Deep value, medium-term horizon, long-term horizon
Deep value, medium-term horizon, long-term horizon
Contributor since: 2012
Freeport could just as easily goto 2 dollars a share if prices decline even modestly from today's levels and the company needs to do a secondary
Freeport has been invested in by hedge fund manager over the last year - the stock continues to go down
The notion that you can just buy low and get rich is naive to the point of being ridiculous - markets have 10 year down cycles, look at steel in the 1970s, housing over the last 8 years, if the market continues to deteriorate Freeport will need to raise capital
We all know having more resources is the key to success - the big banks brilliant investments in housing over the last decade and Jon Paulson's brilliant investment in banking stocks in 2009 clearly show this
The primary reason why I am negative on Icahn's investment is my view of China - which I was correct on when I wrote negatively about Cliffs and the iron ore industry nearly 3 years ago when the iron ore producer traded at 42 dollars a share - today the company is a 2 dollar stock.
Good point - and having more resources always means your right - that is why Biggest Banks on Wall Street were so smart in how they investing in housing over the last decade. It is also why Jon Paulson still runs the largest hedge fund in the world after his huge stake in citigroup has returned massive gains.
The executive team has made mistakes and not been held accountable - these are obviously reasons Icahn and other hedge fund managers have taken the equity stake these individuals have - this company's balance sheet though is so bad the management team will likely spend more time trying to keep there jobs than looking at maximizing shareholder value
I would be careful in presuming that Icahn is still that involved with companies now that he is older - his recent track record is mixed
My view is that copper prices are not likely to recover anytime soon - my position is freeport will underperform the markets - Copper prices just had the metals best run in decades and to expect a normal cycle when Chinese government spending inflated commodity prices is naive. Copper production is very high right now and demand continuese to fall. The argument for a bottom could have been made last year - then copper prices dropped another near 30%. Anyone can find a single grammar proble
Bottoms don't mean a receovery is near - look at real estate in the U.S.- antoher industry with heavy government influence
The problem with Freeport borrowing money at this point is the market will read any significant access to to capital as signs the company is in trouble - if Freeport accessed the revolver last year- which is fairly small compared to the company's long-term debt - probably would have been okayy
The problem with arguing that buy low is a good strategy in much of the commodity complex is that the recent price movement showed copper prices were not in a normal cycle since Chinese government spending caused prices to rise much more than analysts expected. Just as U.S. real estate markets reamin weak, China's real estate market can remain weak much longer than a couple years.
The stake in the new company will fluctuate with share price - the percentage of the company Altria will own under the proposal is 10.5%
Altria would not merge with large global company, but as litigation risks fall the company may continue to seek new and larger opportunities outside of the U.S.
The valuations are from the company's accounting - you need to do more research, obviously it is an art
The value of MO is very tied to Fed policies right now - but if the company can maintain current growth rates the stock should continue to ri
The deal will ilkey be structured so no equity sell will take place imiedateily - but repatriting cash wihtout a bond issuance would incur aditional taxes
The book value of a position is not changed because the stock goes up - if you own a stock at $10 and it goes to $50 you don't for tax purposes mark it to market until you sell - the book value of a company is also hard to assess
The accounting practicese SBA miller used were significant benefittedd to Altria - and the payout ratio was as well - taxing/accounting isues could be significant
There is a difference between stock price and perceived book value - the share price the company will receive will also likely depend to some extent on the share price movement of both stocks - most people believe the book value of Altria's stake in SAB Miller is worth between $20-30 billion.
The stock price has gone up and the value of the stake is based off book value more than stock price - the real value is somewhat speculative - but SAB miller is a company with a market cap that has recently ranged between $60-70 billion - Altria owns nearly a third of the company - so I think the valuation will be close to 25-30 billion once the deal closes.
Altria would probably not be able t oacquire Vector group because of antitrust issues - but the company would also see diminshed margins as well - Altria has done a better job competing at the low end with L&M, and I think that the company's current strategy for protecting market share from companies undercutting price would be solidd
A merger with PM would create significant currency and liability issues - tax issues would be complex as well since PM is classified as a PFIC - Altria may seek more international investments now that liability concnerns have diminished in the U.S. though
PFIC in tax deferred account withold -often it depends on account and how structure of dividend is paid
American companies have very strong balance sheets and deleveraging has occured in the US - US economy is much stronger than EU/China
THere at times a percentage witheld from tax deferred accounts - can be regained in tax credits
The decision to sell or exchange the SAB position should be viewed as part of a longer-term view that the tobacco business is becoming lower risk and holding the SAB Miller position to keep borrowing costs down is no longer as important
Altria won't have as big of a stake in the company
COmpanies struggle at time
Marlboro is significantly less of the overall market in nearly every market the brand is in compared to the U.S. - the rrcession in Europe hurt Marlboro much more htan the Us recession hurt the brand
The dividend is gonig up up with debt - if interest rates rise you will pay far more for your dividend than you have received
IF the drop in oil prices continues oil companies and oil producing nations will cut supply significantly - oil reaching recession prices is unlikley