Contributor since: 2008
They run a great business, have great food, and represent one of the few consistently performing companies in the market today that are on sale.
Very nice breakdown. I've been looking the the shippers. Based on this, it makes sense to focus on those that have little to no Capesize vessels in their fleet. Rates for the smaller vessels look relatively strong and appear to reflect a recovery.
Thanks for your feedback.
In writing the article, I also thought it was interesting to see how the stocks compare on a relative basis. I think that one could argue that the required P/E could be higher (or cash flow yield lower) on ADP and Intel as they are both more cyclical. ADP could see benefits from improving employment, should that eventually occur, and Intel could be facing some nice upside from a delayed upgrade cycle. I have to admit that I added Pepsi above my target (around $60), but a purchase at these levels looks expensive on a relative basis.
It's not that I'm demanding a dividend. I just have doubts that they can invest all that cash flow at acceptable returns.
Thanks for the link.
For a small REIT, Winthrop is fairly complicated. In valuing their real estate, I'd start with real estate revenue of $40,605M. Back out about 5% for management fees ($2,030M), then back out other real estate operating expenses of $9,585M to get a net operating income of $28,990M. At a 8.5% cap rate, their real estate would be worth about $340 million. This compares to the $218MM in net real estate held on their balance sheet. Make the adjustment and you get total equity of about $350 million, or around $20 per share.
There is a lot of noise after that with their adjustments to investments. Still, FFO per share for 2009 was $2.62. That's quite a number for a stock now priced below 13 (5x FFO). With low leverage, an 8x FFO multiple gets you to $21.
It will be interesting to see how they deploy their cash. I wouldn't want to attribute any value to investments they might make. I worry that with REITs, and decline in risk premium (cap rates) will be offset by a rise in interest rates. This will keep values from quickly rebounding. This one is certainly worth watching. With a 40% discount to estimated value, it's worth collecting a 5% dividend while the story clears up a bit. Thanks for your article.
I have an article coming out tomorrow on Dawson. I agree with your assessment.
That's not what I did. I used an 8.5% cap rate applied to annualized EBITDA, less outstanding debt. The 8x FFO is more of a valuation check. It has nothing to do with the net asset value of the company.
I agree with most of what you say. I did outline the goals of the portfolio at its introduction a couple of years ago here: www.poeticportfolios.c...
Blogging about stocks is my way of being disciplined about my buys, sells, portfolio, and goals. It's an investing journal of sorts.
I also agree that a portfolio should be more focused. That's why I hold 20 stocks and two funds here. Not sure where you got 40.
FTR has been a tough one. Keep in mind, too, that their dividend will be going down once their purchase of SpinCo (currently owned by Verizon) is completed. However, it looks like the combined company will have a stronger balance sheet and better economies of scale. There is a good presentation on their website:
I think that's right. Also keep in mind that if you are a long-term holder of Dawson, you've built an understanding of the company and its management. I like their management, and their balance sheet looks great. It doesn't hurt to hold some shares, but I'm no loading up on them either.
I get the sense that if I sold, I wouldn't make it back in before they start adding crews and generating strong earnings again.
Not quite sure I agree with the title of the article, as there are likely to still be some challenges ahead. Despite these challenges, however, Middleby may still prove to be a bargain in the long term.
Last week YouTube said they may try to stream movies online. All of a sudden there was a sell-off of Netflix shares. This always happens with Netflix, and Netflix has continually crushed their competition or prevented them from even entering their market.
I hold my $35 buy-in price and think that I may get it soon.
On Aug 19 10:58 AM Dmoon wrote:
> I like NFLX but note in your numbers looking at Q4 revenue per subscriber
> the numbers are going down 43.96 $40.27 38.19 37.28 so that tells
> me people are moving to lower subscription rices. I know I reduced
> my own when money got tight. I now also do streaming movies on the
> XBox so that must provide some revenue from MSFT to NFLX. Also your
> comments about Q4 and Q1 being highest growth is because its wintertime,
> people stay home and might even cancel their subs in spring summer.
