Seeking Alpha
View as an RSS Feed

Jake Huneycutt  

View Jake Huneycutt's Comments BY TICKER:
Latest  |  Highest rated
  • Banco Santander: One Of The Best Banks In The World Sells At A Discount [View article]
    Quant,

    There's one odd theme I've noticed in my 7 years of writing articles: the best investment theses are often the ones that encounter the most hostility. I got the same reaction to buying homebuilders in 2011, buying REITs in 2009, and with several individual stocks that were hated.

    Obviously, this doesn't mean every time an investment is dissed, it's a good one, but it does suggest a truism: the best investment ideas are often the ones that go against the grain. If everyone else is buying something, it's probably not a good deal. (I've also noted that my articles on stocks that received almost universal agreement have rarely ended up being my best investments.)

    I do have some fears about Santander, but IMO the worst of the macro stuff is largely priced in and there is considerable upside potential.
    May 27, 2015. 09:24 PM | 1 Like Like |Link to Comment
  • Banco Santander: One Of The Best Banks In The World Sells At A Discount [View article]
    Ian,

    I'm not crazy about the valuations on the Chilean banks. Haven't looked into the Colombian ones. I'm not necessarily against those ideas, though.

    Regardless, you're taking on country-specific risks with those banks. Nothing wrong with this, but buying a "pure-play" in banking is different than buying a pure-play in another sector. You're betting on a country more than a bank in many cases.

    The rationale for buying Santander: it's one of the strongest Latin American growth plays and you're diversifying nation-specifc risks. You're also getting it at a price that assumes depressed results well into the future.
    May 27, 2015. 06:47 PM | 1 Like Like |Link to Comment
  • Silver Is Shaping Up To Be The Best Precious Metal Play Of The Decade [View article]
    Excellent and balanced article. Thanks for this, Caiman.
    May 26, 2015. 10:36 PM | Likes Like |Link to Comment
  • Compass Diversified: 8.5% Dividend Yield, 10%-20% Undervalued [View article]
    link,

    I had no idea you meant before the Financial Crisis. Pretty much all investments in that entire sphere got hammered back then.

    CODI has done pretty well since March 2009. The stock has been overvalued at a few times, such as early 2011 and early 2014, but has been a pretty good bargain for most of that timeframe.
    May 22, 2015. 01:14 PM | 1 Like Like |Link to Comment
  • Compass Diversified: 8.5% Dividend Yield, 10%-20% Undervalued [View article]
    Sorry link, but going to have to call BS here.

    Even if you bought CODI at the absolute most inflated price it's sold at in the past 3 years ($19.70 in January 2014), you'd still have no more than a 5% loss once you account for the distributions, if you had continued holding till today.

    The phrase "further under water" seems like extreme hyperbole. From peak to trough, you couldn't have possibly lost more than 15% unless you were day-trading or engaging in some sort of short-term speculation.

    If you're unwilling to risk a 15% short-term loss, you shouldn't be investing in stocks PERIOD! Even companies like Microsoft (MSFT) and Coca-Cola (KO) have more volatility than that.
    May 21, 2015. 04:47 PM | Likes Like |Link to Comment
  • Compass Diversified: 8.5% Dividend Yield, 10%-20% Undervalued [View article]
    Victor,

    Thanks for the comment.

    One reason why CODI stays consistently cheap is that many investors don't understand it. I received your exact same criticism repeatedly three years ago. It's a criticism that tends to ignore the fact that CODI is essentially more like a private equity firm than it is a conglomerate (which many investors consider it).

    The difference: private equity firms buy and sell companies. If you're merely examining operating cash flows, you're ignoring unrealized capital gains. Hence, the fact that CODI's distributions are often aggressive relative to operating cash flows does not take into account gains / losses on the investment side.

    Even at that, operating cash flows exceeded distributions in FY 2014.

    A lot of people don't like the intangible assets. But it's sort of like criticizing a real estate firm for buying real estate. Compass' strategy has always been to acquire valuable brands and grow them to create value. This means that in a lot of acquisitions, they are purchasing a lot of "intangible value." This makes CODI more difficult to analyze, but it's also why they've been able to grow some of their portfolio companies significantly.
    May 20, 2015. 01:18 PM | 2 Likes Like |Link to Comment
  • Coffee Could Roar [View article]
    While I don't claim to be an expert on coffee, I would surmise that higher coffee prices would be bad for SBUX.
    May 18, 2015. 02:01 PM | 5 Likes Like |Link to Comment
  • Antero Resources: Undervalued Assets, Great Risk-Reward Play [View article]
    johnwayne,

    I don't see much downside, except that if prices do rise, then it will take a few years to see the benefits of the improved pricing environment in AR's results. That's not the worst result and frankly, I prefer the greater certainty in results, as it helps de-risk the asset play a bit.
    May 12, 2015. 10:26 PM | Likes Like |Link to Comment
  • Antero Resources: Undervalued Assets, Great Risk-Reward Play [View article]
    Michael,

    Thanks for the comment.

    It's not the current debt that I view as that big of a risk. Rather, its AR's reliance on debt financing for future expansion. In the event of a contracting credit market (like the last financial crisis), that would be bad for firms with a major need for debt. The hedges, I do think, help mitigate this risk somewhat and I suspect that this is partly the reason behind such an aggressive hedging program.
    May 12, 2015. 08:29 PM | Likes Like |Link to Comment
  • Biglari Holdings: Seemingly Undervalued, But With Numerous Caveats [View article]
    Max,

    Spot on.

    That's one of the reasons I do find the stock intriguing in spite of all the bad stuff. Not enough to convince me to buy, though, due to the shareholder-unfriendly practices.

