Comments on Reyer Barel's articles RSS Syndication from SeekingAlpha.com http://seekingalpha.com/author/reyer-barel/articles http://seekingalpha.com/article/85316-aldila-trading-below-par-value?source=feed#comment-609366 609366 Fri, 31 Jul 2009 06:45:23 -0400 http://seekingalpha.com/article/85316-aldila-trading-below-par-value?source=feed#comment-507706 507706 Sun, 17 May 2009 20:59:32 -0400 I had analyzed it on my blog.]]> http://seekingalpha.com/article/84313-aldila-value-play?source=feed#comment-507705 507705 Sun, 17 May 2009 20:57:03 -0400 I remain confident, as a long term investor, it is undervalued at current prices.]]> http://seekingalpha.com/article/91378-craftmade-international-undervalued?source=feed#comment-348853 348853 Thanks DaveMcBlues, excellent comment! > > Craftmade might very well be a company in secular decline. That is > always something to consider when valuing a company in order to avoid > value traps. Another way to look at a company in secular decline > is the eventual liquidation value of the company. > > Craftmade is still profitable and cash flow positive, it seems premature > right now to conclude they will go bankrupt however your point is > excellent and I agree, there is a lot of risk with their business > model. > > If Craftmade eventually does go out of business what should it be > worth today? I would work out a liquidation value for the company > based on discounts to hard assets if you believe this will happen. > Or, just don't swing at it. > > -Reyer.]]> Wed, 07 Jan 2009 13:38:52 -0500
DaveMcBlues@gmail.com


On Aug 18 07:15 PM Reyer wrote:

> Thanks DaveMcBlues, excellent comment!
>
> Craftmade might very well be a company in secular decline. That is
> always something to consider when valuing a company in order to avoid
> value traps. Another way to look at a company in secular decline
> is the eventual liquidation value of the company.
>
> Craftmade is still profitable and cash flow positive, it seems premature
> right now to conclude they will go bankrupt however your point is
> excellent and I agree, there is a lot of risk with their business
> model.
>
> If Craftmade eventually does go out of business what should it be
> worth today? I would work out a liquidation value for the company
> based on discounts to hard assets if you believe this will happen.
> Or, just don't swing at it.
>
> -Reyer.]]> http://seekingalpha.com/article/98551-gsi-group-promising-value-play?source=feed#comment-345170 345170 Sun, 04 Jan 2009 07:43:48 -0500 http://seekingalpha.com/article/107568-value-investors-stay-strong-and-follow-warren-buffett?source=feed#comment-314578 314578 Tue, 25 Nov 2008 10:05:37 -0500 http://seekingalpha.com/article/107568-value-investors-stay-strong-and-follow-warren-buffett?source=feed#comment-314254 314254 Mon, 24 Nov 2008 22:52:56 -0500 www.amazon.com/dp/0615... ) examines each of the basic steps they perform in “framing and making” an investment decision. This book is a focused look into this amazing invention within “Behavioral Finance” that has been underappreciated by both the business and academic communities. The genius of Buffett and Munger’s four filters process was to “capture all the important stakeholders” in a “multi-variable” equation or formula. Imagine…Products, Enduring Customers, Managers, and Margin-of-Safety… all in one mixed “qual + quant” formula. In rolling two die for double-sixes, the gambler's odds are 1/36 and the house odds are 35/36 or 97%. When Buffett and Munger make a bet, they do so with house odds.
www.youtube.com/v/isB6...]]> http://seekingalpha.com/article/107568-value-investors-stay-strong-and-follow-warren-buffett?source=feed#comment-314086 314086 Mon, 24 Nov 2008 18:26:38 -0500
Duh.

