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Ray Meadows, CFA
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Ray Meadows, president of Berkeley Investment Advisors, is a CPA, CFA, and an MBA, and also has a Masters degree in economics. Berkeley Investment Advisors provides investment management services for clients with $200,000 or more to invest. In addition, we provide advice on all aspects of wealth... More
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  • Caution - The Bad News Outweighs The Good News

    The California issue was always going to be resolved by giving them the information they want. The much more important issue is MBS investors moving to remove OCN as servicer on a major part of their portfolio. This would cause real financial damage to OCN. In my opinion this risk outweighs the positive of the CA settlement. The issues raised by the MBS investors are legitimate issues. I've read some PSA agreements that govern the servicing and I am familiar with what OCN has been doing. Although I think their modifications actually benefit the MBS owners, OCN has pushed the boundaries of what is allowed by the PSA agreement. It always seemed strange that they could settle with the regulators by using MBS investors' money. The stock looks cheap relative to book value but a chunk of value is at risk here. This won't get resolved anytime soon. I have a small long position. I'm not selling, but given the situation I would not buy more unless this goes significantly lower. Proceed with caution.

    Tags: OCN
    Jan 26 2:32 PM | Link | 1 Comment
  • PGN Overpays For Prospector

    As a shareholder of PGN I'm disappointed with management's decision to pay such a high price for Prospector relative to it's own under-valued stock. Based on the numbers in Prospector's Q3 report here:

    and PGN's presentation here:

    It appears that PGN is taking on total debt of $547 million and they get $85 million in 2015 EBITDA run rate for it so EV/EBITDA = 6.4. This probably translates to about .26/share in incremental EPS (the P/E on purchase price is > 23). In contrast at today's price PGN could buy ALL of its outstanding shares for $422 million and I estimate its own EV/EBITDA multiple at 3.8. If they had used the amount they borrowed on their credit line to buy back their own stock (even at today's higher price) the accretion for 2015 would be about .62/share - more than double what they'll get from this deal.

    Tags: PGN
    Nov 17 8:51 PM | Link | 1 Comment
  • Very Strange Accounting
    I want to buy Chinese small caps listed in the U.S. but I don't buy unless their SEC filings make sense.  Unfortunately this company, although it has a great story, has a 2009 10K that doesn't make sense.  And KPMG in Hong Kong signed off! One item in particular that's worth noting is that they show a $24 million expense (that wipes out 90% of income) described as increase in derivative liability.  In the cash flow statement its added back so the liability should still be on the balance sheet.  But its not!  If anyone can explain how they made the balance sheet balace without crediting the liability, I'd love to hear it. KPMG Hong Kong - are you there?
    Another thing that looks very weird is that they started 2008 with negative capital but managed to generate $13.3 million of retained earnings anyway - before raising capital in 2009. Perhaps this is somehow related to their complicated reverse merger but it certainly deserves a well written footnote.  Their tax accounting is another area that doesn't make sense.
    Finally I will note that their stock sales required them to hit certain financial targets which they did in 2008 and then in 2009 the drop off in income from the warrant liability charge essentially reversed the income into thin air.  Did they somehow use the warrant liability charge to shift income from 2009 to 2008? 
    In short, I like the story, but their financial statement disclosures raise more questions than they answer.  If you're putting money into this stock I advise you to figure this puzzle out - and educate me.
    Tags: YONG
    Aug 10 12:11 AM | Link | 1 Comment
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  • PGN Overpays For Prospector $PGN
    Nov 17, 2014
  • My prior target was 5.60 and I sold this at 6.05. Looking at the effects of capital structure changes at LSE I now put its value at 5.00.
    Feb 24, 2011
  • The dilutive capital raise for LSE reduced FFO per share, but eliminated refinancing risk of their credit line - its roughly value neutral.
    Aug 13, 2010
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