Corner of Berkshire & Fairfax Message Board

General Category => Strategies => Topic started by: infinitee00 on March 31, 2013, 08:35:32 AM

Title: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: infinitee00 on March 31, 2013, 08:35:32 AM
OK. Maybe not anything but well you know ...!

After the insightful and brilliant discussions in the 'Ask Eric' and 'Ask Kraven' threads, I thought I'd would start a thread on Packer as well. I learned about Packers phenomenal track record in the Prince Al Waleed thread (27% annualized for the last 10+ years) and decided to pick his brains.

I am a relatively new member of this board ( about a year old, although chronologically I am much closer to Irving Kahn than Munger !) and consequently not very aware of all the superstar investors on this Board with fantastic track records (Packer suggested twacowcfa and JEast as two others - superstars whom I would very much like to hear from). Being a person who likes to learn from both success and failure, I would've also liked to learn from people who have made big mistakes in their investment decisions as well, but unfortunately these investors generally keep their mouths shut or do not stick around.

This board has been awesome in terms of learning experience and I am very grateful to everyone who continue to take the time to inform, educate and share their thoughts unselfishly with others. So, the purpose of these Q&A threads, as I see it, is being able to learn from the experiences ( both good and bad) of investors who have traveled the road ahead of us ( without searching every thread for their investment philosophy) and to improve ourselves and our investing processes from their insights and knowledge.

So without further ado here is my opening volley for Packer ( a little long but then again no one ever saved the world with brevity)

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: giofranchi on March 31, 2013, 09:28:37 AM
Being a person who likes to learn from both success and failure, I would've also liked to learn from people who have made big mistakes in their investment decisions as well, but unfortunately these investors generally keep their mouths shut or do not stick around.

Hey! No problem! You could start a “Ask giofranchi” thread right away!! I would be very pleased to talk about mistakes… I have plenty of experience!!  ;D ;D ;D

Anyway, jokes aside, I agree that Packer is among the smartest investors out there!  :)

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: twacowfca on March 31, 2013, 10:31:20 AM
OK. Maybe not anything but well you know ...!

After the insightful and brilliant discussions in the 'Ask Eric' and 'Ask Kraven' threads, I thought I'd would start a thread on Packer as well. I learned about Packers phenomenal track record in the Prince Al Waleed thread (27% annualized for the last 10+ years) and decided to pick his brains.

I am a relatively new member of this board ( about a year old, although chronologically I am much closer to Irving Kahn than Munger !) and consequently not very aware of all the superstar investors on this Board with fantastic track records (Packer suggested twacowcfa and JEast as two others - superstars whom I would very much like to hear from). Being a person who likes to learn from both success and failure, I would've also liked to learn from people who have made big mistakes in their investment decisions as well, but unfortunately these investors generally keep their mouths shut or do not stick around.

This board has been awesome in terms of learning experience and I am very grateful to everyone who continue to take the time to inform, educate and share their thoughts unselfishly with others. So, the purpose of these Q&A threads, as I see it, is being able to learn from the experiences ( both good and bad) of investors who have traveled the road ahead of us ( without searching every thread for their investment philosophy) and to improve ourselves and our investing processes from their insights and knowledge.

So without further ado here is my opening volley for Packer ( a little long but then again no one ever saved the world with brevity)

  • Concentrated or Diversified? % of portfolio in top 5 positions?
  • Large Cap, Small Cap, Nano Cap, No Cap ?
  • Typical portfolio - Plain vanilla longs, special situations, options/warrants, shorts? Use of leverage or margin ?
  • Typical mix in American listed companies vs Foreign listed companies (%) ? ( Do you eat Chinese RTOs for breakfast? !!)
  • Top 3 methods for searching investment ideas e.g Screens, message boards/blogs, 52-week low list, bankruptcy filings, newspapers, SEC filings etc.
  • Favorite type of stock - Net Net, Turnaround, special situations, Cyclicals, Anything that talks and walks ?
  • Typical due diligence - conf. call transcripts, 10K/10Q/proxies, message boards, forensic accounting, Others - please specify?
  • Average time spent in due diligence ?
  • Best Idea (Present)- Why?
  • Best Idea (Ever)- Why?
  • Worst Idea (Ever) - Why?
  • Particular Industry Expertise/Favorite Industry or Sector ? Most important factors to learn (maybe 3-5) about that industry in order to invest ? Any other particular insights ?
  • Thoughts on when to sell a stock ?
  • Most important lesson(s) learned in investing?
  • Do you believe '42' to be the Answer to the Ultimate Question of Life, the Universe, and Everything  ;) ? http://tinyurl.com/9mc4tyc (http://tinyurl.com/9mc4tyc) ( Sorry, couldn't help it !!)


