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MikeFromNZ

MikeFromNZ
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  • Aflac: The Perfect Japanese Short? [View article]
    1. Aren't the liabilities of AFL's Japanese operations also in Yen? So if Japan monetizes rather than defaults -- which seems likely, since they have nothing to gain through outright default -- won't AFL's liabilities also decline? So you need to know AFL's net Yen exposure, including assets, liabilities, and derivatives.
    2. If you agree that Japan will monetize rather than default, you should be short the Yen directly, not an equity (or other indirect proxy, since indirect proxies often behave in unpredictable ways).
    3. There are countless ways to lose money on shorts even if you have a good thesis, including timing, corporate actions (acquisitions, dividends, private equity deals, etc.).
    Sep 26 11:49 PM | Likes Like |Link to Comment
  • Gafisa S.A.: The Only Homebuilder I'd Consider Buying at Present [View article]
    GFA is down 67%, the XHB is up 77% (through today) ... and CHCI is up 142% since the original was published on 7/11/2011.
    Jun 19 01:41 PM | Likes Like |Link to Comment
  • Herbalife - A Case History In Bad Due Diligence [View article]
    I can't believe how gullible you all are.

    Hempton visits one (yes, you read that correctly) club (in Queens, no less -- with an interpreter, of course, because it's Hispanic, you understand, and without an interpreter our intrepid Crocodile-Dundee-inspired Jack "Due Diligence" Hempton would have no clue what's going down), skewers Ackman with the ever-populist rich-Ivy League-educated-but-dm-as ("Harvard educated billionaire New York hedge fund manager ... with a misplaced silver spoon that ... could not stop to sit on a subway for thirty minutes and talk with poor people for ninety minutes ... [with] the most easily-falsified thesis I have seen from a major hedge fund ever" -- no hyperbole there, for sure) ... and -- surprise, surprise -- gets himself widely quoted in the financial press and interviewed on TV.

    To paraphrase Mr. Due Diligence, "what this story is really about" is return on investment: for the cost of one return subway ride to Queens and 90 (75, if you actually read the blog posting) minutes talking to poor people through a "translator" (undoubtedly the biggest cost of this stunt), the manager of formerly obscure antipodean hedge fund gets killer free publicity, courtesy of our esteemed financial press, fanned by unwitting social marketers -- yes, that's you (shriek).

    It's Bronte Capital -- not Herbalife -- that has the best advertising possible -- word of mouth from the financial media -- and Seeking Alpha bloggers who have taken his Australian shark bait hook, line and synker (as in "Sydney").

    Drongos!
    Jan 16 08:39 PM | 1 Like Like |Link to Comment
  • Odyssey Marine Exploration: The Perfect Stock For A Choppy Market [View article]
    The most compelling reason to be long OMEX is for the option value of a reasonable settlement of the Black Swan case with Spain. While we think it's unlikely that OMEX will ultimately prevail on appeal, Spain and OMEX would both benefit from a reasonable settlement -- which is more likely, in our view, following the change of administration in Spain.
    Dec 22 02:08 PM | Likes Like |Link to Comment
  • Record Silver Booty For Odyssey Marine Exploration [View article]
    More interesting would be a settlement between OMEX and Spain over the "Black Swann". We believe that OMEX is very unlikely to prevail in the courts, but a reasonable settlement would benefit both parties -- and potentially be a significant positive for OMEX's cash balances -- and stock price.
    Sep 28 01:10 PM | Likes Like |Link to Comment
  • Siga's Setback Promises Gains For PharmAthene [View article]
    SIGA has lost ~ $115M in market cap and PIP has gained ~ $0m in market cap since the ruling ... seems like there must be an opportunity here somewhere? Maybe both stocks would gain if they could settle their litigation and move on? Why doesn't SIGA acquire PIP? Or vice versa?
    Sep 26 02:11 PM | Likes Like |Link to Comment
  • A Look At Satyam Computer Services Ltd. [View article]
    At Friday's closing price of $2.71/ADR, SAYCY's market cap is approx. $1.6B (based on 1.1767B shares or 588.3M ADRs outstanding). Unfortunately SAYCY didn't release a balance sheet with its June earnings report, but assuming that cash was flat from March to June (which seems conservative, given that SAYCY earned $50M in the June quarter), SAYCY's enterprise value (market cap less net cash) is approx. $1.0B. SAYCY is thus trading at approx. 5x EV/EBITDA (annualizing the June quarter's EBITDA of $46M).

