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  • China allows big boost in short selling [View news story]
    Seems to me that given the Chinese pension to gamble, this could lead to a massive speculative short squeeze and ultimately a market collapse.

    It might drive prices much higher in the short term but I don't want to be looking for the exit when the panic starts!
    Apr 17, 2015. 08:48 AM | 1 Like Like |Link to Comment
  • Arcam: Aerospace Order From The U.S. [View article]
    Based on what LAI does, it seems that the Arcam Q20 is the better choice for a production environment.

    The Arcam Q20 features:

    •Larger build envelope (bigger parts)
    •Higher productivity (faster)
    •Improved resolution (more precise)
    •Arcam LayerQam (camera system for real time inline quality monitoring)
    •Software adapted to volume production (tailored)
    •Closed powder handling (efficient use of powder)

    This is a great announcement, IMHO. I expect that this sale leads to many more from LAI in the future. Slow and steady march into the future!
    Feb 5, 2015. 06:46 AM | 1 Like Like |Link to Comment
  • What A Difference A Week Can Make In The Energy Sector [View article]
    Personally, I would wait until after 4th quarter earning reports start coming out. I expect a fair number of misses, downward revisions, dividend reductions and maybe a few junior E&P's in serious financial distress. I think the magnitude and breadth will surprise people.

    If oil stays low, then 1st quarter '15 might be worse. When we start seeing the inevitable acquisitions of the financially weaker (albeit resource rich) players by the big boys, then I'll be back in--with both feet. That should signal bottom.

    Following the smart money has always been wise. In the oil patch that's XOM, CVX, Rich Kinder, Kelcy Warren, T. Boone Pickens, etc. (The confirmatory signal is the opposite of Goldman's call!)
    Dec 25, 2014. 07:52 AM | 11 Likes Like |Link to Comment
  • 3D Printing: Revolutionary Industry, Terrible Investment [View article]
    Look to metals, like titanium, to be the future of 3-D printing. Industrial applications, not home enthusiast usage.

    3-D printing of complex parts for aerospace, automobile, orthopedics, machinery is where the Black Swan will hit and the revolution begins. GE, Whitney Pratt, Stryker, etc.

    Follow the dots:



    Arcam will be a big winner within 5 years...
    Nov 8, 2014. 08:18 AM | 1 Like Like |Link to Comment
  • Accounting Irregularities Knock Down ARCP: Buying Opportunity Or Enron Part 2? [View article]

    You make a strong case and you are probably right on most of your points. A purchase below $8 should give you a nice buffer as well. I'm out of ARCP and don't have a dog in this fight anymore I will watch from the sidelines.

    I'm not so sure that this was a one-off error or mistake.If so, why fire the CFO and CAO?

    In fact, the entire management team (including Schorsch) had a reputation of being "fast and loose." Marcato Capital felt strongly enough to issue a tightly worded statement after the Red Lobster deal imploring the management team to "pause on large-scale transaction activity and give investors a chance to see multiple quarters of clean financial results.” Back then they had 21.8M shares.

    Maybe nothing more will be uncovered. But I can't help but wonder whether the balance sheet will need to be restated (goodwill, assets, liabilities, etc). I wonder about any lending covenants--might they be triggered too? Might cost of capital rise too. We might still hear from large institutional investors who will move the needle if they start lightening up in any real way. Vanguard alone held 13% of outstanding shares--and they tend to be conservative. The SEC will be sniffing around soon.

    It can be hard to regain lost trust on Wall Street--so ARCP may spend some significant time in the penalty box, even if there is nothing else wrong. Can we discount a dividend cut?

    I just don't have the stomach for the risk here, but others may see an opportunity. Below 8...maybe?

    I think we'll get more chances at this over time as the dust clears.

    Oct 30, 2014. 04:23 PM | 1 Like Like |Link to Comment
  • Accounting Irregularities Knock Down ARCP: Buying Opportunity Or Enron Part 2? [View article]
    You rarely find just one cockroach
    Oct 30, 2014. 03:15 PM | 1 Like Like |Link to Comment
  • Loving The Leverage: Wells Fargo [View article]

    Yes, it is leveraged and something like a long dated option. However, these TARP warrants have some important distinctions versus options:

    1. These warrants adjust for quarterly dividends above a threshold--so that protects the warrant holder. Options lack this feature.
    2. These warrants adjust upward the number of shares they lay claim to based upon the dividend above threshold too. This is a nice feature that options lack.
    3. Also to consider, these options increase the float when exercised at expiration, which in WFCWS' case presently anticipate a 2.1% dilution of WFC shares. Although I expect that WFC will be buying back these warrants in the open market over time. One needs to factor in the dilutive effect of the new shares on the earnings model in 2018. This is the reason that traditional Black-Scholes model valuation doesn't work well for warrants (and if used will over value the warrant).

    I've been riding several of these TARP warrants for a couple of years and I love their performance--but I'd recommend that you be certain you like the underlying stock before reaching for the warrant.
    Sep 12, 2014. 03:02 PM | Likes Like |Link to Comment
  • Loving The Leverage: Wells Fargo [View article]
    The warrants trade on the exchanges just like stock. On the Fidelity platform this Wells Fargo warrant trades under the symbol WFCWS. They trade with an average daily volume of about 30,000--so not too liquid. I would recommend being careful with the spread as it does widen unexpectedly. Google this warrant and you'll find the prospectus and a bunch of good articles.

    I don't know of any warrant-focused ETFs, but even if there was one, I'd swing clear. Each warrant has its own dynamic and I'd recommend choosing only those that best fit your preferences.
    Sep 11, 2014. 04:55 AM | Likes Like |Link to Comment
  • Seadrill says offshore drilling market "bad" this year, worse in 2015 [View news story]
    I'm beginning to think that Big John is about to put more of his own money into SDRL. He just lightened up his stake in Golar LNG (at a recent high) and may be looking for a place to park that cash.