"A wet bird never flies at night." is a more memorable absurd answer to the ultimate question than, "42".   But the best short story Isaac Asimov ever wrote (better even than, "Nightfall") will get you within a hair's width of the true answer.  The title of the story is: "The Last Question".  :)
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on March 31, 2013, 10:53:59 AM
As a start:

Diversifies versus concentrated - I like to buy what at least I think I know.  Given I have a day job and a family, I don't have the time to understand alot of industries.  I tend to focus on media/telecom, oil and gas, insurance, leasing, entertainment and banking.  At some point I would like to know more about real estate.  This space is more than large enough to keep me busy.  My top 5 position are about 62% of my portfolio and 86% in my 10 holdings.  This leads to a volatile ride at times (51% decline in 2008).  I want to do what others are not as this is how you outperform in competitive markets.

Size - I go where I find bargains.  This has been primarily below $300 million when purchased but I have owned larger firms as well. 

Portfolio composition - primarily stock with a few warrants (about 10%).  Cheap stocks with bargain based weighting (large bargains have a higher weight).  At one time (2005 to 2008), I was heavily invested in LEAPs (greater than 25%) and lost alot of $$ (see 2008 performance).  At this point I limit my leveraged portion of my portfolio (warrants with expiration greater than 4 years) to no more than 10 to 15%.  I found out the hard way it is difficult to get both undervaluation and timing right (although it does not appear on the surface that it is the case).  I also have a competition of stocks in the portfolio versus new prospects every few weeks, to see if a switch makes sense.

US vs. foreign stocks - I stay away from non-developed market unless I can get a lot (2x plus) upside from similar upside in developed markets and the firms are backed by assets (ie. Lukoil and Gazprom of Telefonica del Peru).  At times I may have had up to 10% the portfolio in non developed markets stocks.  My approach is to look at US/UK/Dutch-based markets first, then other developed the emerging markets with assets.   I have stayed away from China as I have not been able to get comfortable with I am going to have the rights to the cash flows if successful.  For non UK/Dutch based systems, you have to make sure that the minority interest shareholders are aligned with the gov't and large shareholders.

Top method - screen for low EV/EBITDA, Equity of FCF, Greenblatt screen to identify cheap firms and associated industry segments.  Also make sure industries do not have continuosly declining cash flows (such as dial-up internet or paging).   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.  I also like to look at proxy statement to ensure that management is not out for themselves (it has good metric based incentives, management holds a multiple of salary on stock and does not change metrics after the fact to give higher comp or change option strike prices).

Type of stock - I specifically look at spin-offs, post-bankruptcy and rights offerings situations for mispricings versus comps in the specific segment.  Otherwise I just like cheap stocks with recurring revenues of some sort. 

Due diligence - use 10-Ks, annual reports, this message board, value investor holdings, IR presentations and conf call transcripts for firms I am interest in.  Average time spent on DD about 10 hours.

Current best idea - Lin TV or Alliance Healthcare (see threads on these in idea section)

Best idea ever - LEAPs on FFH, Saga, Salem Communications, NTL (post-bankruptcy) or Petrobank.

Worst ideas - LEAPs on sub-prime lenders (LEND, NEW), sub-prime lender (Delta Financial), NTL (pre-bankruptcy) 

Industry factors - vary by industry.  Five Rules for Successful Investment and The Little Book that Build Wealth are good starting points for industry factors.  I try to find segments that have some nature of moats so I can focus on valuation.

Time to get some ham.  More to come...


Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: racemize on March 31, 2013, 11:52:37 AM
Thanks for doing this Packer, I have a couple of perhaps more personal questions, so feel free to ignore if you don't want to answer:

1) What kind of day job do you have?
2) How old are you?
3) Are you planning on retiring from your day job to do investing, and if so, how far off do you think that is?
(FYI, I'm asking 2 and 3 sort of together to get a sense of time spent investing to retirement, or that sort of idea)
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: writser on March 31, 2013, 02:18:44 PM
Yeah, thanks for doing this. For the record, on most forums the "Ask Me Anything" threads are opened by the person of interest themselves. Isn't it a bit rude to open a topic to ask Packer anything, if you're not Packer? (Same holds for the Kraven thread). Then again, maybe the topic starters asked for permission.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Parsad on March 31, 2013, 03:09:31 PM
Yeah, thanks for doing this. For the record, on most forums the "Ask Me Anything" threads are opened by the person of interest themselves. Isn't it a bit rude to open a topic to ask Packer anything, if you're not Packer? (Same holds for the Kraven thread). Then again, maybe the topic starters asked for permission.

