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  • I Am Not A 'Gold Bug' But I Do Like Newmont Mining For The Dividends [View article]
    Try this link for an explanation of variable dividend policy
    http://bit.ly/ZhhZCE

    One might also note that Newmont's free cash flow went negative in 2012 and continued that way in 1Q13.

    In 12, CFFO was $2.4b, cap ex was $3.2b and dividends were $695. This generated a cash flow short fall of $1.6b, which was financed by a net increase in debt of $1.5b so cash declined by about $200m (rounding). On the surface, not a secure dividend, especially if AU prices remain low. Also note that the sustaining cost per oz is around $1100-1200. But the company could be in an investment phase and cap ex may decline in the future. I have not done a lot of research on this company recently. I have been playing in the mid cap miner space, much to my regret.

    The bottom line with miners is that they are leveraged to the price of Au. But high operating leverage is a 2 edged sword; it cuts both ways. Small changes in Au generally cause larger changes in miners. For miners to do well, I think you need to have conviction that Au will rise again. The other problem with miners is that mining anything is a difficult business. The ROE's are low, they require large cap ex and they are subject to execution risk of which there is a lot with mines. Also large miners like Newmont have a hard time replacing reserves with cost effective large projects. Note several changes in CEO's of big miners recently as boards have come to see the huge projects in which they invested may not have great ROI's

    Note that generally when real interest rates are low or negative, then Au does well. Minimal income from bonds and worries about inflation make Au attractive. However, as rates go up, people generally move out of Au into bonds for the income. That is what happened in the 80's when Volker took interest rates up to stop inflation. The opposite seems to be happening now as the market believes the risk of inflation is low and QE may work. Therefore, I believe that if interest rates go up due to backing off of QE, Au will decline. Though call. Who knows when or if all this QE breaks down one way or another and inflation that everyone initially feared and now has discounted, really kicks in.

    Kind regards,
    Skip Olinger
    May 30 04:18 PM | 1 Like Like |Link to Comment
  • 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
  • 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]
    I whole heartedly agree with you. I strongly suspect the shipping sector with react like the home builders; a fast significant rally prior to it being obvious that things are turning around. I believe that there is not any immediate meaningful substitute for oil and that emerging economies, China, will pick up their energy consumption rates that will offset any decline from developed countries. The problem is knowing when to jump in and doing it with a margin of safety.

    My point on TNK is that there is potential further bad news here as 7 of their 15 time chartered ships come off charter in '13. They may be able to renew them but I strongly believe that will be done at lower rates. The Matterhorn was recently renewed at $18k vs $21. And, if some or all drop into the spot pools, then rates will be even lower. Only 8 of 28 ships will be on TC. If that happens the company will start looking a lot more like NAT that is 100% spot except it will have more leverage. Therefore, the market could easily revalue the shares closer to NAV. I will address NAV calc below.

    Thanks so much for your thoughtful comment. Let me know what companies you like in the shipping industry.
    Dec 31 04:52 PM | 1 Like Like |Link to Comment
  • Why Teekay Is Overvalued And Its Dividend Is Not Safe [View article]
    I think the common thread is Bermuda's tax laws applied to an asset that is operated world wide
    Did not know Fredericksen had anything to do with the TK companies.
    Sep 11 07:44 AM | 1 Like Like |Link to Comment
  • Annaly: What Is Going On (The Finale) [View article]
    What is it with you about your Puts witch hunt???
    Do you really think anyone reading SA has the ability to move a $15B market cap company??? In the opening paragraph of your article you talk about "coming under critical fire from a few professionals who questioned my opinions with a pointed attack on my content " It appears that anyone who disagrees with you is attacking you and must be a short seller. Apparently, you are incapable of accepting criticism and carrying on an intelligent discussion.

