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Investment Ideas / Re: TSLA - Tesla Motors
« Last post by Dalal.Holdings on Today at 07:44:13 AM »
Agree with Andrew Left—I too was a Tesla critic not too long ago. It doesn’t take much to see that the laws of traditional auto companies may not necessarily apply here.

Yeah, Apple outsourced its manufacturing to China (COO Tim Cook the master behind that). Hipe Tesla can find a way to keep that Fremont plant running for a long time (GM and Toyota sure couldn’t after decades of failure).

Omg Tesla emailing people who were gonna pay $35k to market to them higher end versions at $45k or more? What a travesty. What’s next—social media based targeted ads? Let’s hope they don’t resort to creating dealerships where the “dealer” puts on a whole bunch of last minute markups to the MSRP and subsequently rips you off on every servicing/repair interaction (a.k.a. The standard for the auto industry).
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Investment Ideas / Re: FCAU - Fiat Chrysler Automobiles
« Last post by walkie518 on Today at 07:43:35 AM »
what's a reasonable acquisition price in you guys' opinion?

The KKR deal pales in comparison to what Marchionne had in mind--either there were material underlying problems with MM that were not disclosed or KKR is getting a good deal.  And of course, the latter is more likely than the former...

I'm not sure "pales in comparison" is correct.  The $6.2B deal is only $0.6B away from the $6.8B Marchionne wanted from KKR before he passed away.  At that time, KKR had offered $5.8B.  FCAU needed two things to happen in any deal...a reasonable price and ensure that their component supply wasn't disrupted.  They got both.  Could they have held out for more...possibly.  But they got mostly what they were asking for and they can move forward.  Cheers!

They paid just over 20 times net earnings or 1.25 times revenues...that seems pretty fair.  Cheers!
I will have to disagree on this point.  MM is probably a better business than the parent dollar for dollar with arguably greater growth prospects.

Without going down that path, before his death, Marchionne was discussing spinning MM: a tax-free event is far better than a taxable one.

The sale to KKR for cash should be understood to be discounted by shareholders since the net return will be lower. 
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Mnuchin supports selling the governments stake.

Do we know how accurate this is, or how credible the source is?

Quote
But such a move would require the unwinding of the preferred shares the Treasury holds in Fannie and Freddie. Mnuchin has said he supported such an undertaking.

Unless Mnuchin has said this very recently, I missed it. Or is it just being extrapolated from the privatization comments?

not very credible imo unless the story appears in multiple outlets.  (or hardincap is impressed).

seems to me the only outlets that care about this are Bloomberg and specialized housing finance and securitization rags.  and WSJ...after it happens

a big if, but if something materially good is coming after the elections or new year via administrative action, it's likely to be leaked often in advance to limit the actual price move on the day of official announcement when most of the news stories are written, given the HF and berkowitz narrative.   so far there's 1.  would need multiple more to have credibility imo.
Both the marginal investor and the marginal journalist are not impressed yet...

it's tough to know.  the demand pool is somewhat limited and there's likely a lot of forced supply from fairholme and other liquidating hedge funds like highfields.  but I do believe we'll see multiple more stories coming out if the asset backed alert story has any validity.

Speaking of stories of dubious validity - care to share the sources you have on all these hedge funds liquidating their holdings?

Also I never heard back from my prior response! :(
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Investment Ideas / Re: WDC - Western Digital
« Last post by walkie518 on Today at 07:36:49 AM »
I am seeing a non-recurring loss this year equal to about 12.53 per share. I am also seeing some pretty large non-recurring losses in past years as well. Can anyone explain what these are? and are they really non-recurring if they are happening every year?
I am having trouble trying to decipher whether the stated 2.12 EPS (gurufocus) is correct or if the 14.73 EPS is correct (valueline).
diluted EPS for 12 months ending Jun 29, 2018 was $2.20/sh

there were a few items of note for WDC of which an investor should be aware from the last few years: (1) costs associated w/floods in Thaliand, (2) SanDisk acquisition, (3) Toshiba-related legal costs, and (4) payments associate with new facilities

GAAP and cash flow show two different companies since WDC declares $2B of deprec

2018 also shows paper losses resulting from cash premium to extinguish debt plus write-off of issuance costs that otherwise would be amortized
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General Discussion / Re: Way to go Boilermakers!
« Last post by boilermaker75 on Today at 07:25:32 AM »
Jeff Brohm can coach, hope ya'll can hold on to him for a few more years.

Me too! From what I have heard he and his family love the community and he is only three hours from his hometown of Louisville.

Plus he should be able to dominate the B1G West and get into the B1G title game every year. Winning the B1G title game should get you in the playoffs most years.

