Papa of Four

Value, special situations, growth, long only
Papa of Four
Value, special situations, growth, long only
Contributor since: 2013
Company: Papaoffour
The Norsk Hydro plant is the only one I see as viable. This is in part due to the companies extensive alumina production in Brazil, but also the companies unique approach to evergy conservation which has lowered production cost considerably over the last decade.
I have written about this a few times over the last couple of years.
Most recently here
http://seekingalpha.co...
Thanks for the update PoF
Perhaps, just a link to the blog in question, so the rest of us are up to speed about what the CEO is saying that is so harmful.
That would help.
PoF
Paulo, while I agree with you about the nature of the one off charge, I do not agree about inventory levels.
Inventory levels of this size are necessary for he company to fulfill its obligations under the new contracts.
Unlike many other industries, they can have no guarantee of being able to pick up extra inventory closer to the time they will utilize it. There is only 1 grape harvest per year!!! To be absolutely certain they have enough inventory to fulfill the obligations, they are forced to buy and carry. The fact that inventories are high relative to even Mkt Cap, is a good indicator of how undervalued this company is from a growth perspective.
I do not feel as yet it is worth trying to attribute a valuation based of off earnings. Imagine what would have happened if analysts had done that for amazon for most of that companies life time.
I would also expect some dilution over the next couple of years, to finance further growth. As long as the dilution is not detrimental to share holder value it is acceptable.
PoF
NO economic theory is ALWAYS EXPANSIONARY. 2 is bigger than 1 and 1000 is bigger than 100. This is why regulated inflation is required to stop an economy over heating. All we are doling is regulating the rate of expansion to try and prevent explosions.
That is econ 101.
and destruction is always net positive growth, once you understand that concept, as the void must be filled by something. That something always has value under the fundamental economic model.
As an individual you may choose not to attribute any value to it at all. This is in essence the argument that surrounds climate change and many other things.
If I believe climate change is a natural phenomenon, I can not ignore the consequences for the human race. If it rains, I put up an umbrella.
PoF
Yeah, I got that, I was just trying to clarify my position for the other reader.
The upshot should be that ALL black swan events are buying opportunities. Also that Long term sentiment changes, should be seen as possible inflection points for both Bull and Bear markets.
Economic theory IS expansionist, which is why Very Very Long term markets always go UP. Which is why I said that sentiment is what ultimately causes declines.
Have a great rest of the weekend
PoF
You miss the point hayesatlbch, it does not matter how the war is fought, it is the additional application of resources.
Yes they may build fewer tanks and ships than they did for WW2, but they will spend more on intelligence, drones, public relations, cyber terrorism and many other things. The USA used to be an agrarian/manufacturing economy, is the economy smaller because it is more service oriented?
Countries build less tanks and warships than they used to, but very few spend less on their military as a whole.
The space race was beneficial to the US and Russian economies due to the application of resources. WW2 was economically beneficial due to the application of resources. WW3 should not cause the markets to sell off from an economic stand point. It will cause them to sell off from a sentiment point of view, IF IT HAPPENS.
The real point that I am making is that; the VAST majority of declines ST and secular Bear markets are driven by sentiment, not economics.
Intervention into normal every day economies, can also cause bear markets. Sanctions are a good example of this, but you should not forget, that sanctions are DRIVEN by sentiment.
ie: WE do not FEEL what you are doing is right, so WE will punish your economy with sanctions.
Or to put it another way.
It costs more to build than it does to destroy. Destruction is always net positive for growth. The sell off is only a reaction to the feelings about the destruction. These feeling are normally Short term.
The feeling about our kids being worse off than us, is Long Term and therefore, is more likely to cause a secular Bear market than any "black swan" event as they only produce a Short Term sentiment change.
Just a thought.
PoF
DAG, thanks for the illustration of the two sides.
I generally work under the assumption that both bulls and bears are right about any individual stock or market at all times. Both sides are entirely right about the optimism and pessimism represented by the respective arguments. The resolution of this argument is the price. I did a full explanation of the position here in an instablog at the beginning of the year.
http://seekingalpha.co...
