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Jake Huneycutt  

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  • Ultra Petroleum: A Classic High-Upside Investment With Reasonable Risk
    Thu, Feb. 26 UPL 3 Comments

    Summary

    • Ultra Petroleum is a low cost producer of natural gas with an excellent track record of lowering costs.
    • Subdued natural gas prices provide UPL with significant upside over the next few years if we were to see a favorable pricing environment emerge.
    • UPL is one of the most attractive natural gas producers since it's a pure-play and has managed its resources well.
    • I'd value UPL at $20; consider it a bargain under $15; and a screaming buy under $10.
    • I'd favor UPL over natural gas producers with more oil exposure such as Chesapeake and Devon.
  • Sonic Is Still A Scary Stock
     • Thu, Feb. 26 SONC 4 Comments

    Summary

    • Sonic's stock has surged over the past two years, with rapidly improving same-store sales.
    • There are a lot of issues lurking beneath the surface with the company, the near-zero store count growth being the biggest.
    • Sonic's aggressive stock repurchase plan is a cause for concern, suggesting little future growth and results driven by financial engineering.
    • Sonic may be even more cyclical than most restaurant stocks, meaning it could suffer significantly in any recession scenario.
    • Overall, SONC is a stock with significant risks and limited upside potential at $32.
  • World Wrestling Entertainment: Intriguing Prospects, But Margin Of Safety Too Small
     • Tue, Feb. 24 WWE 7 Comments

    Summary

    • WWE is selling at a historically subdued level.
    • The WWE Network provides intriguing growth prospects and a new business model moving forward for WWE.
    • WWE has substantial risks, with a downside around $4 and an upside potentially over $25 in the next 3 years.
    • At $16 - $17, WWE is overvalued in my view based on the risks and reward potential.
    • If WWE fell down below $9, it would be worth another look.
  • Jack In The Box: Great Company, Very Expensive Stock
    Tue, Feb. 24 JACK 5 Comments

    Summary

    • Management at JACK has made several great moves over the past decade that have significantly increased shareholder value.
    • JACK's free cash flow growth has been spectacular.
    • Qdoba makes JACK an interesting growth play.
    • At $90+, JACK shares are overpriced based on risks and rewards and have very little "margin for safety".
    • JACK shares will probably not become attractive again until a significant correction in the restaurant sector.
  • The Chilean Economic Miracle Is Over: Is Chile Still A Good Investment?
    Mon, Feb. 23 ECH 11 Comments

    Summary

    • The Chilean stock market has fallen over 50% from its peak due to a weakening copper market.
    • Chile has consistently been ranked as one of the most "economically free" nations in the world.
    • Given the plunging stock market coupled with Chile's strong economic model, it's worthwhile to explore for investment.
    • Unfortunately, the political pendulum is swinging back towards the Socialist direction, creating new headwinds for the Chilean economy.
    • Chilean investment could become attractive in the future, but the dual headwinds of a declining copper market and Socialist politics make the risks too high for now.
  • How Cash Can Boost Long-Term Returns
    Tue, Feb. 17 21 Comments

    Summary

    • Liquidity management is one of the most critical aspects of investment.
    • Cash earns a 0% nominal return, but allows investors to take advantage of higher-return opportunities that may emerge.
    • By holding more cash, one is betting that the purchasing power will increase at a future point.
    • Moderation is key with holding cash; it's rarely advisable to go to 100% cash or 0% cash.
    • I'd recommend a cash position in the 20% - 40% range for most investors right now due to higher than average risks in the market.
  • The Most Underrated Book On Investment
    Mon, Feb. 16 7 Comments

    Summary

    • David Sklansky's The Theory of Poker is the most underrated book on investment.
    • Risk and reward matter more in poker than "winning" or "losing" individual hands; the same logic holds true in investing.
    • Learning to deal with uncertainty is vital in both poker and investment.
  • A History Of U.S. Investment Taxes, Part II: The 1920's
    Wed, Feb. 4 SPY 6 Comments

