Seeking Alpha

Value Doc

View as an RSS Feed
View Value Doc's Comments BY TICKER:
Latest  |  Highest rated
  • Chinese Stocks: Short-Term Buy, Long-Term Sell [View article]
    "A large drop in oil prices is exceedingly bullish for Chinese equities and US small cap value portfolios."

    It's funny, there was a large drop in oil in 1997-98, yet I don't remember that as being a good time for emerging market equities (in the short and intermediate term). Also, the Russell 2000 underperformed the S&P 500 by a whopping 30% in 1998.

    Small-cap are undeniably at nose-bleed levels--top 3% of historical valuation levels. If stocks do well next year, they will be led by high-quality large-caps (try QUAL) much like this past year, with small-caps lagging badly.
    Dec 12, 2014. 08:07 PM | 1 Like Like |Link to Comment
  • Another day of pain for energy stocks [View news story]
    I see a bad moon arisin'
    I see trouble on the way
    I see earthquakes and lightnin'
    I see bad times today

    Don't go around tonight
    Well, it's bound to take your life
    There's a bad moon on the rise

    I hear hurricanes ablowin'
    I know the end is comin' soon
    I fear rivers overflowin'
    I hear the voice of rage and ruin

    Don't go around tonight
    Well, it's bound to take your life
    There's a bad moon on the rise

    Hope you got your things together
    Hope you are quite prepared to die
    Looks like we're in for nasty weather
    One eye is taken for an eye

    Well, don't go around tonight
    Well, it's bound to take your life
    There's a bad moon on the rise

    Don't go around tonight
    Well, it's bound to take your life
    There's a bad moon on the rise
    Dec 10, 2014. 02:02 PM | 6 Likes Like |Link to Comment
  • Canadian Oil Sands: Sorry, But We Told You To Stay Away [View article]
    Trailing P/E and current yield are meaningless. With tanking oil, the earnings and cashflow will dry up. All this said, I'm a long-term bull on oil prices, but not for the next 2-3 years.
    Nov 29, 2014. 08:14 PM | 1 Like Like |Link to Comment
  • Canadian Oil Sands: Sorry, But We Told You To Stay Away [View article]

    Hat tip to you, sir. Excellent call. I actually exited my small COSWF position early in the year partly on the basis of your article and after further studying the budget numbers on the COSWF website. My reasoning was, around 20, it was an OK investment assuming oil prices stayed buoyant, but there were other OK investments without the commodity price risk. Stuff with commodity price risk needs to trade at low multiples to be investable.

    In the same vein, what do you think of Russian stocks once oil stabilizes (I'm not thinking of the Russian state-owned behemoths (other than perhaps SBRCY), but rather, stuff like YNDX, QIWI and LUKOY)? Low oil prices and crashed ruble aside, those seem cheap and well-run with excellent organic growth runway, and Russian macro (balance-of-payments and debt situation appears very strong, i.e. no Venezuela/Argentina).
    Nov 29, 2014. 05:03 AM | Likes Like |Link to Comment
  • The Fall In Oil Bears Watching Closely [View article]

    Nice article. Just one question: what's the basis for your view that demand has not declined? Note the obvious macroeconomic deterioration in Europe, Japan and China, etc. Surely that impacts demand for oil.
    Nov 15, 2014. 09:51 PM | Likes Like |Link to Comment
  • Stocks finish well off intraday lows, but still ugly [View news story]
    Prediction is hard, especially about the future. This guess seems as good as any though.
    Oct 15, 2014. 09:21 PM | Likes Like |Link to Comment
  • Look At The MLP GP Companies For An Alternate Path To High Total Returns [View article]
    Yes, was thinking more of those late to the party or retirees counting on the ridiculously strong performance (the biggest part of it unsustainable multiple expansion) of the past few years to continue. It's painful even for long-term holders. High-quality large caps not at outrageous multiples should be OK and beat the S&P 500 long-term, but definitely not getting 20%+ annual returns going forward from these elevated levels.