Long term markets continue higher because human beings are by default optimistic. It is for this reason we are able to do things like leverage debt.
We think that each successive generation will be better off than the last. For the first time, in November, I heard that this was not the general sentiment of the population. This is a very important inflection. Short term confidence that things are getting better, is rising but long term most Americans believe that their children will be worse off than they were. So we have consumer confidence going up even though there is long term pessimism. We have participation rates increasing, but wage stagnation or depreciation when marked against inflation.
The market may continue higher fueled by inflation, but once adjusted for inflation you could consider them to be flat or slightly down in the future.
Once you add in all the other non financial factors the markets are vulnerable to steep declines. The geopolitical issues for example are causing down days in the market. This is ridiculous from an economic stand point.
For example if the Ukraine, were to turn into WW3 it would be a boon to the economy.
So why are we selling off on the idea?
Because the idea of WW3 is terrible, and that sentiment is stronger than the underlying economic benefits.
If we have a resolution to all of the geopolitical issues at present, we may enter a secular Bear market, just based of the idea that our children and grandchildren will be worse off than we were.
PoF
Still does not change the fact that with that $0.09 in earnings on the books FY eps is $0.44,. Which is what we knew back in January when I wrote this article.
http://seekingalpha.co...
since then the stock has been up 15 - 20%. but that still only gives a E/P of 18-20.
Given the growth rate in the companies core driver business Himax should be getting a PE 22 which gets up to the forecast $9 - $10
All the other addition stuff discusses in that article and more recently this one.
http://seekingalpha.co...
is additional and gravy. Could also be covered under the non driver business.
"We are very pleased to be experiencing growth in both our driver and non-driver business segments. We are particularly excited about the prospects for our LCOS microdisplay and WLO products, which are integral parts of the eco-system for the rapidly emerging head mounted display products and next-generation cameras for mobile devices. Equally exciting is our market leading single-chip solutions for pure in-cell touch display, which we believe will soon become mainstream in portable and wearable devices. In summary, Himax is at a significant inflection point, with many of our non-driver products ready to enter the consumer market after many years of product development" from the release
The growth this year came from China and Korea buying televisions. the companies core business and are undervalued for doing just that.The company is ready to start making money out of its other products, why would anyone sell
now?
Best
PoF
Nice 7% move up on a down day, hope to see this continue through to earnings at the beginning of next month.
Best
PoF
That is my thought, same with the BRL, although for (GGB) the income statement is supported by USD earnings, it costs them less to produce. Should that not lead to higher margin? They got hit with repatriation taxes, but have since instituted a puyback program, to mop up outside of Brazil.
Buying up the ADR should help offset taxes and provide more value to shareholders.
PoF
I like the comment CT, but I think there would be an initial pop because of AAPL. but investors are starting to get the idea that the HIMX base price should be higher, so even without AAPL HIMX should command a higher valuation. This was not the case with GTAT which is why they went bust.
HIMX has been very good about getting its customers to pay for expansion and so have little debt compared to growth. They make the end customer leverage the customers resources to enhance HIMX's production capability. This may mean that they make a little less up front, but it does mean they will not go bust at the whim of one customer and will make more money in the long run.
Best
PoF
I was just writing about this from the (GGB) stand point.
http://seekingalpha.co...
How do you feel about Turkish Steel. What effect do you think the rapid expansion and upgrading of Turkish producers by Russia will have?
Why has the conflict in the Ukraine, not been more bullish for Steel?
I have come to my conclusions, I just wondered if you have a different take on it.
Many thanks
PoF
Not just fellow opec.
http://bit.ly/1Kwac7U
we should also not forget the Russian pipelines
PoF
bjnflicks,
that is a very naive statement. Perhaps you need a greater understanding of why a stock like AAPL would dip on news out of the Ukraine or Greece.
The global economy is in intricate web and not all relationships are apparent.
For some events your Cramer like analogy could be absolutely true!!!!
