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DanielHolzman

DanielHolzman
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  • ModernGraham Quarterly Valuation Of Caterpillar Inc. [View article]
    Is there another part to this article that is coming later? Right around the time I expected the author to get into the fundamental business model of CAT, the article ends. At the beginning of the article, the author patiently explains that modern Graham analysis requires a fundamental, unbiased analysis of the business, which presumably includes a careful analysis of future earnings potential. Instead of seeing such an analysis, the article ends with a single paragraph explaining that the historical ability (the last few years) of CAT to grow earnings should be extrapolated into the future, hence arriving at the conclusion that the company is undervalued.

    A more thorough analysis should likely include the competition CAT is facing, headwinds from reduced oil exploration, the slowdown in the coal mining industry, and the long term debt issues CAT faces.
    Apr 21, 2015. 07:03 PM | 3 Likes Like |Link to Comment
  • Chasing High Dividend Growth Rates For Higher Total Returns [View article]
    "I believe this shows some evidence that chasing high dividend growth rates can be a smart investing strategy."

    Certain the author has demonstrated that the particular strategy he suggests worked for the particular period in question. Of course, there are an infinite number of other strategies that would have "worked" during the same time period, some better, some worse, than the particular one the author analyzed. As always, the question is, will the particular strategy continue to work in the current market?

    Unfortunately this is a far harder question than "discovering" a particular strategy based on hindcasting. I know of no method of determining if a historically good strategy will continue to work effectively in the future. Perhaps the author can explain why he believes that this particular strategy will continue to outperform in the future.
    Apr 19, 2015. 07:53 PM | 2 Likes Like |Link to Comment
  • CSX - Strong Operational Performance And Shareholder Payouts Continue To Drive Appeal [View article]
    Why does the author feel that a P/E ratio of 17 is attractive? This is a slow growth, competitive business (trucks, barge, air), facing a difficult market for its major commodity (coal). A more realistic P/E multiple might be 12-15, suggesting that unless CSX can improve margins or increase total revenue, it may be overvalued rather than attractively valued. In addition, CSX faces the prospect of purchasing new, more robust cars for hauling oil, which would be a CAPEX drain.
    Apr 16, 2015. 01:23 PM | 1 Like Like |Link to Comment
  • Plug Power - Time To Plug In [View article]
    "The company had a better performance in 2014, though it desperately needs to return to profitability to instill confidence in investors."

    What does the author mean by "return to profitability"? This company has never made a profit so far as I understand. Frankly this article baffles me. The author argues that fuel cells are "clean and green", and that this factor is why they are used.

    First off, Plug fuel cells use hydrogen as the fuel source. There is absolutely nothing clean and green about current methods of producing hydrogen. Most hydrogen is produced by high temperature reformation of methane, which uses a fossil fuel (methane), and reduces overall efficiency due to the need to reform the methane into hydrogen (efficiency perhaps 50%). The net result is an inefficient use of a fossil fuel to produce hydrogen, which of course burns cleanly (water is produced), but IN NO WAY can the author or anyone else claim that fuel cells are a clean, efficient use of methane. A cleaner, more efficient use would be to burn the methane to power a gas turbine.

    But that is NOT why fuel cells are used. They are used in applications where emission of toxic fumes is unacceptable (warehouses are a perfect example), or in off grid areas where batteries cannot be recharged. Fuel cells are not very efficient, they are costly on a per kilowatt basis, and the fuel (hydrogen) is expensive. There is nothing "green" about the current batch of fuel cells. They win in specialized applications like warehouses over batteries because they recharge faster, they have no emissions of toxic fumes, and they run at full power until the hydrogen is used up. All very important positives that should have been mentioned by the author as the main reason fuel cells are used at all.

