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  • Rare Earths enthusiasm is misplaced [View instapost]
    The thesis ultimately played out. Wish it was faster, but such is life.
    Jan 5, 2012. 01:03 AM | Likes Like |Link to Comment
  • 2 Overvalued Tech Stocks To Avoid [View article]
    Interesting. What is your take on the industry that TLEO operates in? Takeout multiples are quite rich. Any thoughts on TLEO being a candidate? Thanks! @hedgefundinvest
    Jan 5, 2012. 01:02 AM | Likes Like |Link to Comment
  • Rare Earth Stocks Poised for a Fall [View article]
    Great analysis. Actually surprised the WTO ruling did not impact prices more. It kinda takes the air out of the thesis that China will throttle markets.

    Even with the quota system in place, I expect China to continue to loosen export restrictions, in a bid to "play fair."

    One thing longs should know is that this stuff is stockpiled in China. There are literally tons and tons and tons of it being accumulated as the supply can't leave due to quotas.

    Finally, every single country that can mine this stuff is doing it. Especially countries with lax environmental regs (as mentioned in piece).

    Good stuff. I think you are spot on. Let's see!
    Feb 22, 2011. 12:46 PM | Likes Like |Link to Comment
  • Rain or Shine, Sherwin Williams: The Ultimate Buy and Hold Stock [View article]
    There is no such thing as "buy and hold."
    SHW is pretty overpriced.
    FMV is probably 20% lower from $85.
    There are more negatives on the horizon than positives, at least for 2011.
    1) Raw materials cost increases that can't/won't be passed through
    2) Housing weakness will continue, and perhaps get worse
    3) SHW stock price near all time high, higher than the housing mkt bubble (!)
    4) The FCF to equity yield is sub 5%, and not likely to go higher anytime.
    5) The co. just yesterday to discuss gross profit margins forecast. Why? Because they will likely suck.
    6) WMT is no longer selling SHW paint. Probably not good for fixed cost absorption. (ex stores, of course)
    Rain or shine, SHW is a short at $85.
    Jan 26, 2011. 02:29 PM | Likes Like |Link to Comment
  • Deep Value Shopping Season: Part I [View article]
    Good stuff.
    Dec 28, 2009. 12:23 PM | Likes Like |Link to Comment
  • Why Apple Should Buy Twitter [View article]
    Hey, maybe eBay should buy Skype! Oh... wait...
    May 6, 2009. 02:48 PM | Likes Like |Link to Comment
  • Amazon: Dirty Little Secrets Persist [View article]
    Good stuff. I like the word "sophistry." And AMZN is still probably overvalued.

    On Apr 08 11:02 AM sdt993 wrote:

    > First, who uses book value to measure a growth stock, or any stock
    > for that matter these days? With all the write offs and accounting
    > changes over the years, book value is generally meaningless outside
    > the financial sector where you need regulatory capital. The value
    > of a stock is the NPV of future free cash flows. BV looks backward,
    > not forward. Second, AMZN may have gone public in 1997, but it lost
    > money on a GAAP basis every year until 2003, as you might expect
    > with what was then a start up operation. BV bottomed at -$1.4B in
    > 2002 and has since grown to +$2.7, up $4.1B in the 6 years since
    > it has been profitable. Third, share count has risen from 403 in
    > 2003 to 436 at year end, up 8% over the period. Hardly a disaster.
    > Where did the cash go? Gee, lets check the cash flow statement and
    > balance sheet. Debt down from $1.945B to $.4B so thats $1.5 of debt
    > paydown since 2003, Cash/Short term investments have gone from $1.3B
    > to $3.7B, up $2.4B. SHare repo - just $.6B, not very much. Total
    > CAPX since 2003 is just $1.1B and acquisitions about $.7B. So, total
    > CFFO since 2003 is $5.5B, and i've just accounted for $5.6B. There's
    > the answer to your big mystery. Your comments on fixed costs are
    > borderline insane. AMZN turns its fixed assets 23.5X per year ($20B
    > sales/.850 fixed assets) vs. 4.3X for WMT and 2.6X for TGT. There
    > IS a short case to be made on AMZN, but this article is pure sophistry.
    Apr 8, 2009. 11:27 AM | 1 Like Like |Link to Comment
  • In Memory of Greg Newton [View article]
    You will be missed!
    Apr 5, 2009. 02:59 PM | 1 Like Like |Link to Comment
  • Lessons Learned from Leverage [View article]
    Great set of thoughts. Agree wholeheartedly!
    Apr 5, 2009. 02:57 PM | Likes Like |Link to Comment
  • Citigroup Float May Experience Dramatic Upside Velocity [View article]
    Less float means "directional velocity?"
    I'm not sure if the comments about this being a good theory are sincere or sarcastic.
    But I agree with you. Citi's stock price will certainly have directional velocity once the reverse stock split.
    However, I probably disagree on the directional part of "directional velocity."
    Mar 22, 2009. 09:36 AM | Likes Like |Link to Comment
  • Bank Nationalization: 5 Different Meanings [View article]
    Interesting post. I think in Scenario #2, not sure that simply because the bank is 80% owned by the gov't it is consolidated (there is a different GAAP -- generally accepted accounting principles, for the gov't). More importantly, even if it is consolidated (would be weird), the Federal gov't is under no obligation to guarantee bank debt. They might, but under no obligation are they forced to simply because they own anywhere from 80% to 100%.