It is unfortunately not true for events related to either Greece or the Ukraine at the moment. They are both very relevant to the number of iPhones that APPL may sell in the future.
Best
PoF
I prefer (GGB) to (NUE) for a value and growth perspective. 3% dividend in helpful too.
http://seekingalpha.co...
They have cash dropping to the bottom line at (GGB) which is coming from a sale to (NUE) and just initiated a buyback also.
Thanks though.
PoF
Brazil will be the surprise winner over the next 5 years. particularly like (GGB) down there.
http://seekingalpha.co...
Close to a bottom in Brazil (BBD) earnings yesterday were strong.
Best
PoF
Not many people paying attention to the fact that we are very close to either full scale financial collapse globally.; or a full scale war with Russia, or that there is no true indication of which way China would go. My guess is they would also play the Swiss card and stay neutral until the figure they can mop up everyone.lol
(GGB) is safe haven non USD the benefits of almost every outcome. Got to like those odds.
PoF
The thingy that is worrying the market is the outright possibility of full scale war!
I covered it from the commodities perspective yesterday and the warning sings are there, from oil, to coal and steel. Gold repatriation and a host of other things.
http://seekingalpha.co...
The massive increase in Obamas budget is not for things like free community college for all; it is the largest increase in defense department spending since WW II. The media will not report this for some reason, guess there is nothing to see here. The amount for social services pales in comparison when you place it next to upgrades for nuclear submarines, Aircraft carries, terrestrial nuclear missile stations fighter jets etc etc etc...
Greece is but one small strategic issue as relates to geographic proximity to the Black Sea, Turkey and Syria are more of a problem. The Ukraine is ground zero. But like I said read the article, it is only part of the whole picture which I have been trying to update regularly since last year.
all the best
PoF
OH, PS to all, I forgot to mention that the MASSIVE overspend in Obama's Budget is not on things like free community college for all; it is the largest increase in defense department spending since WW II.
More planes, more money for Overseas Cooperation Troops. Upgrades to Submarines, aircraft carriers, land based nuclear missiles and the list goes on.
But nothing to see here. The media will not report on it, so I suggest you read the budget even if it is heavy going.
PoF
Thanks for the update, (DHT) has been on my top picks for 2015 for some time, in part because of managements ability to navigate what has been a very challenging environment. If we are now sailing in calmer waters, we should expect the same skilled management to do a bang up job of making some real money. The sun is starting to shine, and I think they will make hay.
PoF
I think there will be some political stuff that goes through congress to support US steel makers as has happened in the past. I do not think this will effect Brazil, Japan and South Korea as they will be somehow exempt due to Obama trade deals. You sight the Ukraine as a bit player, they are not once you consider the export capability. They were exporting 3 times as much as South Korea who is a much bigger producer.
China can continue to utilize 800 million tonns for at least the next decade if they want to. That would be like saying there is no need for the USA to import steel because it already produces 100 million tonns a year? Get some infrastructure spending on the go and the USA would need to import more. How about the Exxon pipeline, would the USA be importing more steel then?
Brazil is also nearing fundamental support in its market as outlined in another article today. http://seekingalpha.co...
(BBD) posted good earnings yesterday despite dollar headwinds and a challenging economic climate in Brazil. The turn around is underway in Brazil which only helps to bolster the case for (GGB). The left wing socialist government of Brazil, if far more likely to embark on infrastructure spending than the USA is. (GGB) is supported by that when it happens, and is supported by the USA while you wait. I could easily see (GGB) back up around $18 within the next 5 years, and you have the buyback and cash falling to the bottom line to give you some protection while you wait. The dividend also pays you to be patient.
That is why I have selected (BBD) and (GGB) in my ADR bundle.
http://seekingalpha.co...
South America is going to be the roaring surprise of the next 5 or 6 years.
South Africa will do the same but may be a little slower to get going. India is already well on track and I still like Europe outside of the EURO.
I would even be willing to add Greece to that group if they just leave the single currency.
