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DanielHolzman

DanielHolzman
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  • Silver Can Triple Once It Finds A Bottom [View article]
    Exactly what method does the author plan to use to identify the bottom, off of which he anticipates silver to rally?
    Jul 28, 2015. 07:31 PM | 1 Like Like |Link to Comment
  • Caterpillar: Now Is The Best Time To Buy Since The Great Recession [View article]
    "Now is the best time in the last 5 years to buy Caterpillar stock based on its dividend yield."

    I would appreciate it if the author would explain this sentence a little more. Is the author saying that you get a better yield now than at any time over the last five years, so an investor focused solely on dividends would find this a good time to buy? Or does the author believe that a high yield period suggests that the stock will increase in value during some realistic investment timeframe?

    From my limited understanding of accounting, yield seems to be a simple ratio of dividends to price, and I fail to see any rational link between yield and the future direction of stock movement. My sense is that even the most rabid dividend growth investor would be reluctant to purchase a stock such as CAT if they felt that prospects for stock price appreciation over the next few years were limited, or worse that the stock price were likely to fall by more than the value of the dividends.
    Jul 22, 2015. 03:08 PM | 2 Likes Like |Link to Comment
  • Tesla: Why The Smart Money Is Short [View article]
    "The discussion of any stock must first start with the implicit consideration that one is not buying a ticker, some existential piece of property that exists outside of the crests and troughs of the business environment, but a part ownership of a company and the future earnings that will follow"

    I realize this probably sounds obvious, even inevitable, to the author. But I have to question this fundamental assertion. If you clearly think things through, most people realize that they are not really buying an interest in a company when they buy stock. If you really owned part of a company, then you would have a right to tell the company how to run their business, at least to the extent of your ownership. Clearly this does not happen with the average owner of a tiny percentage of a company, in fact it rarely happens even with a large owner of a company.

    The value of the company may be closely related to its long term profitability, but the same cannot be said about the stock price. Stock prices meander all over the map, based on what price the individual investors are willing to pay at a given time. Any claim that individual investors assign a specific value to a stock based on some sort of mental or actual calculations that have future earnings at their heart requires evidence, not simply an assertion. For every investor, there is likely a complicated set of beliefs and assumptions that drive the price they will pay for the stock. For all any of us know, the majority of underlying beliefs and assumptions may not even be known by the investor, they may reside in the subconscious.

    So for Tesla, I suspect this is a company that is closer to having a cult following, rather than a following who performs a rigorous calculus of potential future earnings. And as a note, I can totally understand it. I recently test drove a Tesla, and it was something like a religious experience. This is a beautifully built car with astonishing performance. If Tesla can actually build a $35,000 version of what they have now, sign me up. And for all I, and the author, know, there is a huge following out there of people willing to pay a premium for the stock based on their love of the vehicle, not some sophisticated analysis of future profitability. Will this last forever? Unlikely, but predicting when the bloom comes off the rose is difficult, maybe impossible.
    Jul 21, 2015. 08:03 PM | 8 Likes Like |Link to Comment
  • Consol Has The Assets To Flourish [View article]
    Maybe I did not fully understand your article. There is no discussion that I could see about the Consol business model. Can they make money by laying off people and cutting Capex? If their strategy is as the author suggests, specifically holding off on production, can they afford to pay their debt? And given that they apparently still have coal assets, can they earn a profit mining coal?

    I understand the principle of waiting for prices to rebound before extracting minerals, but if you have debt to pay, the company may not be in a position to wait.
    Jul 21, 2015. 03:08 PM | Likes Like |Link to Comment
  • Linn Energy - Buy When There's Blood In The Streets [View article]
    Most likely most people reading this article have a good grasp on how Linn Energy operates, unfortunately I do not. Reading through their website provides limited useful information. As near as I can tell, Linn Energy is an oil and gas producer, with a lot of properties and a lot of debt to go with it. According to my Fidelity website, the last time they earned a quarterly profit was August 8, 2013.

