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Skip Olinger

 
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  • I Am Not A 'Gold Bug' But I Do Like Newmont Mining For The Dividends [View article]
    Thank you for point out the obvious. Glad someone does their homework!
    May 30 03:25 PM | 1 Like Like |Link to Comment
  • Why It's Time To Sell DryShips [View article]
    I think its even simpler. If the author subtracts out all the debt, he is taking into account the net value of the ORIG shares. Valuing the "net" shares subtracts the debt twice. Unless there is some off balance sheet debt here but I don't see how a company could recognize an asset without recognizing the corresponding debt.
    May 26 01:05 PM | 1 Like Like |Link to Comment
  • 8.5% Dividend Payer Vanguard Natural Resources Is An Even Safer Haven With Higher NatGas Prices [View article]
    E&P = exploration and production. the company owns wells and produces oil and gas as opposed to being a refinery

    LP = limited partnership
    Apr 2 12:36 PM | Likes Like |Link to Comment
  • 2 Reasons Why Income Investors Should Ignore Warren Buffett's Dividend Argument [View article]
    Dear Mr. McAleenan,
    You did a very good job explaining the couple of points that Mr. Buffett did not cover in his dividend explanation. However, I look at both your article and Mr. Buffett's explanation as a lesson in corporate finance. It really gets at the heart of investing. And that is what is a company's Return on Incremental Capital. At what rate of return can a company redeploy its free cash flow into new projects or investments? And, that rate should be in excess of its cost of capital; otherwise, management is destroying intrinsic value. I thought the guy above who talked about how is father and his partners allocated their grocery stores' free cash at the end of the year was great. It really makes the importance of capital allocation clear.

    The unique thing that BRK has been able to do is to re-deploy its free cash flow very effectively even when faced with the headwinds of really big numbers. Very few other managers can run as highly a diversified company as Mr. Buffett. Many poor managers make bad capital allocation decisions investing in businesses at high prices or do not produce their expected returns. A great example of this are the large mining companies (Value, Rio Tinto, Barrick, BHP Bilton) many of whose CEO's are now gone because the investments and acquisitions are not paying off. So, understanding what a company's reinvestment opportunities are (or are not) is key in determining intrinsic value.

    This leads me to another point I'd like to make about dividending vs share repurchases. Many investment managers get very excited when a company repurchases their own stock. Like Mr. Buffett's dividend example, repurchasing stock at below intrinsic value or better yet, book value, is a sound use of capital. However, the problem arises when CEO's basically believe their own BS and buy stock above intrinsic value. This destroys value of the company. To avoid this trap, I prefer that a company return excess free cash flow to investors (that's ME). I'll assume responsibility for redeploying the cash, thank you. I see this as one advantage to the MLP and REIT structures. Again, this gets back to one of the keys of investing - being able to tell if a management can redeploy cash effectively.

    Lastly, I'd like to point out large tech companies like Microsoft and Apple that just let free cash flow pile up, neither reinvesting it nor dividending it out to shareholders. I could be wrong on this, but it seems to me that tech companies that have "made it" and produce prodigious amounts of free cash flow from their core operations do not do a good job discovering other technologies or diversifying. I certainly understand the safety that a cash hoard provides but enough is enough. Just one man's opinion.

    Again, nice job in explaining what Mr. Buffett left out in his simplified explanation, especially for such a young kid like yourself.
    Best regards
    Skip Olinger
    Mar 15 12:55 PM | 3 Likes Like |Link to Comment
  • Why Gold Miner ETFs Have Lagged Gold Prices [View article]
    You make a very good point about miners not being directly correlated to the price of gold and being an actual business whose values are determined by cash flows. However, the author makes another good point in that several of the large miners have made poor capital allocation decisions with their expanding cash flows. This has decreased the economic value of the miners. Seems to me that the large miners are having problems finding new projects to grow their production. Many of these new large projects are very high cost and operationally complex and hence risky. In addition, there is political risk through out the world. That is why I am not that excited about the GDX, although I still own some.

    I look for mid sized miners that have a reasonable chance of successfully developing existing proven reserves located in politically safe countries. The goal is to buy reserves cheaply and have reasonable, predictable operating costs along with potential to expand production. With a mid sized company, you have the possibility for operating leverage to kick in when and if the price of gold goes up. So you should get a bigger pay off with a miner that owning gold directly assuming the miner can execute successfully. Emphasis on should!
    Feb 15 02:33 PM | Likes Like |Link to Comment
  • Teekay Tankers Ltd. - An Alternative Analysis [View article]
    Thanks very much for the kind comment. Frankly I was impressed as well. Sometimes SA can get pretty banal. I learned a lot.

