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DanielHolzman

DanielHolzman
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  • Valero Energy, Deep Long-Term Value Stock [View article]
    Perhaps the author can discuss why in his opinion the historical P/E ratio for refiners is so much lower than the historical P/E ratio for other industrial companies. The article suggests that Valero is a strong business, but for reasons not discussed in the article, the market does not seem to value the stock in line with the apparent value of the business (low P/E ratio). For the price of the stock to increase, either Valero needs to earn more profit, or the P/E ratio for the stock needs to increase. Maybe I missed it, but there seems to be little in the article that discusses exactly how Valero can increase profits, and there is nothing in the article that suggests any reason why the P/E ratio will increase in the future.
    Sep 15 11:08 AM | Likes Like |Link to Comment
  • It's Time To Short Natural Gas [View article]
    I have to agree with Vermuts comment, your chart is difficult, maybe impossible to decipher. The definition of the word "change" is the difference between two values. Presumably this means that a red bar (representing change in storage) that is POSITIVE means there has been an increase in storage. So this contradicts your statement. For example, you say that "This trend in falling price finally stopped in April of 2012 as inventory levels once again started to fall."

    Your chart shows that the CHANGE in inventory was +800 (you don't list units) in April 2012, so by the definition of the word change, there should have been an INCREASE in storage of 800 units in April 2012. Maybe you mean that the rate of increase of storage began to decrease in April 2012, which would be supported by your chart, but certainly this is a completely different thesis than the one you presented in your article. Some clarification would be useful.
    Sep 9 06:23 PM | Likes Like |Link to Comment
  • Utility Stocks And Rising Interest Rates [View article]
    I think your article clearly demonstrates that there is little or no causal connection between interest rates and utility profitability, which I assume (without proof) drives utililty prices. This is not really surprising. A utility earns money by borrowing money (often using long term bonds), building power plants, then selling the power at regulated rates. There are unregulated utilities, which are more difficult to model since the price they receive for their product is subject to the whims of the market, but the majority of investors are probably purchasing regulated utilities like Duke or Con Edison.

    So for regulated utilities, the business model is relatively simple, you borrow money using bonds, you build power plants, you sell the electricity (or perhaps the water or gas). You earn profits based on the spread between your cost of borrowing and the regulated price you get for the product. The regulatory commissions are generally pretty cozy with the utilities, they don't want Duke to go out of business, so the utilities present a rate case every year, and do their best to maximize the spread between utility cost and earnings from sale of power.

    If interest rates rise, resulting in higher costs to the utility, then the regulatory commission may grant a higher utility rate, with no impact to utility profits. It's all in the spread, the actual interest rate is only one factor in determining the cost to the utility to generate power.

    Of perhaps greater interest going forward is the ability of an individual utility to adjust to what looks like a future where distributed power is going to start challenging centralized utility production. Small scale solar and wind that is non-utility generated, but tied to the grid using batteries for backup, is likely to have significant impact on utility profitability, since the utilities may face a future of reduced sales of power. If the utility sales go flat or decrease, utilities will be faced with large costs for legacy power plants that are operating below optimum capacity. Decommissioning costs, especially for nuclear plants, are very high, and may not be fully funded by the regulatory commissions. I agree with the author, rising interest rates are not a direct problem for utility companies, but global changes in the production, storage and distribution of power look like a major challenge, especially for conservative, slow moving utility companies that fail to understand the issues and respond effectively.
    Sep 7 10:52 AM | 1 Like Like |Link to Comment
  • Retirement Strategy: Avoiding Uncertainty Makes More Sense Than Dealing With It [View article]
    I appreciate the author's point that one should not knowingly accept risk without adequate compensation. However, there is not a stock or bond on the planet that does not carry some risk of loss of capital or dividends, so selling TAXI and buying something else does not necessarily eliminate risk, it simply transfers the risk to the new purchase. The title of the article seems to imply that avoiding uncertainty (risk) is better than dealing with it, but I am sure the author would agree that it is impossible to avoid uncertainty in an uncertain world, so no matter what you purchase, you need to perform due diligence, understand the risks, and satisfy yourself that the compensation for the risk is adequate. There are no risk free investments, there are no investments free of uncertainty, short I suppose of having a portfolio which is entirely cash (no uncertainty, guaranteed loss of principal due to inflation).
    Aug 25 09:30 PM | 3 Likes Like |Link to Comment
  • 8 Cheap Dividend Growth Stars You Must Know [View article]
    I guess I am a bit puzzled by your article. In full disclosure, I own ABB stock. I do not understand how you reach the conclusion that ABB is cheap at the current rate. Not saying it isn't, just that I did not see any analysis in your article that would support the conclusion. The P/E ratio is close to 20, which is somewhat higher than the "traditional" P/E ratio (often quoted as 15) for a large company engaged primarily in the manufacturing and installation of electrical equipment.

