ConservativeOutperformer

ConservativeOutperformer
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  • Greenbrier: Record Profits, Huge Backlog, And A P/E Of 5?  [View article]
    Thanks for the kind words. I actually agree with a lot of what you're saying and I have followed GBX for awhile. I read a BTE Annual Report awhile back showing a doubling of oil transport via rail over the next 3-5 years, mostly due to the lack of new pipelines being approved. This got me interested in the space (GBX, ARII, RAIL, etc). The upgrade requirements should be positive as well....

    But, I'm still not convinced this makes GBX extremely attractive here. I have been rewarded (and burned) on cyclicals before. Sometimes, right when the industry is turning a corner, an external shock implodes your thesis. Or a recession hits, whatever.... Because these businesses are unstable, there's the possibility that something could happen that I might not have accounted for.... I'm just not confident in the future. The only thing that I'm sure of in regards to these investments is they need to be purchased at cycle troughs. GBX is coming off an explosion in earnings that I doubt will continue for the next 5 years. I would expect, for whatever reason or any number of reasons, earnings decline in the near future. Maybe even go negative for awhile.....

    It looks attractive. Even when I first looked at it over a year ago, and 100% higher from here, it looked moderately attractive. I just don't feel comfortable owning it. I've been wrong plenty of times before though...... Of course, if it declines another 50% from here I could change my mind haha.

    Good luck!
    Feb 12, 2016. 12:36 PM | Likes Like |Link to Comment
  • Greenbrier: Record Profits, Huge Backlog, And A P/E Of 5?  [View article]
    I like the qualitative detail in this article, but the quantitative case isn't overly convincing... At first blush this sounds absurd, but let me explain......

    The issue I have with GBX is simple.... What is a normalized operating figure? It's a tough question to answer and the primary reason this stock has such a low P/E. This is a classic case of a business that looks cheap when it's expensive and looks expensive when it's cheap, i.e. a cyclical business. Take a look at the last 10 years of operating results..... How can an honest analysis of that record dictate that the current operating figures will be maintained for the next 5 or 6 years? If we can't form a reasonable conclusion as to where the results might be this far out, we can't be certain the shares are 'cheap'. Here's an example...... In 2006, GBX made roughly $2.50 a share. 2 years later, that number was cut in half. Then it went negative, followed by a few years of nothingness. Finally, after another year of decent results, followed by a year with a 'special charge' that brought them back in the red, they improved on their 2006 earnings number. That was 8 years later.

    As another commenter mentioned above, the bear case has nothing to do with the statement below,

    'As outlined above, the primary justifications for the belief that GBX warrants a PE hovering a hair above 5 are oil related.'

    It has everything to do with a simple phrase..... 'Peak Earnings'. If GBX earns $3 this year and $1 next year, all of a sudden it's expensive. The industries are slightly different, but there were articles daily about a stock with very similar reasoning about 18 months ago. That stock was RIG. Huge backlog, low P/E, dividend, etc etc..... The comment section looked like a pack of dogs begging for leftovers. This same quote was used in those same articles,

    'Furthermore, there appears to be no danger of order cancellations.'

    GBX is in the same boat. The financials are better, but this company didn't become FCF positive until things went great... It could very well appreciate meaningfully from here. Or it could lose another 50% of its value.

    I'd write more, but my laptop battery is dying and I need to go to work.

    Good luck!
    Feb 11, 2016. 09:23 AM | Likes Like |Link to Comment
  • How Much Further To Fall Before The Market Is Cheap?  [View article]
    Recently bought a company that had a 3.25% yield, earnings growing 5-10% a year, solid balance sheet and valued at 16x the average value of the last 8 years of earnings. Not surprisingly, it's up over 20% in 2 months.

    Bought a world class company, a competitor to the one listed above, again up around 20%.

    DLTR was a $61 stock a few months ago.

    Plenty of deals out there for the people looking. And I'm talking large caps only here. These are my favorite times to invest. Most investors focus on the unimportant things......

    Good luck!
    Feb 9, 2016. 09:32 PM | 2 Likes Like |Link to Comment
  • Chesapeake Energy: Too Cheap To Ignore  [View article]
    I looked at the BHI rig count data recently and it's amazing how few are left still pumping..... From 1900+ in late 2014 to about 571 today. It's really an unprecedented decline. However, unlike the late 90's, 2002 or 2008/9 it's tough to envision a scenario where the number of rigs just goes right back up. There's just too many crap companies hanging around waiting to turn the lights back on. With interests rates so low, one could argue this is a direct result of Fed policies...... I don't see how this many boxes of old chinese food would be left in the fridge with interest rates at 6%. It's just prolonging the inevitable.

