Brendan Wagner

Brendan Wagner
Contributor since: 2008
Company: Spectrum Advisory Services
PGN is not a "pure-play" jackup story - they have risks that Rowan does not. They have six floaters, two of which come off contract in Brazil in 2015. One will likely go back to work there, the other probably not. These are huge EBITDA contributors, and are the bulk of management's worries.
I doubt PGN will pay the $80-90million dividend that NE proposed in the form 10's. Most likely a smaller amount will be proposed by management, an amount allowing for dividend growth. The cash flow saved may go to buy back debt, and that seems to make sense with the 2022 and 2024 notes trading at 93cents on the dollar.
I conservatively value PGN at 5x trough 2016 EBITDA of $500m and assume they've paid off $200m in debt by then. That leaves equity of $1billion, or $11.90 per share.
"blinding proof that the S&P 500 is now a complete creature of central bank liquidity and manipulation." - what an amazingly arrogant view you have! In your exhaustive research, did you bother to look at what is happening to actual companies? Is the Fed the only reason that the S&P500's largest company(Apple) is up 750% since March 2009, or is it because their net income rose 749% when comparing March14 to March09? Did the Fed help them sell 43.7million iphones in the March14 quarter, versus 3.8million in the March2009 quarter? And what did the Fed have to do with the Ipad sales of 16.3million units in the March14 quarter, compared to zero in March09 when the product had not even been released yet? Your belligerence blinds you to what is going on "under the hood" of the broad market. Yes, the Fed is accommodating the market, but there's plenty more going on that justifies most of the rise in stocks. Whether you're bullish or bearish, lazily analysis when combined with arrogance can only be harmful in the long-run.
Buffett is happy to pay a fair price for a great brand. The flaw in your valuation is the discount rate. Heinz bonds (cusip 423074AN3) due March2017 have a coupon of 1.5% and yielded about 1.3% before the deal was announced. And yet you use a 7.5%-9% discount rate, which is far, far too high.
I agree with Armistead. The Shiller 10year PE for the March 09 lows was not low enough for certain bears in the market. Thus they KILLED their investors' performance and missed the entire rally. One example of the Shiller PE is Apple. It's 10year average EPS right now is about $6.70, versus the $43 they will actually make this year. The reliance on backward-looking models while ignoring changes in the underlying business is inexcusable, especially for professionals with $Billions entrusted to them.
I agree that BBY is undervalued but the $2.5billion in FCF for the year just ended will not be repeated - it was a one-time working capital reversal. This year FCF will be closer to $1.5-1.6billion, still a lush yield that should afford some upside for the stock.
Some numbers disagree with you. Apple's eps grew 86% in 2011, 75% in 2010, and will grow about 55% this year. If you slow that down to 20% in 2013 and 2014, price the stock at 15x earnings and add back cash&investments per share of $173(by then), you have a $1,077 stock. It may or may not happen that way, but it's no stretch for it to get there.
I agree that FCF is extremely important and useful as a valuation measure. But plenty of great companies (and great investments) can be overlooked by FCF investors, as they might be in a growth/investment phase.
The company is forecasting $2-2.5billion in Free Cash Flow this year, which makes that free cash flow yield north of 20% if you net out the cash.
no, the recent ones aren't all internally managed. but anyway, these blind pools (well not so blind now that they've invested proceeds) are a great buy on the dips, buying a dollar for 70cents.
I'd point out that these blind pool IPO's can have some complicated operating agreements with related parties, as REIT rules require a 3rd party manager of assets in many cases. One nice sign is management that invests alongside the rest of us by buying shares in the IPO or soon after. Among the blind pool REITS, Jeff Fisher at CLDT put in the largest slug of his own $$$$. (no position)
a little more research is called for. and watch out if you're buying the common shares of some of these REITS - you'll forever be abused and diluted in order to raise $$$ to pay off those higher than you in the capital structure:
Only to a Harvard prof does more tax revenue mean "boosting the economy."
You wrote "The term “bubble” implies a grossly mispriced asset that is susceptible to substantial losses."
You can define "bubble" however you like, but it is perfectly valid to say that receiving .44% to lend to the US Govt for two years is a "bubble," especially considering that the USA's finances are magnitudes worse than they were decades ago when you could lend to the govt for over 10%. Saying that there's no bubble simply b/c you get principal back ignores the point that a bubble can also mean being paid too little to lend.
Good article Tim. As a fan of dividends/acquisitions over buybacks, XOM has always been the thorn in my argument.
One thing I'd note is the idea that when companies buy back stock, then the investor "owns more of the company." Well sure you do, but you "own more" of a company that has a smaller cash balance than the day before. And the market might give the company a smaller PE multiple due to reduced cash, so you've gained nothing.
Overlooked is the conflict of stock options. Management that is heavy on stock options does not benefit from dividend payouts, so they might be more inclined to use a buyback to push the shares up temporarily.
