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"Risk comes from not knowing what you're doing" Warren Buffett I look and sift the world for such misplaced bets. When I occasionally find one, I first exploit it for profit. Then, I write about it for anyone else interested in such ideas. Twitter: @unemon1 Scribd:... More
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  • A Quick Look At The S&P500 Free Cash Flow. As Long As The Real Economy Remains On-Track, Expect Healthy Corrections, Not Protracted Bear Markets.

    FCF over time (1990-2014):

    Assuming an Equity Risk Premium (ERP) of 6.75% and a FCF Growth rate of 5% p.a. (at each point in time) … a theoretical Fair Value of the SP500 can be computed:

    Equity Risk Premium so that ... Theoretical FV = Observed SP500 Value? (where the discount factor = ERP + 10Y Yields)

    c.p. … FCF growth … to have Theoretical FV = Obverved SP500 Value? Keeping RP at 6.75% … (where the discount factor = ERP + 10Y Yields)

    I would not be surprised if this bull market ... does still have plenty of room to go. A key requirements ... is ... however ... that the Economy does not slip into a recession (but this is another story).

    Corporations have never generated that much Cash in their history. Next phase would to see them ... starting increasing CAPEX investments ... ... that's when we will probably see the market rally big.

    Disclosure: I am long END.

    Additional disclosure: I am using this sell-off to closing out some of my shorts DDD ZU ONVO(anyway going to 0) .. and increasing some of my longs such as END YGE PPHM

    Apr 11 2:56 PM | Link | Comment!
  • ENDEAVOUR International Corp. (NYSE: END): Ready To Close The Gap? - Some Quotes From The Recent IPAA Oil & Gas Investment Symposium

    Endeavour International Corporation (Endeavour) is an independent energy company. The company operates in one industry segment, which is oil and gas exploration and production.

    March 05, 2014 ... END management gave investors some additional details about the problems the company encountered during Q4 2013 ... causing the PPS to lose as much as 30% during the days following the CC.

    From the Call:

    "As you can tell, there's been a lot that's happened since our third quarter call last November. I think we would have all preferred to spend our time today discussing the fourth quarter results, which were positively impacted by the startup of production at Rochelle, and our plans for 2014. But, as you know, we had an unexpected event occur in January during the restart of production at Rochelle.

    Fortunately, we were able to resolve the stuck valve situation last week, and we're now back on production. Ramp up production at Rochelle is going very well, as Derek will explain shortly.

    The situation at Rochelle was serious. Not because we did not believe it could be fixed, but rather our concern over the time it might take to find a vessel and dive crew to do the work."

    TIME TO CLOSE THE GAP? Since March 2014, END peers have gained approximately 8.20% (outperforming END by >42%)

    April 08, 2014 ... Bill Transier ... President, and CEO of END held a pretty enthusiastic presentation at the IPAA Oil & Gas Investment Symposium. Some Quotes:

    "... now, we have our three core development assets that are on production and are leveraged to commodity prices both to Brent and European natural gas ..."

    "... 2013, we were able to increase our production by 126%, and we increased our EBITDA almost to 157% ..."

    "... At fourth quarter of last year, we were producing over 12,000 BOE a day. ... ... Our production will naturally grow this year by pretty significant effect just because the assets are on production now ..."

    " ... having everybody in one office and not the least of which we save about $15 million a year."

    "... One of the things that set us apart from other companies, kind of small and midcap companies is our exposure to both Brent crude oil prices that come at kind of a nice premium to WTI, as well as natural gas ..."

    " ... at Rochelle, we identified a very large upside, which we call the Rossini project, which I'll talk about later. This may be bigger [P2 40 MMBOE] than Rochelle ... "

    --> Rossini: probably some place in between kind of 40 million BOE and 80 million BOE of reserves (P50).

    "We are working now to find a partner with kind of a similar concept to us to move this forward and we expect to drill this with the way the equipment situation is in the North Sea, probably not till sometime in the first half of 2015."

    "And the other thing is that the capital requirements that have been heavy since 2011 and 2012 and 2013 we expect that number to kind go in half of that number in 2014" ($100-$120m)

    "We will find ways to de-leverage the balance sheet and refinance the cost of capital going forward. And with the appropriate partners that we know we can attract out there for the assets, both in the North Sea as well as the U.S., we will move those assets along and try to capture that value for investors as we go forward."

    Disclosure: I am long END.

    Tags: END, END, Long
    Apr 09 7:21 PM | Link | Comment!
  • A Simple - Almost Risk Free - Long Term Play - Arbitrage Opportunity On MECHEL

    Mechel is involved in four business segments which include mining, steel, ferroalloy and power. The Company unites producers of coal, iron ore concentrate, nickel, steel, ferrochrome, ferrosilicon, rolled products, hardware, heat and electric power.

    Stocks of the Company (Mechel OAO) are traded in the U.S. under the Symbol MTL and in Russia under the Symbol MTLR.

    MTLR is currently trading at 39.10 RUB on the MICEX --> = 1.11 USD/Share

    MTL is currently trading at 2.01 USD/Share in the U.S.

    U.S. traded Shares of Mechel are Trading at a premium of approximately 81.08%.

    The premium is not caused by a lower liquidity on the Russian Market. In fact, MTLR volume over the past 30 days has bee 5.53m shares as opposed to a MTL average volume of only 1.932m shares.

    One was to profit, would be to short MTL and buy MTRL. However, this is not my favorite play here! If you want to play the possible Coal recovery story without incurring substantial risk, I would go for the following play:

    1. Long MTLR

    2. Long Puts on MTL with a Price Strike of USD 2 and a January 2016 expiration date.

    You pay USD 1.11 to go long MTLR ... + ... USD 0.80 to go long the PUT ------> Total Cost = USD 1.91

    This strategy costs less than directly buying MTL .... and offers you a 100% capital protections (+ a 5% gain) ... in the case Mechel were to go Bankrupt before 2016.

    Only risks you would still be exposed are... FX ... and ... the scenario under which Prices of MTL commons were not to converge

    Disclosure: I am long MTL.

    Additional disclosure: MTL, MTLR, Puts

    Apr 04 10:46 AM | Link | 1 Comment
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