1) "37 Billion" is if the entire stock market goes to zero. You're being facetious here. If you think that's going to happen, then maybe you should just move on and not follow the stock market. It won't exist.
2) The puts are not in ten years. SEC documents say fifteen to twenty years.
3) BRK has cashed in 5B$ of premiums from the puts. The loss must exceed that amount before being a true loss.
4) Calculate the value of this "potential" 30B$ loss twenty years from now when accounting for inflation. Calculate that the 5B$ premium that is now is now in Buffet's hands can be put into Treasuries or CDs or invested and yield a non-negative return, mitigating any "loss". Finally establish how significant this 30B$ loss would be in a Berkshire's cash flow twenty years in the future.

"how does one assess the "value" of that?..."

There are ways and I've shown you some. That questions suggests to me it is you, not Buffet, who is out of his element here. ]]> http://seekingalpha.com/article/107568-value-investors-stay-strong-and-follow-warren-buffett?source=feed#comment-313813 313813 Mon, 24 Nov 2008 12:50:39 -0500 http://seekingalpha.com/article/107568-value-investors-stay-strong-and-follow-warren-buffett?source=feed#comment-313677 313677 Mon, 24 Nov 2008 11:05:37 -0500 http://seekingalpha.com/article/98551-gsi-group-promising-value-play?source=feed#comment-274060 274060 Sun, 05 Oct 2008 13:38:42 -0400 http://seekingalpha.com/article/90244-ceradyne-tremendous-growth-with-major-risks?source=feed#comment-271792 271792 Thu, 02 Oct 2008 13:31:22 -0400 http://seekingalpha.com/article/94433-top-market-cap-u-s-banks-a-long-term-view-on-value?source=feed#comment-250171 250171 Wed, 10 Sep 2008 08:12:47 -0400 http://seekingalpha.com/article/94433-top-market-cap-u-s-banks-a-long-term-view-on-value?source=feed#comment-249606 249606 Tue, 09 Sep 2008 14:32:00 -0400
As for which banks are the well run ones, there are two measures which are the best indicators of bank management quality. The first is the expenses figure - the leanest banks keep it down to 50% (USB is the only major that routinely posts numbers under that figure), and anything 60 or less is respectable. The second is an average return on assets over a full cycle. 1% is the requirement for a reasonably well run bank, while anything in the 1.5% range or higher is outstanding. You can expect a bank to average its leverage times that figure, plus a typical bond rate on its capital, long term.

All the well managed banks are exceptionally cheap right now. Consider foreign ones as well. While some of the European majors have typically had significantly higher expense ratios (and lower average ROAs because of it), the Barclay's and INGs are quite cheap right now, along with the 3 US banks the article mentions. JP Morgan should also be added to the list - it has navigated the present mess far better than most, and is in an excellent competitive position because of it.]]> http://seekingalpha.com/article/94433-top-market-cap-u-s-banks-a-long-term-view-on-value?source=feed#comment-248763 248763 Mon, 08 Sep 2008 17:29:34 -0400 http://seekingalpha.com/article/89093-mcgraw-hill-ryerson-worth-a-closer-look?source=feed#comment-239515 239515 Tue, 26 Aug 2008 15:29:39 -0400 http://seekingalpha.com/article/91378-craftmade-international-undervalued?source=feed#comment-233519 233519 Mon, 18 Aug 2008 19:15:53 -0400
Craftmade might very well be a company in secular decline. That is always something to consider when valuing a company in order to avoid value traps. Another way to look at a company in secular decline is the eventual liquidation value of the company.

Craftmade is still profitable and cash flow positive, it seems premature right now to conclude they will go bankrupt however your point is excellent and I agree, there is a lot of risk with their business model.

If Craftmade eventually does go out of business what should it be worth today? I would work out a liquidation value for the company based on discounts to hard assets if you believe this will happen. Or, just don't swing at it.

-Reyer.]]> http://seekingalpha.com/article/91378-craftmade-international-undervalued?source=feed#comment-233017 233017 Mon, 18 Aug 2008 09:41:04 -0400
Big Box retailers are constantly finding ways to go direct to China to source things like lights, fans, air conditioners, etc. I don't think CRFT has realized the full impact of this trend and I don't imagine they have any real intellectual property to protect (with the exception of this season's design on products they sell).

