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General Discussion / RIP Stan Lee
« Last post by LC on November 13, 2018, 11:14:05 PM »
RIP to a guy who created so many dreams and memories for kids, and adults. And who created a wildly successful and profitable franchise! Incredible what he accomplished. I saw someone posted this today about him and it just strikes me as awesome:

https://i.imgur.com/DsKOfFc.jpg

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Investment Ideas / Re: PWE - Penn West Petroleum
« Last post by bizaro86 on November 13, 2018, 10:53:56 PM »
Eyeballing it, it's about as low as it's been since the early 1990s, but adjusted for inflation, it's probably all-time lows.

That's the thing with commodity stocks. You can analyze and price it as much as you want based on some commodity price, or a probability distribution of prices, but you or management have no control over what the actual commodity price will actually be in the future (and for how long), and there's usually a bunch of operating leverage to it and fixed costs that have to be paid even when you're not making money, so the equity tranche can get squeezed pretty quickly.

Which is also the reason why you put it in the sock drawer .....
At a per share cost that is < 1/2 the cost of a cup of coffee - it's not much of a risk.

SD

I have some great oil stock to sell you. It's only $0.01 per share. They don't even make Canadian pennies anymore, so barely any risk at all. Less than the cost of a piece of gum!
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Investment Ideas / Re: PWE - Penn West Petroleum
« Last post by nodnub on November 13, 2018, 09:35:21 PM »

At a per share cost that is < 1/2 the cost of a cup of coffee - it's not much of a risk.

SD

Are you implying that A) an investor should only buy one share or B) that stocks with a low-price per share are not risky?  ;D

Using this logic Berkshire A shares would be one of the riskiest investments in the world  :D
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Politics / Re: WTF is going on in Sweden
« Last post by Cigarbutt on November 13, 2018, 09:21:23 PM »
Parsad,
I have not idea what happened during that time.  I was in college.  But is it Prem's fault if he "had to" issue equity at all?  I am of the opinion that you should never be caught with having to issue equity or ask for a hand out.  BRK was writing checks to bail out banks in 08 and 09.
FWIW, I did not follow investment boards then but was invested in varying forms and degrees in Fairfax.
I would just say that on top of the two things that Cardboard mentions, there was an additional factor that was decisive, at least for me:
-I felt the nature of the financial agression to be unfair and felt that the managment team were an honest group doing their best under the circumstances.
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Politics / Re: WTF is going on in Sweden
« Last post by BG2008 on November 13, 2018, 09:10:34 PM »
Yes, read information from all sources and make up you own mind.

It is amazing that we have to tell that to a group of investors who should constantly investigate.

Actually, it does remind me about the founding of this website. It was founded so that Brolgaboy (supposedly John Hempton) could no longer talk/argue that Fairfax was terminally ill in 2002/2003. The discussion was taking place on Stockhouse and then CoBF was born (Fairfax bulls echo chamber).

You know what? Despite many false conclusions, Brolgaboy brought up a lot of facts surrounding Fairfax that none of us were aware of such as entities in far flung places such as in Mauritius, to watch-out for cross-collateralization, etc. This so-called misinformation campaign and bear attack led to the company initiating its first conference call and all these points were then explained in reports.

While many did not like to hear about massive under-reserving that could lead to a bankruptcy and preferred to be comforted by Prem's statements that the company could be sold for at least $300 CAD, investors in Fairfax discovered in the next 3-4 years that the company had indeed very large reserving problems and had to issue equities multiple times well below book value.

In effect, the company was saved by two things:

1- It made a very large long term treasury gains in late 2002/early 2003. Some good luck there.
2- Under-reserving from prior years, TIG, Crum & Forster could be spread over many future years allowing the company to issue equity and refinance multiple times or softening up the blow.

While I didn't like Brolgaboy at the time and argued constantly with him on Stockhouse, I came to appreciate his analysis, depth of research, and realized that while he was wrong on Fairfax going to zero, he was certainly right about Fairfax being a bad investment. After the large drop in 2002 followed by strong rebound in early 2003, the years after were anything but, pleasant for investors.

There are too many elements being accepted at face value by too many on this website. You should keep a critical mind. Doesn't mean to be a contrarian on everything but, please don't believe everything you are being told by so-called "authorities".