    ABB makes high quality products, but their product mix is not discussed in your article. ABB has been growing relatively slowly in the last few years, and has strong competition from Siemens, GE, Hitachi, and Mitsubishi. But there was nothing in your article discussing their strategic position, long term growth strategy, threats to their positioning, risks, or any of the usual topics that seem to occupy most fundamental analysts on this website. So exactly what is it about ABB (and the other companies you mentioned) that causes you to think they are cheap?
    Aug 19 06:06 PM | 4 Likes Like |Link to Comment
  • The Same Returns With Half The Risk? [View article]
    I am not sure I understand the fundamental premise of your article. The title is "The Same Returns With Half the Risk". The article notes that your beta is very low. Are you equating beta with risk? The idea of equating beta and risk has been discussed numerous times on this and other financial forums.

    Although there appear to be many different definitions of risk, I think it is fair to say that most people think that risk is the potential for loss of money, either in the form of capital, dividends, or interest. Beta is a statistical concept that measures the fluctuation of a time varying series, such as the value of a stock, the returns of the stock, the payment of interest etc. I have never understood why anyone thinks there is any relationship between beta and risk.

    If a stock continuously increases in value, but does so in widely varying increments, it will be a high beta stock. Of course, any stock that continuously increases in value would be considered a zero risk stock by most people. Of course there is no guarantee that the price of a given stock will continuously increase, but you get the point, a high beta stock may be more, less or just as risky as a low or even zero beta stock. In the case of your portfolio, which seems to have 65% bonds, there is always the potential for substantial loss of principal if interest rates rise significantly. Low beta or not, your risks have everything to do with which way an investment moves. If your investment moves up, high beta means bigger profits, if your investment moves down, high beta means bigger losses. But beta itself, so far as I can tell, says nothing about intrinsic risk.
    Aug 15 05:18 PM | 2 Likes Like |Link to Comment
  • The Big Short - The Need For An Externality In A Short [View article]
    "While in the long run, a stock price is determined by fundamentals"

    I have heard this statement repeated many times, yet I have never seen any documentation that it is true. In your article, you take pains to demonstrate that Tesla valuation has little or nothing to do with its underlying fundamentals, and you note that this can continue for quite some time. Similarly, some stocks appear to be characteristically undervalued versus their apparent fundamentals, example Ford is claimed to be seriously undervalued by numerous "analysts" on SA.

    In fact, isn't it just as likely that a stock almost NEVER is valued close to its "fundamental" value, in fact it seesaws around seemingly randomly, based on perceptions, crowd behavior, or who knows what. So I suggest that for many stocks, perhaps most stocks, there is absolutely no meaning attached to the claim that in the long run the value of the stock is determined by its discounted cash flow, or whatever measure you elect to measure "fundamental" or intrinsic value. At any given time, the stock is either above or below intrinsic value, so how can one claim that its value in the long run tracks fundamentals?
    Aug 9 08:20 PM | 2 Likes Like |Link to Comment
  • Lynden Energy - Unknown Permian Basin Pure Play Could Triple [View article]
    Thank you for an interesting article on a relatively unknown company. I notice you refer to the company as a junior oil company. In the mining industry which I am more familiar with, a junior miner is generally a small company in the exploratory business, so typically they have a site, but lack permits, and have no production. This company seems to be actively drilling. And producing oil, so I don't follow why they are a junior company, aside from their small capitalization. Perhaps the author can explain what junior means in the petroleum sector, and why it is important.
    Aug 3 02:51 PM | 1 Like Like |Link to Comment
  • Update: Cameco Earnings - Strong EPS, But It's Mainly A Japanese Story Right Now [View article]
    Full disclosure, I own CCJ. That said, I am puzzled as to what news you believe is positive for uranium pricing over the next year or so. As you carefully note, there are only two Japanese reactors that are even on the horizon to restart any time soon, this out of a fleet of some 55. There are only a handful of reactors likely to be completed and commissioned over the next two years worldwide. In the US alone, there are likely to be at least two, possibly three reactors taken off line permanently over the next few years (example Vermont Yankee). There are no new US reactors scheduled to come on line for at least five years.

    The Japanese have a substantial stockpile of uranium fuel that they purchased during the period their reactors were off line. There is no need for the Japanese to purchase more uranium at this time, in fact they may elect to sell a portion of their stockpile on the world market. The best that can be said for the next year is that the uranium market may remain stable, but there is no credible data suggesting any improvement in pricing over the next year or so. As a long term (+5 year) play, CCJ may be a good bet, and that is my take, but as a less than one year investment, I see little reason to purchase CCJ, or any uranium mining company for that matter.
    Aug 1 01:57 PM | 3 Likes Like |Link to Comment
  • Uranium Miners Rebound On Nuclear Renaissance Restart [View article]
    "They must turn to the safer next generation nuclear reactors."