    Many on SA say that debt is fine as long as it is manageable, meaning the company can afford to pay it, or is growing so rapidly that they will be able to cover current costs with future earnings. Does the author feel that Linn Energy is likely to be able to cover their long term debt if oil and gas prices do not increase? If they are counting on increased oil and gas prices to bail them out, perhaps voluntary bankruptcy is the best option, much like GTAT and several of the coal companies. After all, bankruptcy is a well accepted American tradition, it gets rid of debt, wipes out pensions, eliminates union contracts etc., and allows the company to emerge leaner and perhaps profitable (GM is a notable recent example that comes to mind).

    So why not voluntary bankruptcy? It would seem that management made a miscalculation buying all the properties only to face falling prices, so what is the advantage to hanging on in the face of severe headwinds? Molycorp comes to mind, there were many on this forum who argued that Molycorp had adequate resources to hang on, yet the fact is they are now bankrupt. Perhaps a similar fate for Linn?
    Jul 20, 2015. 11:01 AM | 7 Likes Like |Link to Comment
  • Century Aluminum Grows More Attractive With Each Leg Down [View article]
    The author seems to believe that this is a well managed company with outstanding fundamentals, and a strong future. Yet he ends the article suggesting that now is not the time to buy, but rather wait for a "clear level of support to rally off". Perhaps the author can explain exactly what a clear level of support means. Is this some sort of chart reading exercise? I have never understood the meaning of chartist words, they use all sorts of terms that seem to have no precise definition, or the definition changes from chartist to chartist, or various chartists cannot agree on what they are looking at. So perhaps the author can explain what he means by a level of support, how will he recognize it, and how much of a purchase does he plan to make when he gets the appropriate signal?
    Jul 18, 2015. 06:44 PM | Likes Like |Link to Comment
  • CSX: Coal Worries Shouldn't Last In The Long Run [View article]
    I appreciate the author's discussion about an important sector, and an important player in the sector. I find it interesting that the author shows charts from Alpha Natural Resources and Peabody Energy to bolster his thesis that coal shipment quantities may increase over the next few years. Considering that these two names are bankruptcy candidates due in large measure to poor planning and overpriced purchases of competitors, I would heavily discount anything Alpha or Peabody has to say about future coal volumes.

    Perhaps a better way to look at CSX, or any other railroad, is whether their price earnings ratio is below or above historical average, and whether they are likely to be able to increase profitability over whatever investment timeframe is of interest. CSX is currently trading at a P/E of approximately 16, which is relatively close to historical average. Unless they find a way to increase profitability, it seems unlikely the stock will appreciate significantly over the next year anyway.

    I see little evidence that coal shipments will rebound in the next year, so what will drive CSX higher? There is nothing in this article that suggests that CSX has any tricks up its sleeve to reduce costs significantly, or increase efficiency. If oil prices rebound, the cost of diesel fuel will go up, which will negatively impact profitability. If there is a global slowdown in international trade, intermodal volumes will be impacted.

    My conclusion is that the stock is fairly priced now, and is unlikely to increase significantly in the next year. There is enough potential risk in the railroad sector that I would stay away now, and maybe revisit in a year or two.
    Jul 18, 2015. 06:33 PM | 3 Likes Like |Link to Comment
  • Utility-Scale Solar Is Unlikely To Remain Dominant [View article]
    Certainly this is an interesting article on an important topic. I believe the author is mistaken in his fundamental analysis of the true cost of distributed solar electricity. The author appears to take the position that the true cost of centralized solar electric power must take into account the grid cost associated with distributing that power to the retail customer, and I totally agree with this argument.

    However, the author appears to believe that the cost of distributed power can ignore the cost of maintaining the grid. In this sense, I believe the author has confused the COST of distributed solar with the PRICE of distributed solar. Certainly in many states there is zero cost for connecting to the grid, and in fact in some states (MA where I live is one) the distributed solar producer is effectively paid retail price for the power they feed into the grid, since the meter runs backwards, and cancels out retail power cost.