All one has to do is look at the demise of Fedders (FJCC.pk) to see what happens when the Big Box retailers squeeze you out. Fedders business model and that of CRFT are almost identical... just different products.]]> http://seekingalpha.com/article/90005-trident-microsystems-not-a-rosy-picture?source=feed#comment-229866 229866 Wed, 13 Aug 2008 22:25:44 -0400 please don't give up your day job if this is the best analysis you can muster for a stock like TRID.

At around $3 TRID would probably be a good buy BUT current management clueless, so the competition is having some fun messing with TRID's business hopes to insure they bleed the maximum cash. Selling to a competitor would be a smart move, however refer to the statement "management is clueless"

If you want to write about a stock like TRID please at least understand the game that MTK is playing. TRID is just a puppet in this market Taiwans two big design houses, pull all the strings.

Analysis! LOL]]> http://seekingalpha.com/article/88240-tat-technologies-assets-are-looking-good?source=feed#comment-229825 229825 Wed, 13 Aug 2008 20:24:18 -0400 I agree, they seem to have value as a going concern above liquidation (positive EBIT for last 9 years!).
I'm not so much worried about them going out of business as I am falling prey to a take-under or some other shenanigans. Maybe I'm just a novice, but the organization and ownership described in the 20F of the various companies orbiting TATTF are pretty confusing. Buffett says that if you can't understand a 10k, it's because management doesn't want you to. I haven't dug deep enough yet to make a judgment either way, but until then, it's staying in my "too hard pile".
Best,
Jake
]]> http://seekingalpha.com/article/90005-trident-microsystems-not-a-rosy-picture?source=feed#comment-226734 226734 Sat, 09 Aug 2008 11:07:04 -0400 http://seekingalpha.com/article/90005-trident-microsystems-not-a-rosy-picture?source=feed#comment-226579 226579 Fri, 08 Aug 2008 22:21:57 -0400
My point on the article is that the cash on the balance sheet is approximately the same as the additional paid in capital but there is very little retained earnings. The implication of that statement, since Trident doesn't have a policy of issuing dividends is that Trident has not had much success generating net income over the years. I was not making a statement of where or how the cash got on the balance sheet.

I agree with you that Trident has been building up cash in the past 3-4 years but they have also tremendously increased stock option expenses in that period. If you look at the cash flows for 2005-2007, around $60M of the $115M of cash increase was assigned as stock option expenses (added back to net income on the CF statements since they are non cash expenses). Those options are fairly valued using Black Scholes with associated assumptions and $60M is a pretty decent bet as to the value of those options. These options are likely going to dilute shareholder interests and so you need to account for that in your valuation.

Lastly, I sincerely hope Trident can continue their good fortune but I value a company based on cash flows over an entire business cycle, not just the past 3-4 years. I want to include good and bad years in the valuation to be as realistic as possible. If you go back to the cash flow statements from 1997 to 2003, in those 7 years the total net cash flow impact was approximately -$12.5M.

I hope this clarifies my points.

-Reyer]]> http://seekingalpha.com/article/90005-trident-microsystems-not-a-rosy-picture?source=feed#comment-226129 226129 Fri, 08 Aug 2008 12:13:22 -0400
Look at statement of cashflows and you can see where the cash on their balance sheet comes from.]]> http://seekingalpha.com/article/88240-tat-technologies-assets-are-looking-good?source=feed#comment-221229 221229 Sat, 02 Aug 2008 18:51:29 -0400
All other things equal, if I owned the company (I'm considering it) I wouldn't sell all the position at the liquidation value. The reason is I don't think they are going out of business.

If I thought the company was going to continue operating, i would sell it closer to the intrinsic value which in this case I believe is at least a couple of dollars higher than the liquidation value!