    These companies need to disappear. The Energy industry just doesn't have enough room for all of them. Hopefully with enough bankruptcies and intelligent use of the resulting assets, which will be acquired by the strongest remaining, the market can normalize. I don't see how that happens with just downright idiotic decisions like the one you outlined by CHK executives last year.

    It will take more than the MHR and PVA's of the world going bust for this cycle to exhaust itself.........

    Good luck!
    Feb 9, 2016. 09:19 PM | 1 Like Like |Link to Comment
  • Chesapeake Energy: Too Cheap To Ignore  [View article]
    So a famous investor bought it, they're looking at selling assets and it used to be valued higher.... Got it.

    Don't care about who owns it. Where it used to trade is somewhat useful, as that can be a reference point for how the collective market could potentially value this business. But selling assets? Duh? Every leveraged E&P name is looking to sell assets. The problem? Who in their right mind would buy right now when all these 'assets' can be acquired in bankruptcy for considerably less than their current quotation. All they have to do is wait. And, since their financials are probably in the gutter as well, there's a very low probability any of these companies is excited about buying up anything. This is probably the worst reason to own these businesses......

    I bought a few speculative E&P companies in 2014 and lost a few thousand $. I held off on buying more, simply because these turds need to be flushed. When you understand how accounting works in this space, it's easy to see how valuations can improve dramatically when the price of oil turns around. But, the flip side is true if it stays low for a long time..... And who knows how long it will at this point.

    What we do know is many of these companies are overextended financially and there's a sea of shale oil beneath Texas and an ocean of natural gas underneath America...... Sort of like how Natural Gas has remained low for a long, long time (here's where CHK comes in), it's very difficult to see a scenario where the market just completely forgets about all the resources we found.

    CHK has been an ugly business for a long time.... The financials are even uglier. Nothing has really changed in the last 4 or 5 years. Maybe I'm wrong and something happens soon that will change this company's fortunes for the better. I would argue there are far better options for investment right now......

    Good luck!

    P.S. The best thing about CHK articles is I get to use my 2 favorite words in investing....... Map Collection!
    Feb 9, 2016. 05:12 PM | 3 Likes Like |Link to Comment
  • Why Exxon Mobil Drops To $48 Within 15 Months  [View article]
    Why the majority of people lose money in the stock market.

    Good luck!
    Feb 8, 2016. 11:58 AM | 1 Like Like |Link to Comment
  • Seeking Alpha's New Look: Making It Easier For You To Be A Better Investor  [View article]
    Oh yeah and I can't even get back to the homepage from anywhere anymore...... All the links are dead for me. That's fantastic.

    Good luck!
    Feb 1, 2016. 04:49 PM | 3 Likes Like |Link to Comment
  • Seeking Alpha's New Look: Making It Easier For You To Be A Better Investor  [View article]
    Not really homeslice..... Most modern websites are horrible. They've just made things pretty and removed all the content. Has nothing to do with 'hating change'. Since I'm an engineer, and can speak from experience since I've seen it numerous times, the problem about 90% of these 'updates' have?? They are attempting to design solutions for problems that don't exist. Or, far more likely, are an attempt to crowd more advertisements on a webpage. And, the users aren't dumb.

    I can list dozens of examples where a new 'feature' was unveiled and scores of important content just disappeared. And my examples are some of the largest, most frequented web sites.... Case in point, for SeekingAlpha, I can no longer sort user comments by ticker symbol. A feature that maybe no one else used, but I used regularly..... I can name other things that were 'upgraded' with this new layout. The point is, and none of the geniuses designing web pages have figured this out, just preserve all the features and content present in the old layout before 'improving'. People won't hate you for it.

    Good luck!
    Feb 1, 2016. 04:44 PM | 17 Likes Like |Link to Comment
  • The Mentality Of An Average Investor, Part III  [View article]
    Pretty nice swing there.... Let me know if you make it to San Diego.

    The mentality of the average investor is, bang balls at the driving range with the driver. Never work on alignment, never work on short game, who cares about putting, I watched a video last night on my swing plane, etc etc..... Last week I heard a guy at the range say 'The Dow is down 500 points, I sold everything yesterday'. It's pervasive in life..............

    People lose track of the fundamentals and complicate uncomplicated activities. Investing successfully isn't rocket science.

    Good luck!
    Jan 29, 2016. 02:40 PM | Likes Like |Link to Comment
  • Own Qualcomm  [View article]
    QCOM caught my eye because after yesterday's move. I looked through the last couple quarters yesterday.... @$43-44 yesterday, that is quite a price for a company generating so much cash who already has a mountain of it.

    But then you dig through the operating results and you see some massive dips. I think one of the commenters above said it best,

    'Is that patent portfolio still as potent as it once was? Probably not, but it can still provide a good cash flow.'

