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DanielHolzman

DanielHolzman
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  • Why You Should Consider Buying Pentair Now [View article]
    "Pentair's multiple has not been this low this year, and it is unlikely that Pentair's multiple will contract any further."

    A P/E ratio of 21 is typical of a rapidly growing company, maybe in the tech sector, rather than a solid if unspectacular industrial company, where I would expect a P/E closer to 15. Perhaps the stock reduction is simply the market valuing Pentair at close to a P/E of 15 rather than recently inflated values? Given what appears to be a slowing world economy, maybe the stock still has a way to drop before it reaches a realistic valuation. Maybe the irrationality is the high P/E ratio the market previously afforded this company, not the recent drop in price, which seems like it may have been inevitable.
    Oct 19 08:25 PM | 1 Like Like |Link to Comment
  • Why The Stock Market May Have Found A Bottom And What To Buy Now [View article]
    "Dividend payers have historically outperformed non-dividend payers with less risk."

    This is a pretty remarkable claim, I would have thought you would back up such a strong statement with equally strong sources. I don't even know how you define the word "risk" in the quote, let alone how you measure it. As I recall, Eastman Kodak had an unblemished record of paying dividends, right up to the point where it went bankrupt.
    Oct 19 08:03 PM | 1 Like Like |Link to Comment
  • A Textbook Model Of Dividend Predictability [View article]
    The discounted cash flow model is fine so long as the analyst can accurately predict future payouts, in your case dividends. Since the net present value of any stream of income is heavily dependent on payouts that will occur five or more years down the road, it is clearly essential to accurately estimate dividends in the distant future correctly in order to apply the model. I question how this is possible with a REIT, or for that matter any financial instrument with significant volatility. If you are arguing that historical payouts over say the last decade are accurate predictors of future payouts, I have to wonder what possible basis there is for such a claim.

    Drops in the share price of REITS over the summer, by your account due to overblown fears of interest rate rise, is simply one example of how the landscape for REITS can change rapidly. And you have previously noted in your articles that the dividend payout for some REITS was cut substantially in the past year. I suppose you could argue that O is resistant to dividend cuts because of it's business model, but if that is truly the argument, you would need to demonstrate that there is a high probability that the business model will continue to function substantially unchanged many years down the road in order to apply the discounted cash flow model. I don't see how this is possible.

    The DCF model works fine for truly predictable assets like treasury bills or toll roads. Not so applicable in my opinion to stocks, REITS, or commodity producers.
    Oct 18 10:50 AM | 9 Likes Like |Link to Comment
  • Southwestern Energy: The Acquired Assets Are Top Quality, But Not Inexpensive [View article]
    Interesting article. Perhaps the author can comment on the takeaway capacity in the areas where the acreage was acquired. Ultimately the value of the acreage would seem to be heavily dependent on the cost and availability of pipelines to transport the gas.
    Oct 18 08:41 AM | 1 Like Like |Link to Comment
  • Irrational Ebola Fears: What To Do And What Not To Do [View article]
    I appreciate the author educating us on the dangers (or not) of ebola. Still, the author's thesis, stated in the first bullet, is that markets are being crushed in part due to fear of ebola. When I expressed skepticism, pointing out that not all stocks are being crushed (consumer staples are up, certain mining stocks are up) the author replies that I cannot prove that the ebola hysteria is not negatively impacting stocks. This is true, I can't prove anything, but I did not write an article claiming causality in the first bullet.

    So if the markets are being crushed due to ebola panic, why would they have enjoyed such a nice rally today, in the face of additional cases in the U.S. Seems odd that one week irrational paranoia is crushing the market, yet at the end of the week, with no good news on the ebola front, the markets recover. Perhaps the ebola outbreak, like outbreaks of other rare diseases, gets a lot of media attention, but in the end has little to do with the daily grind of the market. Perhaps better to focus on fundamentals like interest rates, sector growth, supply and demand, new technologies, than Fox News paranoia.
    Oct 17 07:15 PM | Likes Like |Link to Comment
  • How Much Does It Cost To Produce 1 Barrel Of Oil (African Oil Producers, 2013) [View article]
    "1 boe of gas ($100 versus $6)"