    Look, I commented on this article because I thought that it did not address the fundamentals or risks of NLY or mREITS. Since many commenters apparently held the stock but did not seem to understand the risks, I tried and apparently failed to point them out. I too am attracted to the dividend but feel the risks at this time a high so I don't own the stock. AND FOR THE RECORD, I DO NOT OWN PUTS NOR HAVE I SOLD CALLS NOR HAVE I EVER OWNED AN OPTION ON THIS STOCK.

    I will make one more comment about the fundamentals. In fact, I missed a key point about about the payment rate. In a rising interest rate environment, people will not be likely to prepay or refinance their mortgages, so the duration of the mortgage security investments will extend, further hurting the spread.

    A parting thought for all, the author makes the comment that NLY has always made money going back to '98. From Dec '04 to Dec '05, looks to me like the dividend dropped from $.50 to $.10, that's 80%. The stock price went from $20 in Dec 04 to $10.50 in Dec '05. (source: Yahoo Finance) This is not a risk free stock. While it is making a spread now and may for months, years forward, interest rates will go up at some point and the company will be swimming against the tide. Interest rates are difficult to forecast, even for a know-it-all like me.

    One thing I do know for certain, after all I am a know-it-all, is that I will never read or comment on another article of yours. This has been a waste of my time. So go ahead and call me names and enjoy yourself. That is always a great tact to take when you can't say anything intelligent.
    Peace Out.
    Mar 29 06:37 PM | 1 Like Like |Link to Comment
  • Annaly Offers An Eye-Opening 14% Dividend Yield [View article]
    I think we may be using different terminology. NLY, MFA, TWO and all other mREITS are equities. They are not mutual funds or CEF's. They are stocks.

    So this brings up my big question. Not to be impolite, but what was the purpose of your article? It seems to be merely a description of some of the stocks and their prices.

    I was hoping to find some in-depth analysis of the portfolios and some mention of the risks in a rising rate environment. Borrowing short, they are susceptible to their costs rising faster than their investments. Certainly hedging can help mitigate this risk but, as you say, it is difficult to judge. I think if you look back at NLY the last time rates rose (could there have been such a period?) they got killed, as did the industry.

    For what it is worth, I think they may be a good yield play now if you believe the Bernank will keep both ST rates low for a long period. If LT rates drift up, they should be able to reset the yields on their investments. However, if you believe that ST and LT rates may go up fairly soon despite the Bernank's efforts, you may find out what the risk baked into these stocks was. As rates go up, bond prices go down, so the BV of these stocks will decline. As they seem to trade off BV, that could put downward pressure on their stock prices. Pressure on their already smaller NIM's would cause dividends to be reduced.

    Best regrads
    Mar 25 12:20 PM | 1 Like Like |Link to Comment
  • Annaly Offers An Eye-Opening 14% Dividend Yield [View article]
    Think about it. It would be a little difficult to leverage an already highly leveraged company. Why would a PE investor buy one of these businesses when they could do it themselves, if they so desired. mREITS are just investment funds, not real companies.
    One other question you might want to ask is what happens to the spread if interest rates start to rise? None of these businesses are risk free to say the least.
    Mar 24 08:42 PM | 1 Like Like |Link to Comment
  • Microsoft: Can You Really Find a Better Risk / Reward Scenario? [View article]
    Thank you Chris
    Mar 24 12:04 PM | 1 Like Like |Link to Comment
  • Microsoft: Can You Really Find a Better Risk / Reward Scenario? [View article]
    I see your point and understand your concern. However, in theory, any company's value is equal to the PV of the FCF it generates in perpetuity. Another way to think of the perpetuity value is to think what the company could be sold for, say to a private equity firm. You can also look at the perpetuity value as the EV/EBITDA or P/FCF x at given point.

    I baked in a 0% growth factor which does not even allow for inflation so I think I am pretty conservative. My TV is only 10x FCF. The problem with DCF models is that small changes in a variables can have very large changes in the fair value.

