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jclyak

jclyak
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  • Why Everyone Should Own Wells Fargo [View article]
    What do you know, an author on SA that discusses Wells as a company, instead of a bunch of correlations with the nominal inverse square root of Chinese tea consumption in the West Indies. Thank you and kuddos! Well articulated premises and conclusions to boot!

    I'm playing both Wells and JPM with TARP warrants for a bit more spice.

    I'm of the opinion that NIM will revert to normal, high 4's well before your 5 year window expires. That would change the game. No? What are your thoughts on NIM and financial impact on WFC?
    Mar 3 11:03 AM | 10 Likes Like |Link to Comment
  • Bank Of America Should Trade Below Book [View article]
    Nice article. However, I question your premise that the last 5 years miserable ROE should be extrapolated going forward. I own WFC, JPM and BAC. If one looks at the assets BAC has, I believe one must conclude that the assets are every bit as valuable as those held by its behemoth brethren.

    I perceive the underachievement of ROE for BAC has been caused by the clean-up of a much more sizable mess in terms of historic asset/liability issues and the eye being taken off operations. Once these differences are totally mitigated, there is no reason that BAC shouldn't achieve an ROE as in the 10-14% range, new regulations and a bit more capital notwithstanding.
    Dec 11 03:36 PM | 9 Likes Like |Link to Comment
  • Did Warren Buffet Make a Bad Call By Upping Berkshire's Stake in Wells Fargo? [View article]
    I'd bet it came down about like this at their last meeting:

    Stumpf to Atkins: "We've discussed this [issue] several times. I disagree with your strategy."

    Atkins to Stumpf: "You've got it wrong. Did you really understand the analysis in my position paper. We've really got to do it this way."

    Stumpf to Atkins: "The decision has been made. We're going to opt for the other strategy."

    Atkins to Stumpf: "Let's take it to the board."

    Stumpf to Atkins: "Look, I'm the CEO and I've decided this. I'm not going to bother the board with this."

    Atkins to Stumpf: "Take it to the board!"

    Stumpf to Atkins: "No!"

    Atkins to Stumpf: "Your stubbornness and lack of analytical skills are once again manifested you ###ssTT###fu......###! You certainly don't have one tenth the brains of your predecessor... I've had enough...I'm out of here!"

    Stumpf to Atkins: "Good riddance...I was chosen as CEO, not you...you have been nothing but a ###bbyiirt###fu....king pain in the ass...good bye!"

    Atkins exits the building mad as hell. Lawyer to lawyer to hours later: "Do we agree to keep quiet about the details of this?....Yes, by all means...nobody wins discussing this...Let's work out common language."

    Old Trader, It may not have come down exactly like this, but I'd lay good money that it was something pretty darn close.

    Jeff Loudon
    Feb 18 11:15 AM | 9 Likes Like |Link to Comment
  • Mortgage Mess Means Trillions in Losses for Wall Street Banks [View article]
    Avery, interesting analysis. However it does smack a bit (a lot) of "crying wolf" inmy humble opinion.You state:

    "Clayton Holdings is a Connecticut-based firm that analyzes home mortgages for banks, hedge funds, insurance companies and government agencies (see here). After reviewing a sampling of 10,200 mortgages at Bank of America, it found problems in 30% (see here). Assuming a 30% rate, big bank securitizers have an exposure to about $2.19 trillion, with an unknown amount of additional costs and attorneys fees."

    The analysis and conclusion is dramatically flawed for 4+ reasons I believe as follows:

    1. You assume the 10,000 loans sampled are indicative of not only all of BAC's loans, but you assume that the whole industry is just like this. Didn't BAC acquire a little problem called Countrywide, among others? Were Countrywide's practices BAC or industry typical so that you can draw a 30% industry wide conclusion?

    2. Will in fact the "flaws" be correctable? Will a court conclude "no harm, no foul" if the borrower is 18 months in arrears and has not been harmed in any way by a technical flaw. (I've been before judges many times too...they don't listen to plaintiffs' with "unclean hands" seeking "equity"...AKA returning ownership to said plaintiff.

    3. Are the flaws of a nature that correction is even necessary? This so-called "robo-signing flaw is vastly overdone. I believe the banks practices will withstand scrutiny. Can one with a straight face assert that the "agent" of the bank that affixes a state law compliant notorized signature, must scrutinizy the veracity of all documents in total...or is he just saying "the bank compiled these documents and I, a representative of the bank, signed them?"

