Seeking Alpha
View as an RSS Feed

Davy Bui  

View Davy Bui's Comments BY TICKER:

Latest  |  Highest rated
  • Investors Overreact To Chesapeake CEO Loan Scandal [View article]
    After digesting the company's response, I've posted a new article detailing my concerns with the possible, perhaps probable conflict of interest these loan deals make possible:

    I don't think this scandal brings down the company or devalues its assets but it strongly suggests that Aubrey must go.
    Apr 19, 2012. 12:10 PM | 1 Like Like |Link to Comment
  • Chesapeake Response To CEO Loan Scandal Is Lacking [View article]
    Your own response can't even seem to agree with itself, much less connect to the situation at hand. You state, McClendon "collateralized his loans with his ownership interest" [in FWPP stake] but then go on to say "I would be shocked if the loans are non-recourse." Of course, they are not non-recourse, you said so yourself they are collateralized by his FWPP interest ... if he fails to pay it back, the lenders have recourse to his 2.5% ownership stake in the wells associated with the defaulted loans. There is almost zero chance McClendon would be personally liable ... he wouldn't create various entities like Jamestown Resources, etc to expose himself personally and the lenders would have to go after those entities, which most likely have little assets other than the wells they're borrowing against.

    Neither you nor I know the terms or structures of the loan but EIG personnel have stated that the loans are 100% cash sweeps until its capital is repaid + 13% return and the firm then has 42% profit rights in perpetuity after. That is a pretty sweet deal and suggests that a) EIG is paying for all the costs associated with FWPP wells in these loans & b) the loans probably do not require McClendon to make any actual service payments out of pocket, including interest, similar to a no-interest loan where the interest is simply tacked onto the back-end of the loan.

    If the wells can't support the loan, then lenders' recourse is to take these same uneconomic wells ... McClendon loses worthless wells that he didn't have to pay for in the 1st place. This is as risk-free as it gets.

    A lot of this is conjecture but that's what happens when there's not full disclosure. If everything's on the up & up, then all he has to do is disclose everything fully. $1.1B, 10% of CHK's market cap, is a huge sum and a gamechanger as it pertains to the FWPP since it suggests that McClendon has only focused on enriching himself even as shareholders have suffered. Nobody minds the CEO getting paid if everybody makes money but the only one making out like a bandit is McClendon.

    The rest of your response is just as nonsensical ... where do I state that the FWPP is response for CHK's share price? I do assert that management is responsible for a large share of the blame and my chart includes several companies that rely heavily on natural gas as well, all of whom have outperformed CHK by a wide margin so it is not just the price of natural gas at work here.

    Frankly, your response sounds like you're related to the guy or something -- there's absolutely nothing of substance in it.
    Apr 19, 2012. 11:52 AM | 2 Likes Like |Link to Comment
  • Investors Overreact To Chesapeake CEO Loan Scandal [View article]
    Aubrey seems to have no understanding that Chesapeake as a corporation is separate and bigger than him, even if he was co-founder. This behavior isn't surprising.

    You're right in that 2.5% stake program isn't analogous to profits but as far as I understand it, McClendon can choose which wells to participate in and though I don't know full details, I'm sure his cost to participate is probably far lower than say any of the JV partners costs. So it'd be like Bill Gates saying, no thanks to Bing but I'll sure take 2.5% of the new Windows 8 OS, probably at or close to the company's cost of development. McClendon, being the clever fox he is, even found a way not to pay those costs by having affiliates beholden to him finance the stakes. Maybe this was one time too many to that well, we'll see.
    Apr 18, 2012. 01:56 PM | 2 Likes Like |Link to Comment
  • Investors Overreact To Chesapeake CEO Loan Scandal [View article]
    If the stock plummets to $5, it won't be because McClendon took out some loans. But thanks for playing.
    Apr 18, 2012. 01:48 PM | 6 Likes Like |Link to Comment
  • Investors Overreact To Chesapeake CEO Loan Scandal [View article]
    Actually, I do get it as I have discussed the concerns you raise in numerous articles in the past, only with much more detail and far less condescension:

    Also disclosed, I do not hold CHK shares but rather CHK preferred D shares, which yield ~5% with a convertible option in case CHK ever does clean up its act. While management is definitely a problem, its assets are still attractive and provide some margin of safety.

    If you haven't sold before today, this loan story isn't the best reason to sell now.
    Apr 18, 2012. 01:46 PM | 5 Likes Like |Link to Comment
  • Telefonica's Dividend Cut Is Already Priced In By The Market [View article]
    Hey folks, thanks for the comments.

    First off, all references to a dividend cut means future dividend cut on the currently expected €1.30 payout (€1.50 w/ in-kind) guided by the company. By definition, past dividend cuts, including the one in late 2011, are already priced. Cramer's call, specifically, where he called the yield unsafe was on the Mar 12, 2012 edition of Mad Money. Markets are forward-looking and it is my contention that they have already priced in another dividend cut at this point.

    @Hammer, the company has guided to bring its net financial debt to OIBDA ratio under 2.35x, which means bring its debt down as there's no expectation of OIBDA rising significantly or at all even. Also, your assertion re: reducing debt reinforces my point -- if the company announced a significant cut to its dividend to reduce debt, I think markets would welcome the news & the stock would bounce. If they stay the course, investors get paid to wait. So we have two "outs" there, in poker parlance. We get hurt if the company's business/cash flow deteriorate & debt service becomes a struggle or if Europe and/or Brazil melts down.

