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Amit Chokshi, CFA

 
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  • MDC Holdings Trades Below Book Value [View article]
    Sorry for not clarifying, I meant that don't most eventually trade under book value during economic downturns? If you look at TOL back in the Dec99-Mar00, it hit low P/B of .95x. Also, referencing MDC, just looking at its historical P/B multiples, from 93-97 the stock barely traded above .7x book value and in some years hit BV values of of below .5x. It also traded for as low as .7x book value in 2000. I'm not the strongest mean regression advocate but .97x book value doesn't appear to offer much value for MDC based on historical values. Also, MDC really only traded at over 2.0x BV in the hot markets of 2004-2005, it's safe to say that that won't happen again too soon so even assuming everything normalizes, MDC is really a 1.2-1.5x bv stock, not a ton of upside. So I guess I'd agree with your first statement about it being premature to buy homebuilders.
    Sep 18 02:54 PM | Likes Like |Link to Comment
  • MDC Holdings Trades Below Book Value [View article]
    Doesn't a variety of homebuilders trade below book value as economic cycles turn downward? In MDC's case, I'd suspect that the "higher beta" areas for where they primarily develop homes - MD, northern VA, Phoenix, Vegas, parts of Florida would be the reason the stock trades below book value.
    Sep 17 11:43 AM | Likes Like |Link to Comment
  • Warren Buffett Knows Something About USG Corp. [View article]
    While USG is significantly off its recent highs investors should be wary of blindly following anyone into a stock, even if it's Buffett. Buffett's time horizon is a lifetime as opposed to 3-5 or even 10 years so average investors can get shaken out of a position. I believe Buffett also bought USG when it was in the high teens - $20 range and the stock fell to as low as $3. No doubt, Buffet knew what he was doing, but most investors, whether professionals or retail, would have gotten shaken out on the way down because a hit like that is a lot to bear, not only mentally, but an 85% loss even if it represents 3-5% of a portfolio is a real loss. I'm guessing Buffett wants the leader in gypsum wallboard for the long-term and is taking the housing shakeout as a way to get it when it may be oversold.
    Sep 13 10:36 AM | Likes Like |Link to Comment
  • Yahoo Finance Now Carries Seeking Alpha Articles [View article]
    Congratulations to SA, it is well-deserved and definitely a sign of changing times for the better. Did anyone see the grilling the Yahoo Finance GM took today (9/12 around 7:30-8:00 am EST) on CNBC by Joe Kernan? She held up pretty well and it was a pretty pathetic attempt by CNBC to present SA as the equivalent of a Yahoo Finance Message Board. On one hand Joe and his colleague were speaking to the importance of due diligence and fact-checking when presenting stories on SA that will be linked to Yahoo Finance (to which the Yahoo Finance GM said there are over a dozen editors at SA) but it was painfully obvious those hypocrites had never visited SA based on their uninformed comments regarding the quality of the stories/articles on SA.

    Funny how nobody has a problem with a fraud like Richard Kiyosaki having his own "financial advice" column on Yahoo but they'll take issue with content provided by investors/managers who have their own skin/careers/liveiliho... in the game and generally put out far more thoughtful analysis than Wall Street does. I guess CNBC realizes their Moneycentral website content is pretty stale with its Morningstar's best stocks which has invariably been touting the same stocks for years (PFE, WMT, MSFT, etc., no problem with those stocks except that the average investor probably has more than enough exposure to those through their mutual funds), Harry Domash's screening exercises, and model portfolio articles.
    Sep 12 09:40 AM | Likes Like |Link to Comment
  • The Short Case on Vonage: Why No Price is Cheap Enough [View article]
    That's an excellent analysis and VG is one of those special ideas that, despite plenty of media coverage, still has plenty of legs left in terms of an investment idea (short). It is one of those special companies that you may never have to cover on.
    Sep 11 10:07 AM | Likes Like |Link to Comment
  • Parlux Fragrances Roller Coaster Making Me Nauseous [View article]
    All excellent comments. Doing due diligence not only on the company but also on management is critical before initiating an investment. For special situations like take privates it's also important to consider the viability of a proposed deal in terms of financing. The CEO wanted to take the co private at $29 per share when I believe it was trading at $18 or so? Lenders, even in a strong credit market, would probably have said they could lend to support the deal but that the CEO would have to put in a big chunk of equity to support such a high price.

