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Nick Clayton  

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  • Sumitomo Mitsui Financial Group: This Japanese Bank Has At Least 35% Upside [View article]
    ChineseBritishAmerican,

    Thank you for your comment, I think SMFG is definitely a buy at current levels. The bank's valuation is directly affected by global currencies rates. For example, a strong dollar makes it more enticing for Americans to invest in Japan. Moreover, SMFG has the largest exposure to foreign lending. In countries where SMFG lends where the currency is stronger than the yen, SMFG can lend, realize profits in the stronger currency and convert back to yen.
    Mar 4, 2015. 12:14 PM | Likes Like |Link to Comment
  • National Oilwell Varco: A Wonderful Company Selling At A Wonderful Price [View article]
    TF17,

    Thank you for commenting and for reading!
    Feb 9, 2015. 08:07 PM | Likes Like |Link to Comment
  • National Oilwell Varco: A Wonderful Company Selling At A Wonderful Price [View article]
    Old Rick,

    Thank you for reading and for your kind words.
    Feb 8, 2015. 11:09 PM | Likes Like |Link to Comment
  • National Oilwell Varco: A Wonderful Company Selling At A Wonderful Price [View article]
    Noah Research Partners,

    Excellent point, thank you for reading.
    Feb 8, 2015. 02:21 PM | Likes Like |Link to Comment
  • National Oilwell Varco: A Wonderful Company Selling At A Wonderful Price [View article]
    Michael,

    Thank you for your comment, you bring up a good point. I make the assumption that at the very least free cash flow should grow along with the consumer price index. Long-term CPI growth should be virtually identical to both the long run GDP and inflation growth rates. The opportunity cost for investors is the real investor return - average stock return less the inflation rate. If an analyst uses 9% as the discount rate, then they are assuming that there will be ZERO inflation over the next 10 years. This is by no means a flawed approach because I think the more conservative an analyst is when conducting a DCF analysis, the better. If we assume there will be no inflation for the next ten years then NOV is likely fairly valued or slightly undervalued.
    Feb 8, 2015. 02:09 PM | Likes Like |Link to Comment
  • National Oilwell Varco: A Wonderful Company Selling At A Wonderful Price [View article]
    Akaralph,

    Thank you for your comment. To be frank, I have used up all my funds on my four or five best ideas. I feel at this time the opportunity cost with NOV is particularly high and I am considering trimming one of my other holdings to initiate a new position in NOV. In three of my current holdings, there is a near-term catalyst that will likely unlock substantial value in the next 6 - 12 months. Once these catalysts take place, I will take profits off the table and NOV is on my short list of compelling investment ideas.
    Feb 8, 2015. 01:48 PM | 5 Likes Like |Link to Comment
  • The Tandy Advantage: A Growing Business In A Niche Market [View article]
    rstar90210,

    Thank you for your comment. When I mention Tandy to investors, they often mention Radioshack. Tandy Leather is thankfully in a much stronger financial position than Radioshack at the moment!
    Jan 4, 2015. 02:44 AM | Likes Like |Link to Comment
  • Rayonier Advanced Materials: It Should Not Take A Genius To Run This Business [View article]
    Unam,

    Thank you for your question. You raise a great point.

    Rayonier AM's capital structure is unique because they are financing their assets with almost 100% debt. If the debt is subtracted from the DCF analysis then the equity value would be close to what it is currently trading for. Since Rayonier AM has a dominant global market share and excellent business economics working in their favor, the true equity value is grossly understated if the debt is taken out. This is the case with many companies that have a dominant market share because of a competitive advantage such as being a low cost producer. These companies tend to require minimal capital expenditures, can consistently grow cash flows and typically are able to raise dividends year after year which could potentially be the case with Rayonier AM. The company should easily be able to consistently generate at least $170MM in operating income which equates to almost a five times interest coverage ratio. Thus, they have a sustainable business model that in all likelihood will be able to safely use high amounts of debt to finance operations. If the company operated in a cyclical industry such as shipping or the airline industry, then they would not be able to sustain such a high level of debt because future earnings would be so unpredictable.
    Dec 21, 2014. 03:09 AM | Likes Like |Link to Comment
  • Rayonier Advanced Materials: It Should Not Take A Genius To Run This Business [View article]
    Luis,

