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Matt D'Alto

 
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  • Netflix's Business Model Isn't Sustainable [View article]
    Yes, NFLX has a recurring revenue stream and strong revenue growth over the past year, but it has also seen its operating cash flow decline over the same time. That just shouldn't happen. Also, ARPU has been declining, so I wonder exactly why they would have pricing power going forward (without losing subscribers)...
    Apr 9, 2011. 10:05 PM | 4 Likes Like |Link to Comment
  • Using REITs to Generate Monthly Income With Little Downside Risk [View article]
    1.) It's a good point, though I was more focused on the monthly cash flow characteristics of the trade, and not the "2x" capital commitment of being long-long since this will necessarily be a relatively small trade in dollar terms due to the liquidity of the securities. So I guess it depends on what's more important to you.

    2.) As I mentioned, these won't be perfectly correlated securities. The time period referenced is too short to make a conclusive argument, either way. Given I slant more toward the bearish side of the REIT trade currently, I like the fact that REK hasn't done well recently. Today, this pair trade is 50bps to the upside because REK is outperforming in a down market, so it always depends on your entry and exit points in my experience.
    Mar 15, 2011. 10:21 AM | Likes Like |Link to Comment
  • Using REITs to Generate Monthly Income With Little Downside Risk [View article]
    There are definitely some fat dividends right now in mortgage REITs, which is great for the time being. My only caution to you would be that what we are seeing today is probably peak dividend levels for this interest rate cycle -- which means the dividends (in dollars) will likely start to come down over the coming quarters (and in some cases, already have begun to do so). And if there is any whiff of Bernanke coming around on his thinking on monetary policy, you don't want to own mortgage REITs in that rate environment. The mortgage REITs get this, and you have seen several equity raises done in recent months from the likes of NLY, MFA, etc. Gotta strike while the iron is hot and capital is available. Not sure I have a good strategy for pairing up ideas in this space since they all pay out high dividend yields, and there isn't a product out that I know of there that specifically shorts the group for you. So you'd have to pick your shorts individually, stock by stock.
    Mar 14, 2011. 05:14 PM | Likes Like |Link to Comment
  • Using REITs to Generate Monthly Income With Little Downside Risk [View article]
    Thanks for reading, and for the tip on NRO. I will take a look.
    Mar 14, 2011. 05:04 PM | Likes Like |Link to Comment
  • Using REITs to Generate Monthly Income With Little Downside Risk [View article]
    Thanks for reading, though I think you skipped over my comments about KBWY being illiquid. It should therefore go without saying that it really doesn't matter how REK trades (though I did research this) because to pair it up you couldn't be long much of KBWY to begin with. I also mentioned this isn't a trade for people who are putting a lot of capital to work.

    Finally, I'm not clear what daily rebalancing has to do with the chart you posted since it just shows the inverse relationship between IYR and REK, which is how it should be (one is long, and the other is short REITs).
    Mar 14, 2011. 08:00 AM | 2 Likes Like |Link to Comment
  • Diamond Offshore: Attractive Investment, And a Possible LBO Candidate [View article]
    Jeep, your response is well thought out (thank you!), and in some respects I do agree with your rationale. I would have agreed with you even more in 2008, when clearly we were in a bubble in the oil patch. Seems like most services stocks have gone through their near-death experiences (including DO) over the last couple of years, and the offshore drillers again with BP/Macondo/moratoriums. Heck, DO still hasn't recovered fully from the levels it was at before Macondo! So I just questions if we are at the top or emerging into a new bull cycle. And if that's not the case, then I wonder how many more "mini-cycles" the Tisches want to deal with here in DO -- why wouldn't they strike while the iron is hot and capital is cheap? Anyway, we will see what happens. Either way, it seems like we are on the same side, but perhaps for different reasons. Good luck!

    Matt
    Feb 22, 2011. 07:46 AM | 1 Like Like |Link to Comment
  • Diamond Offshore: Attractive Investment, And a Possible LBO Candidate [View article]
    If you're right about the ownership structure, then you have to run the math of how much value accretion there would be to Loews' shareholders by increasing the DO stake by levering up DO. The ROE expansion on DO would be fairly large just from increasing DO's financial leverage. I would imagine that is a great incentive for the Tisch family to consider such action if the value of Loews' stock were to rise meaningfully (in addition to DO), and the ownership/tax structure is as you say.