    I would sell PARL immediately if I were you, I have no position in the stock but that's just $x grand typing up your capital. Understanding the power of compounding is the key aspect, you lose 1/3 of your investment and you'll need a bit over 50% to make up for it so if you're down 60+%, just dump it. It's mentally draining to just have that bagel in your account too, especially if you have no conviction in the position or didn't buy it as a core investment. It doesn't sound like you have any conviction in the company and you bought it as a special situation. I'd suggest putting in a stop loss on situations like this going forward too if you don't really want to own the company.

    This only comes from my own experience on riding down big losers, you're not only wasting time trying to recover your cost basis but you're going against inflation too. In today's market the hurdle is 5% you can get in an online bank account so what's the point in hanging around waiting for PARL to quadruple, that stuff rarely happens to companies with problems like PARL has because the accounting issues it currently faces always take longer to resolve than initiallty anticipated and worse news basically continues to follow basically bleeding your long positions dry.
    Aug 25 01:13 PM | Likes Like |Link to Comment
  • Wal-Mart Facing Tough Times [View article]
    All valid points but at $44 per share, you're buying this at about 8.5x 2007 EV/EBITDA and 13.5-15.0x 2007 EPS. You've got a leading global company at a market multiple so in my view, if more market shocks occur, recession hits, etc. WMT should actually be able to weather the storm much better from an investment perspective. As you note with all of the bad news, investors aren't generally expecting WMT to hit it out of the park right now so those tempered expectations should allow the company to be a good investment at these prices. Just look at how it's earnings did recently when there was a lot of focus on their retreat from Germany. With a valuation of 25x+ EPS and 11x EBITDA that could have resulted in a strong correction but with WMT in this market multiple range the bad news really didn't matter.

    As you can read just about daily, there's a fairly tight valuation band right now with a lot of quality megacaps trading at very fair valuations. We all want to get in at the perfect time but with WMT right now, you're probably getting in at close to ground level for the next 3-5 years.
    Aug 22 09:47 AM | Likes Like |Link to Comment
  • In Defense of (My Own) Perma-Bullishness [View article]
    And if you invested before or after the crash in 1987 and stayed in the market for the next ten years you made a ton of money too, your point in comparing any time span within a secular bull market, esp the strongest one in US history from 1982-2000 is meaningless. Compare transitory periods from going from secular bull to bear markets. If you were in the market from 1966-1981 your gains didn't even keep up with inflation.

    If you're talking about just "being in the market" as in being in the index, I bet an online savings account yielding 5% will be tough for the market to beat over the next 5-10 years.
    Jul 12 09:27 PM | Likes Like |Link to Comment
  • Microsoft's iPod Killer Emerges -- Should Apple be Scared? You Bet! (AAPL, MSFT) [View article]
    Lotus and Wordperfect, let's not forget Foxpro either, those could all be destroyed because the parent programmers were migrating from DOS to Windows and MSFT had the "environment" that everyone was migrating too and between their bargaining power and muscle, they could force out Lotus and other competing products.

    When it comes to the mainstream consumer, however, and the current tech cycle, why hasn't MSFT's crappy money program done anything against Intuit's Quicken? And why wouldn't Adobe sue MSFT for that, in the tech world lawsuits are a dime a dozen, looking at ADBE's 5 or 2 year or 1 year chart doesn't really show any pressure due to their lawsuit with MSFT. If it was as material a concern as you point out, there'd be more focus on it by investors and ADBE management in their calls.

    And then you say "Microsoft will lose money on the hardware in order to ensure the platform supremacy of it’s products. Apple can’t do this because they have no widely accepted platform outside of iTunes. " What do you mean by platform supremacy? Where's the economic gain here, you said they are giving away the content, so that's free, plus they don't own the content anyway so would just skim off the media companies that do own it.

    First of all, MSFT can't force people to take their clumsy late to market PMP that comes out. So to incent people to try them, they'll likely be priced aggressively and lose significant money on that product. Ok fine, as you say they'll lose $ on the hardware to ensure "platform supremacy" which I guess is their iTunes competitor. Ok, so how the hell are they going to attract media companies to give them the rights to sell songs and get a piece of the action? If Warner Music wants consumers to have their songs, they'll go to Apple and deal with the $1/song because at least people buy it and there are enough iPods out there so there's a real market. You think WM is going to be happy that MSFT gives them more of a cut and allows flex pricing per song if only 3 million people own MSFT's device? Not all companies believe in loss leaders.

    Don't underestimate iTunes, if the iPod wasn't such a strong device, the media companies could have easily disintermediated iTunes by offering their songs directly on their websites.
    Jul 10 02:50 PM | Likes Like |Link to Comment
  • Microsoft's iPod Killer Emerges -- Should Apple be Scared? You Bet! (AAPL, MSFT) [View article]
    The negativity is more of a result of the quality of your article. If you're looking for bashing and pumping based on how much people "like" a stock, company, or its products go to Yahoo's boards but there's generally less blind loyalty to companies mentioned in this site.

