Shiller PE Continues To Mislead Investors, S&P 500 Is Fairly Valued In Early 2013 [View article]
This is a disappointing article. While the Shiller (CAPE) PE ratio may not provide predictive content (see Gray and Carlisle, Quantitative Value), this article falls well short of demonstrating that. The biggest problem I see is the very limited data utilized.
Unfortunately, the author also makes some statements that undermine his credibility. For instance, I quote, "The bottom line to my thesis is that I expect future earnings of the S&P 500 to be higher than they are today, not lower, as the Shiller PE would want you to believe." Of course, the Shiller PE says nothing, absolutely nothing, about future earnings.
In any case, I think that the Shiller PE likely provides little predictive content, but I do think that it helps provide perspective on choices of individual stocks. If you find two stocks with comparable current fundamentals, which would you prefer? Would you prefer the stock with a low Shiller PE or one with a high Shiller PE?
Will Nokia's New Lumia Phones Live Up To Investor Hopes And Hype? [View article]
I am not going to comment about the stock, NOK, just the product, Lumina 920. I am a "power" computer user with feet in both worlds, Apple and Microsoft. I have just turned in my iPhone for the Lumina 920. I think that Windows 8 and the new Nokia are great products. I absolutely love the phone.
I think that it is important to recognize that consumer products run in fazes. We all know this, but we seem to forget that saturation leads to boredom. I was bored with Apple. I am not short AAPL, and I am not long NOK, but those would be my inclinations if I played in that sandbox.
Is Microsoft The Ultimate Value Trap? [View article]
2) Contrary to your Win 8 impressions, I love it. I am more PC centric but use Apple extensively. I am inclined to drop Apple. I would love to be in one world only. I am thinking that Windows 8 has made that possible. 3) I have had all four iPads and four out of the five iPhones. The thrill is almost gone for me. 4) Haven't a clue on this one, but I can say that I hanker after a new multi monitor, Win 8, workstation. Already upgraded my laptops to Win 8. I certainly haven't taken a survey, but some of my friends are in the same camp.
This is a very interesting juncture and not obvious one way or the other. And as much as everyone knows the value story, the author fails to admit, likewise, that everyone knows the bear story. I have a very small long on both Apple and MSFT. Both are making money. I do not own GOOG or any of the other mentioned companies.
Make 30% On Your Money With This Nokia Trade [View article]
I don't want to over emphasize the following points. This is a difficult business with significant competition. Having said that, I am finding that the Nokia Lumnia 920 is sold out in some locations, somewhat depending on colors.
My impression is that Windows 8, which I have installed in several machines, is being better received by the paying public than by the reviewers. The eco system, which of course, Nokia has bet on, appears to be gaining more traction than it is getting credit for.
Super Media Is Best Of The Yellow Pages: Management Does Matter [View article]
Just hypothetical. And yes, I believe I did address the point. In investing, in my opinion, we start with the premiss that the future is unknowable and then ask whether the price of the security sells at a sufficient discount to either an intrinsic value or to a judgement of what the "expected value" is.
An example of an expected value analyis that would makes sense to me would be an 80% chance of $0 and a 20% chance of the stock selling at fives times operating earnings. Five times operating earnings right now is equal to $50 per share (quarterly earnings are annualized). Subtract your purchase price of $2.5 (80% times $0) from 20% times $50 and you get $7.5.
Perhaps too quantitative and not qualitative enough, but my conclusion is that the upside is approximately three times the downside. I will take that kind of investment any day, fully cognizant that some of them will not work out. But that is the nature of investing in general. Right?
Super Media Is Best Of The Yellow Pages: Management Does Matter [View article]
This is very important to understand. Your comment that "companies with declining revenues and debt are no sure thing, ever," is absolutely correct but basically irrelevant. All investing is about the odds. I will never forget Eastman Kodak on the floor of the NYSE in 1976. It was the preeminent global brand. And now?
The question is not whether it can, or it will go to zero, none of which is knowable, but rather whether the stock is priced to give you a fair chance of making money.
SPMD is very cheaply priced as an option on the possibility of survival. It is a stressed business model, for sure, but the stock is the cheapest stock I have ever seen in my thirty six years of investing. That is why I characterize it as an option. In other markets, the stock would be at $12 and the two year, $15 calls would be at $2.5.
This is a VERY interesting speculation which, by the way has a 25% EBIT/TEV ratio and a 100% EBIT/Tangible Capital Employed.