> If they can convince the film companies to put new releases on instant
> viewing costs will come down and revenue will go up.
> Not sure you'll see your $35 price anytime soon. Its unrealistic
> to think they are going back to March lows (S&P 666)
I honestly haven't gotten that far yet. I hope to take another look at them soon and post my findings.
In general, I hate to see the dilution, but it seems it was likely required to meet debt requirements. It's difficult to tell about the losses. Loan loss reserves may be swinging the other direction. It's possible that loan losses at banks in general are now more backward looking than forward looking if you know what I mean.
On Aug 19 02:27 PM chchchch33 wrote:
> Thanks for the excellent work Dan. What do you make of CSE after
> their recent equity and debt offerings and the large loss they posted
> in their most recent quarter? I thought they were reasonably clear
> in their last conference call--you felt they were still shady?
Writing about Capital Source is very much like assembling a puzzle. Management gives you the pieces but it seems like they make their best efforts to scatter them around really good to obscure what's going on. Maybe it's intentional, maybe not. It makes me a bit nervous, though.
In 2-3 years there may be clarity, but investors will pay a higher price for that potentially cheery consensus.
On Aug 18 06:16 PM H.J. Huneycutt wrote:
> Great analysis, Dan.
> I've looked at CapitalSource a few times, but have never felt I understood
> the banking aspect well enough to give it much of a write-up. I've
> been kinda loosely following it in order to try to understand the
> industry a bit better.
It's good to be skeptical of bank assets. They could be much worse or much better than reported. When I wrote this analysis, Capital Source was about $2 per share. I ended up not investing more for the same reasons you stated, even though it may have made sense to put some money into it because at that price, you may just earn 5x your money in the next three years.
On Aug 18 05:27 PM stink726 wrote:
> After being burned by so many different types of financial stocks
> in the past 2 years, I don't see how anyone can believe any financial
> company's financials. Who knows what the next thing to blow up will
> be?
As part of their bank requirements, they have to retain their earnings for 2.5 years. Even if they could distribute their earnings to the parent, they would be much better served to pay down debt as quickly as possible.
On Mar 31 10:31 PM dreamer67 wrote:
> Also key question, if they have (the potential) of 80,000,000.00
> a year in income in only one of 4 legs of the company with a value
> of 4 billion, why is the dividend so skimpy. It would seem that
> a modest dividend would change the game for this stock in a huge
> way
I was looking at that last night. This analysis will be part of Part IV of my analysis. Obviously, this is the biggest concern with capitalsource. If I had to guess, this situation likely was part of the resignation of their CFO.
On Mar 31 10:22 AM James Beam wrote:
> What about liquidity? If you look at the non-bank business you will
> see that they don't have cash to payback all of their debt.
I haven't looked lately, but Yamana has typically hedged only copper prices. Management counts copper as a sort of by-product from their Chapada mine and uses revenue here to offset productions costs. Their strategy in the past has always been to remain unhedged on the price of gold, and I haven't seen anything to indicate a change in that strategy.
On Feb 20 11:21 AM MateoJoe wrote:
> Dan,
> Good write up. I've owned since six and change and keep researching
> so your work is appreciated.
> One question: Do you or any other posters know how much of AUY's
> production is forward hedged?
> Thanks.
The press release linked above from Yamana indicates that they are forecasting $800/ounce in 2009 and $825/ounce in 2010.
On Feb 18 06:13 PM arlin wrote:
> I believe AUY's estimates are based on $700 gold.As already stated
> Energy is 25% of the cost of minning gold and its down from $147
> bbl to $35bbl,Also Auy is a Money maker in the currency swaps between
> their operations and selling gold in dollars, roughly 20%.
Thanks, silverwood.
Who knows what gold will do over the next couple of years. I know problems in the banking sector are only just beginning. With unemployment rising very rapidly, banks are now starting to deal with problems that usually occur in a down economy.
One would think that continuing government intervention and an unstable banking environment would only cause the price of gold to rise further.