    Help me out with the arithmetic. You said that 1 barrel of oil was assumed to equal 6000 cubic feet of gas. Then you said that 1000 scf of gas sells for about $6. So wouldn't one boe of gas be $36? As to the equivalency concept, is the theory that you have the same energy content in one barrel of oil as in 6000 standard cubic feet of gas?
    Oct 17 08:05 AM | Likes Like |Link to Comment
  • Irrational Ebola Fears: What To Do And What Not To Do [View article]
    I do not see any evidence in your article connecting ebola with the market downturn. What basis do you have to conclude that an extremely rare disease, relatively easily controlled by your own admission, would have such a dramatic effect on the market, and in particular the energy stocks and tech stocks? But no similar effect on real estate trusts or consumer staples? Isn't it just as likely that the ebola outbreak happens to coincide with a natural correction to the market, and has no more causality than the large typhoon that hit Asia, or the eruption of a volcano in Japan?
    Oct 15 09:19 PM | Likes Like |Link to Comment
  • Annaly: Understanding Interest Rates [View article]
    "If we see a continued decline in long yields, Annaly's book value would continue to rise, which should theoretically translate to a higher stock price."

    I don't understand why book value is related to the price Annaly stock sells for, so maybe the author can help me out here. Isn't the average investor paying for future dividends, less whatever they value risk at? How exactly does book value enter into the price an investor is willing to pay for the stock at auction?
    Oct 14 05:54 PM | Likes Like |Link to Comment
  • Arch Coal: Any Chance Of A Rebound? [View article]
    Isn't it possible that ACI will voluntarily declare bankruptcy, much like GTAT did recently, to eliminate debt, pensions etc? After all, why wait until cash flow crushes the company, the American way is to get ahead of the game, declare bankruptcy, reorganize, continue to mine coal, meanwhile your stockholders get clobbered, and your workers lose their pension.
    Oct 13 10:08 PM | 1 Like Like |Link to Comment
  • My Vision Of What The 'Perfect Retirement Portfolios For Dummies' Might Look Like [View article]
    If the average portfolio at retirement is $200,000, and the average person gets about 4% dividend as you note in your article, then the average person is going to receive about $8,000 per year in dividends in the first year. This will increase over time based on your analysis, hopefully faster than inflation. Regardless, $8,000 per year is a small amount of income, not even close to allowing a retiree to live, even if you add in social security (maybe $20,000 per year), living on a total of $28K per year is pretty tough, even if you have paid off your house and have zero additional debt.

    So it would seem that the average person is going to need to sell some of their stock each year just to live. Or they are going to need to figure out how to live near or below the poverty line. Assuming they need to sell off stock each year to survive, how does that affect your portfolio selection?
    Oct 12 10:55 AM | 7 Likes Like |Link to Comment
  • Investment Strategy: How To Start When There Are Fears And Concerns? [View article]
    In the critical section of your article, the part entitled "Do you like a sale?", you make the reasonable point that the best reaction to a drop in share price is to determine the cause of the drop. Clearly if you know the reason for the drop, it is possible to make an effective response, i.e. buy more shares, hold, or sell shares.

    Unfortunately you offer no clues as to how to determine the reason for a drop in share price. You offer a few possible reasons why a drop could occur, i.e. business conditions deteriorate, investor panic, general drop in the market, but simply listing possible reasons offers the investor no clue as to how to determine the underlying reason for the drop. Since the price of a share is determined in a market auction, the only way to determine the underlying reason for a drop in price would be to conduct an accurate poll of each investor who bought or sold shares that day, and ask them why they bought or sold at a certain price. To the best of my knowledge, this sort of poll is not conducted. Any conclusion about the underlying reason why stock X dropped or gained on a given day is speculative at best, and involves making assumptions about the interpretation of external events by individual investors. Since there is no way to validate the assumptions, my conclusion is that while there are certainly underlying reasons why a given stock rises or falls on a given day, this information is not available to the mortal man. So I see no practical way to implement your recommendation about staying calm, determining the cause of the drop, and reacting appropriately.
    Oct 11 09:47 AM | Likes Like |Link to Comment
  • Why I Now Recommend Armour Residential REIT [View article]
    I have to echo tstreet's comment. The article argues that the intrinsic value of an MREIT is proportional to the interest spread. This is presented without reference or proof. It seems reasonable, but the fact that MREITS have been declining over the past six months, even though the spread has apparently not been tightening, suggests there is more to the stock price of an MREIT than the interest spread.

