User 155569

The Great Dollar Pump of 2008: A Doomed Central Bank Intervention

i don't understand why the central banks tried to temporarily tighten the money supply. it is obvious to me that by doing so they caused the failure of LEH, AIG, FNM, FRE because banks accelerated their hoarding of capital.

Nevada: More Than Just Gambling?

so what is the point of the author? you want to go long NV real estate? that would be incredibly stupid

The Disconnect Between Supply and Demand in Gold and Silver Markets, Part II

I agree with Owen that this article is mostly a diatribe with no supporting facts or, even worse, miscontrued facts. However, I do believe that the sentiment of the author is an important dynamic in the capital markets today, and that sentiment is based on some pretty bad problems.

LandAmerica Financial Group Will Recover on Top

Tangible value should be OK--but it will decline due to negative EPS over the next few years. Now that the stock is down near $10, I am considering buying. The price seems alot more fair than when Matt was pumping the stock.

LandAmerica Financial Group Will Recover on Top

now I REALLY told you so

LandAmerica Financial Group Will Recover on Top

I told you so

LandAmerica Financial Group Will Recover on Top

Matt, this is User 155569. In general, I agree that this stock could be a good long-term hold, especially if you buy below $30 and are willing to hold for 5 years. However, I believe you will be able to purchase LFG at an even better price 1 year in the future, which will improve your IRR on this investment because you pay less and have to hold for a shorter time. Here are my responses to your points:

EBIT margins: again, you have assumed an EBIT margin of 10%, which is above the highest historical margin. While this may or may not be realistic, I do not think it is a conservative estimate. Furthermore, what makes you think that the acquisitions will be accretive to the margin? They bought businesses during the housing bubble and most likely underwrote the transactions using peak margin assumptions that are unsustainable.

2006 best year ever: 2006 had highest revenues. Your argument that you should look at EPS when determing the "best year" is valid. Despite my poor use of words, I was making the point that even at peak revenues they were not able to produce EPS of $13, which you call "normalized." To confuse things, I mistakenly used 2005 net income to calculate my "peak" EPS. However, my point is still valid because 2005 revenues were only 1.4% lower than 2006 (thus still "peak" revenues), and this is when they earned less than $11 per share. I do not think it is realistic for them to earn $13 in a normalized market.

Revenues improve in 4-5 years and stock goes to $100: If you buy at $36, collect a 30 cent div every quarter, and sell on 12/31/2012 for $100, your IRR would be 26%. Not a bad return, but not eye-popping either. I think you can do better, especially considering that it is uncertain that the company can improve as you hope.

Goodwill: Yes, I too doubt they will write it all off during the downturn. However, this is a case of management manipulating EPS. Personally, I am not willing to pay for goodwill that is impaired but not yet written down. Any of my adjusted book value estimates for LFG will use goodwill at 25% or 40% of what they carry it at.

LandAmerica Financial Group Will Recover on Top

Wow, take off the rose-colored glasses! The company COULD earn $13 in a fantasy world, but lets take a look at what they actually DID earn. In 2006, the best year the company has ever had, LFG earned $165MM, or $10.63 per current share outstanding. Do you expect that we will return to a housing environment similar to 2006 in the next few years? If so, I have some swamp land in Florida to sell you. If not, then how much more fat can LFG trim from its income statement? They already trimmed their salary expense by about 25% (why don't you update your model using Q4 numbers?). If they were to eliminate their net loss and just get back to BREAKEVEN, they would have to cut salaries by ANOTHER 30%....and this assumes their revenues don't continue to deteriorate! If you think their revenues will improve or even remain flat, then you must be smokeing some great marijuana.

Now, the most amusing part of your analysis is the statement about how it is trading at just 47% of book value. Thats great, but the majority (67%) of the company's book value is GOODWILL. Do you really think the premiums they paid for their acquisitions aren't impaired at this point? I would be very surprised if they don't start writing off goodwill soon.

In sum, your definition of "normalized EPS" is quite interesting since it is higher than PEAK EPS. And, your method of arbitrarily applying a 10% EBIT margin is also amusing. Finally, any forecast of revenues improving is about 4 years too early.