Author Topic: What are you buying today?  (Read 701108 times)

writser

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Re: What are you buying today?
« Reply #2450 on: September 13, 2017, 07:35:08 AM »
Small block of PERF. Somebody wrote a nice blog post about it here.
When you are dead, you do not know you are dead. It's only painful and difficult for others. The same applies when you are stupid.


valcont

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Re: What are you buying today?
« Reply #2451 on: September 13, 2017, 09:34:47 AM »
Small block of PERF. Somebody wrote a nice blog post about it here.

Just curious how do you size your positions? In this case you are risking a complete loss for a 9% return. There is no arbitrage here so this is a binary bet based on the founder's stake . Is that the right way to think about it? I look at your posts but have never pulled the trigger since I just can't justify the risk/return.

Lance

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Re: What are you buying today?
« Reply #2452 on: September 13, 2017, 10:12:30 AM »
MGTI (MGT Capital Investments Inc)

Thanks
Lance

writser

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Re: What are you buying today?
« Reply #2453 on: September 13, 2017, 11:17:54 AM »
Small block of PERF. Somebody wrote a nice blog post about it here.

Just curious how do you size your positions? In this case you are risking a complete loss for a 9% return. There is no arbitrage here so this is a binary bet based on the founder's stake . Is that the right way to think about it? I look at your posts but have never pulled the trigger since I just can't justify the risk/return.

That's correct. This position is <1%. The market is currently pricing in a 10% chance of failure. I'm willing to bet that that is too high - this is a strategic bankruptcy to take the company private and renegotiate leases. Owners want to preserve NOL's. The cost of throwing a bone to minority holders is relatively low compared to what's at stake for the Nussdorf family yet very nice for minority investors. This should be a done deal (famous last words). What else is going to happen? A trench war between landlords and the company seems like a bad deal for both parties. All the incentives are aligned as far as I can see.

Also, especially because the risk/reward seems so terrible I think there is potential for a mispricing. Who wants to risk $180 to make $20? It reminds me of the Mayweather bet. Hard to stomach but if you make 200 uncorrelated bets exactly like that your should do great (assuming you are correct about the odds .. ).

In a vacuum, with no money on the line, how would you estimate the chances of the package deal going through?
« Last Edit: September 13, 2017, 11:42:28 AM by writser »
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valcont

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Re: What are you buying today?
« Reply #2454 on: September 13, 2017, 05:00:44 PM »

Hard to stomach but if you make 200 uncorrelated bets exactly like that your should do great (assuming you are correct about the odds .. ).


That's the key. And since the positions are small enough, less research. I am fascinated by this approach but you need a certain type of personality to do this churning. I am more like a home run type. If I don't see a lot of potential , I am not interested.

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In a vacuum, with no money on the line, how would you estimate the chances of the package deal going through?

Well I would first try to find out why is there a 10% discount? Most likely it is reflecting the time to get the restructuring plan approved. The exhibit only refers to the opt in date which is next month. Not sure if this is a pre pack where the leaseholders are  already agreeing to the terms or the company will try to cram up. Either way it'll need a judge's approval.

bergman104

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Re: What are you buying today?
« Reply #2455 on: September 14, 2017, 08:08:30 PM »
Just added to my position of PRAA which I've owned for 2 years now. I'd be happy to give my thesis in more detail but they basically have a duopoly in the credit card debt buying market. With credit cheap, banks have little incentive to sell charged off debt but during the next economic downturn pricing should improve. Until then they are trading at ~12x earnings with plenty of upside when the market turns.

I can't seem to get anyone else on board with this one so maybe I'm missing something.

writser

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Re: What are you buying today?
« Reply #2456 on: September 15, 2017, 01:02:32 AM »

Hard to stomach but if you make 200 uncorrelated bets exactly like that your should do great (assuming you are correct about the odds .. ).


That's the key. And since the positions are small enough, less research. I am fascinated by this approach but you need a certain type of personality to do this churning. I am more like a home run type. If I don't see a lot of potential , I am not interested.

To be fair, most of my large positions are bets that are exactly the other way around: risk nothing, gain a little, i.e. cashboxes with a little bit of optionality. I hate losing money! In fact I think a lot of the 'home run' growth stocks are far more dangerous in the sense that if the growth story collapses you are actually losing your capital. See Valeant, Fortress Paper, Horsehead Holdings, etc. But yeah, I think it comes down (at least partially) to personality. I'm a skeptic.

