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  • Dow Chemical: Betting On Continued Margin Enhancements [View article]
    Excellent statisticual analysis and I appreciate your investment process. I would like to know of other companies you find "excellent".

    I think the most important part of your conclusion is: "Had DOW been enjoying mid-teen operating profitability consistently over the last ten years, we would have perhaps been gung-ho on the stock's appeal as a long-term investment...." Management of Dow has been quite poor. Now that Steve Miller is in town, Dow has been flying right.

    Liveris will hopefully retire this year and watch out how the greatest chemical assets in the world will be able to be managed profitably!
    May 24, 2015. 09:15 PM | 6 Likes Like |Link to Comment
  • Sealed In Debt [View article]
    This is a poorly researched article. There is no discussion of Sealed Air's 1) free cash flow, 2) amortization schedule, 3) recapitalization/stated reduction of interest expense or 4) stated plans to shrink it's float by up to 25%.

    Additionally, Sealed Air is not a stereotypical packaging company. Its brands have tangible value: most people have heard of "Bubble Wrap" and "Cryovac".

    The company derives over 20% of EBITDA from Diversey -- so clearly not a "typical packaging company." Regardless, management has stated quite clearly that they are going to hold net debt to EBITDA at 3.5x- 4.0x. They have also said that they will generate $600mm of fcf + $250mm from the tax refund, and will generate $600mm+ over each of the next two years. That fcf alone equates to over 20% of the market cap. Given the tangible tailwinds to the company's key revenue streams -- these targets look light.

    I guess the author here would prefer to invest in companies that don't take advantage of cheap money?
    Apr 8, 2015. 08:33 AM | 1 Like Like |Link to Comment
  • Kennametal Still 50% Overvalued Based On Risks [View article]
    What are your revenue assumptions behind your cash flows in your various assumptions?

    Mar 5, 2015. 11:03 PM | Likes Like |Link to Comment
  • Meet The New NCT: CDO Recoveries, Golf And A 100%+ Upside Potential Over The Next 2 Years With A 10.6% Yield While You Wait [View article]
    what are your thoughts about the insider selling filing this mornnig?
    Mar 5, 2015. 09:08 AM | Likes Like |Link to Comment
  • Meet The New NCT: CDO Recoveries, Golf And A 100%+ Upside Potential Over The Next 2 Years With A 10.6% Yield While You Wait [View article]
    What are your thoughts about the insider selling filing this morning?
    Mar 5, 2015. 09:07 AM | Likes Like |Link to Comment
  • CBI Gives Investors False Hope [View article]
    How does this get past the editors of SA? really a very shoddy hit piece. The title is about the only "catchy" phrase"
    Mar 4, 2015. 09:58 AM | 2 Likes Like |Link to Comment
  • Chicago Bridge & Iron - Does Recent Rebound Signify A Long-Term Trend Or Yet Another Value Trap For Investors? [View article]
    Greenlight Capital took a major position in December. The call was solid and today you are buying the company at price below where they bought Shaw. The company trades at roughly 5.6x EV/EBITDA -- less on 2016 once you factor in the buybacks. Management is very sharp.

    Not sure what a short seller is playing for. Coiled spring looks to be a fair assessment.
    Mar 2, 2015. 08:49 AM | 3 Likes Like |Link to Comment
  • Sealed Air - Fresh Highs Leave Little To No Upside In My Eyes [View article]
    I think you have missed the key financial metric that is exciting the investors in Sealed Air: Specifically it's free cash flow characteristics.

    The company should be able to generate $2B of FCF in the next three years, b/c it will be keeping it's net debt to ebitda ratio constant - and it won't make any acquisitions -- the company will be generating over $4.00 FCF per share, with FCF P/S growing at 21%. Applying a discount to the market multiple, say 15x gets you to $60.

    I would not be short and I certainly would not sell here.
    Feb 12, 2015. 09:28 PM | Likes Like |Link to Comment
  • Parker Drilling Is A Survivor And Too Cheap To Ignore At $3 [View article]
    How do you think about the company's balance sheet?

    What do you think about their Russian exposure? Will those contracts be renewed at profitable rates?

    What is your earnings estimate for 2015 for the rental tools business?

    Feb 9, 2015. 05:10 PM | Likes Like |Link to Comment
  • Farmer Mac: Super Profitable But Cheap Due To GSE Aversion [View article]
    Thanks for this. One of the better articles on SA I have read.

    A couple of q's:

    1)Your description above of the FRE loans, sounds like the AGM balance sheet is basically giving a mortgage to a property that could have been bought with a high amount of leverage. Is this factored in the LTV?

    ie."Author’s reply » Thank ya. Appreciate the question cause you made me look into something I'd known about but glossed over.

    OK, so yeah these deals are weird. Let's say LAND buys 10 farms outright (w/ their own cash) for $1m apiece. Credit cash $10m, debit farm real estate (FRE) $10m. Then, and here is the weird part: from the $10m in FRE LAND creates ~$6m (max LTV is 60%) in mortgages and $4m in equity. Then the mortgages are used as collateral for a bond issued to AGM (w/ principal between $5.5-$6m depending on the overcollateralization AGM demands.)

    "I cannot comprehend where those "funds" get the money to issue mortgage to themselves."