    As to the trade, I think it is still pretty speculative. Oil demand in No America is declining slightly. And imported oil is declining more rapidly due to the increase in domestic production. So any increase in tanker demand has to be taken up by an increase in demand from China and other developing countries. While over the long term I am sure that will happen but in the meantime tanker demand may get hit further if China goes into a recession. Ultimately, I believe the trade is to buy TNK cheaply enough so that you are getting the ships for a very depressed price and be prepared to wait out a pick up in demand. Income is highly operationally leveraged so a pick up rates and utilization should make the company very profitable. I think you have very astute management here and if anyone can manage a fleet well it is TK.
    Best regards,
    Skip
    Feb 14 03:21 PM | Likes Like |Link to Comment
  • Housing And Financial Stocks Could Crash As Interest Rates Rise [View article]
    Not sure why you think rising interest rates are bad for banks. Bank spreads and NIM's are very low and may continue to decline as higher rate older loans and securities mature and have to be reinvested at lower rates. Rising interest rates would actually be a good thing for banks. Also good for pension plans and life insurers.

    I agree with jeffca above. Rising real interest rates would be bad for AU miners and the price of AU.
    Jan 14 11:40 AM | 1 Like Like |Link to Comment
  • Teekay Tankers Ltd. - An Alternative Analysis [View article]
    thank you Doug
    Look forward to your future work
    best
    skip
    Jan 7 01:14 AM | Likes Like |Link to Comment
  • Teekay Tankers Ltd. - An Alternative Analysis [View article]
    I made a mistake in my calculation of revenue run-off. Apologies. I missed a step.

    There are 7 ships that come off TC in '13, 4 in 1Q, 2 in 2Q and 1 in 4Q. TC revenues from those ships total $130.0K per day. By the end of this year, quarterly revenue will have dropped by $11,912 (130.9 x 91). However they will have been redeployed into the spot fleet in a worst case. 3Q average daily spot revenue per ship was $12.9k per the 3Q management call transcript. So, spot quarterly earnings for the 7 ships would be $8,217. This equates to a drop of $3,695 in quarter revenues.

    Distributable Cash Flow for the 3Q was $9,714. Subtract reserves for drydocking and principal repayment of $8,400 and cash available to pay a dividend was $1,314. I assumed that there are no operating cost savings associated with the lost revenues. As the ships are still sailing, there is no fuel or other operating expense savings. Reducing net income by $3,695 would leave the cash available for dividends at a negative balance of $2,318. This is a worst case as some of the ships may be re-chartered at rates higher than spot. That would cause the company to eliminate the dividend.

    My concern in all this is that the market could take the elimination of the dividend poorly and the stock price would drop further. In fact, the company has $380m in liquidity between cash and availability under its revolver, plenty to cover $2m a quarter short fall. It also has $118 of loans it made on 2 VLCC's coming due in June, which should provide additional cash assuming they are not extended. The company can easily handle its commitment for 50% of a new VLCC being delivered in 2Q this year, which I calculate to be only $3m remaining.

    My bottom line is that TNK looks to be a good way to play a recovery in the tanker market and the Chinese economy and energy consumption. However, there still is downside risk to its current price are somewhere between $1.50 and $2.50 a share. The goal is to buy ships cheaply. When charter rates go back up, ship prices will increase as well. New build costs for a VLCC are now around $80-100m. In periods of strong demand, new build cost run around $150-160. I use this just as an example of the potential upside. I am going to start taking a position is this as well as the parent TK.

    Thanks to all for your time and valuable insight.
    best regards.
    Jan 4 08:51 PM | Likes Like |Link to Comment
  • Teekay Tankers Ltd. - An Alternative Analysis [View article]
    I did not mean to imply that you did not point out the substantial downside. My point is that if one is going to make a speculative investment like this, one ought to look at the downside floor and buy in close to that point so as to have an asymmetric bet - low downside, significant upside. Perhaps my downside case is to severe and since TNK has a fair amount of TC's they deserve a higher valuation than NAT and have greater ability to weather extended low rates.

    Regarding the VLCC loan, I assumed it was going to be repaid in full in June when it expires based on comments in the 3Q call. As with all asset intense companies, management will earn its worth by being able to redeploy the capital at attractive accretive rates. Management was pretty vague about redeployment opportunities.

    With $380m of liquidity and cash coming back from the VLCC's, I am not really worried about BK or any kind of liquidity issues. I am concerned with the market's reaction to seeing distributable cash flow go negative. In fact, that may be the catalyst that drives the price down to an attractive entry point

    Thanks again and best regards
    Jan 2 04:47 PM | Likes Like |Link to Comment
  • Teekay Tankers Ltd. - An Alternative Analysis [View article]
    I was actually impressed by the quality to the thread. It really enhanced my opinion of SA. No idiots no emotional garbage.
    Thanks
    Jan 2 04:19 PM | 2 Likes Like |Link to Comment
  • Teekay Tankers Ltd. - An Alternative Analysis [View article]
    fair point
    any comments on the BS adjustments to tanker value?
    Appreciate your looking at this!
    Jan 2 04:05 PM | Likes Like |Link to Comment
  • Teekay Tankers Ltd. - An Alternative Analysis [View article]
    Happy new year. Thanks for your comment

    Beg to differ with your analysis. Net income / loss never includes debt service. It only includes interest expense. Dry docking is also capitalized. It does not take into account changes in working capital and other assets.