As for the company argument that their industry might be to volatile for them to commit to a dividend, I say nonsense. Look at Cal-Maine in the shell egg business - hugely volatile, so they don't commit to a fixed dividend, but rather a fixed % of net income.
The hard drive stocks will never get a "market" multiple, due to their violent cyclicality. That said, buying WDC at sub-7 PE's has usually proven timely. Net of cash, this stock is trading at six times this year's eps estimates if you were to cut them by half...
As for the buybacks though, I think it's a horrible strategy, especially in this dangerous industry. So the company used your money to buy back shares? Great, now you own a larger % of a company with a smaller cash balance.
I like the company, but you're a bit aggressive on the 200 hours of annual training. It's about half that. Still, great company here.
"New sales associates are required to complete 80 hours of initial in-house training focused on product knowledge and functionality, customer service and general store operations. Sales associates also participate in on-going training for an average of 10 hours per month in order to stay current with new product offerings and customer service initiatives. "

If you're shorting the general market instead of the acquirer's stock, you are not engaging in merger arbitrage. You're certainly speculating though! At the very least they should rename this fund.
AAPL is the best example here. Putting a "market" multiple (15) on the shiller 10year average EPS of 2.34 would give you a stock price equal to less than the cash and investments (per share) on Apple's balance sheet . Total silliness.
I think if anything, it's wrong for politicians to exploit this for their gain.
Monday's attack by Wyden of Oregon makes me wonder if he might literally be the dumbest person on the planet.
From your cursory analysis, were you able to specify what % of the material escaping that pipe is oil, versus water and mud?
I don't know where Gold will top out, but it is completely dependent on group-think and the hot-potato effect. The points you (and everyone else) make about deficits and currency debasement are very valid (and I agree with them), but the fact remains that you can make the EXACT same argument with Gold at $200 or Gold at $20,000. If people no longer agree on Gold being the "flight to safety" asset (and why should they? There are plenty of other hard assets that are more useful in an Armageddon scenario...), then how do you justify price targets for this metal?
The world survives without Congressionally-blessed ratings agencies for equities, and they surely will for bonds. The ratings agencies' demise will be a GOOD thing, as it will require a bit more effort from the "dumb money" that throws around hundreds of millions of dollars on the whims of a Moody's or S&P rating.
We already do cover it. Considering excise and gasoline taxes, we "cover it" about 100times over annually, but never underestimate the greed and stupidity of populist politicians.
But I totally agree with you. Everyone filling their car with gas or enjoying a meal caught and shipped thanks to petroleum should pitch nt. Not that I expect that to happen, in this era of extreme ignorance and "lazy-do-gooderism."
Good points. In addition, they're quite cheap, and geographically "diverse" in case the USA gets stupid enough to attack offshore drilling.
So you think the DJIA has downside to 8500, thus IBM should trade at about $99.84? That's 9x last year's earnings and 8x 2010 estimated earnings. Your downside target would have IBM trading at a Free Cash Flow Yield (on IBM's market value net of cash, excluding debt b/c they cover interest 58times) of 13-14% conservatively, for a company that borrows at nearly the risk free rate.
Yikes, I did switch the risk free and equity risk premium...thanks! With both pretty close to each other, it doesn't affect the outcome too bad, but a bad slip-up on my part.
Yes, that's why I spoke mainly about cost of equity rather than WACC, and used two companies with very little debt, so their cost of equity is basically their WACC. But the beta component is actually more damaging, as it rewards debt. If MSFT had another $20billion in debt, then the PV of future cash flows would RISE as the stock fell, b/c cheaper debt financing would count for more of the overall WACC. The more debt they have, the more their DCF valuation would rise as the stock falls. Obviously it's better to buy low, but the intrinsic value of 2011's FCF should not change b/c your stock dropped a few points...yet it does thanks to beta's and CAPM.
Also, MANY investment bankers have admitted to me that they fudge the cost of equity using higher beta's, to come up with a higher buyout/takeover price, and more fees for them.
Oops. Cash and investments per share is closer to $45 per share than the $27 i cited (and I left out per share).
This fund is all sorts of things, but it does not engage in "merger arbitrage." If they did, then top holding Smith International would be offset with a equal dollar short position in Schlumberger, who is buying them in an all-stock deal.
Those other companies are in the spreadsheet to see how feasible a 2% dividend would be.
I would never begrudge free enterprise. I simply found it inappropriate for Charles Schwab to argue for higher interest rates, without disclosing how enormously important they are for his company. Hell, I for one think the likelihood of higher rates makes SCHW a great stock. But what Schwab did is (in an extreme example) akin to Safeway's CEO writing an op-ed for every American to be given a $500 weekly food stamp to be spent in their stores. It might be a noble thought, but it would be completely self-serving.