Combined with the Canadian sale this will be about $5.2 billion. Also, normally in an enterprise to EBITDA valuation you wouldn't subtract the capital leases from the valuation without adding back in the current costs of the leases into the EBITDA (getting an EBITDAR). This would result in a raise to your EBITDA number of about 40 or 50 million. If you make the resultant changes you would find that SWY is trading at about 4.2 X EBITDA, not including Blackhawk. Including Blackhawk gets you to about 3.6X. Using your numbers (5.2 X) I get a price of $31.58 not including Blackhawk or the Property development Corp. So conservatively the stock is worth about $9 more. I like it
    Jun 25 11:35 PM | 1 Like Like |Link to Comment
  • Safeway Update: After Canadian Sale, The Remaining Company Is Undervalued [View article]
    good point that I have seen a few times, paying of 2% debt does not seem to attractive, but still have 2 quarters for them to figure it out or hopefully for a buyer to scoop up the company at a discount to a normal buy out price
    Jun 24 02:05 PM | Likes Like |Link to Comment
  • A Bull Case For Safeway [View article]
    correction:the following statement is incorrect:Safeway owns most of its store base and distribution facilities. SWY owns about 40-50% of the store base
    May 29 12:38 PM | Likes Like |Link to Comment
  • A Bull Case For Safeway [View article]
    The main factor for this industry is the general economy and consumer confidence. As we pointed out above when the economy recovered in 2002-2006 these guys experienced a rapid increase in pricing power which led to an increase in op income of over 60%. You are correct, there are many things that can improve, quality control in the hot foods, better deli, better in store brands etc. At the same time our statement that the company has returned over $ 2.5 billion to shareholders through stock buybacks and dividends in the last 24 months shows that the company is doing quite well.
    May 28 12:50 PM | Likes Like |Link to Comment
  • A Bull Case For Safeway [View article]
    O.K. but WMT is losing same store sales and SWY is gaining. An indication that WMT is losing some business to SWY. Part of the reason is the convenience and higher quality of the grocery stores. The myth that WMT is doing anything is busted by the actual data. Also WMT is normally ranked in the bottom 10% by consumers for grocery and has ended up last many times. The high price leader myth is fairly subjective, in the grocery game prices are rotated fairly regularly. The convenience factor is key. Would you drive to 3 stores to get what you could at SWY just to save $3.00?
    May 28 12:45 PM | Likes Like |Link to Comment
  • "We knew we were in for a fight before we bought the first share," says Corvex managing partner Keith Meister (formally of Icahn Enterprises) of his activist role in CommonWealth REIT (CWH). He's gaining allies - Perry Capital has joined Corvex and Related, with the three accounting for 21% of the shares. Another 20 hedge funds - owning maybe another 4% of the company - have contacted him about joining the team. (earlier[View news story]
    Since CWH trades at a 35% discount to book and the average REIT trades at 2X book it makes sense. These guys may be able to convince a judge to move the proxy forward, or they may just pay the Portnoys to go away. Another question..what happens to the offspring of cwh that are in the same position..SIR, GOV, SNH and HPT
    Apr 22 05:37 PM | 1 Like Like |Link to Comment
  • Salesforce.com: Party Like It's 1999 - Update [View article]
    Good article! As a student of subscription based models, I see that this one is missing a key element: Expanding margins accompanying the growing revs. The fact that the margin is contracting is a sign of churn, increased competition or other unhealthy items. I can't see why anyone would like to own this thing at over 55 X EBITDA (if there is actually any). The business combination accounting merits further investigation. Looks like If not for the addition of 740 mm in goodwiil from biz combinations CRM would have lost book value in the 1st 9 months of 2012.
    Why does the market love this thing?
    Nov 25 01:51 PM | Likes Like |Link to Comment
  • Safeway: Numerous Challenges Suggest Avoidance Is The Best Strategy [View article]
    The Morning Star analysis of SWY aint the best thing. There are a few factual errors as well as other problems. MS Notes: "Over the long term, we still believe the food market share shift trend to super centers, wholesale clubs, and dollar stores continues."

    Super centers actually lost market share in the last 24 months, Mass merchants like WMT and TGT that are not grocers also lost share. People are confusing the reduction in volume consumption as mkt share loss in some cases. Also MS fails to tell us that he is only addressing the CPG category. Traditional grocers still dominate produce, deli, dairy, seafood, meats, flowers wine and liquor or what are known as groceries.

    Also the morning star analyst used a DCF model. Which is not appropriate for an asset that produces cash flow but also has a heavy asset portfolio. Just try to match any REIT or other stock price with a DCF model. Also MS fails to inform you of the effects of the recapitalization, or of the one time expenses when addressing margins and Y over Y gross net income. misleading
    KR just reported better than expected earnings, raised the div 30%and boosted the guidance for the year 2 weeks ago based on the same time period SWY is getting ready to report on. So the margins should improve.
    Oct 9 06:47 PM | 3 Likes Like |Link to Comment
  • Safeway Is A Strong Buy [View article]
    The real estate at cost, land and buildings only, is 8.3 B and divided by 240 mm shares outstanding is $34.00
    Oct 8 07:41 PM | Likes Like |Link to Comment
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