    One thing to be cognizant of is that if the government takes over a financial institution, it can wipe out the equity holders. This constitutes the common equity and traditional preferred. Anything senior, however, like trust preferreds to bonds, to depositors, have varying degrees of legal protection that are protected by contract law and the federal bankruptcy code, namely Chapter 11 in a reorganization.

    FYI, I read Fannie and Freddie prefs are still trading, but have not confirmed.
    Mar 10, 2009. 11:25 AM | 3 Likes Like |Link to Comment
  • With Wells Fargo's (WFC) Friday dividend cut, 2009's total vaporized dividend income for S&P 500 firms ($40.8B) has already surpassed all of 2008 ($40.6B). "Dividend cuts make investors that much poorer, compounding the decline in their stocks' value and adding to the 'reverse wealth effect' in the economy," Tom Petruno writes.  [View news story]
    I think the dividend cut is a good idea. After all, none of the banks are given "credit," or valuation support for dividends.

    Cut 'em, and conserve tangible common equity. It commands a very high premium. I could even argue it is the patriotic thing to do. At least until the balance sheets are viewed as healthy.
    Mar 8, 2009. 11:39 PM | Likes Like |Link to Comment
  • We Cannot Afford to Wait to Recapitalize U.S. Banks [View article]
    Astute observations in taking a look at the Trust Preferreds of the "major" US banks. I've been following these pseudo-equity instruments for some time.

    The preferreds are issued by a trust. The trust then owns junior subordinated debt issued by the bank, or subsidiary of the bank (but often supplemented with a guarantee by the bank's parent company). So the actual public (or street facing) securities aren't debt per se.

    Additionally, another risk, apart from bankruptcy, is that these trust preferreds collect their dividends off of any monies that are paid to the trust via their investment in the junior subordinated securites. (I realize this may sound complex, but think of the trust as a simple pass through entity). The actual risk is that the trusts do not collect the moneys because they can often be deferred. If one is investing in these securities, one should know if the dividends are cumulative or not. If they are not, it clearly explains one major reason why they are trading at a discount. (Think zero coupon bond!)

    Finally, the possibility that there is no intrinsic value in these securities does exist. The value they have really is the product of a binary outcome. They are either worth par (eventually), or they have to power to drag a bank into bankruptcy. Traditional plain vanilla preferreds do not have this power. And obvious common does not have it at all either.

    I've often thought that the government should purchase these securities, at a discount, and convert them into common equity. It would take care of the some of the Tier 1 equity calculations, lower interest costs, and "delever" the financial institutions.

    These instruments are VERY interesting currently. But because the market is giving them a 20%+ does not necessarily mean that it warranted. Or maybe it is. Time will tell.
    Mar 5, 2009. 11:05 PM | 2 Likes Like |Link to Comment
  • Is It Time to Abandon the U.S. Dollar and Go for Gold? [View article]
    Right now, it absolutely would be the worst move to switch to gold as the base for the USD. The USD is amazingly strong and resilient.

    The proposed solution discussed only makes sense if the USD lost buying power. The reverse is happening!

    I honestly don't think we are going to see inflation anytime in the short term.
    Mar 4, 2009. 07:42 AM | 4 Likes Like |Link to Comment
  • Automotive Depression: Government Needs to Let the Weak Fail [View article]
    Philosophically I agree with the thesis in this piece.
    Practically I also agree with the thesis in the piece.
    The problem, I believe, isn't the economics of the US auto manufacturers, it is the workers themselves. Since the current administration is relatively pro-labor and pro-union (vs. the previous administration), I believe propping up the US manufacturers is an attempt to ensure that the retirement/pension/hea... benefits continue. US automakers paid very lavish wages and provided the best benefits up until recently. Many of the obligations to retirees continue to be funded by GM, Ford, and Chrysler. If these companies filed for bankruptcy, they would be off the hook (i.e. they would settle these liabilities for cents on the dollar) for providing these benefits.

    These benefits are just like debt. They impair the value of the US automakers' equity.

    The good times are over. Let them file, and reorganize as nimble competitors, making truly great cars. There was once a time...
    Mar 4, 2009. 07:35 AM | 6 Likes Like |Link to Comment