    Is it your claim then that Japan will replace their existing 55 or so old reactors with next generation reactors? Or do you think Japan will begin a new round of nuclear plant construction in addition to restarting existing reactors? This would be a truly remarkable event, since so far as I can tell the only discussion in Japan has been to restart existing reactors after limited safety upgrades. Certainly I have heard nothing about Japan approving construction of new next generation reactors. Or are you simply speculating that Japan will turn to next generation reactors to meet their power requirements over the next twenty years, rather than simply restarting existing reactors and adding limited fossil, solar and wind power to fill in the gaps?
    Jul 17 12:10 PM | 2 Likes Like |Link to Comment
  • Cameco: Light At The End Of The Japanese Tunnel? [View article]
    "This should be positive for sentiment and send both the uranium spot and term prices higher". I don't follow how you reached this conclusion based on the contents of your article. You carefully point out that Japan continued to honor its contracts to purchase uranium, therefore presumably has at least two years stockpile of uranium. By your logic, there should be no impact on spot prices even if Japanese reactors come back on line, which of course you point out is not guaranteed, nor is the timeframe clear.

    There is no discussion in your article about the relationship of term contracts to spot pricing, nor is there any discussion about the long term consumption of uranium, so I don't see how you reach the conclusion that either spot pricing or long term pricing is likely to change in the near future. Not saying it won't, but the factors that drive spot and term pricing do not seem to be discussed in your article, so perhaps you can comment on the basis for your belief that spot and term pricing will firm in the future.
    Jul 16 01:18 PM | 2 Likes Like |Link to Comment
  • In The Land Of Irrelevant Numbers, Tesla Gave Us A Goldmine [View article]
    Help me out here. The only costs you are assigning to the charging station is the cost of electricity? What about the capital cost of installing the charging station? How about the maintenance, both scheduled and unscheduled? What about lease for the location or purchase of the location? How about insurance for the stations? These are all costs, and if you want to make a claim that the $2000 paid by the owner of a vehicle is greater than the cost of the product used, you need a discounted cash flow analysis of the entire operation, not just the cost of the electricity. What you have done is equivalent to arguing that a nuclear power plant is less expensive than a natural gas power plant because the nuclear fuel is less expensive per therm than natural gas.
    Jul 15 08:43 AM | 4 Likes Like |Link to Comment
  • Apple Is Going To Give Corning The BlackBerry Treatment [View article]
    Certainly there is no doubt that sapphire crystal (it is NOT glass, it is a crystal) is an important product, currently used extensively by the military in critical applications where scratch resistance and strength are important, and cost is not critical. The author takes a variety of undocumented examples (an internet video of someone apparently attempting to crush some sort of phone) and extrapolates that sapphire is going to eliminate Gorilla Glass or similar Corning products from the market. I doubt this will happen.

    History is full of examples of innovative products that come along and coexist with other products that perform similar functions. For examples, the majority of aircraft manufactured today still use piston driven engines, even though the jet engine unquestionably has better power to weight ratio, and operates at a higher ceiling, and was invented more than 70 years ago. Why is this? The piston engine is less expensive to manufacture, and has better fuel efficiency, this retains a niche where cost and fuel efficiency are more important than power and weight.

    There are thousands, maybe millions of examples, of products that coexist due to differing performance characteristics. I have no doubt that sapphire will attain market share, in fact I own stock in GTAT, but I have little doubt that Corning will do just fine with their products, albeit in a different niche.
    Jul 14 02:02 PM | 9 Likes Like |Link to Comment
  • Timken: 'Bearing' All And Still Looking Good [View article]
    Interesting article on an interesting company. I noticed that there was a lot of financial discussion, but little discussion about management's ability to actually develop new products, bring them to market, and earn profits. There was also a one line note about certain risks, not enumerated, that could impact Timken (the bearing company). Perhaps the author can comment on the underlying business model. Does Timken make unusual products that cannot be easily duplicated or undercut by the competition? Is 4% for R&D adequate to develop new products, or is this an old line business that changes slowly and does not need substantial R&D effort? Who are their main competitors, and are they gaining or losing in the bearing wars?

    The P/E ration seems pretty high for an industrial company, perhaps justified if Timken makes high tech items that command a premium position in the industry. But do they?
    Jul 12 08:37 AM | Likes Like |Link to Comment
  • Penn Virginia: Expanding The Marl Position [View article]
    I don't really understand much about leasing concepts in the oil and gas business, perhaps the author can help me out. When you say they "acquired" land, does that mean they purchased the land, and can drill it any time they like? Did they purchase the right to drill only (i.e. the mineral rights), and are there restrictions on the timing, number of wells, or limitations on drilling means and methods? Do they owe residual payments to owners of the land in the event they extract hydrocarbons? Do they need to post a bond to carry costs of cleanup of the well post production? It would seem that all of these factors would influence whether they got a good deal on the property, yet I did not see anything in the article that discussed their rights and obligations with respect to the acquisition. How to tell if this is a pig in the poke, or a potential cash cow?
    Jul 12 08:27 AM | Likes Like |Link to Comment
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