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jclyak

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  • JPMorgan: Strong Yield And ~15% Upside For 2015 [View article]
    I like your reasoning Josh. It's obviously very conservative, yet still sets forth a pretty compelling investment thesis. The numbers get quite a bit better yet if one changes your assumptions a bit to wit:

    1) the risk premium to treasuries at 7% is quite high. Given our government's spending proclivity, one might argue that treasuries are more risky than JPM stock. If you tweaked the premium down to 5%, which is around 5+ times the CDS premium on JPM bonds, the argument for buying JPM gets stronger.

    2) I think in out years JPM will have an earnings multiple of 14+ or -. This is because thru regulations, etc., it is being forced to be a vastly better capitalized bank with way less headline errors. (Eg. Whale, lawsuits). Earnings will be stable and growing....no surprises.

    3) Earnings will be up $1.50 to $2.50 annually over trend when interest rates, loan demand and commercial growth normalizes or even spurts. Throw in an added take home of 8-10% with corporate tax reform one of these days? Yeah, JPM could easily earn $9 in 2017 or 18.

    Put a 14 multiple on $9 or even $8 in 2017 and the current $59 will have proved to be an excellent entry point...now run the numbers on the TARP warrants and the numbers really get fun.
    Dec 17, 2014. 11:11 PM | Likes Like |Link to Comment
  • Bank Of America Has An Ace Up Its Sleeve [View article]
    Well articulated David. A couple of thoughts:

    I have a theory that the next short rate increase will have a much more dramatic increase on NII than past increases regardless of the 10-2 spread. My premise is that the bank has way more liquidity than ever before, all parked at next to 0 interest. Don't you think that an accross the board 1% increase might drop something well north of $8-$12 bil. Of NII with $2.5T assets? Perhaps well, well north?

    Secondly, the other ace in the hole is the deferred tax asset. ($32 bil. More or less) This elusive asset can quickly drop $10 bil. Of tangible net worth to the company if it makes $20 bil. Stated income in 2015. This bonus will be repeated in 2016 and 2017 as well at a $20 bil. Run rate.
    Nov 20, 2014. 02:30 AM | 6 Likes Like |Link to Comment
  • TripAdvisor: Valuations Make It A Risky Bet [View article]
    The thing that really disappointed me about the last Q earnings presentation and cc was the lack of detail as to the metrics of the major ramp up of expenditures. Revs increases $73 mil. Y/Y and expenses were up $72 mil.

    Mgmt described the extras with a pretty broad brush...more TV, some costs of the new businesses, etc. Otherwise, I like others have to sort of go on "faith" that corresponding revenue increases will come about. I don't believe mgmt needed to leave this so much in the dark and the stock has suffered excessively as a result. I hope there is more color on Nov. 4, a lot more.
    Oct 4, 2014. 09:19 PM | Likes Like |Link to Comment
  • TripAdvisor: Valuations Make It A Risky Bet [View article]
    I was disappointed in 2q earnings at first blush. However, upon a little scrutiny it is quite evident that the entire ramp-up of expenses is for growth as opposed to maintenance of margins. There is a big difference between the two. The TV ad campaign is a big experiment with apparently a lot of initial success.

    The expenditures to incorporate the new businesses arguably are capital in nature...new offices, sales staff, software integration and many other accoutrements to major expansion.

    I think it is disengenious to argue that the new expenditures are permanent without crediting the business plan with some major revenue ramp-ups a Q to a year down the road. I'm not saying you don't agree, just that perhaps some more emphasis of this is needed...so here it is....

    Nice article though...well thought...thanks!
    Oct 2, 2014. 08:48 PM | Likes Like |Link to Comment
  • Should Bank Of America Be A Core Holding Now? [View article]
    Well said RS, astutely reasoned and cogent, as usual. I still have wells, jpm and BAC tarp warrants in equal doses...very big doses for me anyway. (Since 2011)

    Jpm seems the best buy at this ten seconds. Its current earn rate is close to what BAC hopes to achieve eventually on a PE basis. The tarp warrants with a 10/18 expiration sell at the same premium as similarly in the money 1/16 call options...way cool...I just wish I had lots more money for the big banks...I feel like a kid in a candy store.

    Thanks again for writing "well" on a subject that is highly relevant to many investors.
    Sep 20, 2014. 09:22 PM | 1 Like Like |Link to Comment
  • Barron's makes the bull case for Bank of America [View news story]
    I'm with ya Mike. I also have a bundle of jPM and Wells warrants. Of note is that the jpm warrants with a $42.42 strike, as well as dividend and anti-dilution provisions of significant value, trade at a premium about equal to long-term $40-$45 calls (which completely lack these enhancements). The other difference is the calls expire in Jan 2016 and the warrants expire in Oct. of 2018...go figure!
    Sep 20, 2014. 11:28 AM | Likes Like |Link to Comment
  • How Bank Of America's Dividend Yield Could Hit 3.1% Next Year [View article]
    Dan Yup, they raised capital..a pretty trivial amount at that. I just think there is so much negative thought inertia, as your thoughts exemplify, that a forward thinker...with luck..and a lot of etc's...can't help but put a bunch I money in their pocket.
    Sep 8, 2014. 10:34 PM | 1 Like Like |Link to Comment
  • How Bank Of America's Dividend Yield Could Hit 3.1% Next Year [View article]
    Dan, just wondering if BAC and the fed had a whiff of the impending settlements when this year's capital plan was approved? Certainly did before the hiccup. No? If I am correct, might the fed be double counting the effect were it to limit 2015 distributions? I think perhaps..well, probably?
    Sep 8, 2014. 07:02 PM | 1 Like Like |Link to Comment
  • How Bank Of America's Dividend Yield Could Hit 3.1% Next Year [View article]
    Well put, however remember if BAC earns $1.50/share in 2015 it will actually increase tangible book by $2.25 because it won't pay any taxes..likewise in 2016, 2017 and 2018 if earnings stayed level. This equates to 143% cash retention on a 7% payout. (On an already excessive capital base)

