Author Topic: Ask Packer - No Seriously, Ask Him Anything (AHA)!  (Read 295681 times)

Kiltacular

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Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
« Reply #40 on: July 09, 2013, 09:49:43 PM »
Packer:
Quote
With low interest rates I think debt is not too bad.  If interest rates were high, it would be another story.

So, you see this as a risk and my guess is the market does too but that it overweighs the risk as compared to your opinion.  In that vein, is it that you feel IF interest rates start heading higher it will be obvious in a time period that would still permit getting out of the investment before the market discounted the new, ''high inflation / your debt is going to sink you' scenario?

It seems this is a theme in many of your investments.  The debt makes them a problem, you see the problem and feel the debt can be managed (in a variety of ways).  Yet, you're also aware that's what you're doing so you must assume that if the change in debt costs (interest rates) happens and hurts these types of investments, you'll have time to sell, etc. ???

kiltacular


muscleman

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Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
« Reply #41 on: July 09, 2013, 10:06:03 PM »
The margin of safety is in the price and the position of having a good amount of the quad-play cap ex in place.  They also have an experienced CEO who was successful at PT doing the same withtout some of the pieces Oi has.  The debt is more than the competitors but Oi generates alot of cash flow to support the debt level.  PT has as much or more leverage as PT.  With low interest rates I think debt is not too bad.  If interest rates were high, it would be another story.

Packer

I see. I used to look at financial stocks and look at liquidation values. For telecoms, I guess that probably is harder to apply here.
I am comparing Oi to Sprint, and it seems like Oi is somewhat like Sprint's situation last year. People don't seem to like Oi due to the high debt, but according to MorningStar, both companies' Long term debt/2012 EBITDA is around 4. Sprint's debt level is even higher than Oi. In terms of Price/(EBITDA-interest expense), Oi is actually much cheaper than S.
Do you think Oi's preferred stock is a better bet or the common? Its preferred has no liquidation preference against common, and no voting rights, as someone posted in the PT thread.
I am wondering if common stock holders can vote to issue more preferred stocks and dilute those holders?

I checked their 20-F, and they said: "The Company is authorized to increase its capital, according to a resolution of the Board of Directors, up to the limit of 2.5 billion common or preferred shares, within the legal limit of 2/3 for the issuance of new nonvoting preferred shares."

Right now preferred already consists of 2/3 of total shares, so I don't think they can issue more preferred without issuing common at the same time.
Probably this means preferred would be a better bet then?
« Last Edit: July 09, 2013, 10:12:51 PM by muscleman »
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Packer16

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Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
« Reply #42 on: July 10, 2013, 03:48:38 AM »
My view on debt is that debt is still overvalued versus equity (esp short-term debt).  As such it makes sense to sell (issue debt) to buy even fairly priced income generating assets.  In this case, the debt is financing a cheap asset.  What I think will happen is the relative value of stocks versus bonds will increase with little or no price inflation.  Bonds can be experience the effect of devaluation via falling in price versus income producing assets (such as stocks) and commodities and facilitate a deleveraging of the debt. 

As to leverage and safety, I have experienced two types situation where debt has blown me up with the firms going in bankruptcy.  First are situations where the debt is too much and the firms have small coverage (less than 1.5x) even in industries where there is some growth (like cable).  Thos happened to me in a firm called NTL.  Second there are situations where the coverage today is fine but the business is in decline.  An example of this was Lodgenet.  It was fine in terms of coverage and its EBITDA grew coming out of 2008 but then it started to decline.  Once that happened I sold at a loss but was saved from the subsequent decline to 0.  Right now, the directory firms are in second camp.  A better way to play these declining firms is to  buy their debt if it is undervalued.

As to the difference between preferreds and common in Brazilian companies, I have always preferred the cheaper selling stock.  The common have the vote but the preferred have a minimum dividend.  As a minority shareholder the minimum dividend and cheaper price are more valuable to me.  In OIBR's case, I am betting on the control group as good managers and I don't have enough assets to influence a shareholder vote so the preferred shares are better for me today.

Packer

Kiltacular

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Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
« Reply #43 on: July 10, 2013, 05:16:19 AM »
Thanks for a thoughtful reply.

finetrader

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Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
« Reply #44 on: July 19, 2013, 10:12:30 AM »
For what it's worth, I opened a position in Oibr. This could be a double in a 2 years time frame.
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Packer16

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Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
« Reply #45 on: July 19, 2013, 04:29:14 PM »
Hopefully you got in before the run-up.  I missed it as I was going to double down.  There may be a few more bumps in the road where I can add to my position.  However, even at today's close there is still some nice upside.

Packer

finetrader

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Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
« Reply #46 on: July 19, 2013, 05:55:09 PM »
Yes, got in at 1.54, yesterday. As you know Packer telecom companies are within my circle of competence and It's been a long time since I've been looking for a big telecom company trading at distressed level with good chance ofrecovery. Thanks for bringing this one to this board.
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tombgrt

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Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
« Reply #47 on: July 19, 2013, 09:01:51 PM »
Packer,  thank you for your willingness to share your thoughts and ideas with us, it is much appreciated.

How do you deal with stocks that have run up a lot but are still cheap? I mean, do you ever suffer from biases because stocks like TVL ran up 500%+ from their lows? I'm not sure how I would be able to hold most/all of my investment with such a fast gain!

Packer16

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Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
« Reply #48 on: July 20, 2013, 04:04:20 AM »
That is one of the tougher issues I am dealing with now.  I have been slowly selling the stocks that have run-up closer to fair value and replacing them with more undervalued fare.  I found a good quote from the folks at Southeast Asset Management that they sell as a stock is over 80% of fair value and replace it with a stock at 40% of fair value.  I was able to this with SGA and SALM.  I have historically sold too early (see Virtus where I sold for a 50% gain and it subsequently went up 6x). 

TVL is a tougher one in part because of its volatility and because HM is selling some stock (based upon the merger prospectus) to pay taxes for the merger.  You can see the big blocks that have been sold the past few days are from them.  I am Assuming if they were not selling it would be higher but I don't know for sure.

Packer

krazeenyc

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Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
« Reply #49 on: October 02, 2013, 08:52:53 AM »
Packer, I see that you are an expert in telecom.

Do you have any thoughts on small cell backhaul?

Also do you have any thoughts on STRP specifically regarding the value of their 39 GHz spectrum ownership? thx.