    This is absurdly cheap given: (i) the quality of SAYCY's business (SAYCY's peers have among the highest margins of any business on the planet); (ii) SAYCY's business has tremendous momentum, with revenues growing 15% YoY and 4% QoQ in the June quarter; (iii) margins should continue to improve with utilization as the company's turnaround gains traction.

    The ADRs may continue to be under pressure in the short-term as US holders who don't want to own Indian shares dump their stock. But at the end of the day you own shares in a world-class company with strong business momentum that trades at a fraction of its peers and ultimately will get taken out by its parent ... hopefully at a premium ... but no-one knows when or how much they'll pay.
    Sep 5 09:43 PM | Likes Like |Link to Comment
  • Why Value Investors Should Take A Look At For-Profit Education Companies [View article]
    I agree that the group is cheap. I also agree that the stocks will run once analysts stop cutting their numbers -- assuming nothing material comes of the various investigations. The key is for new starts to (at least) meet lowered expectations. However, given that most companies in the group are reporting declines in new starts, it's misleading to value the stocks based on trailing FCF -- but it's a good place to start.
    Aug 31 04:30 PM | Likes Like |Link to Comment
  • 10 Undervalued Financial Stocks With Explosive Earning Growth [View article]
    CISG's founder/CEO, in partnership with TPG Asia, has made a "non-binding going-private proposal" to take CISG private at $19/ADS, and the company appointed financial and legal advisors to evaluate the proposal on June 13. It remains to be seen if the deal will go through, but that's a 41% return from where the stock closed today -- and the annualized return could be many times that, depending on if/when the deal closes.
    Aug 17 07:17 PM | Likes Like |Link to Comment
  • VIX Backwardation: Usually a Fleeting Phenomena [View article]
    We placed exactly the same bet (buying XIV at the close on Wednesday -- we had been long the VXX as a hedge, and liquidated our hedge at the close on Monday).

    Maybe this is just wishful thinking, but IF volatility does decline (no guarantee, of course), then the current backwardation could immediately revert to the more typical contango. The XIV would then benefit BOTH from a decline in the value of the underlying AND a shift in the term structure.

    So while it may be wrong to completely ignore the term structure, it can also be misleading to use static analysis (that assumes stability in the term structure). To do this properly, you probably need to use numerical methods (such as Monte Carlo simulation).

    In the absence of numerical methods, Bill's intuition seems correct: XIV's attractiveness as a vehicle for betting against volatility depends primarily on the trajectory of the underlying and/but secondarily on the speed at which it achieves that trajectory.
    Aug 14 04:25 PM | Likes Like |Link to Comment
  • The VIX Can't Stay Elevated Forever [View article]
    to state the obvious: you can make money short the VXX (or long the XIV) even if the market doesn't rally. But you can also lose money short the VXX if volatility continues to spike higher.
    Aug 12 11:57 AM | Likes Like |Link to Comment
  • Mortgage Insurers Have Another Leg Down to Go [View article]
    Interesting article, but you have to wonder if at least some of the bad news is priced in here. The group is obviously cheap -- MTG, for example, trades at 50% of book value, and appears to be reasonably well capitalized -- at least relative to its peers. Of course that book value may be illusory, especially if housing prices continue to decline -- or if MTG dilutes shareholders by raising more capital. Anything that is perceived as having the ability to put a floor under housing prices (sorry, I couldn't resist) would be a huge positive for MTG and the rest of the group. There's chatter, for example, about the government going into the rental business rather than dumping more foreclosures on the market. Given current levels of pessimism about the housing market and MTG's valuation, there could be a trade on the long side here.

    Disclosure: we bought MTG today at the close.
    Jul 29 04:19 PM | Likes Like |Link to Comment
  • 7 Cash Rich Companies: Use Put Options to Maximize Returns [View article]
    BBSI and QXM are also interesting given their cash balances.
    Jul 19 01:22 PM | Likes Like |Link to Comment
  • Everything You Could Possibly Want to Know About Shengkai Innovations [View article]
    This is hardly an original observation (based on comments posted on previous VALV articles) but it's disturbing that VALV keeps diluting stockholders by issuing more shares:

    1. Higher fraud risk (real and perceived)
    2. Dilutive to shareholders
    3. Dependence on continued access to capital markets
    Jul 17 09:15 PM | Likes Like |Link to Comment
  • Gafisa S.A.: The Only Homebuilder I'd Consider Buying at Present [View article]
    CHCI appears to have resolved its near-term liquidity issues:

    ir.comstockhomes.com/r...
    Jul 13 09:54 AM | Likes Like |Link to Comment
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