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John Gilluly  

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  • Gafisa: One Of The Cheapest Stocks In The World [View article]
    If you think that, and don't mind being early, then you could put your GFA capital into ETFs: the EWZ, or its leveraged alter-ego, the BRZU (, and set up a scaled-in plan of buying.

    Heck, the BRZU was at $16 a couple of weeks ago. Now it's at $8. I don't see how one could lose money on the Brazilian economy at this point (who hasn't lost it already). I wrote a couple of articles on the Oil Markets and Emerging markets this weekend. They have been published on S/A. This is the biggest buying opportunity in Emerging Markets and the Oil patch since the Financial Crisis of 2008. If there ever was a time you wanted to buy "low", this would be it. Take a look at the US Brent Oil fund ( or the Emerging markets (EDC)

    As far as your money deployed in GFA, why stick around to be a told-you-so hero a few years from now? Nobody's perfect. We all make mistakes. Even short term ones. A bet on GFA is a bet on Brazil, period. Maybe you could use the tax loss now? I think any money placed in BRZU would probably give back in a few weeks what it took 6 months to lose in GFA. There is a reason the market values GFA's assets at 10 cents on the dollar.
    Dec 14, 2014. 04:44 PM | Likes Like |Link to Comment
  • Crude Oil Is Trapped In A Bear Raid; Not Its Fundamentals [View article]
    Thanks for the Mexico correction. Regarding GASL - It's not a "gas-only" index. Some of the names are both oil/gas.

    In any case, the GASL chart follows the BNO straight down. See charts of BNO ( and GASL (

    You were once a natural resources asset manager. How do you think this will shake out? I think we hit bottom on Monday. My feeling about that comes from watching the market action and the desperate way that oil is now trading. The huge gaps down show we are closer to the end than the middle.
    Dec 14, 2014. 02:15 AM | Likes Like |Link to Comment
  • Emerging Markets At 5-Year Lows Are A Blue-Light Special [View article]
    YMLP - 12.33% dividend-yielding, tax deferred, Master Limited Partnership.
    Dec 14, 2014. 02:03 AM | Likes Like |Link to Comment
  • Crude Oil Is Trapped In A Bear Raid; Not Its Fundamentals [View article]
    Swiss, If GASL returns to the price it had the day before Thanksgiving Day (12 days ago) it would be trading at $12. From the vantage point of $3.50, that looks good to me.
    Dec 12, 2014. 06:57 PM | Likes Like |Link to Comment
  • Crude Oil Is Trapped In A Bear Raid; Not Its Fundamentals [View article]
    Good points, Swiss. However, I have not found the linear dots to line up that well with Natgas. It's a nice idea in theory only. The natural gas industry over-produced in 2012 and got just what you said - $2 natgas. One would think that's fresh in their memory, not a story to repeat.

    Also, Natgas in the US - until the LNG facilities come on stream at Sabine in Louisiana next year - is as much a storage story as it is a supply story. There is limited storage. It is not unlimited. We don't pipe it out of the country to Canada or Mexico either.

    The weather people I listen to think that another polar vortex is in the mix for this winter. We already had one Arctic bout in November. Another thing that Arctic sub-freezing temperatures do is freeze up and crystallize the well-heads of Natgas pumps at the source. That was a problem last year, and could repeat this year if it gets cold enough. The more demand drains existing storage because of super-cold weather, the higher the daily cost Natgas will be.

    Natgas pricing seems incredibly episodic and weather-related to me, and it looks like those who trade it "like it that way". It's think on your feet, deal with surprises in IEA reports; and may the best man win and get the best price for their customers. Maybe I'm being too parochial and personal here, but in my mind, Natgas prices in January could be just as easily $3 (oversupply and warm weather) as $10 (Arctic vortex).

    The everyday trading in US natgas futures has been compared to a psychotic horse trying to escape a burning stable. My brief experience in the September-December timeframe with UGAZ would concur with that observation. You could take a 10-minute bathroom break and be down 10% after you returned to the trading floor. Natgas renders the term "short-term" inadequate to describe the experience.

    So I do not want to make too many prognostications regarding the price of Natgas in the states this winter, and how it would affect the Natgas suppliers and explorers in the Revere Natural Gas Index (GASL).
    Dec 12, 2014. 06:41 PM | 2 Likes Like |Link to Comment
  • Crude Oil Is Trapped In A Bear Raid; Not Its Fundamentals [View article]
    Uncle Pie,

    Yes...there you have it. Money chasing money. I remember that feeling of "market strangulation" in 2008 during the spectacular rise in crude. Kinda like the market being suffocated by too much of it now.