    Conclusion: Fuel cells will play a role in specialized applications like fork lifts. They will be used because of their special properties. Whether PLUG will ever make any money selling fuel cell product is an interesting question, unfortunately not discussed in detail by the author.
    Apr 16, 2015. 11:46 AM | 4 Likes Like |Link to Comment
  • Molycorp: Optimal Example Of Overvalued Equity In Capital Structure Arbitrage Scenario [View article]
    There is no need to short the stock. There is a lot of open interest on puts and calls, making the options market pretty liquid. If an investor wants to profit on the downside, you can always buy puts at a strike price of 1.00. My understanding is that the puts remain in play even in the event of bankruptcy, but perhaps the author can comment on that.
    Apr 16, 2015. 10:59 AM | 2 Likes Like |Link to Comment
  • The Truth About Falling Oil: Demand Destruction [View article]
    "This market for storage capacity will increase almost 10-fold in three years to 2,400 megawatts, equal to six natural gas turbines"

    The problem with quoting sources who know little is that it makes the author look foolish. No doubt the author is aware that storage capacity is a unit of energy, NOT power, hence is measured in megawatt-hours, NOT megawatts. You don't store power, you store energy, and you release the energy as needed. I have no idea what the quote is intended to demonstrate. Existing storage capacity in the United States is mainly in the form of pumped storage hydroelectric plants, which pump water up at night when electric costs are low, and release water during the day when prices are high, thereby arbitraging the cost of electric power. No doubt battery storage or some similar technology will become cost effective within the next decade, but I can assure the author that the storage will be measured in megawatt hours, regardless of the technology adopted.
    Apr 14, 2015. 06:11 PM | 12 Likes Like |Link to Comment
  • Microsoft And 'One-Time Investing' [View article]
    The author makes an interesting point about the difference in return for a series of investments versus a one time investment. I ran an analysis on the numbers presented, assuming 15 years of $1000 per year purchases of stock, and no reinvestment of dividends, followed by sale of all the stock at the end of 2013. The net rate of return was 8% per year. In order to understand whether this is good or bad, it would be useful to compare 8% against alternative investments, say another stock, bonds, T bills, whatever. I suppose the author's point is that simply comparing the value of a stock at two points in time tells us little about the value of a series of investments in the stock. But he could have gotten a lot more useful information out of the data by analyzing rate of return, and comparing to similar stocks over the same time period, if the goal is to determine if MSFT was a good or bad investment over that time period.
    Apr 10, 2015. 02:42 PM | 1 Like Like |Link to Comment
  • 5 Low P/E Value-Stocks Yielding 2% Or Higher [View article]
    Oh if it were only so simple. While there are certainly a number of proponents of using P/E ratio as a useful metric for screening stocks, there are a number of difficulties which the author has elected not to mention. Here are a few:

    1. The P/E ratio is not a well defined term. One can use trailing twelve month average, trailing 5 year average, P/E based on estimated future earnings, a blended P/E ratio that mixes historical and projected information. Or you can use a P/E ratio from a historical time period. Without defining the precise method used to determine the P/E ratio, it lacks unique meaning.

    2. Earnings are not even well defined. Do we mean GAAP earnings? Non-GAAP earnings? EBIDTA? Earnings are easily manipulated for a quarter, a year, or sometimes longer (ENRON comes to mind). If the intent is to compare current P/E ratio to historical ratio, it would seem to be critical to discuss exactly how the earnings are being computed or estimated currently versus at the time we are comparing P/E to. Suppose the method of computing earnings changed over time. That would make a comparison of current P/E ratio to historical ratios potentially meaningless.

