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Caiman Valores  

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  • Banco Santander Brasil: An Investment Gem In The Santander Stable [View article]
    My pleasure, it seems that the stress tests conducted by the ECB were not as rigorous as you would hope for from a banking regulator as a number of Spain's banks passed only to then put their hands up requesting a bailout.
    Jul 11, 2012. 11:37 AM | Likes Like |Link to Comment
  • Banco Santander Brasil: An Investment Gem In The Santander Stable [View article]
    Manya thank you for the comment, however as stated in my previous comment I am referring to the IMF stress test which formed part of their assessment of the stability of the Spanish banking sector. This is not the ECB stress test conducted in 2011, which as you point out Bankia passed. At the time of the IMF conducting its assessment in 2012 Bankia had already been bailed out by the Spanish government. Only Banco Santander and BBVA were found by the IMF not to require any additional capital in the scenario applied. You can find the details in the following link:
    Jul 11, 2012. 08:56 AM | Likes Like |Link to Comment
  • Banco Santander Brasil: An Investment Gem In The Santander Stable [View article]
    Shane thank you for the comments. Overall BSBR is being sold down on a combination of sentiment attached to its Spanish parent and the banking solvency crisis. However, the outcomes of the independent audit were that BSBR's parent SAN doesn't require any capital from the bailout package and also passed the IMF stress test. The other reason relates to the poor economic outlook for Brazil which will impact revenues and profits combined with some concerns as to the quality of its loan book.

    As for the new law to which you refer it is specifically aimed at preventing savings banks from holding majority interests in property development and real estate companies. If implemented the law won't prevent a Spanish bank from maintaining a majority holding in a subsidiary of its core business.

    In addition, despite the rumors I don't see SAN selling down its majority control of BSBR or any of its other independently listed subsidiaries and management have made announcements to that effect. In addition, SAN certainly doesn't need to sell those interests at bottom of the market prices when it has recently received the proceeds of the sale of its Colombian business and is looking to IPO its Mexican business later this year.
    Jul 10, 2012. 09:25 PM | Likes Like |Link to Comment
  • Spain's Economic Turmoil Camouflages BBVA's True Potential [View article]
    John that is in an interesting point. My knowledge of U.S prudential regulations is not particularly strong but to clarify by assets I am referring to regulated assets including loans (asset) and deposits (liabilities) not other assets that the bank has accrued through its operations. My limited understanding is that while the bank's regulated assets and deposits can't be moved offshore to the parent, other assets acquired through the course of business, i.e purchased with profits can be streamed to the parent.
    In addition, it is the parent that provides the capital required to allow the sub to operate and remain solvent, as well as meeting prudential regulations including capital requirements. Therefore, if the parent becomes insolvent or for other reasons is unable to provide the required funds for its sub to meet its funding requirements then the sub is unable to operate.
    Jul 10, 2012. 09:16 PM | Likes Like |Link to Comment
  • Spain's Economic Turmoil Camouflages BBVA's True Potential [View article]
    John that is correct prudential regulation in the U.S protects the deposits and the majority of the assets held by the bank from being shipped offshore in the event of its parent becoming insolvent. This applies to all subs of foreign banks operating in the U.S. It is designed to protect customers of those institutions but not investors.
    Jul 10, 2012. 11:59 AM | Likes Like |Link to Comment
  • Spain's Economic Turmoil Camouflages BBVA's True Potential [View article]
    My understanding is that the bond holders in Compass are not sheltered from the risk in its parent as it is a wholly owned subsidiary. Therefore, they would be rated as creditors ranked by the terms and conditions of the instruments in question. My understanding is that the prudential protections in the U.S extend to depositors only. However, if BBVA were to face any significant problems it is likely Compass would be sold either privately or through an IPO to raise funds. Where this would leave any bond holders is hard to say.