    The creation of the mortgage requires no new money. Rather, it is a means to split the cash flows from the underlying real-estate, the farm, into senior (the mortgage) and subordinated tranches. That's necessary because AgVantage bonds (the collateralized bonds AGM purchases) can't be collateralized by farm equity (the sub tranche)."
    Feb 9, 2015. 12:02 AM | Likes Like |Link to Comment
  • Arlington Asset well protected on prepayments [View news story]
    Dividend is safe. BV deteriated by essentially being short 10 year treasury. Will have to wait 5 years to recoup book. Not sure what is wrong wtih a 14% dividend yield that is tax effected...
    Feb 4, 2015. 01:28 PM | Likes Like |Link to Comment
  • Nuance Communications: A Dive Into The Valuation Divulges Significant Upside [View article]
    Thanks - on what basis do you get your 2015 EPS and 20% CAGR?

    The company's consumer mobile margins have been halved in the last three years, can this reverse?

    "Nuance seems pretty cheap on a PE basis. The company is trading around 11.50 times forward earnings while earnings are expected to grow at CAGR of 20% p.a. during the next five years"
    Feb 1, 2015. 12:46 AM | Likes Like |Link to Comment
  • Medallion Financial: Classic Case Of A Thought Virus Gone Wild [View article]
    TM thank you for a thoughtful and detailed article. 10 days after your Article Murstein was interviewed in the Wall street journal (parts of the article are pasted below) where it highlights that the Taxi Medallion component of the portfolio is much smaller than what they call "sub-Prime" as are the earnings from taxi medallions vs. sub-prime.

    My questions to you, and please reference the pasted article below is:

    1) did the company decrease it's medallion lending because they saw medallion prices as being too high, or did they intentionally want to decrease taxi loans because they view the secular decline of the value of the asset?

    2) your quote about the maritime engines is valid and important. But the 20% Rate to the sub-prime RV lender is equally scary. What is the aging of the company's sub-prime loans? do you have a enough data to believe that those formerly "non-core" loans won't sink the balance sheet?

    The price of an individual New York yellow-taxi medallion fell about 19% last year, to about $810,000 in December from $1 million at the start of 2014, according to the New York City Taxi and Limousine Commission. Other cities have seen an even steeper drop.

    Mr. Murstein expects that the medallion-lending business will continue to be profitable, regardless of Uber’s fate.

    Still, he has a bigger hedge on that bet nowadays, as he expands the business into consumer loans for purchases of items such as boats, RVs, motorcycles and horse trailers.

    Medallion initially made the consumer loans as a sideline after acquiring a Utah industrial bank in 2003 in a bid to diversify and obtain access to cheap financing from deposits, Mr. Murstein says. At the time of the purchase, the bank had about $100 million of loans for RVs and boats on its books.

    That consumer-loan portfolio has grown to $457 million at the end of the third quarter of 2014, the most recent figures available. This is more than twice its $193 million size at the end of 2011, according to the company.

    Loans for medallions, meanwhile, stood at $304 million at the end of the third quarter, down slightly from $307 million in 2011, the company reported. Mr. Murstein says he slowed the medallion-lending business because he was concerned prices had risen too quickly.

    For the first three quarters of 2014, Medallion Financial reported $12.5 million of net investment income, compared with $8.6 million the year earlier. The company doesn’t break out income by division, but Mr. Murstein says about 20% came from medallion lending and nearly 60% from consumer loans. The balance comes mostly from small-business and commercial loans.

    ‘Owning a N.Y.C. taxi medallion is like owning a piece of N.Y.C. I would never bet against them.’

    —Andrew Murstein
    Mr. Murstein says consumers usually come to his firm after they have been turned down by banks.

    “They are real subprime,” says Jill Teelman, senior business manager at General RV Center, Birch Run, Mich., who says that some of her customers have been referred to Medallion to obtain loans and that they sometimes pay nearly 20% interest.

    Some analysts see risk in the strategy, given the troubled history of subprime lending and the potential for big losses in an economic downturn. “They ramped up those consumer loans as a driver to earnings,” says Greg Mason, an analyst at Keefe, Bruyette & Woods. “But it’s dramatically riskier. It’s a change in their business model.”
    Jan 31, 2015. 10:36 PM | Likes Like |Link to Comment
  • Dow Chemical: A Buy, Hold, Or Sell At $46? [View article]
    Yes, I think the muppets are selling. I agree with the author that this may be an opportunity where others are running away.
    Jan 16, 2015. 09:24 AM | 1 Like Like |Link to Comment
  • Dow Chemical: A Buy, Hold, Or Sell At $46? [View article]
    Dow has been hit with a the perception of margin pressure from the collapse in WTI / Brent spread. The company itself has commented that they do not perceive this to be as big a deal as some on wall street contend. It is telling that Goldman lowered their earnings estimates two nights ago whereas JPM reiterated theirs. Dow is a beast of company that has improved despite poor management.

    With a 3.8% yield AND new directors coming on board to police the C-suite (including, Steve "the Turnaround Kid" Miller coming in as the lead director after his stint at AIG) I think good things are in DOW's future.

    As a point, the author did not mention Enlist -- Dow's answer to Round-up. If Enlist gains even a 10% marketshare (which is well below most estimates), Dow's AG business alone is worth $15 per share (note the multiples being achieved by PAH, FMC, etc.).
    Jan 16, 2015. 07:09 AM | 1 Like Like |Link to Comment