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  • 2 Market Beating Value Stocks: Gentiva Health Svcs, Fresh Del Monte Produce
    FDP's ROE is higher largely because they are based in the Caymans and thus pay very little income taxes. That said, the stock is cheap at less than book and under seven times normalized earnings of around $3.25/shr.
    Dec 23 13:21 pm |Rating: 0 0 |Link to Comment |View article
  • Barron's Rags on Jos A. Bank
    This is typical of Barrons: the stock moves as a result of the article for three days, and then months later you realize the publication is a contrarian indictator. JOSB up 26% since this article came out, S&P 500 down 33%.
    Oct 11 16:49 pm |Rating: 0 0 |Link to Comment |View article
  • The AIG Bailout: Advice from Buffett, Munger and Grantham
    This was in Berkshire's 2002 Annual report...it was part of Buffett's thoughts on "financial weapons of mass destruction". It describes to a T what happened to AIG:

    "Another problem about derivatives is that they can exacerbate trouble that a corporation has run into for completely unrelated reasons. This pile-on effect occurs because many derivatives contracts require that a
    company suffering a credit downgrade immediately supply collateral to counterparties. Imagine, then, that a company is downgraded because of general adversity and that its derivatives instantly kick in with their
    requirement, imposing an unexpected and enormous demand for cash collateral on the company. The need to meet this demand can then throw the company into a liquidity crisis that may, in some cases, trigger still more downgrades. It all becomes a spiral that can lead to a corporate meltdown."
    Sep 17 10:07 am |Rating: 0 0 |Link to Comment |View article
  • Fannie and Freddie: 80% Dilution
    The treasury is going to make a killing on this. Borrowing at the risk free rate and buying nearly riskless securities at nice spreads. Ultra low risk preferred paying 10%, financed with borrowings at under 4%. 80% of both co's at likely zero cost, co's will probably have earning power of $2 a share each in a couple of years after the dilution. The warrants are the kicker-probably will be worth over $100 billion collectively in a few years.
    Sep 07 15:14 pm |Rating: 0 0 |Link to Comment |View article
  • Bill Ackman's Plan to Save Fannie and Freddie
    This is very preliminary and early...FNM/FRE's liabilities are covered by the highest quality asset mix of any financial institution in the country. At this point the backstop is just that; a backstop, over time this thing will likely correct itself as the financial panic fades
    Jul 15 23:07 pm |Rating: 0 0 |Link to Comment |View article
  • Fannie & Freddie: Myth vs. Reality
    The FRE and FNM preferred are senior to the common and there is significant upside under the scenarios of 1) massive common dilution to raise capital or 2) big recovery of the common as the current situation is related to market fear and panic. In the case of a government bailout, the preferred could be worthless.
    Jul 11 13:50 pm |Rating: 0 0 |Link to Comment |View article
  • Record Spreads on Fannie Mae
    Shedlock most of what is said on Wall Street is rendered silly within months or weeks. Bear Stearns collapsed because they were reliant on fickle funding in an irrational market. In time we'll see that the well capitalized JP Morgan, who is a fortress in terms of capital, got a terrific deal. You're parroting the collective fear of the market...this is the equivalent of a crazed mob. The voices of the rational and truthful are inaudible amidst the panicked.
    Jul 11 13:40 pm |Rating: 0 0 |Link to Comment |View article
  • Transocean: Cheap Stock, Worth a Look
    RIG's margins are at record levels and they are earning 35% on equity. Companies in this industry, historically, have earned high single digits to low double digits on equity. This is an equipment leasing business. It's in a hot area that currently has a big supply/demand inbalance due to high oil prices. But many new rigs are being built.

    There's no way RIG earns 35% on equity over the long-term. Assuming a 15% return on equity, which is 50% higher than their historical average, they'd be earning $6.60, and selling at 21x that.

    As far as margins, they are currently elevated b/c of the high prices that rigs are commanding. There was a similar supply shortage of shipping vessels a few years ago, and rates soared, and the stocks soared, but collapsed later as new ships came online and rates dropped.

    If you buy this stock, you are betting against historical precedent-and you are paying a high multiple to book and normalized earnings in what is usually a mediocre business.
    Jun 16 17:05 pm |Rating: 0 0 |Link to Comment |View article
  • The Long Case for KSW, Inc.
    $2.80/shr in cash as of end of 1Q08 and the stock is now trading at $4.75/shr in early June 2008. Stripping out the cash and cash interest, about 4x TTM.
    Jun 05 16:18 pm |Rating: 0 0 |Link to Comment |View article
  • Idearc: Cheapest Stock in the Phone Book
    $1.9 bil of their $9 bil in debt is floating...$4.4 bil of their tranche B loan is swapped to fixed at 7.57%, you have to read a footnote to find that, but the major majority is fixed. The decline in libor will shave about $57 mil in annual interest expense between 3Q07 and now. That's about a 25 cent/share annual benefit to EPS.
    Jun 02 16:10 pm |Rating: 0 0 |Link to Comment |View article
  • Idearc: Cheapest Stock in the Phone Book
    I was surprised they completely eliminated the dividend, but I think Harless's insistence on paying it...and her constant marketing of it to investors...was one of the reasons she got axed. If the co could instead engage in some very modest stock buybacks, they could preserve EPS over the long-term. That of course must be approved within their bank covenants. With the debt reductions alone EPS will likely otherwise fall over time, assuming 4-5% annual revenue attrition in the traditional business.
    May 30 09:28 am |Rating: 0 0 |Link to Comment |View article
  • Idearc: Cheapest Stock in the Phone Book
    I don't understand the thinking behind buying at a 1.7x P/E and having a target price that represents a 2.5x P/E. If your DCF comes up with that value, it implies that given the leverage, the valuation is very sensitive to the assumptions. Given that the market cap is about $600 mil relative to $9 bil in debt, it leaves little margin for error.
    May 21 18:43 pm |Rating: 0 0 |Link to Comment |View article
  • Barron's Rags on Jos A. Bank
    Yeah that looks right. One issue is that inventories are always seasonally highest in the 3Q ahead of the holidays...at 2Q they were $196m, 1Q $180 mil, 1Q, and $184 mil at year end 2006.

    Also inventories at the end of the 3Q...at 225 mil, were up 11% YoY, about the same as their sales...I don't see the big issue here. Of course Barrons is in the business of selling magazines...

    As one analyst of the co told me "this is a stock that the street loves to hate..." partially b/c management doesn't give guidance and doesn't take Q&A on the conf calls.
    Mar 31 00:14 am |Rating: 0 0 |Link to Comment |View article
  • No Reason for BofA - Countrywide Merger to Fail
    There's a very significant reason why this deal will fail-the owners of CFC are likely to vote it down. Bill Miller's Legg Mason value trust owns 15% and in his 4Q newsletter said the deal, at 30% of book value, is "puzzling". Brandes, a classical deep-value investor, owns 10% and is highly unlikely to support the deal. SRM Global owns 5% and has come out in opposition to the deal. Pzena Investment management, also a deep-value investor, owns 4%. That's 35% of shares. For more:
    stocksonclearance.blog.../
    Mar 12 13:17 pm |Rating: 0 0 |Link to Comment |View article
  • Dogs of Dow Merely In-Line During Current Bull Market
    The DJ select dividend index has also been a pretty lousy performer this year, and highly volatile. Deep value is deeply undervalued.
    Dec 17 17:05 pm |Rating: 0 0 |Link to Comment |View article

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