Buffett Would Buy SuperMedia If He Knew About It [View article]
One other thought with regard to SPMD, unrelated to fundamentals:
The short interest has come out for the two weeks ended June 15th. The "days to cover" is 99. That is the second time in four weeks that the days to cover were approximately 100. Not only is this frightful number for the shorts, but the stock is very tightly held. Almost half of the stock is held by a couple of 13D investors who have phenominal track records.
I have a friend and fellow investor in SPMD who keeps asking me, "where are the shorts finding the stock to borrow?" Frankly, I don't know the answer to that. I find it a bit of a mystery.
Buffett Would Buy SuperMedia If He Knew About It [View article]
It is great that you reference Warren Buffett but frankly, Charlie Munger has more to say about SPMD than Buffett. I quote:
“To us, investing is the equivalent off going out and betting against the pari-mutuel system. We look for a horse with one chance in two of winning and which pays you three to one. You’re looking for a mispriced gamble. That’s what investing is. And you have to know enough to know whether the gamble is mispriced. That’s value investing.”
The shorts and other skeptics are not wrong about SPMD and the business model. It is challenged and there is a chance that management doesn't turn the ship around in time. What the skeptics misunderstand is that the bet is mispriced. It is too cheap. You may not win on this one, but if you make many bets like this, you are sure to win on average. SPMD is "mispriced."
You have got to be kidding me? If you have held the stock for decades, you have done quite well. I divide my assets between conservative long-term investments and short term trading assets. I have owned XOM for decades likewise. It depends upon your starting point, but XOM has beaten the market in any long term time frame. For instance, since Feb of 1984, XOM has beaten the rise in the market by 300 basis points. Eleven percent versus eight percent. You have had a decent dividend the whole time. For the worlds largest oil company, that is a fantastic record. I don't really look at it this way, but I think you could suggest that the "risk-adjusted" out performance was even better. Hang on for a couple more decades and you may well continue to outperform. They are among the best capital allocaters in the industry.
The Darkest Star In The Commodities Boom [View article]
Again, thanks for the thoughtful exchange. I have acquaintances on the ground in Mongolia. While you comments have a ring of truth, I am not sure they take into account the incredible investment that is going on in Mongolia right now. If my acquaintances are correct, there will be more coal coming out of Mongolia than you anticipate, probably not enough, but more than you are using in your "model".
The Darkest Star In The Commodities Boom [View article]
This is a well argued piece. Unfortunately, sometimes logic isn't enough. When there are so many moving parts, the future is hard to predict. I don't have any kind of position or opinion so this is just an observation.
I do have one question. What about the humongous coal mines that are being developed in Mongolia?
TravelCenters Of America: Driving Profitability [View article]
I am, apparently, a little late in commenting on this article, but I want to complement the author. This is a well written, well organized, piece that focuses on the meat of the story. I have always said that, if you can't explain the reason to buy a stock on an elevator ride, then the story is too complicated. While this piece is not exactly "an elevator ride", it is darn close in its clarity and simplicity of presentation. Well done!
SuperMedia: The Fixed Cost That Won't Go Away [View article]
It is an interesting question as to whether this classic "cigar stub" investment will work.
We know that the company, by the convenants, must pay off approximately 35% of their excess cash flow, per quarter, to the senior secured term loan. We know, via the SEC filing yesterday, that the company has $88 million more cash as of Sept 30th than they had as of June 30th. Their "free" cash flow must have been something around $135 million for the quarter.
We will have to wait and see what the source of the free cash flow was. Was it accounts receivables, etc., or operating? In any case, we know that they ended the quarter with $267 million in cash.
The equity is a very favorably priced option. Anyone have more of these ideas?
The Upcoming Crash Of Apple And Amazon [View article]
First the disclosure. I have no position in AMZN, long or short. I take great exception to your thesis on AMZN. It may well be overpriced, but that is a different issue than thesis that you suggest, that the only competitive edge AMZN has is in the tax structure. I am a loyal and steady customer of AMZN. Price is the last consideration in my decisions. The AMZN service is unbelievable, and until that changes, I will remain a loyal customer.
Shiller PE Continues To Mislead Investors, S&P 500 Is Fairly Valued In Early 2013 [View article]
Unfortunately, the author also makes some statements that undermine his credibility. For instance, I quote, "The bottom line to my thesis is that I expect future earnings of the S&P 500 to be higher than they are today, not lower, as the Shiller PE would want you to believe." Of course, the Shiller PE says nothing, absolutely nothing, about future earnings.
In any case, I think that the Shiller PE likely provides little predictive content, but I do think that it helps provide perspective on choices of individual stocks. If you find two stocks with comparable current fundamentals, which would you prefer? Would you prefer the stock with a low Shiller PE or one with a high Shiller PE?
