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Brian Abbott

 
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  • Using Free Cash Flow To Compare Company Valuations [View article]
    Of course it's possible, it just runs counter to the history of most acquisitions. Very few acqusitions live up to the touted benefits. But unless they are saving up to buy Microsoft or ExxonMobil someday, the fact that they HAVEN'T made such acquisitions recently suggests the opportunities aren't out there or that they don't wish to pursue them. plus they are in a bit of a growth quandary, because they've had such a great growth rate it is hard to find other companies actually growing even faster and also large enough able to impact AAPL's EPS. AAPL has become like a mega-cap mutual fund that can't even fool with small companies because of the size factor.
    Feb 17 05:47 PM | 1 Like Like |Link to Comment
  • Using Free Cash Flow To Compare Company Valuations [View article]
    Great comments. I think the market is already telling us what you suggest - namely, that BRK.B deserves a premium valuation because of superior demonstrated skill at allocating its FCF. The problem for the new investor is that it's already factored into the share price now - in other words that premium benefited the prior investors as the shares got bid up. Plus, there is now execution risk because if BRK fails to continue in its tradition, the valuation could come down.

    Also, I agree that AAPL loses points for its massive cash hoard, but partially redeems itself by at least not making stupid, overpriced acquisitions. But just what does it need all that cash for? The fact that they don't return it to shareholders should warn people that they either think they'll need it to fuel future growth (R&D, etc) or that they WILL need to make a stupid, overpriced acquisition in the future. I'd argue that their valuation looks like it is discounting that possibility rather than rewarding it with a premium.
    Feb 17 05:34 PM | 1 Like Like |Link to Comment
  • Discounting Everything By 30% [View instapost]
    Micheal- thanks for commenting.

