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Michael Orwin  

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  • Cummins Is Rapidly Becoming A Dividend Growth Star [View article]
    Also, from Daimler's outlook on http://bit.ly/1OFJ35Y

    "In the worldwide market for medium- and heavy-duty trucks, another drop in demand is expected in 2015 following last year’s significant decrease. Furthermore, the situation will remain varied from one region to another. Market prospects are the most promising in the NAFTA region and Europe. In North America, the main economic indicators suggest that demand for trucks will remain favorable despite a slight cooling off, so the market should expand by between 10 and 15%."

    NAFTA includes the United States, Canada, and Mexico. Daimler's outlook is worst for Russia and Brazil. For Brazil "we must now assume that demand will fall again severely by about 40%".
    Jul 25, 2015. 04:46 PM | 1 Like Like |Link to Comment
  • Cummins Is Rapidly Becoming A Dividend Growth Star [View article]
    I found this - "Daimler Trucks Reports 50% Growth in Operating Income, Record North American Sales in 2Q" http://bit.ly/1OFyobu (ttnews.com), and "GM earnings more than double on U.S. truck demand; shares jump" http://reut.rs/1OFyobv (reuters.com).

    Most long term forecasts are not free. I found "Freight Outlook Infographics Explain Strong Growth Thru 2025 & Why Now’s the time for Shippers to Evaluate Expert Help" http://bit.ly/1OFymAi September 10, 2014 (cerasis.com). It's based on a forecast from the American Trucking Assns. (ATA) in collaboration with IHS Global Insight. While ATA could have an optimistic bias, the idea of collaborative forecasts is that the partner would not want to spoil their reputation.
    Jul 25, 2015. 03:14 PM | 1 Like Like |Link to Comment
  • Cummins Is Rapidly Becoming A Dividend Growth Star [View article]
    I expect the market for engines is cyclical. It's reasonable for the valuation of a business in a cyclical industry to be low at the top of a cycle and high at the bottom. I've googled "have us truck sales peaked" (which I admit is a biased search) and found "Volvo Says North America Truck Market Peaks as Orders Drop" http://bloom.bg/1JDX4Ne July 17, 2015 (bloomberg.com). I can see that the dividend hike and the acquisition of distributors is evidence that management are confident of further growth, and I'm inclined to trust CMI's management more than I'd usually trust management, but I think the point about cyclicality is worth considering and I'd appreciate comments on it.
    Jul 24, 2015. 05:14 PM | 6 Likes Like |Link to Comment
  • EnerNOC Hard To Value And Facing Major Regulatory Unknowns [View article]
    I can see that if you want to save energy, it helps to know what kit is consuming it, but presumably ENOC's demand response clients have some idea of what to switch off in order to get paid for consuming less power. Is DR much less demanding of detailed information than energy saving?

    There's also the point that it's possible to save on energy costs without consuming less energy, by getting the best tariffs.
    Jul 24, 2015. 04:15 PM | Likes Like |Link to Comment
  • SunEdison Sees The World As Its Oyster; Deals Everywhere In Solar, Wind, Hydro And Storage [View article]
    I sold half my SUNE shareholding today because of the recent acquisitions, keeping a quarter of my original investment. I regard the stock as speculative, with "indigestion risk" and increasing complexity for investors adding to the risk.
    Jul 21, 2015. 03:17 PM | Likes Like |Link to Comment
  • Assessing GE's Wide-Body Opportunity [View article]
    "is the closing of the ex-im bank going to affect GE ?"

    I'd guess not much, but it's hard to quantify and the opinions I've found are likely to be biased. For example "Boeing: Why Export Import Bank Expiration is No Big Deal" http://on.barrons.com/... followed "Boeing Helps Export-Import Bank Fight for Survival" http://on.wsj.com/1JeyeYs . The Forbes article (in 5 pages) "Export-Import Bank Closes: Kill Subsidies To Cut Federal Liabilities, Promote Economic Fairness" http://onforb.es/1JeyeYt advocates small government and was not likely to say the bank achieved a lot.
    Jul 21, 2015. 12:00 PM | Likes Like |Link to Comment
  • Assessing GE's Wide-Body Opportunity [View article]
    "Low oil prices might be a possible tailwind to boost aircraft demand, but it does not seem to have materialized yet"

    You can argue that cheap oil makes it harder to sell expensive new fuel-efficient aircraft, as here "Lower Jet Fuel Prices Shake Up Aircraft Market" http://bit.ly/1CMjcYY . Not everyone agrees - "Cheaper oil to boost aircraft sales, Boeing official says" http://bit.ly/1CMjbUS .

    I think it's hard to determine the overall effect of the oil price and expectations of it. Where cheaper oil means lower fares and higher demand for air travel, airlines won't want to miss out by having too few planes, but they won't buy more planes if they think the oil price will soon go up and the number of passengers will fall as a result. When they buy they'll consider fuel efficiency, and they won't want to bet that oil will stay cheap for the life of the plane.
    Jul 20, 2015. 09:56 PM | Likes Like |Link to Comment
  • Assessing GE's Wide-Body Opportunity [View article]
    franklja - good point!
    Jul 20, 2015. 09:51 PM | Likes Like |Link to Comment
  • Assessing GE's Wide-Body Opportunity [View article]
    You might be interested in "Can the Chinese Create a Competitive Commercial Aviation Industry?" http://bit.ly/1CLZkoH about the problems they've had so far, and this piece from Airbus http://bit.ly/1CLZi0a about a joint venture in China which is all positive.
    Jul 20, 2015. 04:43 PM | 2 Likes Like |Link to Comment
  • Assessing GE's Narrow-Body Opportunity [View article]
    "That is why I suggested it as a portion of one's speculative portfolio, albeit, I believe, somewhat less speculative than your typical speculative play."