The game before the OSU game was Illinois. We had the game won, so you could see he was running plays in the fourth quarter to give OSU things they would have to work on in practice. His play calling against OSU was perfection.
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Investment Ideas / Re: TSLA - Tesla Motors
« Last post by Liberty on Today at 07:15:56 AM »
Andrew Left went from shorting and suing Tesla to this...

https://www.cnbc.com/2018/10/23/short-seller-who-is-suing-tesla-changes-his-mind-tesla-is-destroying-the-competition.html

Quote
"Citron is long Tesla as the Model 3 is a proven hit and many of the TSLA warning signs have proven not to be significant," said Left in a blog post Tuesday. "Plain and simple – Tesla is destroying the competition."

"TSLA is not just pulling customers from BMW and Mercedes but also from Toyota and Honda. Like a magic trick, while everyone is focused on Elon smoking weed, he is quietly smoking the whole automotive industry," Left said.
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Mnuchin supports selling the governments stake.

Do we know how accurate this is, or how credible the source is?

Quote
But such a move would require the unwinding of the preferred shares the Treasury holds in Fannie and Freddie. Mnuchin has said he supported such an undertaking.

Unless Mnuchin has said this very recently, I missed it. Or is it just being extrapolated from the privatization comments?

not very credible imo unless the story appears in multiple outlets.  (or hardincap is impressed).

seems to me the only outlets that care about this are Bloomberg and specialized housing finance and securitization rags.  and WSJ...after it happens

a big if, but if something materially good is coming after the elections or new year via administrative action, it's likely to be leaked often in advance to limit the actual price move on the day of official announcement when most of the news stories are written, given the HF and berkowitz narrative.   so far there's 1.  would need multiple more to have credibility imo.
Both the marginal investor and the marginal journalist are not impressed yet...

it's tough to know.  the demand pool is somewhat limited and there's likely a lot of forced supply from fairholme and other liquidating hedge funds like highfields.  but I do believe we'll see multiple more stories coming out if the asset backed alert story has any validity.
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Investment Ideas / Re: TSLA - Tesla Motors
« Last post by ERICOPOLY on Today at 07:06:47 AM »
Possibly , Tesla Model 3 shocking high order, delivery and reservation numbers.  Highest VIN now tracks to 156129.

The VIN numbers are useless for tracking #delivered cars because they are not assigned in sequential order.

Would be very surprised if the reservation number is high because they did not provide any update on the reservation count 3 weeks ago in the Q3 deliveries report (in contrast to Q2, when they referred to the magical 420k reservation number) and they had to announce the lower priced M3 (why would they do that already now if demand is still high for the higher priced model?).

I also understand that they are emailing and calling the current reservation holders to try to persuade them into buying this lower priced version instead of waiting for the 35k model, so not really positive news with respect to demand..

To answer the question, one theory is that Panasonic has not been able to supply them with enough battery cells.  The lower priced model uses a mid-range battery that likely contains 20% fewer cells and therefore they could produce 25% more cars.

Another theory is that they have lowered their cost of production of the Model 3 such that they can produce the lower priced mid-range version profitably.  Elon previously stated that they have to wait on delivering the $35k model until they can do so without losing money on it.

Their behavior is consistent with the second theory.

This company does not even advertise, is not yet offering the Model 3 to international markets, and people wonder if they are scrambling due to a demand problem.
9
Mnuchin supports selling the governments stake.

Do we know how accurate this is, or how credible the source is?

Quote
But such a move would require the unwinding of the preferred shares the Treasury holds in Fannie and Freddie. Mnuchin has said he supported such an undertaking.

Unless Mnuchin has said this very recently, I missed it. Or is it just being extrapolated from the privatization comments?

not very credible imo unless the story appears in multiple outlets.  (or hardincap is impressed).

seems to me the only outlets that care about this are Bloomberg and specialized housing finance and securitization rags.  and WSJ...after it happens

a big if, but if something materially good is coming after the elections or new year via administrative action, it's likely to be leaked often in advance to limit the actual price move on the day of official announcement when most of the news stories are written, given the HF and berkowitz narrative.   so far there's 1.  would need multiple more to have credibility imo.
Both the marginal investor and the marginal journalist are not impressed yet...
10
Investment Ideas / Re: OZRK - Bank of the Ozarks
« Last post by Schwab711 on Today at 07:04:23 AM »
Thoughts on OZK:

1. First, my point on the 50% LTV vs walk-away point is truly just that. It's the amalgamation of evidence that worries me about OZK. Normally, only lending to the senior tranche of a risky project would be prudent for a bank. Build/enhance relationship and get solid, above-average interest. However, OZK is predominately providing non-recourse CRE or condo/1-4 mult loans in NYC/Miami, and to a lesser degree, LA. No one thinks these markets are cheap. I work in valuation/appraisal business and some of the RE appraisals I see make me wonder how rosy the C&I appraisals are. At least for already built RE, there's a NOI and you can adjust the cap rate the appraiser does as the bank. The development appraisals get trickier because how do you know what the sales schedule will be, if there will be construction delays in 2 years, financing increases, ect. The macro economy, interest rates, foreign investment in RE, ect all play important factors in demand. This is all somewhat odd because for the entire 20% compounded era for Gleason, they did business in Arkansas and Texas. That's your historical data. In 2014 alone, lending in NYC jumped from $320m to $1,600m. NYC RE went from <10% to 21.5% of their loan book. 4 years before that, they had never originated a loan in NYC before.

