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Investment Ideas / Re: FB - Facebook
« Last post by Parsad on Today at 12:22:22 PM »
Updated list of reasons to short FB from previous posts (nkp007 & Spekulatius):
Short-case:

1) Regulation / anti-trust / fines all unknown, but potentially huge and devastating.
Not sure how to handicap this one apart from previous experience (Exon, BP, AIG, DVA) where things usually don't turn out nearly as dire as the market expected in particular where the company is able to lawyer/lobby up. Also this has been a risk for many years. I recently read the VIC writeup on shorting FB from 2012 and its instructive to also read the back and forth over 200+ messages. Regulation/fines were a concern then and to date has not materialized; rear view mirror stuff though.
 
2) Ads are very economically sensitive, so in downturn, revenue will evaporate quickly
http://resources.emartin.net/blog/pic/SAI-US-Ad-Spending-2009-vs-2008.jpg
https://www.statista.com/chart/12136/worldwide-digital-and-tv-ad-spending/

3) While 18x earnings and growing 20% a year doesn't seem that expensive, the business model has shifted dramatically as past 50% profit margins likely to be 25% or lower given increasing security / regulatory costs so you're overpaying even here.
If we assume these numbers over a 5 year period then it also implies they're giving away $88Bn worth in margin to security/regulatory costs. Seems like a lot.

4) Engagement on FB blue app going down.
I hear this a lot, but I'm not sure how relevant it is. Probably should be looking at the ecosystem and the bit that I struggle to get visibility on most is how to think about the social graph e.g. if a user stops logging into the FB app for a year, but uses apps outside the FB family i.e. Tripadvisor then did you lose the engagement? FB did not stop collecting data and Tripadvisor would still pay FB despite. I suppose FB might have lost the engagement, but not the revenue. Engagement numbers are thrown around a lot, but I'm sceptical on exactly what it tells you.
Also, FB app is still an app that is consistently high up on the annual rankings for most downloaded on Android/iOS stores.

5) Inability to monetize whatsapp, instagram stories, messenger meaning growth cannot be sustained.
We've learned from Tencent that there are loads of options for a business with a exceptional social platform. To short FB means you value their cash and the above at 0. It is one thing to say you cannot monetize a particular part of your business, but if you say that is the case where others have succeeded means you also saying FB management is particularly incompetent. Don't think MZ's track record is that poor.

6)deteriorating employee morale.
https://www.eweek.com/it-management/facebook-google-top-glassdoor-s-2018-list-of-the-best-places-to-work
https://www.digitalinformationworld.com/2018/12/facebooks-ranking-falls-in-best-places-to-work-list-2019.html
https://www.cnet.com/news/facebooks-ranking-falls-in-best-places-to-work-list-2019/

1)  Name one company that has truly been devastated by anti-trust/fines...Microsoft, nope...Google, nope...Phillip Morris, nope...BP, nope...Bridgestone, nope...Kodak, not really.  About the only two significant cases were Standard Oil and AT&T.  I'm not sure FB falls in the dominant position that both enjoyed when you look at the whole sphere of social media platforms globally.

2)  This would also occur to Microsoft and Google, as well as all print/television/radio/online ad companies.

3)  I think they are being careful about guidance on their profit margins, but does anyone really think they are going to take a 25% cut on margins for security and regulatory issues?

4)  Offset by growth elsewhere

5)  Monetizing is actually the easy part...getting a billion users is the hard part!  How many other companies can say that they have a platform with a billion users?  How many can say that they have four (FB, Whatsapp, Messenger & essentially Instagram)?

6)  I'm sure employee morale and benefits were great at GE five years ago...not so great today!  I'm sure employee morale was terrible at Bank of America ten years ago, but looks pretty damn good today! 

Cheers!
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Investment Ideas / Re: SATS - Echostar
« Last post by whistlerbumps on Today at 12:21:55 PM »
Very roughly... I'm not too worried about being precise to the $ here... More interested in knowing that it does have some relatively material value compared to SATS' current share price. 

That being said, here are a couple of back of the envelope methods.....

Dish Mexico has >4mln subs.  At $500 per sub that's $2bln or 980mln for the 49% shares which is ~$10 per share.

Another back of the envelope.  If we assume $25 per month in ARPU, that's 1.2bln of revenue so ~1x and you're also at ~$10.
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Not sure I understand this scenario.. could you expand? Companies survive receivership and go on run-off. Cash flows to be used partially to repay Jrs. (at 20% of CF) and any excess flows to commons. What would the Srs. benefit be? And taxpayers? Also, this contemplates new companies running with new assets and presumably any reform they want to institute (paid-off guarantees, no charters, etc.).

sure. just guessing, and would stop writing on this if someone says why it cant work, but:  sweep stops now.  commitment fee established to pay for backstop (which is needed).  companies into receivership in 2019.  operational assets carved out into new companies and re-ipo'd eventually with a clean slate (don't need to raise a lot of $ so more doable).  legacy assets (5trn portfolios with some operational assets to wind them down) stay in receivership.  normally in receivership all cash flows go to sr pref until paid off, then jr pref, then common gets anything and everything left over (if there is any).   in this plan, there'd be a pre-arranged waterfall of cash flows:  say sr pref gets 75pct, jr pref 20pct, common 5pct.   since the cash flows would expected to be large as the 5trn portfolio runs down, a jr pref shareholder would expect to get par over the course of a few years.  lawsuits go away.   tsy commitment goes away over time and tsy makes a lot more $ for deficit reduction.
Where are the warrants in this plan? Also, if they institute a fee on the remainder backstop why would the Srs. remain? Something is complicated in this scenario: Srs. remain yet NWS stops? You mean Srs. at 0% yield so that only principal is returned? I know it is the legal view but even Calabria stated the original commitment was not a scheme to profit from. In this scenario, the government will be making an absolute killing for decades.