    Somewhere along the way in 2008, it became apparent that the market for crude oil prices was not being created by demand from those "using" crude, but by hedge funds who were buying-up oil contracts and thus taking crude "off" the market. It was the greater fool theory.

    I have read that worldwide crude demand has remained relatively constant for a decade now, even slightly lower than 2005. This can easily be explained away by the widespread adoption of renewable energies in developing and developed nations, and by the sale of more fuel-efficient automobiles.

    It makes sense. In the same way that oil was "taken off" the market by speculators in 2008 (thus increasing demand); it is now being dumped onto the market to set it awash in crude. Question is, who's doing the dumping?

    Sure, China is slowing, but it doesn't explain the radical short-term volatility in crude oil prices. I think this thing is going to end just like the 2008 debacle did, except this time by the mother of all short-squeezes.
    Dec 12, 2014. 02:39 PM | 4 Likes Like |Link to Comment
  • Crude Oil Is Trapped In A Bear Raid; Not Its Fundamentals [View article]
    Yes, true. Raymond James's favorite is 12% yielding YMLP (at $12.26 today). This mid-stream MLP probably has $3 of capital gain ahead of it too.
    Dec 12, 2014. 12:11 PM | 1 Like Like |Link to Comment
  • Crude Oil Is Trapped In A Bear Raid; Not Its Fundamentals [View article]
    10.6 if my memory recalls me.
    Dec 12, 2014. 10:44 AM | 2 Likes Like |Link to Comment
  • Crude Oil Is Trapped In A Bear Raid; Not Its Fundamentals [View article]
    Scott, click on the dynamic yield link that I included in the article and watch it through time. Flat is flat. Not elevated.
    Dec 12, 2014. 10:43 AM | 2 Likes Like |Link to Comment
  • Gafisa: One Of The Cheapest Stocks In The World [View article]
    Here we are, it's just 2 weeks later, and GFA is now down 28% from its recent highs, trading at another 52wk low ($1.62), following the Bovespa DOWN towards its support level of 45,000. The stock markets of the commodity nations in the BRICS are getting mercilessly hammered, and one has to believe that home buying will soon follow the losses down.

    After writing my comments above, I got disgusted and first sold at 2.10 - 2.12, and then the remainder at 2.07. My purchase was at $1.69, so it was profitable, but I don't think GFA is safe to touch - at any price - until the Bovespa (and oil) finds a bottom in the $50-$60 range.

    ALL of these things are inter-related in a commodity country. There is just no escape when revenue from exports has such a drop. And Dilma's spending programs? WHERE is she going to get the money for THAT? Definitely not from PBR trading at $7.50. Heck, PBR was $10 just a week ago.

    The oil price drop is a spectacular income rout for Brazil, and soon it will show up in the streets of Brazil. The government foolishly spent the bulk of the profits of its lush years during the commodity boom on social program that were one-way-streets out of the treasury. Now the lean years have arrived (and the Olympics too) and the government is left with nothing to spend. Someone should read the story of Joseph from the Chapter of Exodus to Dilma.

    Look at what Norway did, when it consciously decided to salt away the bulk of its oil profits into a sovereign wealth fund for the benefit of that nation. Life in Norway went on as it had always gone on, yet with an enormous savings account ($600 BL USD) sitting on the sidelines. See:
    Dec 11, 2014. 12:34 PM | 1 Like Like |Link to Comment
  • Gafisa: One Of The Cheapest Stocks In The World [View article]
    As long as they keep buying-back their shares at these prices and support the stock, you can say whatever you want. I watch it several times during the day. There is - or at least there has been - up through today - a constant bid under the stock each time it's about to fade into its usual oblivion. So there is some hope for shareholders here.
    Dec 3, 2014. 01:15 AM | Likes Like |Link to Comment
  • Gafisa: One Of The Cheapest Stocks In The World [View article]
    If we take the author's current estimates as good assumptions, then "working capital (C.Assets-C.Liabilities) of $1,256 million" gives GFA a book value a little north of $6/share.

    But let's crunch down a little further. Let's take the cash out of that "working capital", to get $1.256BL minus $320ML (cash) = $936ML.

    Let's imagine we are going to sell-off those remaining assets at 50 cents on the dollar for $468ML, and add it back into the cash of $320ML which gives us $788ML. Dividing that by 203ML outstanding shares yields a price of $3.88/share.