    I also believe that both the debt and equity pricing for BBVA is an over-reaction to the bank's connection with Spain and as a result are priced irrationally by the market. Along with CaixaBank and Banco Santander, BBVA was not found in need of bailout funds. Furthermore, along with Santander it was found by the IMF to be able to withstand the stressed economic scenario set out in a previous comment. BBVA as a whole is still profitable and has its non-performing loans and capital levels within acceptable parameters.
    Jul 10, 2012. 05:47 AM | 1 Like Like |Link to Comment
  • Vale: A Promising Mining Investment Overwhelmed By Uncertainty [View article]
    wuhlman thank you for the comments. Vale is a hard stock to make a decision on. Given the conclusion I have reached in the article it seems counter-intuitive for me to be long as I have disclosed. But while it may not be a good time to invest in a particular stock holding a stock during a rough patch is a different proposition. If the uncertainty coming from Brazil eases up and the Supreme Court finds in Vales favor with regard to the tax case then the shares should see a surge in value. This should then in my view see the shares hit the $24 to $26 range, which is lower than the analyst mean price of $28. But reflects some political risk being priced in. BUt overall the Brazilian government's policies are acting as a significant drag on the company's share price.
    Jul 6, 2012. 10:07 PM | 2 Likes Like |Link to Comment
  • Einhorn Triples [View instapost]
    I didn't know David Einhorn was such a fan of poker! Do you know what hand knocked him out of the tourney? We should have a Seeking Alpha contributors poker game!
    Jul 6, 2012. 03:25 AM | Likes Like |Link to Comment
  • Vale: A Promising Mining Investment Overwhelmed By Uncertainty [View article]
    sheldon no need to place a caveat on your opinion, it is always good to hear the other side of the story and gain that perspective. I quite like having some very animated debates plus having readers with a different view post their comments and views adds to the discussion and broadens not only other readers knowledge and view of the company but also my own.

    There is a lot of sense to the strategy you are using and I certainly don't believe that Vale is a poor company plus it is looking cheap for a long-term buy and hold strategy. The company also pays a healthy dividend, but that dividend will reduce in yield as net income falls. Plus cutting the dividend may be one strategy the company could consider as means of managing the fallout from the income tax case if it loses the appeal.

    My concerns stem from the uncertainty surrounding the actions of the Brazilian government and the inability to predict what will happen next and the impacts this will have on Vale. You only need to look at Petrobras and see the opportunities that have been squandered.

    However, if I am proved wrong and future events unfold in Vale's favor then there is no doubt that the company will go from strength to strength. But as one of the earlier readers commented China is the key and I don't see future iron ore demand and thus prices increasing as they have over the last 10 years.
    Jul 5, 2012. 11:59 PM | 2 Likes Like |Link to Comment
  • Vale: A Promising Mining Investment Overwhelmed By Uncertainty [View article]
    jweissman, thank you for the feedback. I must admit given that I am writing quite a lot about Brazil lately my Portuguese is getting better and thankfully it is a similar enough language to Spanish to make translating relatively easy.

    I agree Vale is cheap but it is cheap for the reasons I have discussed. It is quite frustrating seeing a company with so much potential being so adversely affected by the economic policies of the country where it is domiciled. Perhaps taking a stake in an ETF in which Vale is a significant holding is one way of gaining exposure to the company.

    However, it is very difficult to pick an entry point for Vale primarily because of the Brazilian government's policies and the uncertainty they are generating for businesses operating there. If Vale were to lose its appeal in the Supreme Court then the price will fall further, but if that matter ends in the company's favor it is likely the price will spike. However, despite researching the case it is very difficult to obtain enough information to even make an educated guess as to which way it will go and my gut is telling me the Supreme Court will uphold the previous decisions.
    Jul 5, 2012. 11:11 PM | 3 Likes Like |Link to Comment
  • Vale: A Promising Mining Investment Overwhelmed By Uncertainty [View article]
    Mercy thank you for the feedback. Sometimes I feel that I am being to harsh on the government and President Rousseff, but every time I get that feeling they implement or announce the implementation of an even more extreme policy. The direction of the government's policy is far more extreme than under Lula and it seems that ideology with a healthy dose of revenge and megalomania is driving it.

    My fear is that if the government continues down this path all of the great work put into developing the country and the economic development that has occurred over the last decade will be brought undone leaving Brazil with a structurally unstable economy taking it right back to the end of the 70s.