    What this boils down to is do you think that MSFT's cash flow and earnings are going to start to decline significantly 4-5 years from now? Will windows machines really start to decline in favor of tablets? What about their Office franchise? Business division sales were up 24% in '10. Will the corporate world throw away the PC and office in 5 years? What about their new game controller? Sales in the entertainment division rose 55% to $3.7b. Kinectx sold 8m units. Granted, Windows revenues were $300m short in '10 but overall the company way beat expectations. Then there are the cloud computing contract wins over Google - Dept of Agriculture, Dept of the Interior, NYC, CA and MN. (per Fred Hickey).

    This is a very solid company with huge cash flow generating ability and cash reserves. It appears cheap to me now
    Mar 23 10:29 AM | 1 Like Like |Link to Comment
  • Dividends: A Company's Leading Indicator [View article]
    Well done article. I have a few points to add:
    1. Stock buy-backs - these are a tax efficient equivalent of dividends. Many companies that have extra free cash flow will buy back stock instead of paying more dividends. Management wants to show steady increases in dividends and they never want to cut them as they know many widows and orphans depend on the income. So they buy back their own stock. In my opinion this is an invention of the devil. Managements are notoriously over optimistic about the value of their own stock. They will buy back stock to offset the increase in shares from stock options, which hides how much regular shareholders are being diluted. Tech companies like Yahoo horde cash for future growth and acquisitions. That hasn't always been a successful strategy. It's my money, dammit. I'd prefer to pay the taxes and reinvest the money myself.
    2. Neither the economy nor companies growth at a steady pace. Therefore how can dividends grow at a steady pace? I think the desire to produce a long track record of steady dividend growth has caused management to underpay dividends. Also there will be periods where companies have great opportunities to make attractive investments and compound capital much faster than an individual can do on his own. In a perfect world it would make sense for a company to reduce or even suspend its dividend rather than pay an investment banker to raise more capital, if it was available. I know this variable dividend policy is unlikely to be enacted by any company but it makes economic sense.
    May 18 01:36 PM | 1 Like Like |Link to Comment
  • Is There Enough Natural Gas? [View article]
    What a pathetic post.


    On Apr 27 10:30 AM Ferdinand E. Banks wrote:

    > Hmm. I like to see this kind of work. Too many mediocrities working
    > in energy for my taste. But even so I know a couple of things that
    > bother me when reading this article. I'm thinking of 'FUELING HALF
    > OF ALL US TRUCKS AND CARS WITH NATURAL GAS, AND REPLACING 50% OF
    > COAL FIRED PLANTS WITH NATURAL GAS. 'That may sound good, and make
    > sense from the point of view of chemistry, physics, biology, political
    > science, witchcraft and gender studies, but from the point of view
    > of energy economics - and the leading academic energy economist in
    > the world, as I occasionally call myself - it is very very wrong.
    >
    >
    > Then why don't I produce some numbers which show that it is wrong.
    > Well, as a Canadian billionaire once said, we are living in the most
    > dishonest period in history, and so I belong on the sidelines. But
    > I will say that ANDY has the right idea: flow rates and possible
    > flow rates tell a very different story from inventory values. And
    > by the way Mr Nieder, Germany had some of the highest electric prices
    > in Europe, and given their grotesque belief in wind I doubt whether
    > it has decreased.
    Apr 30 02:21 PM | 1 Like Like |Link to Comment
  • Why is the Market Ignoring American Express's Bad Report? [View article]
    1. very good short summary of 1Q activity. Well written
    2. you said $136 billion, you meant million
    3. Visa MC as someone above points out is over several more quarters. But I agree, it is non-core income.
    4. $25M loss from US ops is not that bad given slow down in spending and write offs. In a past Amex presentation, they showed that write off in, I think '90-91 went to just over 10%. Amex survived. They could very well go to 12-15% this time. Amex will survive. I believe Mr. Market is getting excited about the prospect that the portfolio is getting close to being cleaned up. They aren't putting many new receivables on the books so at some point the losses will stop.
    5. You correctly point out that card member spending is way down. Again, at some point it will stabilize and come back.