    Centralized power producers get no such break, they are paid wholesale price for the power, which may be far lower than retail. The fact that a distributed producer gets an effective cost subsidy affects the effective price the power is paid at, but masks the true cost of production. Without a grid, there would be virtually NO distributed solar production in MA, or for that matter anywhere that is subject to cloudy days with low power production. Essentially every distributed solar system in MA is connected to the grid, and the retail customer would be hard pressed to survive without the grid connection. Do we expect every retail customer to have a massive battery backup, and a backup generator if the battery fails?

    The model of grid connected solar is fine, so long as the producer pays a fair and reasonable portion of the cost of maintaining the grid they are connected to. Comparing distributed costs to centralized costs, while assigning zero grid value to the distributed producer, masks the true cost of production and use, which is likely to create poor economic decision making.
    Jul 16, 2015. 06:03 PM | 8 Likes Like |Link to Comment
  • Commodities Today: More Bad News For Coal, Monsanto Finds An Ally [View article]
    For an interesting discussion about the "conversion" of coal fired power plants to natural gas, see the following site http://bit.ly/xwlchs.

    In particular, I direct the author's attention to the following comment in the article
    "Although some coal-fired power plants are reported to have been converted from coal to natural gas, a 2010 study by the Aspen Environmental Group for the American Public Power Association reports that such "conversions," when examined, are replacements rather than retrofits:[12]"

    The first article listed by the author discusses proposed conversions, not ones that have occurred. The second article is apparently only available to subscribers.

    Although it is certainly theoretically possible to convert a coal fired plant to natural gas, there are many engineering issues that need to be addressed, including delivery of gas to the plant, retrofit of the burners, pollution control equipment, and equipment location. For a full discussion of the issues, see http://bit.ly/1LdMUWc.

    The cost and difficulty of conversion limits the number of plants worth retrofitting. Construction of new plants, on the other hand, is well understood, often very cost effective, and allows considerable flexibility in design.
    Jul 15, 2015. 09:04 PM | Likes Like |Link to Comment
  • Commodities Today: More Bad News For Coal, Monsanto Finds An Ally [View article]
    "what is the value of knowing that if all plants are converted to natural gas that a utility will not have to worry about coal ash spills from drainage sludge ponds like those recently experienced by Duke Energy (NYSE:DUK) in North Carolina? "

    There are several problems with the thesis presented in this paragraph. First, coal plants are rarely if ever "converted" to natural gas. Coal plants may be shut down, and the lost electricity is made up by running existing natural gas plants longer, or a new natural gas plant is built to replace the capacity. Second, even if every coal plant shut down, the existing coal ash sludge ponds remain as a liability essentially forever, or until bankruptcy extinguishes liability. Whether it is economically viable to continue to operate a given coal plant is a complex decision, but converting the coal plant to natural gas is unlikely to be an option.
    Jul 15, 2015. 08:45 AM | 4 Likes Like |Link to Comment
  • Coeur Mining: Higher Grades And Low Costs Will Lead To A Recovery [View article]
    "Due to improving operational efficiency and grades, it is likely that Coeur will be able to increase its production and lower costs at the same time."

    This critical sentence is in the author's Conclusion section. So one would anticipate that the most important sentence in the article, situated in the Conclusion section, would be backed up by discussion in the article itself. Unfortunately, I am unable to locate any discussion in the article that supports the conclusion that the company will be able to lower production costs while increasing production, except for a cartoon graph showing apparent cost reduction for a Silver equivalent ounce. The graph lacks backup and attribution, so it is not possible to evaluate it's accuracy.

    One has to take claims of cost reductions and simultaneous production increase with skepticism, especially as the claim seems to be based on the company purchasing someone else's project. It is unclear from the article what the true value of the acquired properties are. That can only be determined through a careful, often complex, analysis of the grade, method of extraction, and cost to operate of the mine. I would be interested to see the report on the acquired properties.
    Jul 14, 2015. 04:31 PM | 1 Like Like |Link to Comment
  • Commodities Today: This Copper Miner Is A Buy, But Too Soon To Buy Big Oil Stocks [View article]
    "There are still a lot of questions that investors want answered moving forward regarding the markets, but now that Freeport's stock price has declined considerably, along with the price of copper and WTI Crude, our feeling is that buying now is closer to the bottom than before assuming that we are not yet at the bottom (although we do feel that this is very close to the bottom, if we have not already hit it)."