Cardboard

Cardboard,

You leave out one important facet of what was happening at Fairfax...the fact that Brolgaboy and a slew of others including hedge funds, journalists and analysts were systematically driving the price down so that Fairfax could not even raise capital from an equity raise, especially as credit quality deteriorated due to 9/11, Hurricane Hugo and Andrew.  It's one thing to put out analysis, but completely another thing to release that analysis early to journalists, hedge funds, etc and then watch hedge funds naked short the hell out of a company driving the price down.  This forced Fairfax to raise the $300M from Cundill, Southeastern and Markel.  Brolgaboy is a smart analyst, but he's still a frickin' prick!  Even on my best day, I am not going to give him an ounce of credit for being anything other than a venomous, corrupt asshole who was trying to make a name for himself.  Cheers!

Parsad,

I have not idea what happened during that time.  I was in college.  But is it Prem's fault if he "had to" issue equity at all?  I am of the opinion that you should never be caught with having to issue equity or ask for a hand out.  BRK was writing checks to bail out banks in 08 and 09.   
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Politics / Re: Orange Headed Trump's Behavior in France Truly Shameful
« Last post by Spekulatius on November 13, 2018, 08:43:34 PM »
"You last President did not WILLFULLY hurt the United States - he NAIVELY hurt the United States. Obama was not unpatriotic. He was weak and naive - and ignored the lessons of history.  He was Neville Chamberlain. Trump is not."

Unfortunately he was a lot more evil than Neville Chamberlain and a lot more incompetent. Neville did realize he had been duped.

All he was good at was making a big show of killing Bin Laden.

I would say that close to 1 million people died because of the actions of Obama and Hillary Clinton by encouraging the Arab Spring, leaving Iraq on its own. Think of the mess in Syria, Libya, Iraq, Yemen, rise of ISIS (which he always called by a different name so that people could not understand). These are all consequences from their actions.

2017 and 2018 must be so far the years in history where humanity has seen the least number of violent death per million people.

Cardboard

The Arab spring started when a shopkeeper in Tunisia decided to light himself up out of protest, the US or Obama had nothing to do with it. itís wasnít really foreseeable that it ended up causing a disaster in Syria and even if one could have foreseen it, it was probably not preventable. Obama ran his campaign on thr promise on pulling the troups out of Iraq and Afghanistan and I believe that was the right decision, otherwise US soldiers would still be there with no end in sight.
We will see if Trump walks the talk, so far everyone seem to walk over him - the rocketman, Putin and his Saudi friends who get away with chopping up a journalist in the embassy of a NATO state. The problems in the Middle East were there before Obama came into power and will be there after Trump leaves there office and I donít think there is all that much that the US can do about it.
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Investment Ideas / Re: TRUP - Trupanion
« Last post by Cigarbutt on November 13, 2018, 08:36:40 PM »
Not sure either.
Have been reviewing WRBerkley, RLI and EverestRE and a few others lately and come to the conclusion that many roads lead to Rome, in terms of ROE. I agree that moat is the exception rather than the rule in the insurance industry and would say that the classical low cost advantage is only one of the ways to stand out from the crowd.

TRUP has a consistent operating history showing that they have a good product which is distributed in an efficient way and, so far, most or all relevant competitors have been slow to react. There appears to be some noise at this point concerning a strategic part of the moat, but, at this point, my feeling is that it's only noise.
https://seekingalpha.com/article/4221796-trupanion-naic-address-pet-insurance-weekend

I emphasize the balance sheet when valuing insurance companies and the following reference is a reflection of what I'm trying to get at in this post.
http://www.scmessinacapital.com/blog/2017/8/16/why-are-insurance-companies-valued-at-pb-instead-of-pe

IMO TRUP "deserves" to be looked at using a different lens. For other industries, the Dupont decomposition of ROE=NPM*AT*leverage can be useful to "isolate" the driving forces. For an insurance firm with the TRUP profile, I suggest a variant on the above ROE equation:

ROE being a function of 1-underwriting profit, 2-growth in market share and 3-NPW/statutory capital.

When I look at EverestRE from that angle, for years 2013-7, they report an avg CR of 88,8%, a CAGR of NPW of 5,5% and a NPW/equity of 0,65 to 0,75. Using the above-described ROE function, numbers look poor but obviously, for EverestRE, other significant factors need to be taken into account including the value of float.

When I look at TRUP,
For 1-, they have consistently reported below 100% underwriting, with an attempt to reduce corporate costs with scale (slowly happening) and voluntarily allowing for higher vet costs in order to provide not a cheaper option but a better value option for the customer, contributing to 2.

For 2-, NPW have shown a CAGR of 32,7% for the 2013-7 period and there appears to be further room to run.