    4. If there is a 30% flaw rate, does that mean a 100% loss on all flawed documents? Isn't this a bit of a stretch given that 90%+ of all mortgages are current? Isn't it also a stretch to assume that all land being secured by these mortgages is all 100% worthless?

    Oct 18 10:38 AM | 7 Likes Like |Link to Comment
  • Updated: WFC Is Still Undervalued [View article]
    Hmmm Deadly. Wells refused the bailout money and plainly didn't need a dime. The CEO was told, in a crowded room, that if he didn't take it, the FDIC and Fed would close the bank. Likewise, but with less fanfare with JPM.

    I've always hated the generalizations re "these banks," they all were different in 08 Deadly, and they still are.

    I have always hated the de minimus impact put forth by all, of the effect of ruinous government policies relating to home lending, purportedly had on the calamity. Seems that with 3% down payment loans, guaranteed by Fannie, to people with 580 FICO scores, things can go bad when house values decline by 35%? Yeah, it was all the "big banks" fault...still is, because Fannie is still doing 5% down loans.
    Jul 6 03:41 PM | 6 Likes Like |Link to Comment
  • Why Wells Fargo May Be Overvalued [View article]
    A lot of interesting and perhaps dubious assumptions and miraculously sophisticated sounding irrelevant statistical analysis here Christopher? IMHO

    Let's start with your premise that you'd never value a company "at or above 3 times sales." Hmmm. Have you ever heard of profit margin % or net income? Let's say you have two companies with the same operating costs...$5/shr. Company A that has a share price $100 and company B priced @$100/shr. Company A only generates $30 of revenues per share, but has a gross profit margin of 90% yielding $27/year of margin and $22/shr of net income.Company B has revenues of $200/shr with a gross profit margin of 3%, yielding $6/year of margin and $1/shr net income.

    I'll take Company A that is "over-valued" at more than triple revenues and you'll take Company B...Right? ...Deal!!

    Next you only count 1/2 of Wells revenues..interest income only. Why? Wells whole business plan is to generate 50% non- interest income..Why handicap Wells? Dah, money is money.

    Next you say Wells share count tripled from 2003 to now. I beg your pardon? Share count was 3.4 billion in 2003 and is 5.3 bil now? Lot's of mumbo jumbo statistics in your article, but how bout some basic math? Yeah, sales (all sales..not your interest only handicap) tripled since 2003, net income nearly tripled and share count went up only 60 odd %.

    The net result is you had a 2003 share price @ 3.5 times revenues and a trailing 12 @ 2.2 times sales presently. 03 book value/share was $10.12/share compared to $27.05 now, net income/shr was $1.82/shr in 03 and T-12 is $3.19/shr.. Finally, 03 share price at year end was $29.59 and it is $36 now..

    Yeah, based on all your statistics Wells Fargo is grossly overvalued now...especially compared to 2003...Guess I'll mortgage my house and short the stock!
    Feb 22 05:58 PM | 6 Likes Like |Link to Comment
  • The Fundamental Value In Wells Fargo [View article]
    With all due respect, why do you take a couple of the myriad of relevant data points and extrapolate (ludicrous) conclusions about a stock. Basically you conclude the more revenues and dividends increase, the more the stock price will drop, based on specific, very specific durational analysis...Why?

    Furthermore, you seem to be highly erroneous in the data itself. For example, you point out that "compounded annual growth rate in revenues for the company over the last 10 years has been 1-1.2%."

    Excuse me? In 2002 the company's revenue was $24.5 bil and in the last 12 months rev run rate has been around $85 bil. 1-1.2% compounded? Hmmmmmm. Where are you getting your numbers?

    Next you predict a ".4 to .5%" increase in dividends based on last 3 years revenue growth...where does the fact that 2013 earnings will exceed double the 2009 earnings fit into this equation? For that matter, where does the fact that shareholders equity has increased nearly 60% ($58 bil.) fit into this dividend prediction?