    This is a really convoluted sentence that I had trouble parsing. You point out in the article that Freeport is trading near 52 week low, so mathematically of course it is closer to the bottom than it has been for 52 weeks, regardless of where the bottom is. So mathematically you are correct, however what actionable advice are you trying to convey? Do you think Freeport will decline more before it goes up? Why do you think copper is near a bottom? Is the "bottom" you refer to the absolute bottom, or a temporary bottom, to be followed by more decline? Are you suggesting that now is a good time to buy Freeport because you are long term bullish?
    Jul 10, 2015. 09:29 AM | Likes Like |Link to Comment
  • The REIT Bloodbath: Game Plan For 2nd Half [View article]
    "Clearly, the market thinks REITs are more vulnerable to interest rates than are other equities. "

    This is a curious sentence. The author takes great pains to point out that first off, interest rates have not really increased, and second even if they have, REITs are fundamentally not negatively impacted by rising rates. So either the author believes that the average REIT investor does not get it, i.e. mistakenly believes that REITs are negatively impacted by rising rates, or...the average investor is worried about something else entirely, perhaps a downturn in the economy, the potential for loss of revenue on specific properties, cosmic rays, nuclear radiation, or who knows what.

    Case 1: The average investor foolishly believes that REITs are negatively impacted by rising rates. In that case, if rates do in fact rise, as the FED seems to imply periodically, then REITs will be negatively impacted in the second half of the year. Not because there is something fundamentally wrong with REITs, but simply because investors who buy shares in REITs are concerned about rising rates, and will not pay as much.

    Case 2: Investors agree with the author, that in fact rising rates are not a problem for REITs, but are worried about something else entirely. In that case, the author is simply mistaken about the cause of the drop in REIT prices, and the article provides no clue as to the direction of REITs in the second half of the year, or for that matter at any time in the future.

    I am not arguing with the author's fundamental thesis about the intrinsic value of REITs, frankly I have no idea what the intrinsic value of a given REIT is. But as an investor who owns REITs, I suggest that just as important, maybe more important, than the fundamentals, is the belief set of the average investor. If as an average we think REITs are susceptible to higher interest rates, well then that's the ball game, isn't it. Just like the intrinsic value of a house is not generally a factor in determining actual selling price, the intrinsic value of a REIT may have little or nothing to do with the selling price.
    Jul 6, 2015. 04:15 PM | 4 Likes Like |Link to Comment
  • Coal: A Long-Term Bull Market, Fueled By Supply And Demand [View article]
    Interesting article with an interesting viewpoint. The EIA data clearly indicates that the price of coal has increased over the past five years or so, at the same time that the coal mining stocks have been severely hammered. On it's face, this makes little sense. Perhaps some of the coal mining companies are locked into long term supply agreements that prevent them from benefiting from higher prices? It seems unlikely that the cost of mining has increased over the past five years, presumably wage increases are a thing of the past, there is more automation, and the price of diesel fuel has dropped. So to what does the author attribute the massive loss of market value sustained by virtually all the coal companies? Surely a relatively small loss of market share in the generation of electricity cannot account for the massive stock price losses, especially given the author's observation that the price per ton has gone up. Something is missing here.
    Jul 2, 2015. 02:22 PM | 2 Likes Like |Link to Comment
  • Chesapeake Energy: Good News, And Nobody Cares? [View article]
    The author states repeatedly that the sale of assets is good news, and expresses disbelief that the stock price retreats in the face of good news. However, the author does not explain why he believes that this particular sale of assets is good for the company. Presumably if the assets were sold for more than fair value, that would be good, similar perhaps to getting $20,000 in the sale of a used car worth $15,000. But if the assets were sold for less than fair value, that would suggest a fire sale, and would not necessarily be good news for the company.

    Perhaps the market is (correctly) interpreting this sale as evidence of a failed business model?
    Jul 2, 2015. 07:10 AM | 7 Likes Like |Link to Comment
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