    I don't know if we have reached the bottom of consumer spending or cc write offs, but we are a lot closer. Amex is a great company and it is trading a historical low multiples. It is buy low - sell high. You don't get the lows without a great deal of uncertainty. So don't get mad a Mr. Market, take advantage of his offers. That said, I am not going all in with Amex now. I think we are in for a long haul and there is a good chance Amex and a lot of other companies will retreat.

    Apr 26 10:52 AM | 1 Like Like |Link to Comment
  • The 15 Most Cash Rich Companies [View article]
    GOOD ONE!! YOU SAID, "Just as you would not extend your mortgage to pay for day to day living....." I assume you meant that as a joke as that is exactly what people were doing over that 5 years that brought on the current Depression?


    On Mar 16 05:13 PM Anna Coulling wrote:

    > Finding a cash rich company in which to invest is an important first
    > step but trying to establish where the cash is coming from and where
    > it is going is even more important. I was given these tips by some
    > specialist insolvency accountants (and they should know!).
    >
    > It seems we all need to understand a balance sheet these days and
    > short of becoming forensic accountants at the very least we should
    > try to find answers to the following three questions. Number 1
    > - Where is the cashing coming from? Companies can boost short term
    > cash flow by borrowing or selling assets. However, there are only
    > so many assets that can be sold and without a regular inflow on cash
    > a company will soon run into trouble. The number to look for is
    > “cash flow from operating activities” – this shows how much cash
    > is generated from the company’s core business activity. A negative
    > number is a red flag and always check back a few years to see if
    > there is any pattern. Highly volatile operating cash flows can suggest
    > trouble – Enron was a classic case in point before it failed.
    >
    > A firm can also enhance operating cash flows by delaying payments
    > to suppliers just before the financial year end so always take a
    > look at the note that supports the cash flow figure (usually placed
    > a few pages back) and look for the number showing “change in creditors”.
    > If this number has jumped without a corresponding rise in activity
    > – “cost of sales” – in the profit and loss account, be suspicious.
    > It is also worth comparing the firm’s “operating profit” to its “operating
    > cash flow”. Big variations, or an operating profit not matched by
    > a similar amount of operating cash flow are both warning signs.<br/>
    >
    > Number 2: Where does all the operating cash flow go? Analysts often
    > quote “free cash flow” which should be positive and ideally consistent
    > with past years, allowing for changes in activity. For example if
    > sales have decreased 10%, free cash flow will probably have fallen
    > as well and should be in proportion. Companies such as Tesco have
    > been able to expand rapidly by using huge free cash flows to buy
    > freehold sites. However, if a company is enjoying high levels of
    > free cash flow and not expanding or paying it back to investors as
    > a dividend, be concerned. Also consider the relationship between
    > free cash flow and the equity dividend. If free cash flow does not
    > cover the dividend at least twice, future payouts could be at risk.
    >
    >
    > Number 3: The final area to look at is the “cash flows from financing
    > activities” section. Just as you would not extend your mortgage
    > to pay for day to day living, a typical bankruptcy candidate will
    > raise long term finance as new debt or equity and then use it to
    > keep trading. So compare the total raised as debt or equity in the
    > “cash flows from financing activities” section and the amount being
    > spent on new assets in the “cash flows from investing activities”
    > above it. A big mismatch with no explanation from directors is another
    > warning signs.
    >
    > In addition look at a company's “Altman-Z score” This indicates
    > the probability of a company entering bankruptcy within the next
    > 2 years. The higher the Z score, the lower the probability of
    > bankruptcy. An Altman score above 3 indicates that bankruptcy is
    > unlikely; a score below 1.8 indicates that bankruptcy is possible.
    >
    >
    >
    > Finally always look at the directors' dealings - are they buying
    > or selling.
    Mar 17 02:31 PM | 1 Like Like |Link to Comment
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