On Feb 17 11:03 AM silverwood wrote:
> Dan, good analysis and very conservative. There is a strong possibility
> that gold can rise to $1200 and hold a floor of $1000 after that
> this year. That would make AUY a $20+ stock. I'm also glad to see
> someone who is commenting on a company that has some skin in the
> game...Disclosure: I currently hold shares of Yamana Gold. I am also
> long AUY.
Mr. Rufus
Thanks for your comments. I have to admit, my first reaction is that I'm wrong and you have found a flaw in my analysis. This is what is great about this forum. If people approach these articles with intellectual integrity, a great deal of learning can occur.
So let's step through the numbers and see where we end up...
I see where you get $376MM. You take reported gross rental revenue in the 3Q of $94,166M and multiply by 4. Fair enough. This represents gross revenue for the third quarter less vacancy. My cash flow analysis is equal to $442MM on this basis.
I will point toward the annualized cash rent in their consolidated portfolio of $387,868M on page 23 of their supplemental report. I then added $48,256M from their strategic asset portfolio. This looks like a mistake, because Lexington only owns a portion of this entity. I couldn't find the exact ownership interest, but their claim after preferred returns is 35%.
So gross revenue (assuming properties are fully leased) is as follows:
$388MM + 16.8MM = $404.8MM in Gross Potential Rent
Less Vacancy (6.4%) = ($25.9MM)
EGI= $379MM
So we're not too far off here. $376MM was based on annualized rental revenue, and $379MM is based on grossed up rents less vacancy. I want to do this so I have an accurate vacancy factor in my stressed cash flow.
Keep in mind that we have both excluded tenant reimbursements to this point. This would be about $44 million annualized. I left it out initially to be conservative. They get about half of their operating expenses back in reimbursements. Add this back and you get:
$451.6MM GPR
($28.9MM) Vacancy
$422.7 EGI
This looks pretty accurate. The expenses aren't really disputed. You did manage to apply vacancy to operating income, which already included vacancy. I assume you took 7% vacancy against $304MM, which already included vacancy, to get your $278MM in operating income. The rest of my income statement looks like this:
Operating Costs: ($81 million)
Management and Admin: ($34 million)
Net Operating Income: $307 million
Debt Service: ($149 million)
Net Cash Flow After DS: $158 million, FFO/Shr = $1.44
DSCR: 2.07x
Implied value at 8.0% = $3,838MM. LTV~66%.
$452MM GPR
($90MM) Vacancy
$362MM EGI
($115MM) op costs
$247MM NOI
($149MM Debt)
DSCR=1.66, FFO=$98MM, $0.90/shr
I still feel pretty good about my analysis. No doubt the market looks difficult this year, but I do not believe that the numbers look as dire as you indicate.
Thanks for your comments!
Revenue and earnings were pretty flat quarter over quarter. No new crews. Channel count is the growth story going forward, but this quarter no growth was the story.
If you look at my intrinsic value table, the market is thinking more along the lines of 6% growth than 9% or even 12%. I think this is a bit premature. So, yes, I'm still holding this sucker. I'd buy more, but I already have a pretty full plate of Dawson. Full enough, anyway.
I would be out of Netflix in a second if they made a play for Blockbuster. Blockbuster has two major issues. First, they have quite a bit of debt. Second, they have all the stores hanging like an albatross around their neck. Better to let them suffer on their own than befriend them...
I'll respond first by pointing to Blah123 and saying, "Exactly!" I admire Apple as much as many of the posters here. I just don't want to rely on them repeating their amazing past performance in the future. They already have a market cap of $100 billion+. Are they going to be worth $300 billion in five years? Or $500 billion. What's realistic?
User146420, I don't think it's arrogance to assume that Apple will never come up with another hot product, I think it's conservative not to make an investment that requires them to produce multiple hot new products. I'm trying to tilt the probabilities in my favor.
Pat S, you make a very convincing bull case. I think the stock is a buy as well. I am just waiting for my price.