    Summary

    • The 1920s saw a dramatic reversal of the World War I era tax policies.
    • Under Treasury Secretary Andrew Mellon, taxes on income and capital were significantly reduced in the US from 1922 - 1926.
    • The severe Depression of 1920 - 21 ended almost immediately after the first series of tax cuts.
    • The 1910s was marked by a horrid economy and a flat stock market, whereas the 1920s was defined by rapid growth and booming market.
    • The dramatically different tax policies of the 1910s and 1920s were likely a major driver of the divergent economic paths.
  • A History Of Investment Taxes In The U.S., Part I: 1913-1921
    Tue, Feb. 3 SPY 11 Comments

    Summary

    • President Obama recently proposed a significant hike in the capital gains tax.
    • While trade policy has the biggest impact on the economy, tax policy can still have a significant impact on growth and the markets.
    • The World War I era tax hikes were the most dramatic in American history.
    • The 1910's tax hikes helped lead to the Depression of 1920 - 21 and created an awful stock market environment.
  • How To Analyze Insider Selling
    Tue, Jan. 27 ACAS, FSLR, Z 2 Comments

    Summary

    • Insider activity can be an extremely valuable tool when analyzing an investment.
    • Insider buying is typically straight-forward, while insider selling is trickier to analyze.
    • Insider sells should be analyzed by their size and frequency, the number of insiders selling, and insiders' overall holdings and wealth.
    • First Solar in 2007 - 08 provides a classic illustration of how large amounts of insider selling can be a red flag.
  • Have IBM's Share Repurchases Created Value?
    Thu, Jan. 22 IBM 39 Comments

    Summary

    • IBM has repurchased over $100 billion in its own shares since 2004 (about two-thirds of its own market cap).
    • Given the large size of IBM's share purchases, it's worthwhile to examine whether the buybacks have created value for IBM shareholders.
    • My analysis suggests that IBM's buybacks neither created nor destroyed value from 2004 to 2013.
  • How Low Can Oil Fall?
    Wed, Jan. 21 DBO, OIL, UCO 13 Comments

    Summary

    • Oil prices aren't returning to $100 any time soon.
    • Technological innovation in oil extraction will keep production costs lower, while alternative technologies such as electric cars will slowly chip away at oil demand growth.
    • We're more likely to see oil trading in the $40 - $75 range over the next few years.
    • Low cost oil producers selling at a discount will be better investments than speculating on a high-cost producers and a return to $80 - $100 oil.
  • Taking A Look At Historical Natural Gas Prices
    Mon, Jan. 19 CHK, DVN, RRC 16 Comments

    Summary

    • Natural gas has been in a bear market since late 2008.
    • Natural gas prices are currently about 15% - 30% below historical inflation-adjusted levels.
    • If history is any guide, natural gas producers could become very attractive investments sometime in the next 2-5 years.
  • Share Buybacks And Value Destruction
    Wed, Jan. 14 13 Comments

    Summary

    • Share buybacks are neither inherently good nor inherently bad.
    • Share repurchases should be analyzed in the context of a company's intrinsic value, its market value, and its potential growth opportunities.
    • Too many companies use share buybacks as a "default option" when they can't find other internal projects to invest in --- this can be a red flag.
  • America's Disinflationary Future?
    Editors' Pick • Oct. 22, 2014 SPY, DIA 76 Comments

    Summary

    • The US could suffer from a low-growth, disinflationary future, similar to Japan after the collapse of the Japanese asset bubble.
    • Policies of the Federal Reserve, such as QE, have increased the likelihood of disinflation.
    • QE incentivizes short-term investment at the expense of long-term investment.
    • Interest rate suppression results in a cycle of subdued returns, lower investment, and lower growth.
    • Fed policies that have suppressed interest rates will increase likelihood of future issues with pension funds, resulting in austerity (higher taxes and / or lower benefits).
  • Projecting The Forward Returns On The S&P 500 Index
    Jun. 12, 2014 SPY 15 Comments

    Summary

    • Savvy investors focus on forward returns, rather than the past.
    • Forward returns on the S&P 500 over the next five years are likely to be in the 1% - 6% range, well below historical averages.
    • The S&P 500 appears to be moderately overvalued.
    • A 20% correction in the S&P 500 would be needed before hitting an expected 5-year forward return of 8%.
  • The Central Bank Boom Is Creating Huge Risks For Investors
    Editors' Pick • May. 19, 2014 BP, CNY, EWJ 129 Comments

