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Geoffrey Rocca

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  • Lesson From Japan: Western Policymakers Must Apply Sustained Fiscal Stimulus [View article]
    Your example does overlook the massive stimulus package called World War 2. That was about the least austere thing we could have done.
    Nov 6 06:17 PM | 1 Like Like |Link to Comment
  • Why Private Capital And Not Government Spending Equals Public Prosperity [View article]
    If you've lived primarily in the US, your taxes have been going more or less downward for the last five decades. Remember, the top marginal rate used to be 91%.

    And I would remind your that our great experiment in free enterprise culminated in the Great Depression.
    Oct 30 10:09 PM | Likes Like |Link to Comment
  • The WSJ reports Treasury is considering eliminating some taxes on overseas profits of U.S. multinationals as part of a broader re-write of the corporate tax code also expected to include a significant reduction in the 35% tax rate and closing of some loopholes. However, with election season about to heat up, don't hold your breath waiting for enactment anytime soon.  [View news story]
    That is roughly the system we have now; the IRS allows a tax credit equal to any foreign income taxes paid up to what the taxes would be under US law. However, under existing law the IRS is unable to collect taxes on the income of a foreign subsidiary until it is distributed to the US company that owns it. The result is that companies just leave all their money overseas and then lobby for a one-time repatriation tax holiday. Of course, such a tax break gives companies that move their operations overseas a huge advantage over companies that leave them in this country.
    Sep 10 08:10 PM | 1 Like Like |Link to Comment
  • DST Systems: Hidden Portfolio Assets Make A Compelling Opportunity [View article]
    I generally prefer to go with free cash flow rather than earnings, but a figure of $3.80 would not surprise me.
    Aug 31 10:59 AM | Likes Like |Link to Comment
  • DST Systems: Hidden Portfolio Assets Make A Compelling Opportunity [View article]
    DST Systems owns about 2% of State Street, so I'm not sure that I see the strategic influence DST gains from such a small holding. Many of the State Street shares were acquired by the sale of DST's interest in certain joint ventures to State Street, and DST has sold State Street shares in the past, as its peak holdings of State Street has been 12.8 million shares and the current holding is only 10.3 million.
    Aug 30 03:41 AM | Likes Like |Link to Comment
  • DST Systems: Hidden Portfolio Assets Make A Compelling Opportunity [View article]
    There is zero chance that an investor would value this company's equity at $2.2 billion after the investments were sold and the cash paid out in a dividend if such a step were simultaneously executed tomorrow.

    Question if I bought the entire company and executed the contemplated dividend transaction today, would you still pay $47.38 a share tomorrow ex dividend?"

    Probably not $47, but I would pay more than the remaining $25-and-change market price, owing to the very low free cash flow multiple for the company's operating incomes.

    "Further, the company does not trade at 5.6x earnings ex investments. EPS adjusted for the investment income (the income on those assets you want to sell) is ~3.40 run-rate."

    On the contrary, the figures above are calculated only using income from operations. Investment income, apart from DST's unconsolidated affiliates, which are operating, is not included.
    Aug 30 03:15 AM | Likes Like |Link to Comment
  • DST Systems: Hidden Portfolio Assets Make A Compelling Opportunity [View article]
    Netting out the debt is only necessary if DST's debts genuinely have to be paid back. If, however, a company is capable of rolling forward its debts as they fall due, as DST historically has and, based on its interest coverage ratio from operating cash flows of over 7x suggest, will be able to do so in future., then it is not necessary to incorporate a repayment assumption on a going-concern valuation. If anything, DST is capable of leveraging its operations further (which may contribute to the buyout premium estimated in the article I cited).