The ultimate goal of a plan like this is to prevent a windfall for shareholders. At all costs.

And even then, minimize the gain over a period of many years so as for any solution to become more palatable. It's a bit over the top, in my view. Given some of us have already been on this for almost a decade.
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Politics / Re: The Fifth, the Fifth, I Plead The Fifth!
« Last post by cubsfan on Today at 12:11:20 PM »
Actually, I do care. Explain it to me if you don't mind.

Explain to me how Trump worked (colluded) with the Russian government to throw the US Presidential election.
Explain to me the quid pro quo.

I'm not that bright, so explain to me like I am 10 years old. I really do care.
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Investment Ideas / Re: GRPN - Groupon
« Last post by Sportgamma on Today at 12:09:46 PM »
I'd start with the last shareholder letter (which is actually the first one ever written) and go from there.

The letter was ok, I found. Focus on operational metrics but vague on the financials. Perhaps it is just that a certain Edward kind of ruined the word transformation for me.

That being said, the strategy outlined in the letter makes sense. Owning the relationship with the customer should be much more valuable than the legacy business. It all comes down to execution though and I assume that sounds very scary to many investors.

Take a look at this offer for example: https://www.groupon.com/deals/ga-fleetway-travel-rome-amalfi-7
  • If they want to own the relationship with the customer, why on earth are they placing ads to some super shady comparison site on the product page? This is beyond stupid.
  • If you scroll down to the reviews, the top review begins with (and I kid you not) "My friend and I had such a great time in Barcelona" (this is a trip to Italy...).
  • Scrolling further down, we get to the Other Recommended Products. Again, this is a 7-day package to Italy. Groupon decides to show me hotels in Las Vegas, Niagara Falls and Dallas...why?

I'm not sure if I should see this as a negative or a positive. Perhaps the fact that they are screwing up the 101 stuff of eCommerce means that they have a lot of runway left to extract gains out of the transformation?
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Politics / Re: The Fifth, the Fifth, I Plead The Fifth!
« Last post by Schwab711 on Today at 12:01:33 PM »
I am trying hard to follow this logic of "collusion" to throw the Presidential election to Donald Trump.

If I follow this - at some time, Donald Trump was in discussions to put up a building in Moscow. So, the Trump organization
had to work with the Russian government in order to put up a building.

Therefore Trump "colluded" with Russia - and the quid pro quo was Putin's role working with
Trump to throw the election his way, because Putin allowed Trump to build a building in Moscow.

I'm not sure I get it - but is this it?

Do I have your logic correctly?

Define what you mean when you say 'collusion' on this site. That's probably our only chance of figuring out whether we are comparing apples and oranges or not (if you actually care).

The reason I think you should define what you mean by collusion is that, among other reasons, conspiracy doesn't require being successful. That's why I keep putting (') around collusion. I suspect this will be a worthless conversation unless I can get you to define the term and care about that definition.
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Investment Ideas / Re: WFC - Wells Fargo
« Last post by sleepydragon on Today at 11:52:33 AM »
remind me a couple years ago when AXP got into trouble with Costco. Stock was at 50ish. I bought as much as I could. It's now doubled. AXP is similar to WFC in that Buffett would like to buy more but couldn't due to 10% limits.
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Investment Ideas / Re: BAM - Brookfield Asset Management
« Last post by khturbo on Today at 11:52:01 AM »
John thanks for responding in depth. I implicitly trusted that the valuations were clean between BPY and BAM, but it's good to see the hard numbers there.

I just emailed IR asking about the management fees and whether they're reflected in the IFRS value. I always thought that the IFRS value was simply the summation of the individual properties, which would imply that corporate level management fees aren't reflected, but I could be (and hope I am) wrong. I think Brookfield IR is usually pretty good at getting back to you within a couple of days so I'll let everyone know what they say.

One other thing is the IDRs. If you assume 5% distribution growth and use a 12% discount rate (I just used 7% yield + 5% growth as the approximate return on the stock so used the same dr on the IDRs) the NPV of the IDRs is a bit above $2 / BPY share. I think everyone would agree that that should come out of the value in some way. Whether you deduct the fees from the IDRs by BAM's 53% ownership percentage in BPY or you deduct ~$2 / share (or whatever your estimate is) from BAM's holdings in BPY, I think you have to do one of those or else you really are double counting.

You have the same issue with BIP and BEP. Hypothetically since BAM uses the market price in their SOTP for themselves you don't need to make adjustments as the market should account for IDRs in the prices. I personally prefer to value them independently for mine but I guess you don't need to.
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Investment Ideas / Re: WFC - Wells Fargo
« Last post by Dalal.Holdings on Today at 11:46:23 AM »
The buy case looks fantastic...buy WFC for the same price as in early 2014, but with fewer shares outstanding and a higher dividend. If interest rates rise, it looks even better in the long term.
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General Discussion / Re: What are you buying today?
« Last post by boilermaker75 on Today at 11:38:23 AM »
Wrote WFC 48.5-strike Dec 14 expiration puts for $0.95 per share this morning.

I am tapped out. If put to on everything I will be fully invested. Actually a few thousand on margin.
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