    Summary

    • Flawed macroeconomic policies create significant market risks and can quickly undermine valuations.
    • China's US bond buying binge, along with loose Federal Reserve policies, helped fuel the US housing bubble from 1997 - 2005.
    • There's a significant correlation between US Federal Reserve bond buying activity and the US stock markets since 2007.
    • The market's reliance on central bank stimulus is creating significant downside risks for investors.
    • A defensive posture, focusing on attractively-priced dividend stocks and holding extra cash, can help cushion against potential downside risks.
  • Krispy Kreme: Strong Growth And Great Turnaround, But Is It Overpriced? (Value Invasion, Episode 2)
    Apr. 22, 2014 KKD 5 Comments

    Summary

    • In spite of a high P/E multiple, KKD's stock price is justified.
    • Over the past decade, KKD has transformed from a dysfunctional company with insolvency risks into a cash flow machine.
    • Strong management, attractive business model, great cash flow growth, and a reasonable valuation make KKD an OK buy.
    • KKD has some upside potential due to deleveraging, which could make an LBO offer attractive to a private equity firm.
    • High growth expectations embedded in the stock price provide KKD with less "margin of safety" than might be desirable for many value investors.
  • Un-Redeeming Greenspan: Why The Fed Was To Blame For The Housing Bubble
    Apr. 1, 2014 31 Comments

    Summary

    • Christopher Matthews' case for "Redeeming Greenspan" is based on a flawed understanding of monetary policy.
    • The Greenspan Fed aggressively lowered interest rates in the early 00's in spite of surging housing prices, strong loan growth, and high money supply growth.
    • "Cheap money" policies by the Greenspan Fed altered the economics of housing, incentivizing both banks and borrowers to engage in reckless behavior.
    • The Greenspan Fed deserves the lion's share of the blame for the housing bubble and subsequent financial crisis.
  • Bank Money Is Contracting (And Other Hidden Statistics)
    Editors' Pick • Mar. 19, 2014 NLY 62 Comments

    Summary

    • While overall money supply in the US is increasing, bank money appears to be declining, possibly due to Dodd-Frank and tighter Federal regulations.
    • Tighter regulations, coupled with loose Federal Reserve policies have created an odd combination of de-leveraging in some categories and surging debt in others.
    • The above-average spread between the Federal Funds Rate and US treasuries, alongside of weak loan demand may suggest that US treasuries are undervalued.
    • Mortgage REITs appear attractive at current prices given economic data.
  • Italy: The New 'Powder Keg' Of Europe
    Editors' Pick • Feb. 19, 2014 EWI 188 Comments
  • The Crisis Of Modern Economics
    Feb. 6, 2014 FXI, SPY 23 Comments
  • High Margin Debt And Quantitative Easing
    Feb. 4, 2014 9 Comments
  • Don't Worry About Being 'Right'; Focus On Risk Vs. Reward
    Editors' Pick • Jan. 19, 2014 73 Comments
  • Five Major Underreported Economic Threats
    Jan. 15, 2014 DBO, ENOR, EWD 38 Comments
  • 2014: Stealth Tightening, Hidden Austerity, And The Potential For Recession
    Nov. 22, 2013 VNQ, SPY 26 Comments
  • Bubbles, Crashes, And Market Corrections, Part 2: 1900 - 1925
    Oct. 16, 2013 SPY 6 Comments
  • 3 Year M2 Money Supply Growth At Highest Level Since 2003
    Oct. 15, 2013 3 Comments
  • Bubbles, Crashes, And Market Corrections, Part 1: 1871 - 1900
    Oct. 15, 2013 SPY 15 Comments
  • Amazon: Much More Profitable Than Perceived And A Foolhardy Short
    Oct. 14, 2013 AMZN 131 Comments
  • Examining Historical Margin Debt
    Sep. 27, 2013 SPY 15 Comments
  • Now Is The Time To Be Fearful
    Editors' Pick • Sep. 19, 2013 SPY 752 Comments