    But the market is saying we are overestimating (err..the company overestimated what its assets are worth in its statements. Highly-likely in my opinion). So let's sell those assets at 25 cents on the dollar (of the company's estimate) and add it to the cash. That would give us $320ML + $234ML = $554ML, or $2.72/share.

    And that's kind of what I think the best case scenario for a buyout would be at this depressed state of affairs, a range of about $2.50 to $3.00/share, just about where it's been for the last 2 years and since they sold the Alphaville unit.

    At the current share price, if we are to trust the author's and the company's figures, the market is valuing Gafisa's working capital assets (assets minus all liabilities minus cash - at $78ML, or TEN CENTS ON THE DOLLAR. I think it's safe to say that someone could get 10 cents on the dollar for Gafisa's assets if they finally wrested them away from this management team.

    Fire sale anyone?
    Dec 2, 2014. 09:59 AM | 1 Like Like |Link to Comment
  • Gafisa: One Of The Cheapest Stocks In The World [View article]
    As a last comment...and the hopes that management might finally read this...GFA has lost 95% of its capitalization in 4 years. Think about that. You managed to lose 95% of your shareholders investment capital; all the time crying about how much your company was ACTUALLY worth and that your share price didn't represent it.

    Well here's a clue: after a billion shares have traded in price-discovery these last 4 years, the market has given up on a "story" that's always supposed to happen next quarter, next year. It's not buying it because the management team doesn't have the moxie to turn it around.

    The board should remove its incompetent management team - beginning with Duilio Calciolari - and look to sell this company to someone who actually knows how to make a profit in Brazilian real estate, for example, Marco Willer, the CEO of the Alphaville team. The only time this company has made money was when it was selling parts of itself to someone else. Blackstone paid $3.69 USD for its 70% chunk of Alphaville on June 6, 2013. Ten days later, GFA's shares were trading at $2.30 USD, and have languished ever since. The market got it right. The only true value in Gafisa was now 70% GONE, the Alphaville part. And the 38% haircut in the share price reflected it.

    The market has been accurately assessing GFA's value for several years now through price discovery, and what it's saying is that the company's assets are WORTH MORE on the market as individual pieces of land, real estate, and cash than they are as ANY kind of business run by this management team. That's where the undervalued piece comes in. Take away the management piece and you unlock the true value of the individual pieces.

    I say spread the rumors - beginning tomorrow - that GFA is in play to anyone who's interested in buying any or all of it. And investors better hope to God that this Tenda/Gafisa split doesn't go through - one share of Tenda for one share of GFA - because then you'll "unlock" a 2 to 1 reverse split and the total value of the new shares would be something like a buck each, with the Tenda quickly dropping to a penny stock. Result? GFA gets kicked-off the NYSE, for lack of sufficient capitalization, and Tenda's shares trade down to nickels and dimes.

    Tenda has NEVER turned a profit, and has been an albatross around investors' necks for 6 years. Tenda in every shape, make, model, and restructuring has lost money for investors. This proposed stock split was another of management's hair-brained schemes that would surely blow-up in investors faces if they did it.

    Management's addiction to hopium needs to stop, and someone should throw this lot of dreamers into a Wall Street rehab facility so the company can be sold. When I wrote my articles on GFA last year, I estimated the company could sell their entire inventory of sky-scraper residences at a deep-discount of 50 cents on the dollar to pay-off ALL their existing liabilities, and still have enough left-over to divy up the remaining cash at $2/share. Today that figure sits at $1.58/share in cash.

    Is the entire business (minus all liabilities, plus maybe a little profitable inventory) worth today's $2.00? I hope so. That places current management's value to shareholders at cash + 40 cents a share. Ten days ago, trading at $1.68/share, the market was telling Gafisa that's its management team was practically worthless, and you could buy the "business", people end of the company, for 10 cents a share.
    Dec 2, 2014. 08:25 AM | 1 Like Like |Link to Comment
  • Gafisa: One Of The Cheapest Stocks In The World [View article]
    BTW...the "unlocking value" story regarding Tenda and Gafisa by splitting the stock is simply not true. If they have little value together, they'll have even less apart.

    The one valuable part of the company was Alphaville - and its stellar manager - but that part was sold last year to Blackrock. The buyers probably had little interest in Gafisa, and less than NONE in Tenda, even for free. Gafisa is a construction company; Tenda uses molds and erector-set style fabrication with liquid concrete poured into the molds to build dwellings. Almost no overlap between the two divisions.