    That's my position. I got interested in GE because of their "Industrial Internet" concept. If they can realize their vision of the II there should be a big long term reward. "If" and "should" make that a speculative reason for investing in GE, and I can't quantify "big".
    Jul 19, 2015. 12:59 AM | 1 Like Like |Link to Comment
  • Assessing GE's Narrow-Body Opportunity [View article]
    There's a factor which I expect many investors won't know about - free routing. In principle, by allowing more direct routes, fewer planes will be needed for the same amount of air travel (e.g. as measured by Air Passengers Carried). The US has a program which includes free routing, called the "Next Generation Air Transportation System" or "NextGen". It's had problems, see "FAA's Next-Generation Air Transportation System Falters" http://bit.ly/1Oly41z (ecommercetimes.com). I have not seen similar criticism of the European program.

    Free routing is only one factor, and there are positive factors such as this "More than 350 new airports planned across Asia-Pacific" http://bit.ly/1Oly5SZ (July 30, 2014).

    I'm long GE.
    Jul 17, 2015. 11:51 PM | Likes Like |Link to Comment
  • Main Street Capital Corp.'s Dividend Sustainability Analysis (Pre-Q2 2015 Earnings) [View article]
    "With a stock price at a 40% - 50% premium ..."

    You'll know that NAV goes up when stock is issued at a premium to NAV. Can you say how much of MAIN's performance depended on that, or would that need a whole other article?

    I'm long MAIN but the benefit from the premium is an area of doubt for me.

    Thanks for your excellent article.
    Jul 15, 2015. 10:34 PM | 2 Likes Like |Link to Comment
  • Berkshire Hathaway, Property And Casualty Insurance Stock Prices, And Higher Interest Rates [View article]
    Thank you for your reply, and the information that nothing in the piece has anything to do with the normal distribution. You have every right to make people pay for your hard work, and I have the right to not be impressed by an article that leaves the work out.

    I liked your previous article "Bank Stock Prices And Higher Interest Rates: Lessons From Bank Of America 1974" where you made a good theoretical case.
    Jul 12, 2015. 07:19 PM | Likes Like |Link to Comment
  • Berkshire Hathaway, Property And Casualty Insurance Stock Prices, And Higher Interest Rates [View article]
    "With respect to your comment on "academics," how is that consistent with the objectives the editors of SeekingAlpha have for the quality of discussion on this site?"

    What I said was "I might also believe you if you illustrate the technicalities instead of name-dropping academics". If you could find some way to illustrate the technicalities it would be a fine contribution to the quality of this site.

    I do not automatically trust academics, having in mind the Nobel Prize-winners at Long-Term Capital Management who applied sophisticated techniques to false assumptions, lost a pile of money and needed bailing out. That's why I like to understand the work behind stats-based conclusions, and if I can't see or follow the work I'm wary of blind acceptance.

    That does not mean I am against academics. I have great respect for the mathematician Benoit Mandelbrot (the fractals guy) who pointed out the danger in the assumption of a normal distribution in the Black Scholes equation. (You will know that Myron Scholes was one of the 'geniuses' at LTCM.)

    Statistics is a tricky area which needs care, which is why I would like to either see your working explained better or see the same relation hold in a long period or rising yields.
    Jul 12, 2015. 02:50 PM | Likes Like |Link to Comment
  • Berkshire Hathaway, Property And Casualty Insurance Stock Prices, And Higher Interest Rates [View article]
    "higher interest rate levels and lower P&C insurance company stock prices go together"

    Show me thirty years during which yields generally rose and the stock prices fell and I'll probably believe you. I might also believe you if you illustrate the technicalities instead of name-dropping academics. I can see that you haven't just fitted a straight line (which would have produced a negative correlation for any stock that rose at all during the period of interest rate decline), and I give you credit for challenging a common assumption.

    Did you check that survivor bias did not affect your results? I don't think it's likely to be a serious problem anyway. This http://cbsn.ws/1SgNJzu claims "there have been very few insurance company bankruptcies, unlike bank bankruptcies".

    It's possible that circumstances can affect both interest rates and stock prices independently of interest rates affecting stock prices, for example the financial crisis, and AIG in particular. Removing any such effects could make the negative correlation you report stronger.

    My problem is not with the plausibility of the hypothesis. I don't remember much detail from reading many of Markel Corp's 'letters to business partners' (I'm long MKL), but frequent complaints about too much capital chasing insurance business stood out, as did occasional complaints that the competition had reached irrational levels. Interest rates were mentioned but not with the same force. QE has caused low yields and much capital in search of a yield. That isn't good for insurance businesses, but it isn't the first time there's been too much capital, and QE has pushed asset prices higher including stocks and presumably the valuations applied to insurance stocks.

    Expressed differently, the potential benefit of earning more from the insurance float when interest rates are higher is likely to be competed away, while the discount rate applied to future quantities like book value or dividends will be higher.

    IMO the best strategy is probably to hold quality insurance stocks and to add when they are relatively cheap if there's no good reason to doubt the quality.
    Jul 12, 2015. 07:38 AM | Likes Like |Link to Comment
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