Author Topic: Ask Packer - No Seriously, Ask Him Anything (AHA)!  (Read 228776 times)

infinitee00

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Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
« Reply #10 on: March 31, 2013, 07:21:18 PM »
Packer, Thanks again for taking the time do this. I very much appreciate your thoughts and found the following very insightful

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I want to do what others are not as this is how you outperform in competitive markets.
I found out the hard way it is difficult to get both undervaluation and timing right
I also have a competition of stocks in the portfolio versus new prospects every few weeks, to see if a switch makes sense.

Here's a few follow-up questions

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This leads to a volatile ride at times (51% decline in 2008)

I imagine this scenario everyday with my own portfolio. How to prepare myself emotionally so that if there's a 50% or more decline in my portfolio I do not freeze in fear but keep adding to my best and most undervalued positions. Since I invest my family's money, how do I convince my family that this is not a permanent loss of capital but just paper loss.

How did you handle the large down swing emotionally/mentally?

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My approach is to look at US/UK/Dutch-based markets first, then other developed the emerging markets with assets.

I am curious - why Dutch? Can you give us a few pointers how the Dutch market is different from the US market? How does one go about looking for undervalued companies in the Netherlands/Holland? How is their corporate governance?

If I remember correctly, in the book 'King of Capital' it is mentioned that European markets generally trade at lower multiples compared to US. If that true how do you know when a stock has reached intrinsic value based on (say) EV/EBITDA multiples or does the IV metric still remain the same?

Have you looked at Australia/NZ market?

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When I see a few firms in a given industry pop up on screens I will put together a spreadsheet the "tracks" the multiples for firms in that industry.  This provides a value framework that assists in buy and sell points for stocks.

Are the multiples the same for every industry or do you have favorite multiples for each industry? Can you give us an example ?

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I specifically look at spin-offs, post-bankruptcy and rights offerings situations for mispricings versus comps in the specific segment.

How do you search for post bankruptcy/rights offering and how do judge whether they are mispriced or not?

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I have a tendency to buy levered firms so I need to make sure the EBITDA is not in a LT down trend.

How do you get confidence that is the case as opposed to a few bad years?

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Day job - Business appraiser (value companies, distressed loans, derivatives and intangible assets).

I am guessing that your day job definitely helps you on the valuation front. How do you think appraising businesses as part of your day job different from appraising public companies?

Will look forward to your responses and I very much appreciate your time.


Packer16

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Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
« Reply #11 on: March 31, 2013, 07:22:49 PM »
Investing Time - stocks 12 years (last 10 more seriously), mutual funds 25 years. 

Education - BSEE (Union College), MBA (UCLA), CFA

Best Year - 2009 (+108.9%) helped take sting out of 51.4% decline in 2008 (worst year)

LT record - 10 yrs (27.1% annualized); 12 yrs (21.2% annualized) (Note: 10-yr record coincides with 2002 bottom)

Easiness - focusing on circle of competence is easier and expanding it leads to more opportunities however the stress of not knowing if you are right or wrong is still the same as when I began.  I have tried to stop mistakes from turning into disasters by doing more credit analysis.

100% invested - yes I have and it has led to volatility. 

Hedge - I have thought about this but at this point in time the equities I own provide the cheapest set of cash flows out there.  If I were to hedge I would by more FFH.  Puts are cheap but my concern is if the Fed can cause asset inflation the puts will do no good and good cash flowing firms will perform the best.

Packer


Packer16

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Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
« Reply #12 on: April 03, 2013, 06:17:17 PM »
51% decline preparation -  I don't know how to prepare other than find something else to do when the losses hit.  I think in times of decline I have put money to work in cheaper stock so I know at least psychologically I am doing the right thing with that portion of my portfolio.  Usually the large declines like this occur in a sector by sector basis so you have some winners to re-invest in the decliners however in 2008 everything went down so it was a little different.

Dutch market - historically the Dutch were the first to develop the joint stock company and had a financing monopoly for many years which allowed them to develop a navy and colonies far larger than their size would  imply.  The UK stole the system when they married off their queen to a Dutch statesman.  So the financing monopoly was expanded to the UK.  Most of the UK colonies inherited the market system (US, Canada, Australia and NZ) and thus had the fruit of the market system before others.  These countries have had working market systems longer than others and therefore I think are safer than others who have blended systems (China) or are newer to markets (Japan and Korea).