    Thank you. I agree!
    Dec 19, 2014. 07:19 PM | Likes Like |Link to Comment
  • California Resources Corporation Is A Spin-Off With A Substantial Opportunity In The Golden State [View article]
    Thank you for your comments Robert. During my research I read that CRC is able to charge slight premiums because of the limited transportation options in the California market. That coupled with the like you mentioned lower transportation costs I think gives CRC a small competitive advantage over some other E&P companies. This should bode well for CRC investors and potentially mitigate the risks associated with a prolonged slump in oil prices. That being said, I hope oil doesn't fall below $50 for an extended period of time because obviously CRC would lose lots of money as would most energy companies.
    Dec 8, 2014. 02:22 AM | 1 Like Like |Link to Comment
  • California Resources Corporation Is A Spin-Off With A Substantial Opportunity In The Golden State [View article]
    Ringdown,

    Thank you for your kind words, I couldn't agree more. Regulators can be quick to point the finger at the potential environmental consequences of oil exploration and production. What they fail to see is that the economic benefits far outweigh any environmental consequences of oil production in my opinion.
    Dec 8, 2014. 02:10 AM | Likes Like |Link to Comment
  • California Resources Corporation Is A Spin-Off With A Substantial Opportunity In The Golden State [View article]
    Dutchtender,

    Good point. While the timing of the spin-off may not have been the greatest considering the crash in oil prices, I don't know anybody who has consistently made accurate projections about macro events. Once oil prices return to the $100+ level, CRC will be a great long investment.
    Dec 8, 2014. 02:05 AM | Likes Like |Link to Comment
  • California Resources Corporation Is A Spin-Off With A Substantial Opportunity In The Golden State [View article]
    Robert,

    No problem, feel free to make comments as you see fit. You're probably right.
    Dec 8, 2014. 01:59 AM | Likes Like |Link to Comment
  • California Resources Corporation Is A Spin-Off With A Substantial Opportunity In The Golden State [View article]
    Neo-Me,

    Great question. That is exactly right. If you notice in my income statement analysis, say the price of oil falls to $50, the company would go from losing roughly $100 million to $1 billion in pre-tax income in a given year for a net loss of $900 million. (-$900 million yearly loss/4 = $225 million quarterly loss) $225 million/$25 drop in oil prices equates to $9 million impact on pre-tax income per dollar change in the price of oil. They would probably lose something like $75 million in pre-tax income for the first quarter of 2015 if the Brent index is around $65-70 per barrel. (approx. -$117 million based on $75 oil price/4 = -$30 million - (5*9 = $45 million) = -$30 million - $45 million = $75 million loss. These are just estimates and can obviously change based on the price of oil and production and selling expenses per barrel of oil. I don't foresee the price of oil falling to $50 levels for an extended period of time but there is a possibility which makes it a very real risk with this investment and many oil stocks in general. I hope this helps.

    Thanks for the question.
    Dec 8, 2014. 01:49 AM | Likes Like |Link to Comment
  • Alaska Communications: Better After The AWN Sale? [View article]
    Ted,

    Well written article. This analysis provides some great insight on what (to the untrained eye) appears to be a significant credit positive event.

    Three issues I was hoping you could address in regards to what the company might do with their free cash flow moving forward:

    1) How much do you think ALSK could pay out in dividends?

    2) Would they strictly use FCF to fund the dividend or tap alternative sources like a revolving line of credit?

    While I don't know for a fact, it is likely the company was funding the large dividend with a revolving credit facility pre-2009. They were often paying out anywhere from $30-$40 million during this time despite the fact that in 2005 and 2008 they were FCF negative. I emphasize the dividend because (as I'm sure you know probably better than me) large institutions with the buying power to move stock prices typically buy telecom stocks for their dividends. That is why the market once valued this company at close to $17 per share even though the company was sometimes leveraged 20 to 50 times or even had negative equity when they were paying an 8-10% yield. It was obviously an unsustainable dividend and management has made the necessary moves to turn things around.

    3) Would the company be better off increasing their capital spending in the broadband segment which management has projected to be generating 20%+ IRR?

    Thank you for the great analysis.
    Dec 8, 2014. 12:17 AM | 2 Likes Like |Link to Comment
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