    I would refer you to the company's calculation of distributable cash flow at the end of their 3Q press release. you can see that they take net income add depreciation and they subtract a reserve for debt service and dry docking. That left them with $0.02 to distribute. However, that calc does not take into account working capital and other asset changes. In any case, the company is coming very close to b/e cash flow.

    Note the company said it expected rates to spike for a brief period in 4Q but return to current average levels. 3Q is also supposed to be their worst quarter. Things should look better in 4Q. But, this year '13, 7 TC's are expiring and will either be renewed at lower rates or go into even lower rated spot pools. I think that could push them into negative cash flow with dividend elimination. That may drive share price down further.

    I agree this is one of the best management teams in the industry with the best model. But the model will be tested this year.

    Do you own the stock?
    Jan 1 12:10 PM | Likes Like |Link to Comment
  • Teekay Tankers Ltd. - An Alternative Analysis [View article]
    My ship valuations from RS Platou:
    Name Age Class Value
    Mahanadi Spirit 13 MR $15.0
    Teesta Spirit 9 MR $15.0
    Hugli Spirit 8 MR $15.0
    Nassau Spirit 15 Aframax $18.0
    Kareela Spirit 14 Aframax $18.0
    Kanata Spirit 14 Aframax $18.0
    Kyeema Spirit 14 Aframax $18.0
    Americas Spirit 10 Aframax $18.0
    Australian Spirit 9 Aframax $18.0
    Axel Spirit 9 Aframax $18.0
    Everest Spirit 9 Aframax $18.0
    Esther Spirit 9 Aframax $18.0
    Erik Spirit 8 Aframax $18.0
    Matterhorn Spirit 8 Aframax $18.0
    Helga Spirit 8 Aframax $18.0
    Donegal Spirit 7 LR2 $18.0
    Galway Spirit 6 LR2 $18.0
    Limerick Spirit 6 LR2 $18.0
    Ganges Spirit 11 Suezmax $30.0
    Yamuna Spirit 11 Suezmax $30.0
    Narmada Spirit 10 Suezmax $30.0
    Ashkini Spirit 10 Suezmax $30.0
    Iskmati Spirit 10 Suezmax $30.0
    Kaveri Spirit 9 Suezmax $30.0
    Godavari Spirit 9 Suezmax $30.0
    Pinnacle Spirit 5 Suezmax $30.0
    Summit Spirit 5 Suezmax $30.0
    Zenith Spirit 4 Suezmax $30.0

    apologies for the mis alignment
    Jan 1 11:55 AM | Likes Like |Link to Comment
  • Teekay Tankers Ltd. - An Alternative Analysis [View article]
    Hohum,
    Thanks for the response. Happy New Year. And, thanks for the tip on RS Platou. I have tried a couple of time with Clarksons and found nothing.

    It appears that the difference between your and my NAV calculations is that I throw in all the balance sheet numbers with the exception of the derivative liabilities. Using Platou's 10 year numbers (the average age of their fleet is 9-10years), I come up with a vessel value of $615m. My adjustments from 3Q are as follows:
    Cash 26.3
    Other Cur Assets 42.5
    Investments 117.0
    Non Cur Assets 16.7
    Total Debt (732.1)
    Cur Liabilities (19.0)
    Non Cur Liabs (4.6)
    Minority Int -
    Subtotal (553.2)
    NAV 61.8
    Diluted Shares 83.6
    NAV $0.74

    I was able to get my hands on a Dec 17, 12 Morgan Stanley Maritime Industry Report. In it, they did detailed NAV calculations and used slightly higher ship values. Their NAV was $1.10. I could not tie their BS numbers and using mine, I came up with $1.70.

    I see your point about the usefulness of NAV when it comes to refinancing. However, my investment thesis is that the tanker market is very depressed but will eventually turn around. And, the most money will be made thru ship asset appreciation, not from increasing cash flows. However, increasing rates does drive ship values. So what an investor needs to do is to look for cheap stocks that trade close to or below NAVs and have sufficient determinable cash flows to carry the company for another year or 2 until the market turns. That is the great thing about TNK; they have a mix of spot and TC to stabilize cash flows and they have a variable dividend policy. My only problem with TNK now is that it looks like 7 or their 15 TC ships are going to come off lease in '13. That will put them into negative cash territory and make them look more like NAT except with more debt. I grant you their debt structure and repayment schedule is very favorable. However, it may make more sense to wait one or 2 quarters to see how their renewals go and whether emerging market oil consumption starts to pick up. There are still a lot of ships out there suppressing rates.

    Do you think now is a good entry point? Do you own this stock?

    Best, Skip
    Jan 1 11:49 AM | Likes Like |Link to Comment
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