Industry valuation - Attached is an example for the leasing industry.  I started by investing in SSW (a ship leasor) then expanded to include an airline leasor (ATSG) and a medical equipment leasor (AIQ).  As you see from the sheet if you look at the relative mulitiples you can see the cheap stocks jump out (highlighted in red).  This has been and probably will be expanded in the future.

Post-bankruptcy, rights offerings search - I text search Yahoo Finance News.  As for valuation, I use spreadsheets as developed above.

Confidence if EBITDA data - Like to look at 10-year trend and see in what context the EBITDA was generated.  For example, if you look at radio, most companies have had a decline in EBITDA since 2005.  However, two have not (SALM and SGA).  You can now add BBGI to this list.  When I saw SALM and SGA trading at a discount to other radio with better performance that is what peaked my interest.  Similarly with the TVs (TVL, NXST and GTN) had good growth rates but were behind the valuation of others with similar growth like SBGI.   Overall I think the TVs are misunderstood.  What industry do yo know that has increased EBITDA by 40 to 100% since 2005/6 but the valuations are down?     

Private versus public businesses - Private businesses tend to be smaller and in some case good niche businesses.  Other than the valuation drivers are the same, FCF.

Packer

Yours Truly

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Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
« Reply #13 on: April 04, 2013, 12:32:48 PM »
Great thread and impressive track record! congrats!

On that, regarding your top 5 successes, what were the % gains on them?

augustabound

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Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
« Reply #14 on: April 04, 2013, 02:01:45 PM »
I agree, great thread.  I've liked all the Ask threads so far.

About your leasing spreadsheet, what made you look at them in the first place?
Contractual obligations with the shippers and airlines?
"Serenity now, insanity later." - Lloyd Braun

ShahKhezri

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Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
« Reply #15 on: April 04, 2013, 05:29:46 PM »
Packer -

Is there any reason why you haven't expanded your circle to container lessors?


Packer16

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Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
« Reply #16 on: April 04, 2013, 06:34:27 PM »
largest % gains - FFH LEAPS (550 to 875%), Telephonica del Peru (415%), Petrobank (367 to 672%), Uranium One (396%) and  Saga Communications (297% to 614%)  - I also have some 100% losses

Lessors - Fist lessor was Seaspan introduced by JEast which has nice recurring revenue that was being levered by lower cost debt

I focus on where the bargains are and then expand from there.  I probably should include container lessors.  Do you which ones are publicly traded? 

zippy1

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Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
« Reply #17 on: April 06, 2013, 01:58:25 PM »
largest % gains - FFH LEAPS (550 to 875%), Telephonica del Peru (415%), Petrobank (367 to 672%), Uranium One (396%) and  Saga Communications (297% to 614%)  - I also have some 100% losses

Lessors - Fist lessor was Seaspan introduced by JEast which has nice recurring revenue that was being levered by lower cost debt

I focus on where the bargains are and then expand from there.  I probably should include container lessors.  Do you which ones are publicly traded?
Packer,

       You are too humble. I bought some VRTS around $16-18 which you mentioned about three years ago.  I sold around $60-$80 last March. Now it is trading around $170-$180.  A ten bagger from you!

Packer16

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Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
« Reply #18 on: April 06, 2013, 02:24:46 PM »
I am glad it worked out.  I should have held on longer.  I only got about 30% of the upside, sold at 0.8% of AUM.  The valuation looked like it increased from 0.6% of AUM to almost 3.0% of AUM now as a well as doubling AUM.  WOW!  As I recall, that was one where the value to AUM was way out of line for VRTS versus the other asset managers (@ about 2% of AUM) because it was a recent spin-off.  I sold when I found some of the radios/TVs that were so cheap.

Packer
« Last Edit: April 06, 2013, 02:44:18 PM by Packer16 »

stahleyp

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Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
« Reply #19 on: April 06, 2013, 08:33:47 PM »
good stuff, packer. thanks for posting!
Paul