    The broader European crisis is a wild card and outcomes are uncertain but as a value investor, I focus on cheap companies and not big-picture questions I can't answer. How many investors missed out on the 2009 rally while waiting for the US to descend into another depression?
    Mar 30, 2012. 11:39 AM | 2 Likes Like |Link to Comment
  • 7 Stocks Unanimously Loved By Analysts [View article]
    Hey guys, thanks for the comments.

    RE: F ... this article is a stock screen and thus meant to provide only a survey of the stocks which fit the criteria in order to find candidates for more in-depth research. That's why it's in the "Quick Picks & Lists" category. As for Ford's debt, I only mentioned it in the context of its ROE of 282%, which is staggering if you could earn 282% return on your money but the reason it is so high is because debt can skew ROE figures.

    RE: SVNT ... the screen criteria was "at least 80%", which means 80% or more. Hope that clears up any confusion there.
    Mar 8, 2012. 11:46 AM | Likes Like |Link to Comment
  • Covered Calls: Cautious Approach Struggles To Keep Pace With Market [View article]
    Hey Nathan, that's a good question ... I do have some cash covered puts open on XRX & TEF. generally, I only like to sell naked puts on stocks at levels where I wouldn't mind owning them. If markets are too dear, then it's the same problem as not having enough cheap stocks to buy (or write naked puts on).
    Mar 6, 2012. 07:01 PM | Likes Like |Link to Comment
  • 8 Strong Growth & Value Stocks Selling At 52 Week Lows [View article]
    Hey folks, thanks for the comments. This article was a summary of a stock screen, as indicated by the title. It is not an-indepth analysis of FTR hence only a brief overview of each stock. Readers are advised, as I do, to use any stock screen as only a starting point for further research.
    Feb 9, 2012. 12:04 PM | Likes Like |Link to Comment
  • Xerox Misses But I'm Still Buying [View article]
    Thanks for the comments ... I didn't mention the dividend because I'm basically long via naked puts so I won't get paid the divvy while this position is open.

    $8 entry point isn't bad, IMO & actually, the 2% dividend would cover your loss since stock closed at $7.81.
    Jan 25, 2012. 04:26 PM | Likes Like |Link to Comment
  • Selling Exxon Mobil, Buying Total SA [View article]
    I don't mind if TOT drops a bit from here. As a value investor, I like to buy down into my positions so it'll allow me to build my position at a lower cost basis.

    I didn't really discuss their specific operations & strategies much. In general, I don't expect them to be as efficient as XOM ... just hoping they don't keep buying solar companies.
    Jan 24, 2012. 12:59 PM | 1 Like Like |Link to Comment
  • Is Transocean A Broken Company? [View article]
    Hey folks, thanks for the comments.

    @DelibTrader: like your naked put idea ... 14-20% annualized returns might not be a bad trade-off for less risk exposure. I use naked puts often (see for my naked put on Minefineders (MFN). I wrote naked puts on Nat Oilwell Varco (NOV) back in late 2008 at some ridiculously low price and really wish I had gone long instead.

    @Chemist: I'm just trying to evaluate mgmt with any/all data I have. Financial + downtime issues damage mgmt credibility & my experience is usually these signs are not a blip but indicative of the quality of mgmt. It's dangerous for investors to hope mgmt is better than what they're showing.

    The market in the short term is random & prices can go anywhere. But if RIG doesn't get to $35, I'm OK with missing the boat -- that's how I sleep at night. I've missed plenty of boats (in fact, I missed the $50 RIG boat in Oct and saved myself 25 pp of loss vs. the market).

    I don't mind folks disagreeing w/ me but don't sling unwarranted accusations of short pumping. I have been a certified SeekingAlpha contributor since 2007. I also post my ENTIRE portfolio on a monthly basis so my 5-year track record is there for everyone to see:

    Good luck all.
    Jan 19, 2012. 12:11 PM | 4 Likes Like |Link to Comment
  • Time To Sell Penn West Exploration [View article]
    Hey guys thanks for the comments --

    I do like some of the other former Canadian trusts better than PWE but none seem to be selling a marked discount to asset value. There were a few that only trade in Canada that looked really attractive a few years ago and have done better than PWE. If you have any US-listed candidates, I'd be happy to take a peek.

    PWE's debt is a little higher than I'd like to see but not outrageous. With a company so dependent on energy market prices, I just like a little more cushion. I don't worry about XOM or DVN getting killed if we revisit late 2009/early 2009 turbulence but PWE is walking a tighter line.
    Jan 13, 2012. 06:00 PM | Likes Like |Link to Comment
  • These Stocks Offer Cash Flow, Dividends And Growth On The Cheap [View article]
    I followed up with more in-depth analysis on Staples (SPLS) here:
    Jan 11, 2012. 08:45 PM | Likes Like |Link to Comment
  • Allied Nevada And Minefinders: 2 Gold Miners Worth Owning [View article]
    Thanks for the comments! I've managed to make some $$ in MFN but must admit it did sting to get called out at $13 when the thing ran up to ~$19. Now it's around $11 so pretty whipsaw ride. When it comes to gold stocks, options are your friend. If nothing else, they enforce selling discipline.
    Jan 5, 2012. 01:19 PM | Likes Like |Link to Comment