    If core earnings normalize to say $2.25-$2.50, that deferred tax asset will be used up sooner...shucks!
    Sep 8, 2014. 06:53 PM | Likes Like |Link to Comment
  • TripAdvisor: Eyeballs Growth, Can't Justify The Valuation [View article]
    Macro, I think I spoke my thesis on Trip in my earlier posts on this thread. As for the lack of growth of ebit in Q2, I believe the answer is quite obvious. The company took all its revenue and margin growth, which was huge and used the money to ramp up the restaurant and now attractions venues so as to monetize them. Had trip refrained from these expenditures profits would have blown away all projections.

    Unlike Amazon that has a flawed biz plan that relies on eventually undercutting everyone on price, in spite of a very high-cost delivery system (costco adds 14% on product cost to land with consumer! Amazon 47%), Trip has a wonderful demographic and plan..280 million eyeballs...eyeballs of consumers with money and a specific desire to spend it. All trip has to do is monetize it and in the last two Q's it has taken huge steps to do so...make it the last 5q's...and there are very day margins to be monetized in this huge "niche."

    I'm not a dreamer kinda guy...I see some reality happening with trip, and I belief the smart money guys that funded trip share that reality and expect near-term results..
    Sep 7, 2014. 08:56 AM | Likes Like |Link to Comment
  • TripAdvisor: Eyeballs Growth, Can't Justify The Valuation [View article]
    Hey Macro, the market has given Amazon 17 years of no profits to build out its biz, give TRIP a little slack, huh? They are profitable and they certainly are building out rapidly.
    Sep 6, 2014. 08:50 AM | Likes Like |Link to Comment
  • Bank Of America: Stage Set For Substantial Upside [View article]
    Dan, I'm on vacation (near Wall Street lol), so I don't have time to look at the 10k, but I think you will be surprised at just how fast the assets turn over. Note it didn't take all that long for NIM to drop. Also the banks, including BAC in particular "went short" a long time ago in anticipation of rates going up and because of major new liquidity requirements. Yes? This makes a bump in short rates much more significant for NIM.

    There has been confusion on this, but look at historical NIM calculations and ROA. They are grossed up to all assets rather than so-called "earning assets" I believe.
    Sep 4, 2014. 09:58 AM | Likes Like |Link to Comment
  • Bank Of America: Stage Set For Substantial Upside [View article]
    Thanks Dan,

    Dimon also has some miserly claim about the effect of interest rates that doesn't make sense to me until you look at the environment. You've got, Elizabeth Warren, Obama, all the libs and many of the republicans still looking for more blood to suck. A banker would be nuts to confirm even a bit of my optimism.

    As I previously posted, I believe the effects of interest rate increases will be greater than usual on NIM for at least a couple of reasons. Secondly, in 2010, avg bank NIM was 3.84, compared to about 3.16 now and short rates were very low then (and two years before) with long rates about 150 bp higher.

    I believe if we get 100 bp on the short and 150 on the long, coupled with the aforementioned factors, NIM has gotta go back up 70 bp..at least, to where it was in 2010.. That is around $15 bil. pre-tax for BAC $10 bil. post.

    If all rates go up 200 bp, it should drop 100 bp on assets to pre-tax income,($21 bil.) in spite of the modesty (aka survival instinct) of the CEOs IMHO.
    Sep 2, 2014. 09:11 PM | Likes Like |Link to Comment
  • Bank Of America: Stage Set For Substantial Upside [View article]
    Bret, nice analysis as usual.

    I believe the earnings will ramp up farther and faster than most analysts perceive. A major driver of my belief is that NIM will vastly increase with improvements in short-term rates.

    The compression of NIM over the past 4 years has been exacerbated because of the requirements of capital build and significant added liquidity. The capital build, coupled with a lack of loan growth obviously hurts NIM. However, the added liquidity coupled with 0% returns on short-term money has really had a huge impact.

    Let's say BAC is sitting on $1 trillion of very short term stuff yielding essentially 0. Bump that up to 2%...hummmm. Doesn't that alone drop about $1.20/share post tax to BAC's bottom line? I think this happens sooner than a "few years" out, much sooner, with instant impact?
    Sep 2, 2014. 11:31 AM | Likes Like |Link to Comment
  • Loving The Leverage: Bank Of America [View article]
    Nice write up on the warrants. I have wells and jpm warrants too. They both are deep in the money, but the premiums are slightly over 2 bucks. Jpm in particular is interesting....cheap.

    As for BAC, I think the reason it has such a comparatively high premium is that the dividends will be much higher than you conservatively project. I think BAC will make $20 bil. blindfolded commencing in 2015 and $25+ in the out years. Given the DTA (deferred tax asset) of $30 bil., capital build 2015-18 will be considerably in excess of $120 bil. Present capital levels and liquidity are reg. compliant and then some.

    My point is that $120 bil., less say $30 bil. core capital build thru 2018 means BAC will have $90 bil. to return to shareholders over this period (conservatively...admi... assuming no macro Econ meltdown). If interest rates normalize, I think the capital build could be easily $40 bil. greater. In any event the warrants will benefit in a very big way...at the high end of earnings 75% of present market cap could be used for dividends/buybacks..

    I won't waste your time doing the specific math on dividends or repurchases, but in any event, these numbers point to fun things for both the common and the (a) warrants.
    Aug 31, 2014. 03:28 PM | Likes Like |Link to Comment
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