    The man is not timid and his timing is usually excellent. Recent comments seem orchestrated to drive the price into buying range. Interesting times!
    Sep 10, 2014. 09:08 PM | 7 Likes Like |Link to Comment
  • Loving The Leverage: Wells Fargo [View article]
    Thanks for the warrant series.

    Loving WFC, BAC, KMI and LNC warrants.
    Any chance for an article on LNC warrants?
    Sep 5, 2014. 09:13 PM | Likes Like |Link to Comment
  • Loving The Leverage: Bank Of America [View article]
    Sure, the warrants trade just like stock. You can buy and sell at will through your broker's platform.

    The only caveat being that during the execution period leading into Jan 16, 2019, you will need to arrange for their conversion into the common with your broker (or you can just sell them into the open market). Unlike stock, they will expire worthless if you don't take action to convert to common.

    I fully expect to convert mine.
    Sep 1, 2014. 07:39 AM | 1 Like Like |Link to Comment
  • Kinder Morgan, Inc. to Purchase KMP, KMR and EPB; 2015 KMI Dividend to Increase to $2 per Share [View article]
    Over the next year (as the dust settles on this transaction), I expect KMI to trade around a yield of 4% giving it a share price of $50. If indeed it can grow the dividend at an annual rate of 10% that should bring the per share price of KMI up to about $60ish in 2017--when the warrants are due.

    That puts the warrant value at $20 around exercise time--or a 694% return. Have to expect some dilutive effect of the warrants (although I expect continued buyback).

    I know this sounds crazy but...
    Aug 10, 2014. 10:55 PM | Likes Like |Link to Comment
  • The Linn Energy 2-Step: Reinvest, Then Stop Reinvesting [View article]
    GeorgeH--I like your style!

    I have the same approach with some of the same companies, and I really believe it offers a better way. Traditional DRIP investing is simple enough but I have found that I much prefer taking dividends and distributions in cash to redeploy into the portfolio as I wish. It is less mechanical and depends upon my constant analysis of relative risk/reward across many instruments. But I do that anyway.

    I think of my approach as "Balanced Portfolio-Based Reinvesting with an Income Bias"

    1. Select a handful of companies across a few sectors that have high distributions/dividends into a tax-advantaged portfolio;
    2. Collect those distributions in cash;
    3. Add to the cash by selling out-of-the money call options on those that are fairly to overvalued based upon your favorite metrics;
    4. Scan the portfolio for the best instrument (based on tech and value) to reinvest the growing cash--when I believe the timing is optimal;
    5. Sprinkle in some smaller, growth companies when prudent to "spice up" the return;
    6. Prune the underperformers, add to the strength, add new positions that offer potential, but keep some sector diversification.
    7. Watch some metrics: I like to keep the portfolio's annual cash generation growing at least 2x the annual inflation rate AND the portfolio's value at the S&P 500 growth rate. I usually do much better than that.
    8. Wash, rinse and repeat...over 30 years!

    Of course, like any recipe, "season to your own taste" but keep it simple.


    PS: Since we share many of the same companies, I'll add that in addition to those mentioned in your article, I hold and like: MWE, SDRL, KMI, KMR, ETE, VTR, WFC, WPC
    Jul 30, 2014. 07:51 AM | 1 Like Like |Link to Comment
  • Kinder Morgan Warrants Aren't Trash For Shareholders [View article]
    I own both KMI and KMI warrants so I think both are fine. but they are two different animals. KMI appreciation and dividend will likely do just fine. But if KMI does "just fine" then the KMI warrants will give a turbocharged return.

    Case in point: I bought KMI and KMI warrants around the same time in March. My KMI basis is $32.10 and my KMIWS basis is $1.78.

    As of right now, my total return on KMI is 6.74% and KMIWS is 30.11%.

    I love turbocharged on the way up...not so much on the way down. But right now the asymmetry on the warrant is welcome.
    May 22, 2014. 02:45 PM | 1 Like Like |Link to Comment
  • Kinder Morgan Warrants Aren't Trash For Shareholders [View article]
    So as a holder of both warrants and underlying KMI, I try to follow Richard Kinder's lead in deciding how to handle my investments. I must assume the following:

    1. Kinder believes there is a high probability that KMI stock will trade above the $40 strike price on May 25, 2017. I assume this because he is using cash today to purchase warrants that are still a fair bit out of the money. Presently down to 317 Million warrants from over 500 Million, tells me that Kinder believe that the most productive use of KMI cash today is the retirement of cheap warrants.

    2. In fact, given the debt position of the KM enterprises, and their WACC, I could probably calculate what RK thinks is the probability that the warrants will reach the $40 threshold in three years.

    3. Richard Kinder himself owns a ton of KMI shares and has openly declared that he believes it is a great investment--and he continues to add to his stake. RK is a very smart guy and as a KMI and KMI warrant holder, my interests are directly aligned with RK's interest. I like that.

    So, as long as they continue to purchase warrants in the open market, then I have to assume that they are attractive and I will hold mine. I expect another 20-25 M warrants to be repurchased over the next quarter and an announcement of a reloading of the warrant repurchase plan. Take out 25M per quarter over 3 years voila--almost all gone.

    I expect that over the next 2 years that the warrants will return 3-4 times what KMI returns. After that, I'll re-evaluate.

    Finally, I agree that in the end, the warrants will not be too dilutive--either because there won't be any left in the marketplace, or the price of KMI is not much above $40. I hope for the former.

    May 8, 2014. 07:48 AM | 9 Likes Like |Link to Comment