    Finally, how about the fact that Wells has exceeded 2018 capital requirements and will soon no longer have extreme governmental constraints on its dividend paying ability, allowing it to pay at historical levels or more...40% +? This suggests a payout of $1.20 in 2013, which is already pretty much baked in...a 35% increase over 2012 (or around 70 years of increases per your analysis). It also suggests something north of $1.50 in 2014... Another 25% increase. (Another 50 years of increases per your prediction)

    Think you better tinker with your predictive program IMHO.
    Feb 10 04:51 PM | 6 Likes Like |Link to Comment
  • Bank Of America Raises Capital It Doesn't Need? [View article]
    I concur with Sophieclare. Your whole premise in this piece is incorrect. Moynihan has repeatedly asserted that it would not need to raise capital by selling common stock or other dilutive means as opposed to redeploying capital it presently has to comply with Basel III.
    Admittedly, the Buffett sale is dilutive, but given the lack of public confidence in BAC at this ten seconds, the deal was a no-brainer.
    Sep 11 10:54 AM | 5 Likes Like |Link to Comment
  • At Current Levels, Shares Of TripAdvisor Are Priced For Perfection [View article]
    Michael an excellent analysis...thank you. I'm a TARP warrant investor in big banks and love fundamental analysis intertwining macro and micro factors with hard numbers as you have so eloquently accomplished. I'm not a tech, social media nor momentum stock investor. TRIP is a major exception for me. Bought a lot of it @ $82 in May.

    My purchase is rooted in a Peter Lynch "One Up on Wallstreet" sort of premise. I have traveled extensively over the past decade and have been a TRIP user addict. Having spent 4 months in Thailand and Vietnam last winter, including remote parts I witnessed that TRIP literally owns the hotels and restaurants. There are TRIP signs proudly hanging everywhere in Sapa and Hoi An Vietnam as well as Chiang Mai Thailand and the proprietors knock themselves out for great reviews.

    There are no Expedia, Priceline, Google or Facebook signs to be found...just Trip...which now is anchored in 22 languages I might add. Trip is literally the judge and jury for these business and in many cases the sole source of customers. (FYI, google "Secret Garden" hotel in Chiang Mai on Trip's site.. In a very recent post the owner of this great place laments the huge loss of business because Trip (rightfully) relocated the hotel to a town outside of Chiang Mai...a killer, because Trip is where the get their guests....

    Obviously as Lynch points out a great biz doesn't necessarily translate to a great, or even good stock pick..the price has to be right for the shares...at first blush the numbers only dubiously support the current stock price, or even 1/4th the current price for that matter.

    I believe Trip has always been a great site, providing great value to all constituencies. I started following the company in earnest about 8 months ago wondering whether Trip will be able to monetize its product. I've concluded that it is now on the cusp of monetizing in an extremely big way. Here are some factors:

    Hotel bookings. I have never used Trip to actually book hotels. It was a royal pain in the ass. You clicked on "show prices" and 6 different travel websites simultaneously started downloading on my PC or ipad...once loaded, I got to sort thru each...yup an ass pain and I wouldn't do it. That is now totally fixed..like in the last several weeks.

    Now all hotels have links to online travel agents...a few months ago less than a third did (a guess...educated though). As I write this I believe the number of Trip users that will click to a hotel directly from Trip to a hotel or agent has grown multi-fold...like over the past couple of months.

    Restaurants. I've always loved Trip for restaurants...Europe, USA, Asia...however why didn't Trip figure out a way to get money from 2.2 million restaurants to whom Trip travelers are sent? As you pointed out, this is happening with recent initiatives. I just don't believe that you realize the enormity of this to Trip..I believe it will be huge.

    Attractions and shopping. Trip hasn't even started going there, but the CEO in the recent CC agreed this stuff is on their mind..and Trip mgmt does move quickly.

    General advertising revenue. I believe the Trip customer demographic is without peer on the web, or anywhere for that matter. What would Rolex, Mercedes, Chanel or McCormick and Schmicks pay for a Trip web viewer per click compared to a generic reader on Facebook or elsewhere (especially with some other inter-connected data points, like whether they read about Le Meridian hotels..etc) My guess is that Trip targeted ads from non service/travel industry sources will be huge one day...soon.

    Trip is a target? You bet. Facebook, Google, Amazon would all do extremely well to combine with Trip...$50 bil. Wouldn't be too much to pay by google. FB paid $19 bil. For What's App...what's up?

    Yes Michael, I love your analysis, but sometimes a little Peter Lynch snooping is what turns an ostensible dog into a four-bagger IMHO

    Jeff
    Jul 3 06:00 PM | 4 Likes Like |Link to Comment
  • Bank Of America Has Failed Shareholders [View article]
    I like your thought process in this article and it is well written. However, I think you are being a bit hard on management and the BOD. I believe the Fed has in effect demanded that BAC "show it the money" before allowing a cash dividend increase.