    I also just want to point out that I am not a big fan of IMF style development economics nor a fan of the Chicago school of economics. I also understand the important role the government plays in the provision of public goods, the need for regulation and its important social responsibilities, but they need to strike a balance and that balance needs to be supported by transparent and equitably applied laws in the interests of all stakeholders in society (I am cringing as I use the word stakeholder).
    Jul 5, 2012. 10:31 PM | 4 Likes Like |Link to Comment
  • Vale: A Promising Mining Investment Overwhelmed By Uncertainty [View article]
    baaad thank you for the comments. It was a hard call on China and the jury is still out, but it looks more and more like we aren't going to see a repeat of 2002 to 2008 regarding the demand for metals and to a lesser extent metallurgical coal. This as you pointed out will have a significant impact on global commodity demand. Effectively investing in an iron ore miner is a leveraged play on iron ore prices which doesn't make sense in this market.

    In saying that there is a lot to like about Vale, BHP and Anglo American. I also like the fact that Vale is diversifying out of iron ore and trying to build up other profitable operations in fertilizer nutrients and energy. But with the growing political risk and economic uncertainty in Brazil I believe that Vale will struggle despite fundamentally being a great company with high potential and having a management team that learns from its mistakes.

    It is clear that BHP and Rio have concerns over China and iron ore demand with their efforts to diversify but I have a soft spot for BHP and still regret selling my ASX listed stock a few years back.
    Jul 5, 2012. 10:19 PM | 2 Likes Like |Link to Comment
  • Vale: A Promising Mining Investment Overwhelmed By Uncertainty [View article]
    Chazsf that is a good point, but it is comparative to its peers plus as I pointed out costs in proportion to revenue increased significantly which explains the poor numbers.
    Jul 5, 2012. 08:35 PM | 1 Like Like |Link to Comment
  • Telefonica: A Compelling Investment Or Value Trap? [View article]
    Telefonica is down 4.5% today. I haven't seen any indication of upward movement and I doubt the share price will recover for sometime.
    Jul 5, 2012. 08:30 PM | 1 Like Like |Link to Comment
  • Telefonica: A Compelling Investment Or Value Trap? [View article]
    PMRoth I disagree and the issues which have become apparent and management's recent actions support my statement on the scrip dividend. The difference is they will not make an admission in public. Why else would a company implement a compulsory scrip dividend for such a large portion of their dividend payment?

    Further to that, the reasons for the sale of assets is to reduce debt levels because they are currently at unsustainable levels. The sheer size of the debt combined with the amount maturing in the short-term has created significant problems for the company including an increased likelihood that they won't be able to refinance it in the current operating environment. I also don't see leverage of 2.5 times as being a healthy debt ratio for a telco or for most companies. This becomes even clearer when they can't convert that high leverage into a decent return on equity, which is traditionally another red flag when analyzing a company.

    Telefonica have as much as admitted they can't manage their debt, why else sell a good quality and valuable asset like the O2 business at bottom of the market prices. In addition, due to the cost impact of the debt and a significant drop in revenues Telefonica is unable to retain its dividend and continue paying it in cash which is why they have reverted to an almost all scrip dividend.

    I am also aware that European companies use scrip dividends but those companies don't issue compulsory scrip dividends nor do they do it on the same scale as Telefonica. A good example of a well managed scrip dividend program is Banco Santander where the dividend payment is set for the year by the board and then shareholders elect whether to take cash or scrip. One of the key reasons Santander introduced a choice between cash or scrip is that ADR holder cna take the scrip and avoid 21% Spanish withholding tax.

    However, Telefonica offers no choice between cash or scrip, shareholders must take the dividend as it is structured. With again a significant portion of the dividend in scrip not cash because they don't have the cash to pay the whole dividend in cash. This is signaling that the company is unable to sustain the current dividend payment which typically reflects issues with cash flow and debt management.

    I agree the company should lower the dividend but after cutting it in December 2011 if they lower it further it will most likely decrease investor confidence and see a further sell off of shares pushing the share price lower. If the price were to drop lower it is highly likely that debt covenants will come into play and secured lenders will start calling in their loans. If this occurred in the current European market Telefonica would be unable to secure alternate financing and the shares wold continue to be sold down triggering further breaches of covenants with more lenders calling in their loans.
    Jul 5, 2012. 08:27 PM | 1 Like Like |Link to Comment