    The question is how much??? It's tough to gauge going forward. Because of that, it's very hard to describe QCOM as 'extremely cheap'. Looking in the rear view mirror doesn't help. Any estimates for this company should be made extremely conservatively and even then I wouldn't consider their likelihood of occurring 'extremely low'.

    They're struggling. This price assumes a lot of bad things will happen. Maybe they do. I don't see how anyone really loses a lot at this price, but if q/q and Y/Y comps look like this going forward you better be ready to sell..... Still watching.

    Good luck!
    Jan 29, 2016. 01:58 PM | 1 Like Like |Link to Comment
  • Microsoft Suffers Revenue Decline In The December Quarter  [View article]
    Bought MSFT in 2011 when everyone hated it.... Looking at paring back the position up here after significant outperformance relative to the S&P. Buybacks are great, but the financials aren't what they were when I bought in.... Profitability is down, the valuation has gone way up and LT debt has gone from $10b to $40b. Buybacks and dividend raises are great, even if they're coming on the heels of massive debt issuance at extremely low yields, but eventually MSFT has to figure out a way to justify a $500b mkt cap. The move to cloud is going great and the economics are fantastic. But does it justify adding the equivalent of QCOM to it's current Market Cap every year?

    I don't doubt this company can continue to do well for the next decade. I just don't see how regular shareholders see outsized returns relative to the S&P anymore..... There's no double from here at this size (same argument I've used with AAPL)..... I see some companies out there that offer superior returns.

    Good luck!
    Jan 29, 2016. 12:50 PM | 1 Like Like |Link to Comment
  • James A. Kostohryz Positions For 2016: An Upside Surprise For The Year?  [View article]
    James, I would suggest going back to the basics. 'Making judgments about the future... is the very essence of investing' is a quote that doesn't seem to coincide with some of the best advice ever given in regards to finance. According to Ben Graham, investing successfully is about protecting against potential surprises the future may hold. Not making guesses and hoping they come true.

    Good luck!
    Jan 16, 2016. 01:40 PM | 3 Likes Like |Link to Comment
  • WSJ's Lahart: This isn't 2008  [View news story]
    Edward, I would suggest researching the history of the DJIA or S&P.... Or, just go pick up the Intelligent Investor and read a few chapters. Market swings of this magnitude are not 'once in a lifetime' events. Perhaps in a given calendar year a move of this magnitude is unique, but that is only applying clean start and stop dates to a situation that may or may not take a few years to play itself out. Remember, from March 10, 2000 to October 4, 2002 the Nasdaq lost over 75% of it's value. The S&P lost roughly 40% of it's value.

    Over time the market goes up simply because businesses are profitable and our economic theory, generally, allows for everyone to participate in the sharing of these profits. Sometimes, however, shocks, overvaluation, struggles within the business sector and even negative sentiment can cause significant equity declines. Any investor in stocks should be prepared for the possibility of potentially significant declines in the value of his or her holdings. If the investor isn't prepared for this possibility, or cannot handle it emotionally, they should think twice about whether owning stocks is right for them. There's always the possibility of owning high quality bonds......

    Good luck!
    Jan 16, 2016. 01:21 PM | 4 Likes Like |Link to Comment
  • Fastenal misses by $0.01, revenue in-line  [View news story]
    Yea, I read the release this morning doghouse..... Nothing to really be alarmed about. The customers they have are struggling and the PMI has been going lower for months. They've invested in their business via new employees while, as always, being extremely transparent about this for months. Simultaneously they have continued to buy back stock into this environment. Anyone that believes this business will exist with similar economics in 10 years should be buying..... This business will certainly be larger and I doubt the culture of honesty and clarity disappear.

    Good luck!
    Jan 15, 2016. 12:42 PM | 1 Like Like |Link to Comment
  • Why Confirmation Bias Is A Portfolio Killer  [View article]
    Taken to its logical conclusion, this is basically an indictment of the entire online investment forum / SeekingAlpha website concept. And 100% logical. But, it should be obvious by now, most people / investors don't act rationally. Individual thinkers with unpopular opinions are lambasted in all walks of life. A lot of stocks I care about are rarely covered. And there are hundreds of articles on AAPL over the course of a year. The whole concept is spam to attract page views. It's why ESPN is basically a reality TV channel at this point.

    It takes guts and an honest appreciation for intellectual honesty to be a successful investor. Luckily for the people that have those traits, they are competing against people who value sound bites, quick takes and quantity over quality.

    Think about it like this..... How could an author / poster with tens of thousands of posts honestly claim to be doing serious investment research? And yet, the most vicious spammer on these boards, operating under an enormous conflict of interest, is probably the most popular contributor.......... It all stems from the confirmation bias disease you outline in this article.

    Good luck!
    Jan 14, 2016. 10:21 PM | 9 Likes Like |Link to Comment
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