Best
PoF
Thank you,
I feel that Brazil has bottomed or is near a bottom. (BBD) results yesterday were very encouraging. I have an article out in about 2 hrs that covers Brazilian Steel and (GGB) in particular. You might enjoy as you list commodities in your interests.
Still on pro Alerts for now, but here is the link,.
http://bit.ly/1z9HSBI
I might be tempted to pick up a case load of (PBR), but do not favor VALE. I do like (NHYDY) who bought a large bauxite operation from VALE a while back.
Thanks for another view of the Brazilians.
PoF
We are headed for a test of 16450 on the DOW,
IBB sold off yesterday, making the Nasdaq the only index to enter negative territory yesterday. Biotech due for a correction and it will drag the nasdaq lower. Dow had a double bottom breakdown on Monday which confirms the test at 16,450.
Covered both of these possibilities last Friday.
http://seekingalpha.co...
Expect a bad ISM number in about an 30 mins or a substantial build in oil in about 1 hour.
Looks like another volatile week or two, with no clear signal as to market direction for the LT.
PoF
Lol that is ok, the main thing is the news articles drop off much faster than the Contributor articles. So is you attach in comments to an article then readers get the most benefit.
This News item will be invisible by the time earnings comes round. At that time, the stock movement will attract more readers as they will be wondering why the stock is going up so much. Your extra comments and links are very useful too them.
PoF
Lol 808Amigo,
you are supposed to post all this under one of my articles so at least I get the paid for the page views.
It is also helpful to new readers of the article; to help them with extra info available since the article was published.
It also brings the article back up under most commented and helps to attract attention to the stock. This does not happen for news items in the SA model.
PoF
Nah, if you put 10 of us in a room, we would not reach anymore agreement than the FED. It is a function of the Markets. Bulls and Bears must both be right at all times. Market Direction is just a case of one side being less certain than the other for a period of time.
Price is the resolution of the Bull/Bear conflict. Volatility is a sign of a healthy market place, that is considering all options.
http://seekingalpha.co...
Best
PoF
LoL MeisterG, you got a growing fan club. Told you you should start writing.
I just hope this global catastrophe dose not get in the way of Himax and other things this year.
http://seekingalpha.co...
may be under embargo till tomorrow morning, not sure. But taking a look at (GGB) in Brazil as a decade long growth story. Minimal downside, safe dividend and some nice surprises in the earnings call at the end of the month to give some extra protection. Could go from $3 to $18 over the next 5 years. Also a nice opportunity to diversify out of USA and tech. (BBD) earnings were very strong this morning signaling there is money to be made in Brazil over the next year or two. (BBD) currently yields about 7%
Best
PoF
Lol my article called the Bipolar economy should have been called the Bipolar Fed!!!
http://seekingalpha.co...
they are acting very predictably, we all knew they had no idea what they were doing.
PoF
Thomas is right. Obama and other European leaders are desperate for Greece to stay in the EU from a strategic position and geographical location as it relates to the Ukrainian Crisis. They may bluff this out for a while, but Putin my cause them to fold the financial hand they are holding. I covered this from the point of view of the Global Steel industry in my article this morning.
http://seekingalpha.co...
A full scale war is much closer than many people consider possible and it is becoming more apparent in the commodity markets.
all the best
PoF
If that is entirely true, why is my ADR bundle up over 37% in less than 12 months.
http://seekingalpha.co...
That is a 37% average, not one individual stock. Yes Central Banks are buying the USA, but it is not all they are buying. The bundle was envisioned as an alternative hedge, instead of Gold. From that point of view it has been extremely successful especially given the headwinds created by the stronger dollar. The 37% also does not include substantial dividends which in some case are 6-10% relative to various entry points.
I understand your point of view, but do not think that you should so easily discount a strategy that has well outperformed the US markets in what was another golden year for them.
Thanks
PoF
Nasdaq leads the way, right on queue.
http://seekingalpha.co...
PoF
Was the really, for me or for jj's usual buy the market comment?
I am not sure I have ever heard him say anything other than that lol.