    Just food for thought...
    Feb 21, 2011. 03:17 PM | 1 Like Like |Link to Comment
  • Diamond Offshore: Attractive Investment, And a Possible LBO Candidate [View article]
    Thanks for your comments - you raise a very interesting point. People I think get very U.S.-centric in this analysis. But clearly DO has a strong relationship and competitive advantage in Brazil, and it would be relatively easy and hardly unprecedented for a government-sponsored entity like Petrobras to essentially vertically integrate their offshore drilling capability. This way they can guarantee their access to rigs. DO would be the natural choice if this scenario plays out.
    Feb 21, 2011. 10:19 AM | 1 Like Like |Link to Comment
  • Diamond Offshore: Attractive Investment, And a Possible LBO Candidate [View article]
    With all due respect, your facts are incorrect. If he died today, he WOULD have to pay estate tax. For individuals dying after 2010, the estate tax is reinstated, up to 35% with a $5M exemption.

    More importantly, the current federal estate tax rules are scheduled to end after 2012, along with the so-called "compromise" on income taxes that Obama made with the Republican Congress.

    I will tell you that there are lots of conversations going on between investment bankers and business owners every day about how and when to cash out, and income and capital gains tax considerations are at the forefront of every conversation. There is a huge window of opportunity for business owners in the next 2 years.

    If you think the capital gains and estate tax laws will remain this favorable in the future, then please enlighten me and everyone else because I for one cannot see it happening given our current fiscal status. Someone has to pay for the debt we've accumulated eventually.

    Personally, if I were in that situation, I would hit the bid, and take my windfall minus the tax hit. One way or another, the tax bill will almost certainly be higher in the future.
    Feb 21, 2011. 08:54 AM | 2 Likes Like |Link to Comment
  • Diamond Offshore: Attractive Investment, And a Possible LBO Candidate [View article]
    Thanks for your comments. As I mentioned in the article, older and/or commoditized equipment is part of the concern among the DO bears, but to me it's not a very convincing argument. Everyone thought PTEN would go out of business in the latest N. American downturn, given their older equipment, the need to rebuild their fleet, and the fact that natural gas prices would be low for an extended time. People forgot they had no debt, and here we are and the stock has doubled over the past year. Investors said the same thing about Todco a few years back -- talk about old and crappy offshore rigs! And those were mostly commoditized jackups and barges (shallow water). But they still got bought out at a premium when the cycle turned. SWSI was in one of the most commoditized parts of the oil patch (pressure pumping), and they still found a buyer at a premium.
    Feb 20, 2011. 05:18 PM | 2 Likes Like |Link to Comment
  • Whitney Tilson: Why We Covered Our Netflix Short [View article]
    I wouldn't be surprised if this article will mark the top on NFLX for some time to come...from a contrarian standpoint, the bulls should be concerned, not emboldened by this...
    Feb 20, 2011. 05:03 PM | 2 Likes Like |Link to Comment
  • Key Takeaways From Aruba Networks' Q2 Earnings Call [View article]
    I think you're spot on...
    Feb 20, 2011. 04:58 PM | Likes Like |Link to Comment
  • Is Apple the 'Short of the Century'? [View article]
    AAPL is only expensive if you think the revenue and earnings growth slows meaningfully from here. And even then, it's not nearly as egregious a valuation as some other smaller-cap tech stocks that are much more interesting shorts to me (like NFLX). AAPL's cash hoard alone dwarfs most companies' entire market capitalizations, and AAPL actually innovates. Even if Jobs died tomorrow, I don't think the stock gets to $300, never mind $200. Too many buyers waiting to snap up the shares, and there is a real company now behind the man, the myth, the legend. The multiple would shrink for sure, but I think that would be a great buying opportunity. I certainly wouldn't be loading the boat here on the long side given the recent run up in AAPL stock (a correction of 5%-7% could easily happen just with an overall market pullback). But if AAPL is the short of the century, then the entire Nasdaq gets crushed and I have 20 or 30 other tech stocks than I can short in that scenario and make a much greater return than shorting AAPL...
    Feb 20, 2011. 04:53 PM | 2 Likes Like |Link to Comment
  • Diamond Offshore: Attractive Investment, And a Possible LBO Candidate [View article]
    Thanks for your comments, but the existence (and demise) of offshore drilling companies like HAWK is proof-positive that there are still lots of inefficiencies out there and companies that just shouldn't be in business by themselves. This goes for public as well as private companies.
    Feb 20, 2011. 11:57 AM | 3 Likes Like |Link to Comment
  • Key Takeaways From Aruba Networks' Q2 Earnings Call [View article]
    Good company, good quarter, but a massive short-covering rally on Friday on a 1c beat and CFO resignation in a high valuation stock just smells bad to me. I shorted the stock into the close on Friday.
    Feb 20, 2011. 11:10 AM | Likes Like |Link to Comment
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