I once worked at a very large midwest bank. They had operated since before statehood. They had something like 40% of the deposits in the state. Everyone loved them and they earned 15%+ ROE for two decades. They were running on all cylinders. Then some hotshot CEO bought a bank in FL and we started lending to FL and AZ like crazy. Those two banks took down the massive, conservative midwest bank holding company. They had no business being in FL or AZ at that scale, that quickly.

Another example from history is Hudson City Bancorp. They grew through the GFC and were famous for being the largest bank in the US that didn't take TARP money. Then 2 years later they took a $2b charge. Then their funding was too expensive relative to peers and profits started to fade. Then loan performance started to fall like a rock and M&T Bank had to rescue them.

That's my point on NYC/Miami/LA. OZK doesn't have the historical data or expertise in these areas like they did in AR/TX. Beyond that, OZK's margin profile (solely due to Gleason's shoot-at-the-hip style and refusal to take warnings from the Fed on rates) means that OZK is going to see declines in PPNR, if everything goes perfect. OZK is maxed-out on CRE concentration. They are maxed out on L:D ratio. If they try to pull back on L:D, PPNR will tank. They are trying to dilute CRE concentration (supposedly their bread-and-butter and what we are all paying for) with indirect RV/marine loans. They have self-forced themselves out of the underwriting game! When the non-purchased loans run-off, NIM is going to be 3% ish, at best. Even that means lot of RV/marine/consumer loans though. OZK can't profitably originate a dang mortgage so how are they supposed to attract consumer deposits? They are winning what commercial deposits they have by offering non-recourse loans on low cap rate (aggressive) appraisals for construction. Gleason is a gunslinger and I'd prefer something else running my bank.

2. As to examples of actual loan performance, here's an article on their Miami lending. What scares me about Gleason is when he implied on a CC that he's conservative because he doesn't make the maximum allowable loan. That's... not really the definition of conservative.
https://therealdeal.com/miami/2018/05/18/a-little-arkansas-bank-is-funding-much-of-south-floridas-condo-boom-what-could-go-wrong/

First, OZK is the largest C&I lender in Miami. That's crazy they outdo a bank 100x larger than them (and outdo shadow lenders that don't have risk capital calcs to worry about).

Second, this article shows OZK's largest loans. They made their largest loan in 2016, after the Turnberry Club project had already started. At the time of the loan, 40% of condos had been sold and construction was planned for 2017. After OZK gets involved, construction is delayed and only 10% more sales are made.
https://miami.curbed.com/2016/11/16/13624278/turnberry-ocean-club-breaks-ground-sunny-isles
https://www.prnewswire.com/news-releases/turnberry-ocean-club-residences-announces-50-sales-milestone-as-the-project-goes-vertical-300593402.html

Construction is moving at a reasonable pace and might be finished at the end of 2019. But with higher rates and low sales, there's a possibility this loan gets impaired. There's more loans like this in Miami and NYC. I haven't looked in to LA, but I imagine we'll find the same type of stuff. The national condo index peaked in March 2018. For major cities, it seems to have happened slightly before. Liquidity and foreign money is declining for these properties.
https://fred.stlouisfed.org/series/NYXRCSA

I'll write more later but that is my response to some recent comments. I think you are buying a beehive with OZK. There are a few banks with similar CRE exposure, but less concentrated, more non-interest income streams, and cheaper funding. I think OZK is going to dilute the heck out of current investors at some point.


Edit:
Quote
Also,  I wouldn't waste my time on a sum of the parts analysis of OZRK.  If RESG is valuable, the bank lives.  If RESG blows up, it will be the FDIC selling the assets and not Gleason.  Sum of the parts doesn't make much sense to me in bank investing under these sort of scenarios.

I think the point I was making is being missed. If you are truly only interested in RESG then there's no sense buying OZK now since RESG originations will be declining for several Q's. CRE exposure is too high right now. They have to loan because they have variable funding, so L:D can't decline with CRE exposure. RESG is handcuffed for at least another year and the rest of the bank is commodity lending or below-average crap. That's my point on the quasi-SOTP view of OZK. That gets to one of my other points that now OZK has vintage risk with CRE because of their poor rate management. It's just one more angle to look at the bank.
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