    A lot of the hot growthy small-caps are dicey. TRGP dropping 1/4 of its value in a few days illustrates the risks.
    Oct 14, 2014. 02:12 AM | Likes Like |Link to Comment
  • Look At The MLP GP Companies For An Alternate Path To High Total Returns [View article]
    ETE, SXL, etc. Even my faves EPD and MMP to a slightly lesser extent. Interestingly, KMI is holding up well on a relative basis because it never got bid up to very high multiples.

    As someone who sold all his MLPs a few months ago (time-stamped, check my comments) and locked in mid-teens returns for the year while sitting in 100% cash since then, I feel sorry for all of you. Valuation always matters in the end.
    Oct 13, 2014. 03:55 PM | 1 Like Like |Link to Comment
  • Look At The MLP GP Companies For An Alternate Path To High Total Returns [View article]
    The problem is that no one paid attention to valuations on the way up. As a result, high-fliers like TGRP, EQM, PAGP etc. were bid up to extremely high multiples. As a result, they are now tanking severely.
    Oct 13, 2014. 02:11 PM | 2 Likes Like |Link to Comment
  • Overvaluation Pervasive Among The Industrial Cyclicals - A Survey Of Timely Short-Sale Candidates [View article]
    I thought it might be worth checking in for a follow-up on how the industrial cyclicals are doing vs. the S&P 500 since the date of this article:

    S&P 500: +1.8%;

    CAT: -8.3%;
    CMI: -13.7%;
    NAV: -5.6%;
    AA: +11.9%;
    MTW: -31.9%;
    TEX: -31.2%;

    Five out of six, not bad (in fairness, I was too lazy to write about MTW and TEX though they were also part of my short position--a six-stock basket). Overall, a major alpha-generator, plus very profitable on an absolute basis (and likely to become far more profitable as the bear market continues). Alcoa showed some traction in their turnaround efforts recently hence the outperformance.

    In addition to the representative names mentioned, most other industrial cyclicals have also significantly underperformed since May (and are likely to continue to do so).
    Oct 10, 2014. 10:42 PM | Likes Like |Link to Comment
  • Why The Market Topped Out [View article]
    "I do not think we get a full-blown "bear" market, which consists of a 20% decline from highs on the major indexes."

    Any particular reasoning behind this?
    Oct 10, 2014. 09:52 PM | Likes Like |Link to Comment
  • Energy MLP returns double S&P, despite naysayers [View news story]
    Hack-job article on that link. First, the 90% pass-through rule does NOT apply to MLPs--the author is confusing this with REITs. MLPs need only generate 90% of their income from qualifying business activities (i.e. energy and natural resources). The author has instantly blown his credibility with this first bit of basic factual sloppiness.

    Second, for pipeline MLPs, the value of the underlying easements appreciates much faster than the physical pipes depreciate. For example, Williams (WMB/WPZ) once drew up a hypothetical to figure out what it would cost nowadays to build the Transco Pipeline (built 60 years ago, one of the three major nat gas pipeline networks serving the Northeast). The ballpark estimate was US$100 billion. The easements have become so valuable that the network is basically an irreplaceable natural monopoly.

