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  • 50% Upside To This Liquor Retailer [View article]
    I would be careful to use a short term funding and a short term interest rate assumption to value long term cash flows. Just think about that the US treasury 30 year is around what 3.66? The 20 year is like 3.4ish? Then you are saying they only have a premium to that of .5...seems like a pretty aggressive assumption (caused by the mismatch noted above).

    But to each their own...
    Mar 12 11:51 PM | Likes Like |Link to Comment
  • 50% Upside To This Liquor Retailer [View article]
    6% WACC is very low...I agree with Natan...maybe the author can expand on such a low WACC?
    Mar 11 11:18 PM | Likes Like |Link to Comment
  • 10 Adjustable Rate Preferred Stocks [View article]
    I am hopefully getting to an article on those, but not sure when (I travel a lot with work making it tough).

    Some symbols would be things like MVCB, SAQ, HTF to name a few.

    One point - pay attention to the call dates as that can really change the yield (so yield to call vs. yield to maturity).

    VM
    Sep 30 08:02 AM | Likes Like |Link to Comment
  • 10 Adjustable Rate Preferred Stocks [View article]
    I agree. I would not load up the boat, but I am watching for certain prices. I probably like better some of the BDC baby bonds that are in the short to mid maturity. Although, since those are illiquid as well prices can move quite a bit (so saying that right now, it may not be true I like them where they close).
    Sep 26 07:03 PM | Likes Like |Link to Comment
  • 10 Adjustable Rate Preferred Stocks [View article]
    hi Bruce - as I noted a risk here is the opportunity costs as it could take a while for the short end to get to where it needs to be. Perhaps I could have stated that better, but yes, if the fed keeps raising rates then I would see the payments going higher. But the risk is when? To be clear, no I don't really think LIBOR is going over 3% in the next year or 2, but I wanted something in my port to position me in the event of a quick change in expectations as a way to offset something on the longer in.

    If you click on the link to LIBOR in the article you could see that LIBOR was over 3% in 2009. Interesting though as it was over then more due to stress in the market. So to the extend that you feel these can survive a stressful market or big even for financial companies, in those times the payments could rise as LIBOR shoots up. In 2009 it was from fear of borrowing from each other (banks I mean).

    I think if you want maybe a more realistic answer for a "normal" scenario, then we would say 2007, maybe 2008 (for when it was over 3%), didn't check the exact dates. Since we could probably say that was the last normal market over 3% (assuming early enough 2008). Where would these trade in such a market? Well, just as an example, the Goldman shares were a bit higher.
    Sep 26 07:00 PM | Likes Like |Link to Comment
  • 10 Adjustable Rate Preferred Stocks [View article]
    On the SCE - C and D, are those variable rate? I did a quick read and it didn't look like it...could have misread though.
    Sep 14 08:37 AM | Likes Like |Link to Comment
  • 10 Adjustable Rate Preferred Stocks [View article]
    Sorry for the delay in responding, trying to catch up (out of town). I think part of the fall is that the yield curve is increasing at the long end right now, but not that much at the short end. As well, these are still not paying based on libor so they are still at the floor rates and actually need a good move in short term rates in order for that to change.

    On your second part, I tried to look for older securities to see how they traded back in 1999 - 2001, as that could be a rate environment to compare, but as I was just manually searching and doing so quickly I didn't find any. It is a bit hard to predict because again, I think it matters a lot how the entire yield curve moves and looks as we get to LIBOR of 4% (just using your example). I would tend to agree at a higher short end on treasuries (and LIBOR) could not really mean a price increase because the spread over that rate would narrow (since these are at a floor % not LIBOR now). Seems to me as the short end rises these could be more reactive to movements in that part of the curve.

    I am mainly mixing these in with some BDC baby bonds that would be between 5-10 year maturity. As well, some preferred stocks, but not a ton of those. I have tried to stay away from anything longer on the bond side.
    Sep 14 08:35 AM | Likes Like |Link to Comment
  • 10 Adjustable Rate Preferred Stocks [View article]
    Nothing wrong with that...my main focus was how they came out of the last crisis, which was quite severe...I figured if they could continue paying common dividends, I am not as concerned.
    Sep 11 06:44 PM | Likes Like |Link to Comment
  • 10 Adjustable Rate Preferred Stocks [View article]
    Given these are paying at the floor I am not terrible concerned on changes to LIBOR...what worries do you have on it as to how it would impact these?
    Sep 11 05:44 PM | Likes Like |Link to Comment
  • Southern Company: Debt Or Equity? [View article]
    Exactly...I only reviewed quickly, but it seems mainly using the very low 10 year treasury to base everything off of it the main driver. Because when you plug that into the CAPM you get a super small equity risk premium. It is also inconsistent because the beta is across time, but then the RF is just a single point in time.

    I understand what the website is trying to do, just be mindful that those are hard things to do in a "general" way. And you want to go see where they are really raising capital at (looked like the market rates on the really long term debt was around 8% pretax, but I just glanced).
    Sep 6 03:00 PM | Likes Like |Link to Comment
  • Southern Company: Debt Or Equity? [View article]
    Just to give an example of why I think it isn't consistent, look at it from an investors standpoint. The pretax cost of debt (4%) that is used should be what debt investors would require to own that debt (i.e. what the company would pay to raise that capital).

    The cost of equity is less than this at 3.12%. Then it seems pretty off to me (mostly driven by using the single data point on the US debt rate it seems, even though the Beta and this the equity premium is based on a much longer time frame).

    So from investors standpoint they would want 4% to own the debt but only 3% to own the equity? Would certainly expect to see the equity cost more than debt for a stable company (pre-tax debt could cost more if the company is maybe not solvent, etc as more debt could effectively act as equity).

    Just my thoughts though.
    Sep 6 02:40 AM | 1 Like Like |Link to Comment
  • Southern Company: Debt Or Equity? [View article]
    Yes, I know how they are calculated...what I am saying is I think that under 3% isn't consistent with where they are raising capital at in the real world. Also, even in a theory sense you would necessarily use just a point in time for the cost of funds because you could grab a time where cost of capital are abnormally high or low. Particularly in a business that takes a relatively longer time frame to realize the return on that investment (i.e investments paying off now must have been funded some time ago).

    I understand those aren't easy to understand (especially because cost of equity and the true equity risk premium is not a tangible thing and always has a bit of gray), but I would just be careful if you are relying on that site too much.
    Sep 6 02:29 AM | 2 Likes Like |Link to Comment
  • Southern Company: Debt Or Equity? [View article]
    I think that cost of capital number seems very low...looking at where the preferreds are trading and seeing that the market yields are greater than what the cost of common equity assumption is, seems pretty un-realistic.
    Sep 5 12:48 PM | 2 Likes Like |Link to Comment
  • The Truth About Robin Raina's Ebix: Part I [View article]
    I don't know why they haven't filed them, but I cant think of any logical answer to not have statutory filings done. This is the same data that must be used for the global financial statements (even if sing GAAP will have some differences, the underlying data should all be the same and you would typically expect to see it reconciled).

    I work more in the US and LATAM, but these issues can be a problem. Again, not claiming to know APAC rules, but I do think that not having those in compliance cant in any way be a good thing.
    Jul 12 11:07 PM | 1 Like Like |Link to Comment
  • The Truth About Robin Raina's Ebix: Part I [View article]
    What is your opinion about the delay in the statutory filings (Singapore)? From what I saw that fact is verified and they haven't made the statutory filings....how do you explain that?
    Jul 12 12:21 AM | 1 Like Like |Link to Comment
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