Analytical Chemist

Long only, value, long-term horizon, biotech
Analytical Chemist
Long only, value, long-term horizon, biotech
Contributor since: 2011
Your support for the PC market "dropping like a rock" is an article showing global sales of PCs...unchanged.
Do rocks drop differently for you than everyone else?
Larry,
I'm glad you mentioned that "past performance…has virtually no predictive value at all." Based on that, why should we care about Berkshire's returns over the last 15 years? They don't say anything about what will happen over the next 15 years.
Basically, your article can be summarized as: "Berkshire didn't provide the total returns that some other assets did over the last 15 years." But you admit that that has no predictive value... so what's your point?
So just to be clear: you identified a stock that was a "painful disaster" and "Ponzi-like," whose "share price is going to collapse and whose dividend will collapse soon after," but you didn't think that stock should be sold?
James:
Some direct quotes from your article:
"Linn Energy (LINE), which has been one of the most touted investments by dividend stock promoters, is just the first of what is going to be a very long procession of painful disasters in the MLP space and the high-dividend yield sector more generally."
"LINE will not be the last company that is currently paying out high dividends and/or distributions whose share price is going to collapse and whose dividend will collapse soon thereafter"
"Not all of the companies in these sectors are equally Ponzi-like."
Over and over again, from the title on, you're implying that investing in Linn Energy is like investing in a ponzi scheme. If you're not suggesting that people sell (i.e. the comment you just made), are you actually saying that people should invest in Ponzi schemes?
Raifel is correct. This is really shoddy reporting.
"Come on, you're setting up a straw man. There is no evidence, but that doesn't mean Buyandhold is wrong to be speechless."
Every field of study that I respect requires evidence for statements. Asking for evidence is nothing like a strawman argument. Arne provided evidence, and reasonable people can differ on the interpretation. Buyandhold did not.
Buyandhold,
If Arne's claim is so extraordinary as to leave you speechless for the first time in your life, it should be extraordinarily easy for you to provide evidence that debt levels are harmful to the economy. I look forward to seeing that evidence.
Very nice article! I have to admit, the title had me expecting an entirely different type of article on an entirely different sort of debt issue. What a pleasant surprise!
In this case, it gives me an easy filter – I can safely ignore that opinion since they have no handle on actual facts!
Otherwise, yes, it's pretty irrelevant.
I'm just responding to the claim Michael Fitzsimmons made that methane "is likely the most common molecule in the universe" which is factually wrong. Mind-bogglingly wrong - saying that Rhode Island is the most populous state in the United States is closer to accurate in terms of how many orders of magnitude he's wrong by. And when someone is that wrong in their introductory material, I don't trust their conclusions.
See my previous comment. H2 is a molecule.
What form do you think hydrogen exists as? Even if you're only considering extra-solar material (since in the sun there are other, more common forms of energy generation), the overwhelming molecule in the universe is diatomic hydrogen (H2).
If you don't accept that H2 is a molecule, you should not be commenting on this post.
You are technically correct (according to Futurama, the best kind of correct!) on Helium. But H2 is orders of magnitude more common than any other molecule in the universe. Just look up the composition of stars and their relative proportion of mass. Then, if you want to look down three orders of magnitude, look up the composition of gas giants.
The larger point was that if a source is off by several orders of magnitude on the abundance of some material, I wouldn't trust anything else they wrote on that material without significant verification.
The energy from biomass comes from the sun.
Methane is nowhere near the most common molecule in the universe, and you should view anyone who says so with great suspicion. Hydrogen is far and away the most common, and helium is next. Everything else combined is orders of magnitude less common.
Michael,
The "real substance" suggests that if Apple's ROIC falls to the S&P average (problematic for many reasons), then it's only worth $8 per share after cash. http://seekingalpha.co...
Oh, that makes more sense. It did seem a surprising error for someone who clearly understood the company so well. Good article!
I love to see more coverage on CODI, and this article has some good information. Unfortunately, it also contains a crucial error. You state that "Compass' primary cash flow is from the interest paid on the loans from the subsidiaries." This is false. Most of CODI's cash flow comes from the operating profits of its wholly owned subsidiaries. In other parts of the article you're very clear about how CODI differs from BDC's, but in this case you missed the mark.
I very much liked your calculation of consolidated net asset value per share. I never thought of calculating that, but I think I'll use it going forward– thanks!
I published this yeterday, but I think my article well illustrates the silliness of this piece:
http://seekingalpha.co...
This is really the question. Kimberly Clark is clearly not the investment now that it was in 2002.
That's an interesting move. Care to go into some detail for why you sold INTC and CSCO? Don't get me wrong, I like the consistent 10% earnings growth for CL and 8% for GIS, but CL trades at a PE 10% higher than its high of the last 5 years, and GIS is approaching it's 5-year high PE. Intel has similar 9% annual earnings growth but trades at a P/E much closer to its 5-year low than high, while CSCO is the same but with 10% earnings growth.
(I'm long INTC)
Hi Chuck,
Can you say exactly what metric(s) you used to bin these companies? There are correlations among buckets based on current P/E compared to historical P/E, as well as predicted forward 5 year annual return, but neither has clear dividing lines.
David,
If your model fully accounts for cash, then your model argues that if Apple's ROIC falls to the average for the S&P then Apple is worth only $8 per share ex-cash. You and I both know that that is absurd.
That one does. But the earlier link to http://bit.ly/102dSHW relies on an image that's linked as http://bit.ly/13xZPhw
I eventually figured out the proper link for the image should be http://bit.ly/102dVDm
Before you post the same links for the fourth time on the same article, could you perhaps make sure that the pages actually work correctly? Your "Figure 1" on the Invested Capital doesn't display, and so your calculation is not, in fact, transparent.
And I think it's only going to get worse:
http://seekingalpha.co...
In addition to the logical problems with this analysis shown by previous commenters, this analysis has serious mathematical and economic errors. In particular, two "weighted averages" jumped out at me. The articles calculated a weighted average buyback yield, and a weighted average "program yield" that for some bizarre reason averaged the dividend and share buybacks. Listen: share buybacks are additive, not averaged. When Apple buys back $10 billion and then $50 billion worth of stock, they buy back a sum of $60 billion, not an average of an intermediate amount. And when Apple pays a dividend, the actual dollars that they pay out are deposited into people's accounts, not bizarrely averaged with the shares they have and will buy back.
Just because you can do a calculation doesn't mean that the output has any physical or economic sense to it.
That situation wouldn't be liquidation, it would be going private. And that route could be used for great wealth generation.
Apple doesn't hold treasury stock. As with most buybacks, this should simply retire the shares that Apple buys back.
Think of it this way: if we're equal partners in a company and I buy you out, how much of the company do I own? Your logic says 50%. Reality says 100%.
You're doubling down on this fallacy, huh? You think that investors value Apple's cash hoard at $2.50 per dollar?
I guess you do, based on your "no good news" comment
Ross:
Are you saying investors are so dumb that they value $1 of cash at $2.50 because it's held in Apple's bank accounts?
Owning 10% more of a company means absolutely nothing? Because that's the effect of a buyback.
This is a great response. The article was fine with discussing buying puts to hedge against further losses, but totally lost me when it started discussing selling calls. This completely knocks out your upside potential for far too little in premium.