    The 30% that GFA didn't sell to Blackrock last year is the rent they'll continue to receive on that one guy's success as a homebuilder. The problem with GFA has to be its management. Why was one guy so singularly successful year after year with Alphaville, while all the other department heads delivered excuses rather than profits? That is probably the real question analysts should ask.

    And Tenda's eternally legacy assets? Sell the damn things at 50 cents on the dollar and be done with it, instead of telling us each year GFA had another oops! But the problem (as elucidated by one poster here) may be they couldn't get 20 cents on the dollar for some of those assets because of where they are located.
    Dec 1, 2014. 07:46 PM | 1 Like Like |Link to Comment
  • Gafisa: One Of The Cheapest Stocks In The World [View article]

    Something along the lines of your enthusiastic and bullish article has been written by previous authors (myself included), all of which have noted the severe undervaluation for the better part of 3 years. It's just amazing how much time has gone by and how little things seem to change. The recent downgrade by Citi mentioned something along these lines, the awesome power of Gafisa shares to remain stuck where they are in a value trap.

    Thirty-four months ago, Sam Zell offered Gafisa somewhere between $5.20 to $6.20/share to buy out the whole company through a Private Equity firm, and this was just before the company posted a massive $600ML loss for 2011 (See:

    Man, what I wouldn't give for $6.00 share (+200%) right about now! Maybe some other shareholders too? Have you guessed the reason Gafisa turned it down? Gafisa's board thought it severely undervalued their assets!

    So it seems like all the writers and the buyers are on the same page. That leaves us with the one who isn't on the same page - the stock. And there's the rub. Blackrock recently bought-out 70% of Gafisa's one, truly-well-run division called Alphaville. But if they just had waited a few more months, they could have bought the ENTIRE COMPANY for 25% less than that.

    I think the real culprit is probably the political/governmental situation in Brazil. When Dilma Rousseff got elected in October, 2010, the EWZ (Brazil country ETF) was at its highs of $80 and GFA was trading for $18.00 ( Fast forward 4 years, and every year there's been an annual high and an annual low that's lower than the previous year. Lower lows, that's our stock. At the November, 2014 lows, GFA was down 95% and the EWZ was down 50% from 2010. And that during the biggest bull-market in decades in the US.

    Undervalued you say? That's our Gafisa.

    So it's the end of 2014 and here we go again. Dilma gets re-elected, promising the same pork-barrel success she's had in the past by lifting Brazil's poverty-stricken minions out of the mire by slowly, steadily, killing-off the successful parts of her economy and siphoning off Petrobas profits to pay for it. Dilma is Robin Hood with the revolutionary's love for the free lunch. The country is a basket-case economically, and the person who was in the room when every bad decision was made is now running it for another 4 years. I think that's what's really bugging the stock, and by extension, all Brazilian equities.

    I never really realized how important politics was in emerging markets till I saw the Brazilian market rise 40% this Spring on the hopes that Dilma would be defeated in the October election. Imagine that. Rooting for destruction and riots in order to get a better deal for the middle class.

    Look at what her fellow BRIC-bat, Vladimir Putin, has done for Russia with his extremely popular social intransigence and nose-thumbing of the West. His policies manufactured a 14% currency devaluation just LAST WEEK for the ruble. It's getting to the point that pay day in Rubles in Russia is followed by the "mad dash". You RUN down to the guys on the corner to buy Dollars (if there's any available) or Euros before the Ruble loses another 2% that afternoon! The Ruble has dropped 40% since summer. Come to think of it, Mad Magazine should put Vladimir Putin on the cover - replacing Alfred E Newman - with the words, "What? Me worry?" Or maybe he and Dilma could fight over that lampoon award.

    It's hard not to be sarcastic about the economic hopelessness and "Mind-boggling incompetence" ( that popular proletarian leadership brings to an emerging-market when it's allowed to divorce decision-making from economic reality.

    The one thing that Gafisa has going for it in the current reality is its share buyback program - 16 million shares. I get the feeling that they've been buying lately, and their buying has put an artificial bid continuously under the stock. Do the math: average daily shares traded: 1 ML. If the share buy-back accounted for just 10% of average daily volume at these prices (100K per day traded), they could put a "bid" under the stock for an entire year (160 trading days) Then they too could buy-in to their company's undervalued "story" with their money (not just their mouth) and join the rest of us Waiting for Godot (

    As an investor in this Urban Myth, I would eagerly bark at ANY buyout-offer above $2.50 for the good ol GF of A. Then, mercifully, management would finally be put out of their misery (and we too).
    Dec 1, 2014. 07:13 PM | 3 Likes Like |Link to Comment