    MSFT's been in talks to develop an iPod "killers" for years, now they finally got around to where they might release one, big deal. AAPL owns the space as it is, unit sales have generally moderated at this point. MSFT is going to be competing for the same shelf space that Rio and SDSK and CREAF all do.

    And I think many people have all heard about the "threats" the various internet music stores from YHOO, AMZN, and even WMT were going to pose to AAPL. WMT was going to undercut AAPL and it was going to be over for them. MSFT is going to bumble into the MP3 market the same way they've done the console market, spend a lot of shareholder money and become an unprofitable second place market leader. The PS franchise counts for close to what, 40%, of SNE's operating profits, MSFT can't turn a profit on the 360. So some of the statements you make, about MSFT like "Microsoft has a pattern of entering a business and sucking the profit opportunity out of it by incorporating it as part of its platform. Why should entertainment infrastructure be any different?" is based on one example which is Internet Explorer. MSFT hasn't displaced Adobe or Intuit or other software vendors that MSFT would love to get its hands around. And have they done anything with the gaming console area? 17% of the market isn't bad but Nintendo actually makes money off their systems and the Wii reviews suggest the 360 could face competition from Nintendo (which doesn't do so bad at about 14% market share).
    Jul 10 01:14 PM | Likes Like |Link to Comment
  • Can Kirin Brewery Go Higher or Is Its Run Over? (KNBWY) [View article]
    What do you think about Kirin's other businesses? Seems like they have various ancillary units in the pharma, restaurant, logistics, and real estate industries. It seems that they try to make the case that some of the businesses, like pharma, are based off brewing technology.

    Would you recommend buying directly off the Tokyo exchange or going through the former ADRs now pinksheeted stocks?
    Jul 7 12:46 PM | Likes Like |Link to Comment
  • The Problem With Stock Picking in a Down Market (SAN) [View article]
    Top-down approaches result in herd mentality in that top-downers generally focus on broad secular themes that everyone, including the market, is/has already priced into securities. In essence returns are largely just driven by the risk assumed. By the time one figures out what sector to get into, the initial "risk-free" gains have already been made.

    Also, time frame needs to be considered. If you're going long in any emerging market, the higher volatility requires one to be willing to have a stronger stomach and higher level of patience. Big deal that SAN is down 20% from its high, it's a large bellweather stock on the Chilean exchange and like a TKC on the Turkish exchange, serves as a proxy for its country's market. If the fundamentals are strong, buy more. The focus on the initial buy-in or a 52 week high price is a behavior flaw. The real value of a money manager is from what he/she does when a stock is down that 20% in terms of adding more, getting out, or just being patient.
    Jun 20 09:24 PM | Likes Like |Link to Comment
  • The Problem With Stock Picking in a Down Market (SAN) [View article]
    If you're not a value-oriented bottom up manager you're going to struggle in volatile markets. Disciplined bottom-up managers have at least some anchor point on valuation that they can reference. While those points are widely subjective to model inputs, value-oriented investors are generally conservative in these estimates when trying to determine whether a stock is a good buy or not.

    It's tough to find stocks with adequate margins of safety, you picked an emerging market stock that at $7BN in market cap is probably a bellweather market stock/proxy for the Chilean market. When investors get scared, stocks like SAN will take the brunt of the punishment for the Chilean market, just like TKC would for the Turkish market.

    I'd imagine bottom up investors have a much more patient time horizon from which to realize investment returns as well. Big deal if you lose 20% off a sound investment and sound valuation point due to a market correction, buy more if the fundamentals still support it. Averaging down for general investors who play without a margin of safety is one thing but in many cases the decision that results in whether you win or lose on an investment is what you do with it once you take a hit off your initial position.

    Also, you speak of your fondness for the Chilean market, I would argue that many of the basic macro/top-level points are the first things to be priced into any stock. Witness how CTC has done over the past year.

    Secular bear markets serve fundamental, value-oriented bottom up managers the best. Rotating in and out of sectors based on mainstream macroeconomic ideas will run up transaction costs and most times the manager will be too late to accrue the real alpha of that sector (real returns might be 30% for a sector but by the time the manager gets in he only gets 15%, which might be poor on a risk adjusted basis).

    Bottom up analysts do value general economic trends but the focus is on industry specific trends and views that can directly impact a company and not broad secular themes.
    Jun 20 02:43 PM | Likes Like |Link to Comment
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