    No doubt the author has detailed knowledge of each of the companies mentioned. It would be useful to discuss current versus historical P/E ratios, why they have changed, and some indication as to the author's opinion about the future trajectory of the P/E ratio for the company.
    Apr 7, 2015. 07:48 PM | 7 Likes Like |Link to Comment
  • SunEdison's Wind Ambitions Will Hold The Company Back [View article]
    The majority of the cost of a solar panel installation is NOT in the solar cells, it is in the electric controls, wiring, supports, purchase of roof space, inverters, and other things. So even if solar cells go to ZERO, 90 percent of the cost of installation remains. The author compares the reduction in the cost of polycrystalline silicon to the cost of a complete wind installation. This is meaningless. The important issue for SUNE is whether they will earn profits from wind power or not. If they will, then it is a good purchase, if not, well then it wasn't very smart.
    Apr 5, 2015. 07:28 PM | 3 Likes Like |Link to Comment
  • Railroad Companies Have Been Losing Alpha Returns Over The Years [View article]
    Have to agree with the comments, this was a bizarre article, perhaps an April Fool's day joke of some sort. Surely the author is aware that none of the railroads he mentioned are involved in passenger service, except perhaps for hobos who bum rides on their freight cars. And I don't think hobos make a significant contribution to the bottom line of the freight railroads. If the author somehow believes that operation of high speed rail will force the freight railroads to abandon track, this is not going to happen, since any high speed rail will either need to occur on dedicated high speed rail track (new right of way), or possibly on upgraded right of way already owned and operated by AMTRAK. Getting a freight railroad to give up right of way is more difficult than negotiating a nuclear deal with Iran.
    Apr 5, 2015. 09:37 AM | 10 Likes Like |Link to Comment
  • Chicago Bridge & Iron Company Is Set To Deliver Growing Shareholder Value In The Years Ahead [View article]
    An article about CB&I that does not even discuss the Shaw acquisition? That is remarkable. Shaw could turn out to be a great or a disastrous acquisition, surely the author has some opinion with a few facts he can throw at the discussion? Bear in mind that with Shaw, CB&I is into nuclear energy, which could turn out be an albatross. Certainly worth talking about.
    Apr 3, 2015. 03:29 PM | 2 Likes Like |Link to Comment
  • General Electric: Well Positioned To Exploit The Looming Paradigm Shift [View article]
    ephud: Coal and nuclear plants generate electricity by boiling water to generate steam, then using the steam to run a steam turbine, which is connected to a generator. A natural gas plant burns natural gas to produce hot gases, which directly power a gas turbine. A jet engine is a type of gas turbine, and GE makes a lot of jet engines (as well as stationary natural gas turbines). In some cases, waste heat from a natural gas turbine can be used to boil water, which in turn runs a steam turbine. This is a more efficient way to use the heat from natural gas, but is more expensive than a simple cycle (once through) gas turbine.
    Apr 3, 2015. 12:01 PM | Likes Like |Link to Comment
  • General Electric: Well Positioned To Exploit The Looming Paradigm Shift [View article]
    The author seems to believe that GE will profit from the switch to natural gas from coal. Although a bit difficult to discern from the article, it appears the author believes that GE has an efficient fleet of natural gas turbines, which they will presumably sell to electrical producers who use NG. This may well be true, although of course GE has to compete with other NG turbine manufacturers like Siemens.

    However, GE also supplies steam turbines, which are used by coal fired power plants (and nuclear plants). So with the reduction in the construction of new coal fired power plants, GE will no longer be supplying steam turbines to the coal industry. So the net "paradigm shift" may amount to nothing more than substitution of natural gas turbines for steam turbines. In any case, the author does not discuss net profit on gas turbines versus steam turbines, nor does he discuss the net changes in numbers of turbines to be supplied over the next twenty years or so. I am unable to extract information from this article that would support the (apparent) thesis of the author that GE is going to earn more profit over the next 20 years selling natural gas turbines than they would selling steam turbines for coal plants. And after all, it is profit we care about, not the total number of units sold, or the total megawatt capacity.
    Apr 3, 2015. 09:13 AM | 5 Likes Like |Link to Comment
  • Whiting Petroleum - Rock-Solid Liquidity, 100% Upside [View article]
    The author makes a good case that Whiting suffered due to inept risk management, including poor decision making regarding hedges, production, and acquisitions. The author seems to indicate that the same financial management team that he roundly criticizes is still in office. If this is the case, I would expect the author's thesis to be exactly the opposite of what he suggests. I understand that the author believes the operational capability is there, but what steps has this company taken to improve their financial and risk management?
    Apr 2, 2015. 12:17 PM | 9 Likes Like |Link to Comment
  • Palladium Prices Are Suffering And HSBC Might Have It All Wrong [View article]
    What am I missing here? The author lumps palladium in with gold and platinum as a precious metal. So far as I understand, palladium is primarily used as a catalyst, particularly in the gasoline vehicle sector. So why does the author think that palladium prices will rise and fall in tandem with gold and platinum?

    The author dismisses the HSBC claim that there is greater consumption than production of palladium, which HSBC believes will lead to higher palladium prices. The HSBC thesis is scarcely revolutionary, if in fact palladium production is lower than consumption, eventually stocks of palladium will be drawn down, and the price should increase. This seems reasonable. I cannot follow the author's thesis as to why palladium prices would continue to fall, perhaps he can enlighten me.
    Apr 1, 2015. 09:16 AM | Likes Like |Link to Comment
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