You have to make a judgement call on that. I personally think they are going to continue operating.

cheers,
Reyer]]> http://seekingalpha.com/article/88240-tat-technologies-assets-are-looking-good?source=feed#comment-221081 221081 Sat, 02 Aug 2008 14:07:42 -0400 Here's a hypothetical/rhetorical question for you: If you bought at $5.57 and it went to $6.87 within a year, would you sell? ]]> http://seekingalpha.com/article/85316-aldila-trading-below-par-value?source=feed#comment-221054 221054 Sat, 02 Aug 2008 13:12:16 -0400 Disclosure: I don't currently own any shares of ALDA.
Keep up the good work!
~Jake
]]> http://seekingalpha.com/article/87697-low-p-b-ratio-defense-small-caps?source=feed#comment-217934 217934 Tue, 29 Jul 2008 22:14:32 -0400
thanks for the well constructed comments. We are actually remarkably similar in our views. I never just take P/B and trade off that. I am also very careful when I do intrinsic business valuations to ensure that the earnings potential of the company and the replacement value of assets is used. So I do a careful evaluation of the quality of assets for the replacement value. I consider specialization of equipment in my process for asset valuation. If there is a large amount of goodwill and intangibles on the books, I mark it down severely if the earnings do not justify it. I tend to look at goodwill and intangibles as a writedown waiting to happen and I need to be convinced that they are worth what management claims.

I totally agree with you, with a lot of these apparently cheaper looking companies, book value can fall apart quickly, so its investor beware for sure.

However I have done a lot of intrinsic business valuations and you do tend to find value in some of these companies if you look enough. I still like the low P/B screen and low P/E screens to to help me find potentially undervalued companies, but we both say, its only a starting point.

Regarding these companies above, you could be right as I haven't done an intrinsic valuation yet, but I'll tell you what, I will do all three and if any look good to me, I will post it. Then we could discuss further if you like.

Regarding Benjamin Graham plays, there's still some net net plays and liquidation plays out there if you look hard enough, but the mainstream analysts aren't going to talk about them because they are usually small cap's.

cheers,
Reyer]]> http://seekingalpha.com/article/87697-low-p-b-ratio-defense-small-caps?source=feed#comment-217846 217846 Tue, 29 Jul 2008 19:54:21 -0400
The reason P/B got a good reputation is that back in the Benjamin Graham heydeys he was able to buy companies that held net cash and high-rated bonds right around their market capitalization (i.e. you were buying the cash and bonds and getting a company that might actually turn a profit in the bargain). The idea was that even if the company couldn't turn a profit, they could at least liquidate and pay off investors.

I don't think these companies are that sort of value pick. If I look at the balance sheet for ARTX, the assets are about half goodwill and intangibles. If the company were earning on that goodwill/intangibles, if those indicated that they had acquired profitable companies and developed useful intellectual property, it would be fine. But they're not earning - earnings have actually been negative. So it seems that their might be a goodwill writedown in the future for ARTX, because you can't really profitably liquidate the goodwill of a company that doesn't turn a profit.

The rest of the assets that are making up the book value are a little better, but inventory is pretty high (almost a quarter worth of revenue), as are recievables (similar magnitude). This suggest a fairly inefficient company. You also have to consider that their property and equipment may be specialized to the particular products they produce, so it may not actually possess its stated book value if it can't be used in a profitable business.

I figure that if ARTX could clean up their inventory and recievables they probably could do a lot better on cash flow for a few quarters, but is the underlying business actually profitable? Can they rely on government contracts flowing to a small and unprofitable company? Tread carefully here - all that book value could fall apart in a hurry. There's a reason the price is so low. ]]> http://seekingalpha.com/article/87030-finding-value-in-the-aerospace-and-defense-sector?source=feed#comment-215284 215284 Sat, 26 Jul 2008 20:17:02 -0400 http://seekingalpha.com/article/87030-finding-value-in-the-aerospace-and-defense-sector?source=feed#comment-214308 214308 Fri, 25 Jul 2008 10:31:13 -0400
I'm glad this article worked out for you. I'm not actually a shareholder of any of those companies at the moment but I am starting to looking closer at the low P/B stocks. You might be interested in some of the follow up articles I plan on doing with those stocks. Eventually I will do complete intrinsic business valuations those companies.

Cheers,
Reyer.]]>