But then that can be construed as egotistical as well.  I'm not sure there is any right way or wrong way to do this, but as long as the inquisitive mind is polite about it, and the respondent has the time and inclination to respond...it's all good!   ;D 

I think there is also a level of "pay it forward/back" involved here.  Alot of people feel indebted to each other over the years because of the knowledge and comraderie they've shared.  Cheers!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on March 31, 2013, 04:11:02 PM
Yes, the starter did ask permission which I appreciated.  Follow-up on last 2 questions:

When to sell - 2 times.  First, when my target is reached.  For example on the media cos it is about 8/9x EBITDA.  The other time is when I am wrong.  I have a tendency to buy levered firms so I need to make sure the EBITDA is not in a LT down trend.  I was able to this with LNET before it went BK.  This is the first time I have successfully done this.  Previously, I have gone down with the ship in NTL (now Virgin Media), Delta Financial and Charter Communications.  Due to this tendancy I check and monitor the coverage and leverage ratios of the levered firms I invest in.  What also helps in some of these situations is a large value investor on my side of the balance sheet (equity) but not always as Monish Pabrai held Delta Financial and D. Einhorn held New Century Financial.  Both of those were built on poor business models that I did not realize until it was too late.

Most important lesson - be patient and do what others are not doing.

Day job - Business appraiser (value companies, distressed loans, derivatives and intangible assets).  With the job it keeps me focused on what is important due time limitations for investing.

Age - 49; kids 18 and 14

Retirement - I don't know but as long as I enjoy day job I will keep on doing valuation of some sort. 

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: infinitee00 on March 31, 2013, 05:49:16 PM
Yeah, thanks for doing this. For the record, on most forums the "Ask Me Anything" threads are opened by the person of interest themselves. Isn't it a bit rude to open a topic to ask Packer anything, if you're not Packer? (Same holds for the Kraven thread). Then again, maybe the topic starters asked for permission.

I am curious, why do you consider asking genuine questions and trying to improve oneself from someone else's experience rude?  On the contrary, I think the AMA threads on Reddit sometimes border on vanity and narcissism.

Heck, I want to start a thread for every single investor on this board who have had long term (10+ years) track records of >20% ( while not foolproof, with small pools of capital I consider 20% to be a good threshold that separates the best investors from the good), but then that may get me banned from this board !

Btw, I did ask for his permission.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: DTEJD1997 on March 31, 2013, 06:37:58 PM
OK:

Mr. Packer, I have a few questions for you:

A). How long have you been investing?
B). What type of education do you have?
C). What is the best year you've had, i.e. largest % year up?
D). What is your long term record, annualized?
E). As you age & get more experience, do you find investing to be easier?  Are you finding more opportunities?
F). Do you stay largely 100% invested?
G). Do you hedge your positions, or have significant cash holdings when you think it is warranted?

Thank you for your time!

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: infinitee00 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

Quote

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

Quote
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?

Quote
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?

Quote
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 ?

Quote
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?

Quote
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?

Quote
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.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 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

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 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
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Yours Truly 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?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: augustabound 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?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: ShahKhezri on April 04, 2013, 05:29:46 PM
Packer -

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

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 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? 
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: zippy1 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!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 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
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: stahleyp on April 06, 2013, 08:33:47 PM
good stuff, packer. thanks for posting!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: motownsf on April 07, 2013, 08:02:12 AM
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!


Did the same thing with VRTS. Sold too early!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: zippy1 on April 07, 2013, 02:11:06 PM
VRTS was a great pick in several ways.  First, it was a spinoff. The company that spun it off, I think, went over bankruptcy. The price vs. AUM is really cheap as Packer noted. It probably will be difficult for investment managers to explain to customers how great this investment is.

My thought at the time Packer brought it up was "If I were to be an investor manager, I would not touch it with a ten-foot pole."   It really was a great pick. Thanks to Packer. It paid for my son's four-year college expenses!  ;)
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: fenris on April 07, 2013, 02:47:57 PM
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?
Container lessors: TGH, TAL, CAP
Recent transactions: Triton Container by Warburg Pincus, GE SeaCo by Chinese conglomerate and BOX (Seacube) by Ontario Teachers' Retirement Plan

Compared to other leased equipment, containers have very long useful life and high residual value (scrap value of metal). Also shippers are cash strapped (have been since crisis) and global mix continues to shift from shipper to lessor ownership. Having that said, pretty much all production capacity is located in China and if there is a rush of capital lease rates could get hammered as the production cycle is short and the product a commodity. Nice thing about these firms is that the assets are global and the players are incorporated offshore to minimize tax burden. In combination with depreciation of container fleet this eliminates cash taxes for the time being.

Sector has had a great run since the crisis...
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on April 07, 2013, 03:25:54 PM
Thanks I have added them to my leasing spreadsheet but they do appear a bit pricey in comparison to some of the other sectors at this time (8 to 15x EBITDA and 6% to 10% FCF yields).