Note: I'm reading Sam Walton's Made in America these days and he describes that when he started out with his first variety store in Newport, Arkansas (1945!), he noticed, among other things, that he could sacrifice his own profit margins (by selling cheaper or "lowering the markup", or offering better value to his customers) in the pantyhose category and still optimize his bottom line (and I presume his ROE although he does not say) because the decreased margin was more than compensated by the much higher turnover.

For 3-, they have been able to maintain very high and growing NPW/capital ratios.

For 3-, over time (maybe it's starting to happen now), the ratio may have to come down causing a lower ROE but, at that point, it would mean that they are building float that could contribute to their bottom line mitigating the effect of lower "leverage" measures.

This will be interesting to follow because it will tend to converge to the margin between investors looking for subscription-type of firms and more classic insurance investors and there may be an opportunity during the period when the "story"-type investors get bored and before the traditional insurance investors notice.
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General Discussion / Re: Corner of Berkshire and Fairfax and Breitbart
« Last post by Morgan on November 13, 2018, 08:29:41 PM »
I agree. Keep the politics on the politics board. I donít have anything muted and read a fair amount on this site everyday, but the culture seems to be changing as more hostility from political discussions spreads to other areas - mostly the result is people posting less in general. This site is very important to me and I really donít want it to decline because of politics.


(This is isnít a slight against moderators. Sometimes it just leaks out and is hard to control.)
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Investment Ideas / Re: LBTYA - Liberty Global
« Last post by Spekulatius on November 13, 2018, 08:20:33 PM »
Does anyone know (done any correlation work with other UK businesses) how much of this is Brexit?  I know it's been mentioned before but don't think there was much of a response.  Sterling has held up pretty well while LBTYK has taken it on the chin & I don't see this business as particularly vulnerable (particularly with the optionality if the deal closes) to a deteriorating domestic situation in the UK but I can't really see material business deterioration ex-Brexit either.  I initiated at $26-$27 and have been adding but I don't want to miss something obvious either...   

Obviously funds betting on a bigger VOD deal/buyout/speculating if Brian missed Sky he may do something with LBTYK are going to have to unwind & that can bring the opportunity.  But given the magnitude of the decline I'm concerned I've missed something...  After re-reading the 10Q's/transcripts I don't see what & would love (hate...) to have someone point out the magnitude of Brexit/etc & why this is a disaster.  I know Howard Marks said levels in the UK are still too high to make anything (debt) investable but I don't have any numbers.   :( 

I am actually on the other side of just about everyone on this forum and think Fries is an "ok" and relatively transparent CEO.  I think Belgium and Switzerland really are tough markets but I think he's done a decent job of exiting/partnering to build scale when he's disadvantaged and working out solutions & Virgin Media is a slam dunk. 

I agree that he's sold the companies best asset but I do think he got a reasonable price for it and I don't think the rest of the company was/is being valued appropriately and it's reasonable to assume selling at a fair price to arbitrage the value gap between public/private is an "ok" strategy.  I'm probably too cynical but I'm skeptical about whether people would think so poorly of him if the stock price was $37-$40 USD with no fundamental change to the business...

I should have been clearer when I was criticizing Fries.....he/they have done a great job buying/selling/arbitraging/buybacks, no question, but his execution with operations has been atrocious, especially if you compare to a well run cable operation.  His propensity to brag and his overconfidence in aggressive targets that he made a couple years ago have come back to bite him hard.  The stock would not have fallen this far if investors didn't lose trust in him...you can tell he's just deceiving/full of shit when he talks, constantly overhyping potential positives and completely glossing over any negatives, constantly spinning nonsense.  Look at his results on their commercial business, how late he was to identify that as a huge opportunity.  Always putting down his American peers, or trying to justify their underperformance against say Chtr, even when nobody asked specifically about that. I mean the company has grown rebased cash flows every qtr for a decade (this is more because of the advantaged assets rather than mgmt execution and would have grown faster with say Rutledge running things imo) and the stock is selling like its going under (which by itself does not bother me, have owned it for 5 years and I am in the negative).....and mgmt is a big reason.  He overpromised and underdelivered, and that is a big problem for a public company, nobody can argue against that last point, it's a fact.

Yes, thatís it in a nutshell. I also believe that running a cable business in Europe is much harder than in the US - the economics are just not as good, because pricing is lower.
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Events & Meeting Notes / Re: Toronto Dinner: November 22
« Last post by NormR on November 13, 2018, 08:11:43 PM »
Thanks. Yes we are going to the Keg. I've made the correction.
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