Forget Herbalife; Blyth Is The Real MLM Steal [View article]
Will Nokia's New Lumia Phones Live Up To Investor Hopes And Hype? [View article]
I think that it is important to recognize that consumer products run in fazes. We all know this, but we seem to forget that saturation leads to boredom. I was bored with Apple. I am not short AAPL, and I am not long NOK, but those would be my inclinations if I played in that sandbox.
Is Microsoft The Ultimate Value Trap? [View article]
3) I have had all four iPads and four out of the five iPhones. The thrill is almost gone for me.
4) Haven't a clue on this one, but I can say that I hanker after a new multi monitor, Win 8, workstation. Already upgraded my laptops to Win 8. I certainly haven't taken a survey, but some of my friends are in the same camp.
This is a very interesting juncture and not obvious one way or the other. And as much as everyone knows the value story, the author fails to admit, likewise, that everyone knows the bear story. I have a very small long on both Apple and MSFT. Both are making money. I do not own GOOG or any of the other mentioned companies.
Make 30% On Your Money With This Nokia Trade [View article]
My impression is that Windows 8, which I have installed in several machines, is being better received by the paying public than by the reviewers. The eco system, which of course, Nokia has bet on, appears to be gaining more traction than it is getting credit for.
I like the first option trade that was proposed.
Super Media Is Best Of The Yellow Pages: Management Does Matter [View article]
An example of an expected value analyis that would makes sense to me would be an 80% chance of $0 and a 20% chance of the stock selling at fives times operating earnings. Five times operating earnings right now is equal to $50 per share (quarterly earnings are annualized). Subtract your purchase price of $2.5 (80% times $0) from 20% times $50 and you get $7.5.
Perhaps too quantitative and not qualitative enough, but my conclusion is that the upside is approximately three times the downside. I will take that kind of investment any day, fully cognizant that some of them will not work out. But that is the nature of investing in general. Right?
Super Media Is Best Of The Yellow Pages: Management Does Matter [View article]
The question is not whether it can, or it will go to zero, none of which is knowable, but rather whether the stock is priced to give you a fair chance of making money.
SPMD is very cheaply priced as an option on the possibility of survival. It is a stressed business model, for sure, but the stock is the cheapest stock I have ever seen in my thirty six years of investing. That is why I characterize it as an option. In other markets, the stock would be at $12 and the two year, $15 calls would be at $2.5.
This is a VERY interesting speculation which, by the way has a 25% EBIT/TEV ratio and a 100% EBIT/Tangible Capital Employed.
Buffett Would Buy SuperMedia If He Knew About It [View article]
The short interest has come out for the two weeks ended June 15th. The "days to cover" is 99. That is the second time in four weeks that the days to cover were approximately 100. Not only is this frightful number for the shorts, but the stock is very tightly held. Almost half of the stock is held by a couple of 13D investors who have phenominal track records.
I have a friend and fellow investor in SPMD who keeps asking me, "where are the shorts finding the stock to borrow?" Frankly, I don't know the answer to that. I find it a bit of a mystery.
Buffett Would Buy SuperMedia If He Knew About It [View article]
“To us, investing is the equivalent off going out and betting against the pari-mutuel system. We look for a horse with one chance in two of winning and which pays you three to one. You’re looking for a mispriced gamble. That’s what investing is. And you have to know enough to know whether the gamble is mispriced. That’s value investing.”
The shorts and other skeptics are not wrong about SPMD and the business model. It is challenged and there is a chance that management doesn't turn the ship around in time. What the skeptics misunderstand is that the bet is mispriced. It is too cheap. You may not win on this one, but if you make many bets like this, you are sure to win on average. SPMD is "mispriced."
Exxon Mobil: What Big Upside? [View article]
The Darkest Star In The Commodities Boom [View article]
The Darkest Star In The Commodities Boom [View article]
I do have one question. What about the humongous coal mines that are being developed in Mongolia?
TravelCenters Of America: Driving Profitability [View article]
SuperMedia: The Fixed Cost That Won't Go Away [View article]
We know that the company, by the convenants, must pay off approximately 35% of their excess cash flow, per quarter, to the senior secured term loan. We know, via the SEC filing yesterday, that the company has $88 million more cash as of Sept 30th than they had as of June 30th. Their "free" cash flow must have been something around $135 million for the quarter.
We will have to wait and see what the source of the free cash flow was. Was it accounts receivables, etc., or operating? In any case, we know that they ended the quarter with $267 million in cash.
The equity is a very favorably priced option. Anyone have more of these ideas?
The Upcoming Crash Of Apple And Amazon [View article]