    P.S. I admit that I'm also a Max Headroom fan.
    May 8, 2015. 01:40 PM | 1 Like Like |Link to Comment
  • Biglari Holdings: Seemingly Undervalued, But With Numerous Caveats [View article]
    Aurelien,

    BH's stock performance has been awful because SnS's performance has been awful. It's not a "great deal" merely because other restaurant stocks have gone up.

    Check out my JACK article:
    http://bit.ly/1IVTrWb

    JACK's free cash flows have grown from about $110 MM to $170 MM over the past five years. BH has seen a completely opposite trajectory; going from $90 MM all the way down into the red. The main reason for this is that JACK's performance has improved, while BH's has gotten worse.

    I've looked at BH a few different ways. I'm seeing no way to spin the results as good. Costs have been increasing at a faster pace than revenues. While the franchising efforts are helping, the operational costs have been increasingly rapidly, as well.

    In 2015, SnS is not operating in an attractive niche either. It's in a very crowded, low-growth sphere of the market. The franchising efforts have gone decent given that, but I wouldn't expect any miracles.

    The reason BH is "cheap" is because Biglari has a poor track record as an operator and seems more interested in rewarding himself than running the businesses.

    Honestly, BH would have significantly more value if Sardar Biglari were ousted from the company, and replaced by an experienced restaurant CEO. But that's not happening, because SB has basically created a scenario where he gets wealthier if he's ousted, while shareholders get screwed.
    May 8, 2015. 12:27 PM | 1 Like Like |Link to Comment
  • Biglari Holdings: Seemingly Undervalued, But With Numerous Caveats [View article]
    5% of "profits" = / = 5% of company

    Over 50% of the BH's worth is tied up in Cracker Barrel. Moreover, if you're arguing that Steak n Shake's poor results are "the norm", then that's an even bigger case against BH.

    What you're missing here is that without Cracker Barrel, BH's stock performance would look awful. BH bought CBRL shares back in 2012. Since that time, CBRL shares are up nearly 150%.

    Start doing the math and you'll realize that CBRL has added about $350 - $400 MM in value to Biglari. BH's market cap is currently $750 MM. Subtrack CBRL from that and you come up with ~ $375 MM. Even if you assume that BH would've generated a return equal to the S&P 500 with that capital, that still leaves it at $515 MM without CBRL.

    That would put the stock price at around $250. Which means that without CBRL, BH has generated approximately a 0% return over the past 5 years.

    Mind you, that 0% return came during one of the biggest restaurant stock bull markets in US history. Compare SnS with JACK in terms of cash flows and operating performance, and it's two completely different worlds.

    Biglari was smart enough to see that CBRL was a good investment. He's not smart enough to see that he's better on the investment side than he is on the operating side.
    May 8, 2015. 11:23 AM | Likes Like |Link to Comment
  • Biglari Holdings: Seemingly Undervalued, But With Numerous Caveats [View article]
    dicksonpau,

    Thanks for the comment.

    Cracker Barrel's operating track record is excellent compared to Biglari's. It's night and day. The irony is that Biglari was trying to tell CBRL how to run its operations, when if anything, it should've been the other way around. Biglari would benefit immensely from having people with CBRL's management expertise at Steak n Shake.

    Sardar Biglari's strategies are more reminiscent of Eddie Lampert at Sears than Warren Buffett. Lampert is a good investor, but his issue with buying Sears was that he never knew how to operate the company. He did it as an asset play, but he's lost a boatload of money on the operations side.

    The more I dig into Biglari's results, the more parallels I see with that. Biglari's cash flows seem to be in perpetual decline. His restaurant segment results continue to get worse with each year, in a market where peers such as Jack in the Box are improving results significantly.
    May 8, 2015. 10:47 AM | 1 Like Like |Link to Comment
  • Biglari Holdings: Seemingly Undervalued, But With Numerous Caveats [View article]
    Aurelien,

    Thanks for the comment. I could've written 5 articles on Biglari. I chose to keep it short.

    I haven't missed the main reason people dislike BH. I agree with the overcompensation claims, but didn't feel the need to rehash about a dozen other articles.

    If Biglari's goal is to increase long-term cash flows, he's done an absolutely dismal job. And yes, it does matter how small First Guard is. It shows a basic lack of understanding of portfolio management and allocation on SB's part.

    If you have a $1 billion portfolio, buying a $1 million position in a $10 million microcap stock isn't going to make much of a dent, unless that investment has something like a 2000%+ return.

    Sardar Biglari is more Donald Trump than Warren Buffett. He's loud and aggressive. He understands the basics of value investing. He understands financial extraction. He does not understand how to operate companies. He doesn't understand portfolio allocation.

    In spite of Steak n Shake's franchise growth, results have been dismal. This is in an environment where nearly every peer has done spectacularly.

    I certainly think he's made some smart moves at times. The buy of Cracker Barrel turned out brilliant, but ironically, it's because his activism efforts completely failed.
    May 8, 2015. 10:39 AM | 1 Like Like |Link to Comment
  • South Korea: Home Of The World's Best Equity Opportunities [View article]
    Great article, as always, Chris.

    I would caution that the reason South Korea is "cheap" is likely because a lot of its growth over the past decade has been related to China's growth. Hence, to some extent, a bet on South Korea is a bet on China. That has been my main rationale for avoiding it, even though I largely agree with your analysis on economic freedom, property rights, governance, etc.

    Of this group, I actually think Turkey is the most interesting. It has its share of problems, and I worry about compromised independence of its central bank, as well. Nevertheless, it's one of the few that is not tied to commodity growth or the Chinese real estate bubble. Interest rates in Turkey are relatively high now, too, so there's less that can go wrong on that end of things. I also happen to think that Turkey's political risks are overstated a bit.
    May 5, 2015. 09:01 AM | 4 Likes Like |Link to Comment
COMMENTS STATS
1,396 Comments
2,592 Likes