    I am unclear from reading this article why the author believes that this particular MREIT has reached bottom. Certainly the return seems to be favorable, but when the distributions are so high, perhaps there are fundamental reasons for caution not discussed in this article.
    Oct 5 02:05 PM | 3 Likes Like |Link to Comment
  • Nuclear Reactor Outages & Their Impact On Natural Gas Price: Another Strike Against The Bullish Case [View article]
    I would like to thank the author for an interesting piece on an undercovered topic. I have a few relatively minor issues with the article.

    First, the author states, but does not demonstrate via reference, that natural gas is the substitution for lost nuclear power. This is not at all clear, since as has been pointed out by others in the comment section, there appears to be a relatively large number of idled coal power plants available to pick up the slack.

    The author notes that coal and gas are used for peak power production, but this is not really accurate. Natural gas and hydropower are good for peak power production, since both can typically be ramped up very quickly, even from a cold shutdown condition (hydro plants I have worked at can go from shutdown to full power in less than five minutes, natural gas plants can generally be ramped up in less than0 minutes). Coal fired plants on average take about nine hours to start from cold shutdown (http://1.usa.gov/1rOu13p). This makes them unsuitable for peak power production, at least from a cold shutdown condition.

    I don't disagree with the author's conclusion that natural gas pricing is unlikely to benefit from nuclear plant shutdowns, if anything I think the substitution of coal baseload for nuclear will dampen the price response to near zero.
    Oct 5 09:47 AM | 1 Like Like |Link to Comment
  • Praxair: An Exciting Boring Stock [View article]
    I want to thank the author for an interesting article on a large, though apparently relatively unknown, company. I understand the author's point that Praxair is a stable, slowly growing company. I don't follow the author's point that Praxair deserves a higher P/E ratio than similar industrial companies. The author seems to take it on faith that Praxair owns a moat of proprietary technology not easily copied by others, yet the author does not seem to mention any specific technology, other than the apparently experimental dry frac system, that supports this claim.

    There are several other companies in the gas business, including Air Liquide and Airgas that would presumably have been interesting to compare to Praxair. Don't misunderstand my comment, Praxair is a long standing, well run company that produces essential products, and is unlikely to crash as a company any time soon, but the issue is whether Praxair stock is overvalued. Certainly if one is going to justify what appears to be premium value, some discussion about exactly what Praxair offers that is premium would be in order.
    Sep 29 07:13 PM | 1 Like Like |Link to Comment
  • EVs Are Winning, So Is Tesla [View article]
    It is far from clear or obvious that this article supports the author's claim that the present adoption rate of BEV's means they will ultimately take a significant share of the total vehicle market. History is full of seemingly great ideas that promise to displace the existing, competing idea, but ultimately take only partial or even negligible market share. For example, the jet engine is certainly a remarkable invention, yet the majority of aircraft sold every year are piston driven ICE's. This is due to the cost of a jet engine, and the better efficiency of piston engines at low speed and low altitude.

    The steel stud is arguably far better than the wooden stud, it does not warp or twist, yet the vast majority of houses use no steel studs, despite that they have been around for at least 40 years. This is not simply a cost issue, it is more of a cultural issue.

    I have no idea what percentage of the total market will be BEV, PHEVs. gas engines, diesels, fuel cells, something else in 20 years. But it is certainly plausible that BEVs will attain a small but perhaps meaningful part of the total picture, then plateau or even decline. Picking winners in such a complex investment space is difficult at best, but I don't see how the author's article supports the thesis that BEV's are taking over, or even grabbing more than a toehold.
    Sep 29 08:13 AM | 8 Likes Like |Link to Comment
COMMENTS STATS
499 Comments
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