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In a vacuum, with no money on the line, how would you estimate the chances of the package deal going through?

Well I would first try to find out why is there a 10% discount? Most likely it is reflecting the time to get the restructuring plan approved. The exhibit only refers to the opt in date which is next month. Not sure if this is a pre pack where the leaseholders are  already agreeing to the terms or the company will try to cram up. Either way it'll need a judge's approval.

Frankly I think it is dangerous to use market prices as a starting point for your analysis - you are creating a situation where it is extremely likely your analysis is biased. I.e. if PERF trades at $1.96 you think "that's a juicy return for a few weeks" but if it trades at $1.80 your starting point is "let me find out what is wrong with this horribly risky bet". That's why I asked you to estimate the chances of the bankruptcy package deal going through in a vacuum. How would you handicap it if you read it in a newspaper, without any stock prices?
When you are dead, you do not know you are dead. It's only painful and difficult for others. The same applies when you are stupid.

valcont

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Re: What are you buying today?
« Reply #2457 on: September 15, 2017, 07:43:17 PM »
Frankly I think it is dangerous to use market prices as a starting point for your analysis - you are creating a situation where it is extremely likely your analysis is biased. I.e. if PERF trades at $1.96 you think "that's a juicy return for a few weeks" but if it trades at $1.80 your starting point is "let me find out what is wrong with this horribly risky bet".

Well this is not my style of investing but for an argument sake , will I be interested in it if its closer to fair value and I can get a nice IRR? Well that will be determined by my position size and the time that I will spent on it. At closer to fair value , I have to have a decent position size and spend a lot of time since I am risking a dollar for a penny. So not worth it. But if I bet multiple times on similar situations, than I am betting on the deal flow which in this market is pretty guaranteed. So a good strategy in this market. Not sure if you have tried it around 2008,09,10 but there were fewer deals then and a lot more diligence.

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That's why I asked you to estimate the chances of the bankruptcy package deal going through in a vacuum. How would you handicap it if you read it in a newspaper, without any stock prices?

As I have said before, if its a pre pack in which all parties agree to the deal then the only risk is buyer walking out. So a good chance that it will go through.

« Last Edit: September 15, 2017, 08:07:42 PM by valcont »

compounding

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Re: What are you buying today?
« Reply #2458 on: September 16, 2017, 01:29:44 AM »
Frankly I think it is dangerous to use market prices as a starting point for your analysis - you are creating a situation where it is extremely likely your analysis is biased. I.e. if PERF trades at $1.96 you think "that's a juicy return for a few weeks" but if it trades at $1.80 your starting point is "let me find out what is wrong with this horribly risky bet".

Well this is not my style of investing but for an argument sake , will I be interested in it if its closer to fair value and I can get a nice IRR? Well that will be determined by my position size and the time that I will spent on it. At closer to fair value , I have to have a decent position size and spend a lot of time since I am risking a dollar for a penny. So not worth it. But if I bet multiple times on similar situations, than I am betting on the deal flow which in this market is pretty guaranteed. So a good strategy in this market. Not sure if you have tried it around 2008,09,10 but there were fewer deals then and a lot more diligence.

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That's why I asked you to estimate the chances of the bankruptcy package deal going through in a vacuum. How would you handicap it if you read it in a newspaper, without any stock prices?

As I have said before, if its a pre pack in which all parties agree to the deal then the only risk is buyer walking out. So a good chance that it will go through.

It's not your style of investing to estimate intrinsic value without using price as an anchor? Because that is exactly what he asked you to do.
@JohanHjortsson

valcont

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Re: What are you buying today?
« Reply #2459 on: September 16, 2017, 07:05:12 AM »

It's not your style of investing to estimate intrinsic value without using price as an anchor? Because that is exactly what he asked you to do.

 Estimate intrinsic value for an entity that just declared restructuring? NO THANK YOU. I sometimes think that Buffet has done more harm than good by blabbering these aphorisms that people mindlessly parrot. Here is a better one

“These stunts are performed by trained professionals, don't try this at home..”