    Third, it's true that MLPs have become fairly pricey, but that's true of the entire market, and the metrics the author cites (book value and div yield) are completely irrelevant metrics. Book value, as with real estate, is a historical notional entry that has little bearing on the value of the assets. Dividend yield is arbitrary--EPD retains about 1/3 of its distributable cashflow to pour back into growth projects in lieu of issuing more equity units. Accordingly, the dividend yield understates its cashflows. MLPs (like stocks) are properly valued based on the amounts of cashflow that they can throw off over time. On this basis, EPD is trading around an 18-handle. Rich, but certainly no higher than S&P 500 companies most of which have inferior growth prospects. Large MLPs will likely outperform the S&P 500 over time (though that's not saying much from current S&P 500 valuations) even from the current price levels.
    Sep 27, 2014. 11:28 PM | 3 Likes Like |Link to Comment
  • Bubble Stage Of This Bull Market May Be Nigh [View article]
    Heebner is a gunslinger and uses a high-risk, almost reckless approach. He has also been off very badly in recent years after a terrific 10-yr run. I'm glad that I never went back to him. 2007 was spectacular though--it almost made up for the 2008 collapse. I don't think he really uses intelligent risk management, and as I get older, I'm no longer interested in shooting for the stars. It's more about cranking out acceptable (i.e. average high single digit) returns over the long haul with as little risk as possible. That's why I'm quite content to underperform in a bubble year like 2013 and be hedged or in cash during the statistically dangerous summer and fall periods. Think of all the negative compounding you would have avoided over the past couple of decades just by staying out of the market from July-October! Significant, sustained up moves during that period are rare--2013 and 1995 being notable exceptions.
    Sep 23, 2014. 12:09 AM | 1 Like Like |Link to Comment
  • Bubble Stage Of This Bull Market May Be Nigh [View article]
    Actually, I should answer my own question with regard to strategists. People who called the bear market of 2007-08 while also turning bullish after the crash (time-stamped, publicly-available).

    - Jeremy Grantham. Also, he was also bearish in the late 1990s on the US markets and turned bullish on emerging markets, correctly nailing both big trends.

    - Doug Kass. Called the March 2009 bottom perfectly and was bearish for some time going into 2008. He also side-stepped the 2000-02 bear market.

    - John Hussman. Gets a lot of flack for missing the 2009 bottom (due to his technical indicators), which killed his investment returns. However, he did turn constructive on valuations in late 2008 after the crash. He uses a combination of valuation analysis and technical analysis. I disregard the latter as garbage but believe his valuation work is spot on, and the long-term track record on valuation calls is excellent. He also side-stepped the 2000-02 meltdown and turned bullish in 2003.

    Note that all of these guys tend to be a couple of years early but are never wrong. They've been cautious/bearish for a couple of years this time around too.

    There are others that were bearish in 2007, but most of them stayed bearish right through the 2009 bottom. Hence, they are perma-bears, or more charitably, "waiting for the buying opportunity of the century" types--clearly impractical as money managers.
    Sep 22, 2014. 03:19 PM | 1 Like Like |Link to Comment
  • Bubble Stage Of This Bull Market May Be Nigh [View article]
    You're probably doing broad-based buy-and-hold which is fine provided that you factor in long-term returns from current levels are likely to be disappointing. I wasn't looking to criticize anyone who has a consistent investment plan. The main point is realizing where we are in the valuation/sentiment cycle.

    The run from 2009 wasn't luck--valuations in 2009 were attractive, and I was very bullish. The past couple of years has been tail-end excess/euphoria though. I've done quite well myself the past several years but have been cautious the past two years, using various seasonal hedging strategies and riding the mid-stream MLP boom. I'm currently in cash but did very well in 2009-10 thanks to aggressive positioning, and have managed consistent mid-teens in 2011, 2012, 2013 and 2014. 2013 obviously underperformed, but I'm fine with that.

    Now in cash for the time being. If we get through the fall without a correction and don't show further signs that the bear may be starting, I need to decide whether and how to play for returns in 2015 while minimizing risk. Perhaps some long-short, perhaps some macro trades, perhaps some call LEAPs to play James' hypothesis. Perhaps back into some Russia ETFs--those at least look cheap!

    I went into 2008 with 25% in stock funds, 25% in cash, and 50% in Chinese real estate. Stock funds got killed in 2008, but one consolation is that my biggest one was Ken Heebner's CGMFX which returned 80% in 2007 riding some sector bubbles. Put my cash back into stocks and industrial cyclical LEAPs in late 2008 and through Q2 2009. Got out of my Chinese real estate a few years ago. I no longer invest in mutual funds but manage my own portfolio instead.
    Sep 22, 2014. 03:02 PM | 1 Like Like |Link to Comment