    Furthermore, apart from a receivables securitization agreement and certain small loans secured by real estate assets and equipment, none of DST's debt is secured, so there is no issue pertaining to the proceeds of the sales of collateral either.
    Aug 29 07:37 PM | Likes Like |Link to Comment
  • S&P lowers its sovereign credit rating for the U.S. from AAA to AA+. "The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics."  [View news story]
    Actually, Abraham Lincoln gave us the first income tax in 1861. Unlike some other Republicans, he had more sense than to get us into a war without seeing the need to pay for it.
    Aug 7 12:15 AM | 1 Like Like |Link to Comment
  • S&P lowers its sovereign credit rating for the U.S. from AAA to AA+. "The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics."  [View news story]
    This ratings downgrade has nothing to do with actual credit quality and everything to do with the impasse in Congress. Futhermore, S & P assumes that the Bush tax cuts, which were a bad idea to begin with and a worse idea to renew, will be extended again. At some point, the anti-tax crowd is going to have to yield to economic reality, and a bipartisan agreement to allow the tax cuts to expire will go a long way to restoring our rating.
    Aug 5 09:43 PM | 2 Likes Like |Link to Comment
  • CSG Systems Underpriced and Attractive [View article]
    Thank you for your pointing this out. My view is that convertible debt doesn't actually cost a company what its face value would suggest; it would be more conservative simply to consider the effect of the interest savings on cash flows to equity. Obviously conversion enhances the liquidation value of the company at the face value of the bonds, but on a going concern basis the effect is likely to be smaller.

    The convertible debt costs the company only about $5.1 million in interest per year, which comes to about $3.3 million after taxes. Capitalized at 10x, this comes to $33 million, or slightly less than $1 per share.
    Aug 1 04:08 PM | Likes Like |Link to Comment
  • Best Buy: Great Cash Flow, Solid Earnings, Inexplicably Low Valuation [View article]
    On the whole I have found that changes in working capital are generally of a nonrecurring and reversible nature. As a result, I do not take them into account when assessing a company's future earnings power.
    Jun 15 02:53 PM | Likes Like |Link to Comment
  • Best Buy: Great Cash Flow, Solid Earnings, Inexplicably Low Valuation [View article]
    I did? Oops. I did mean Best Buy, yes.

    Of course, I do think Dell is also very attractive. I have an article on it.

    seekingalpha.com/artic...
    Jun 15 12:30 PM | Likes Like |Link to Comment
  • 6 High Yielding Stocks With Risky Dividends [View article]
    In addition to the free cash flow issue that has been discussed by other commenters, the reason that Windstream's quarterly earnings are down year over year is due to a nonrecurring expense associated with debt refinancing. Without this expense, quarterly earnings would have been higher than the same quarter last year.
    Jun 6 12:39 PM | 3 Likes Like |Link to Comment
  • Cal-Maine Foods: Profit Opportunity in the Egg Business [View article]
    Yes, there has been an antitrust suit filed, but the field of law is so complicated and nebulous that it is difficult to pin down damages with any certainty, particularly in an environment of rising feed costs generally (2008). And that issue is not even reached until liability is established. Furthermore, there may be an exception for farming cooperatives that covers part or all of the alleged activity. I anticipate there will be a settlement many months in the future, but I would not care to guess how big it is.

    Hope this helps.
    May 24 02:34 PM | Likes Like |Link to Comment
  • Considering Ayn Rand's philosophy holds that laissez-faire capitalism is "the only moral social system," it's not surprising that Ayn Rand Institute's Yaron Brook thinks the economy is sputtering because the U.S. government's response to the 2008 crisis was too heavy-handed. "We should have let banks fail, let auto companies fail [and] let housing prices tank to reach their true bottom."  [View news story]
    Victor Niederhoffer, who named his daughter "Galtia," managed to blow up two hedge funds. And of course, Greenspan was integral to blowing up the world.

    Seems like being an Ayn Rand fanboy is correlated with flawed thinking. Even Greenspan admitted to a "flaw"
    May 9 05:47 PM | 3 Likes Like |Link to Comment
COMMENTS STATS
69 Comments
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