    Another point of clarification is the the "delta" would be one third where estimates are concerned. Obviously a company like Intel has a lot of momentum and maybe long term contracts so I wouldn't discount all of that. What I would discount are incremental changes that rely to some degree on unverifiable estimates - that is where the cognitive biases creep in. So on something like an overall EPS estimate I wouldn't change by 30%, but if there is a list of speculative guesses for things that add up to 5% or 10% of the incremental growth - perhaps that portion should be discounted by 30% (usually downward).
    Jan 22 11:16 AM | 1 Like Like |Link to Comment
  • 2012 Permanent Portfolios Performance Review And Outlook [View article]
    the genius thing this fund manager did is keep one fourth in cash and another fourth in bonds at all times and yet kept charging a typical expense ratio. True, even money market funds have their expenses, but an individual investor even with a small amount of money could invest the minimums in much cheaper options elsewhere. But I guess their value proposition is simplicity so I can understand why people like it.
    Jan 11 04:44 PM | 1 Like Like |Link to Comment
  • Selling Covered Calls On Most ETFs Guaranteed To Lose You Money In The Long Run [View article]
    The only way i acquire shares is through exercises in my put-writing program, and the only way I sell them is through selling covered calls that occasionally get exercised. I haven't bothered to calculate returns, but the equity curve of my portfolio is very satisfying to me. I use the strike prices of the puts and calls as functionally the same as limit orders. As long as you are identifying companies that are solidly run with limited leverage and good balance sheets, this can be a fantastic strategy. (energy sector has been the most successful for me). It has worked so well that I simply refuse to just outright buy a stock with a buy order. I will only acquire it through selling an out of the money put. it gives an additional discount to the current price.
    Jan 11 01:35 PM | 1 Like Like |Link to Comment
  • The Innovator's Dilemma: Is Apple A Sustainer Or Disrupter? [View article]
    In technology there is a school of thought that with technology always changing, your current customers aren't that important to your future a decade from now. If you fail to move into new areas with new customers, you'll lose your current ones anyway, when they move on to a newer disruptive technology that was brought out by a new entrant to the market that didn't have the overhead of a large dominant company.
    Jan 1 10:19 PM | 1 Like Like |Link to Comment
  • A Retirement Income Portfolio [View article]
    I agree about BDC's. I like GLAD and GOOD personally. But got really burned by this sector in 2008.
    Jan 1 09:47 PM | 1 Like Like |Link to Comment
  • The Innovator's Dilemma: Is Apple A Sustainer Or Disrupter? [View article]
    Even if AAPL has proven to be the rare exception to the rule about dominant companies rarely being successful disrupters, the examples you cite are all in the past, and with the company's higher market cap and expectations, it will be even harder to repeat. It doesn't mean they can't -- just that they have a headwind facing them. Maybe there's another iTunes up their sleeve. But eventually technology companies fall into the "trap" of pleasing their current customers rather than their future customers in potential new markets. Furthermore, it's all baked seemingly into expectations at this point. Thanks for commenting.
    Jan 1 09:09 PM | 1 Like Like |Link to Comment
  • Fiscal cliff negotiations between Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell hit a major snag after Republicans demand use of the "chained CPI" method for calculating entitlement benefits - which would result in lower payments for Social Security beneficiaries. Pres. Obama backed the provision previously, but Democrats now object to including it as part of a scaled-down deal. Updated 5:51 p.m.: The Senate won't vote tonight and will reconvene at 11 a.m. tomorrow, Reid says. [View news story]
    sure, they were targeting 5% inflation when it was actually 15%. well, probably not until Volcker under Reagan
    Dec 31 05:07 PM | 1 Like Like |Link to Comment
  • Fiscal cliff negotiations between Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell hit a major snag after Republicans demand use of the "chained CPI" method for calculating entitlement benefits - which would result in lower payments for Social Security beneficiaries. Pres. Obama backed the provision previously, but Democrats now object to including it as part of a scaled-down deal. Updated 5:51 p.m.: The Senate won't vote tonight and will reconvene at 11 a.m. tomorrow, Reid says. [View news story]
    of course Greece couldn't monetize since they can't print their own currency, but you see what I mean.
    Dec 31 04:54 PM | 1 Like Like |Link to Comment
  • Fiscal cliff negotiations between Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell hit a major snag after Republicans demand use of the "chained CPI" method for calculating entitlement benefits - which would result in lower payments for Social Security beneficiaries. Pres. Obama backed the provision previously, but Democrats now object to including it as part of a scaled-down deal. Updated 5:51 p.m.: The Senate won't vote tonight and will reconvene at 11 a.m. tomorrow, Reid says. [View news story]
    the government might lay off hundreds of thousands of workers if no deal reached? wow, that might not be that bad of an outcome (no offense to the affected workers)
    Dec 31 01:23 PM | 1 Like Like |Link to Comment
  • Fiscal cliff negotiations between Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell hit a major snag after Republicans demand use of the "chained CPI" method for calculating entitlement benefits - which would result in lower payments for Social Security beneficiaries. Pres. Obama backed the provision previously, but Democrats now object to including it as part of a scaled-down deal. Updated 5:51 p.m.: The Senate won't vote tonight and will reconvene at 11 a.m. tomorrow, Reid says. [View news story]
    the problem is, the govt debt largely isn't used to invest in ANYTHING.... it's mainly to pay current expenses.
    Dec 31 12:32 PM | 1 Like Like |Link to Comment
  • Fiscal cliff negotiations between Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell hit a major snag after Republicans demand use of the "chained CPI" method for calculating entitlement benefits - which would result in lower payments for Social Security beneficiaries. Pres. Obama backed the provision previously, but Democrats now object to including it as part of a scaled-down deal. Updated 5:51 p.m.: The Senate won't vote tonight and will reconvene at 11 a.m. tomorrow, Reid says. [View news story]
    don- the US has to station troops all over the world - that's how you maintain an empire. I am not an apologist for the US military, just stating the facts. if we didn't establish a presence everywhere, then someone else would, and the US would lose its influence. it's just part of maintaining an empire.
    Dec 30 07:09 PM | 1 Like Like |Link to Comment
  • An Introduction To Investing In Reinsurance Companies [View article]
    How timely - After writing my first reply, the next day I notice that one of the stocks I listed with widest discount to book value, Alterra (ALTE), is getting a buyout offer from Markel: at a 34 percent premium to the stock price which is about 10% over book value. (A few months ago Flagstone was bought by Validus, and Flagstone formerly had the widest discoount to book) Hmmm.... I am sensing a pattern here!

    http://reut.rs/VR59oS
    Dec 19 09:08 AM | 1 Like Like |Link to Comment
  • An Introduction To Investing In Reinsurance Companies [View article]
    You make a great point about the permanent impairment of price to book value for most of these companies (ie, consistently selling below book, including acquisitions). TRH was a special case because they had problems back with AIG's near-collapse, but even the 15% discount to book at acquisition was a large increase from where they had traded before. But the finance theory for permanent prices below book value might say that the market is rendering a verdict that these companies destroy capital, through bad underwriting, bad investing, or expensive management, or that book value itself may be improperly valued. If all of these theories are wrong, then the best approach for these companies is to buy back their shares below book value, which in fact most of these companies are doing.

    I don't have an informed opinion on Alleghany. Many of the ones I listed as reinsurers are not quite pure plays, as they have diversified into also writing primary lines of specialty insurance, including Lloyd's syndicates. So Alleghany would probably fit it alongside them. Thanks for commenting!
    Dec 18 03:12 PM | 1 Like Like |Link to Comment
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