    This has been the pattern with all other banks post crash. BAC made $.25/share in 2012. I think the Fed would have turned them down a la Citi if they asked to increase the cash payout. Citi learned this lesson and I believe BAC did too, without the painful public rebuke from the Fed.

    I believe the implicit...well, explicit Fed endorsement that the worst is behind BAC is pretty big, notwithstanding no cash payout...I moved some chips from JPM to here (tarp warrants) because I believe the next milestone for BAC is book value..$18, and that will be attained in short order if 1Q earnings start to depict BAC's earning power. Of course, there will be no cash outlay for taxes on those earnings...for a very long time, converting book value to "tangible book value" and generating loads of extra cash in the process.

    I love all the big banks, except C, and believe in the next 2 years share price will normalize to 14-15 x trailing earnings, earnings that will grow a bunch with NIM, cost savings and credit metric improvements.

    Thanks for your nice article.
    Mar 17 12:09 PM | 4 Likes Like |Link to Comment
  • Wells Fargo's 'Ongoing Internal Dispute' Over Financial Disclosure [View article]
    Wells answered the allegation twice in a manner that would expose it to significant liability if their answer is false..."The departure of the CFO had nothing to do with financial accounting or reporting of financial results."

    I don't know how more clear the company can be in denying this totally unsubstantiated crap. I hope you took this opportunity to cover your short. Now move on to bashing something else?

    This is laughable, except for the holders of 68 million shares that were sold on this BS.

    Jeff Loudon
    Feb 16 01:10 PM | 4 Likes Like |Link to Comment
  • TripAdvisor: Eyeballs Growth, Can't Justify The Valuation [View article]
    Nice support for your position Amir from a numerical extrapolation standpoint based on history. Just wondering whether you put any credence in mgmts discussion at the cc? Gathered that the last 12 months was a pain for gain consolidation period...like a lot of pain...meta-search, general positive changes (vacation rentals, hotel listings & direct Trip mobile bookings and restaurant bookings) with a ton of gain in the present and near future ...not to mention a major tv campaign that is cost heavy at the outset...

    Your analysis lacks any real qualitative support for your conclusion that growth will be linear, or at least close enough to linear to make the stock highly over-priced...I get a much different feel for this company based on boots on the ground analysis, the actual changes in the website, mgmt discussion of its monetization efforts (that are in their infancy) in the cc and elsewhere.

    Query: are you an in-depth user of Trip services? Historically, so you can ascertain the breath and depth of the recent huge changes? I'm not trying to be condescending...I usually think just like you on these momentum plays...especially ones with no p/e, but shorting TRIP? Hmmmmm, you're in good company (many shorts) and I've bought quite a few of those shorted shares. Time will tell.

    Btw, thanks, nobody seems to want to discuss this company anywhere...this is a breath of fresh air...from a smart guy.

    Jeff
    Jul 5 07:20 PM | 3 Likes Like |Link to Comment
  • I Might Very Well Be Wrong About Bank Of America [View article]
    I like it! There really never is a "wrong or right," so long as the person carefully, thoughtfully and intelligently sets forth factual and analytical premises. You meet the test IMHO Regarded. Facts change, caution is still warranted with BAC, but some less now. BTW, I, like you prefer Wells and my warrants are weighted accordingly.
    May 27 03:14 PM | 3 Likes Like |Link to Comment
  • Bank Of America Still Does Not Cut The Mustard [View article]
    Fair enough. I will read your next article. You are smart and well-written.
    Apr 8 10:07 PM | 3 Likes Like |Link to Comment
  • Updated: WFC Is Still Undervalued [View article]
    Very true Misho about the subprime. The funny thing is Wells and JPM weren't really big in the subprime stuff. In fact a pretty small footprint as I recall. (Wasn't their conservatism a main driver to their survival and strategically positive position going in and out of the crisis?)

    You could put BAC a considerable tier below the former two, but really Countrywide and Merrill were its problems, not subprime BAC originated. (And Citi...well..). All of these banks swallowed up poisoned canaries with the advice, consent, encouragement and perhaps coercion of the government...WAMU, Wachovia and Countrywide. The net result is that good actor banks, have been castigated because they swallowed up the dummies and took a huge problem off the back of the taxpayers.

    It just never made sense to me to hammer these banks and call them risky because they cleaned up a huge mess. It also makes no sense to call them ultra risky because the got huge, diversified and vastly better capitalized in the process.
    Jul 6 05:03 PM | 3 Likes Like |Link to Comment
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