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: fenris on April 07, 2013, 03:55:35 PM
Yes. Check out how much they were able to grow earnings since the crisis as a result of shippers' lack of capital to invest in containers. Combined with good lease rates (vs. ie. lease rates on ships which collapsed) made for a very favorable environment. I think these are great businesses but I'm not sure that this is a great time in the cycle to invest in them (not invested in any of them right now).
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: JBird on June 30, 2013, 02:02:26 PM
When you create valuations do you estimate a probably-weighted range of values?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on June 30, 2013, 04:53:43 PM
No I do not as I would not know what the probabilities are today or in the future.  I try to make it simple as I don't have time to do extensive DCF modeling on my investments.  I do however get a feel for what a normalized valuation would be. 

Let me give you an example.  About 2 to 2.5 years ago I invested in 2 radio companies.  If you looked at the values at which I bought one Saga Communications it was 4.7x EBITDA.  Good recurring revenue media properties typically were sold for 8 to 10x EBITDA if not higher prior to 2008.  This is due to real synergies that can be obtained by aggregating media stations.  So in looking at both Salem and Saga I found the 2 radios who had the best performance of the radios in terms of EBITDA before and after the crisis.  They both also happened to be amongst the cheapest of the radios on an EBITDA and FCF basis also.  The debt coverage ratios for both were also the best amongst the radios.  After the radios has appreciated I noticed the TVs had not so I purchased some of them at 5 to 6x EBITDA and now they are bring purchased for 8 to 10x + EBITDA multiples. 

Packer 
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: JBird on June 30, 2013, 07:21:25 PM
Thanks
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on July 03, 2013, 10:28:41 PM
Mr. Packer, could you tell me how you analyze telecom companies? I am very interested in PT, but not sure how to start.
Could you share your perspectives on that?
The basic things that I know:
1. large fixed cost, so they had better have a large customer base, and bundle plan offering is usually cost effective.
2. Capex. They need to upgrade the network from time to time. 2G to 3G and then to 4G. I am not sure what is the cost of each upgrades, and usually how many years would it take before another upgrade is needed?
3. What is their moat? Existing network?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on July 04, 2013, 08:21:45 AM
Telecom can be thought of as 2 businesses (a legacy business (think landline and wireless phone service) and broadband services business (think cable, broadband internet and 4G wireless)).  Right now we are in transition from legacy to broadband services.  The legacy business throws off alot of free cash flow which is being re-invested in broadband services.  I think going forward you are going to see a convergence of these 2 businesses and consolidation.  If you look at the presentation, PlanMeastro has posted about telecom you can see the increasing profitability of scale and the 2 less consolidated markets are the US an Brazil.  So as we see consolidation in those markets we should be able to see more profitability.  Bundling these services together is key and right now PT has done that successfully in Portugal and is beginning in Brazil (through Oi).  PT has done a great job if increasing EDITDA in a terrible macro situation and having to spin-off its cable business.  So PT has re-built its broadband services business from scratch and is a good competitor in broadband services.  The CEO of OI and formerly PT get the triple-play future.  BTW this is trend that John Malone is investing in when he is buying cable cos such as Virgin Media and Charter Communications.

The one risk for both OI and PT is the relatively high leverage of over 3x EBITDA.  But as long as the focus is on broadband, I think this fine due to low interest rates and the cable cos typically have in excess of this amount of debt.

The moat is the existing network and the cost advantage of bundling.  There is also the media distribution channel.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Sportgamma on July 04, 2013, 08:53:44 AM
Telecom can be thought of as 2 businesses (a legacy business (think landline and wireless phone service) and broadband services business (think cable, broadband internet and 4G wireless)).  Right now we are in transition from legacy to broadband services.  The legacy business throws off alot of free cash flow which is being re-invested in broadband services.  I think going forward you are going to see a convergence of these 2 businesses and consolidation.  If you look at the presentation, PlanMeastro has posted about telecom you can see the increasing profitability of scale and the 2 less consolidated markets are the US an Brazil.  So as we see consolidation in those markets we should be able to see more profitability.  Bundling these services together is key and right now PT has done that successfully in Portugal and is beginning in Brazil (through Oi).  PT has done a great job if increasing EDITDA in a terrible macro situation and having to spin-off its cable business.  So PT has re-built its broadband services business from scratch and is a good competitor in broadband services.  The CEO of OI and formerly PT get the triple-play future.  BTW this is trend that John Malone is investing in when he is buying cable cos such as Virgin Media and Charter Communications.

The one risk for both OI and PT is the relatively high leverage of over 3x EBITDA.  But as long as the focus is on broadband, I think this fine due to low interest rates and the cable cos typically have in excess of this amount of debt.

The moat is the existing network and the cost advantage of bundling.  There is also the media distribution channel.

Packer

Hi Packer,

Could you direct me to the presentation?

Edit:
"BTW this is trend that John Malone is investing in when he is buying cable cos such as Virgin Media and Charter Communications."
Malone is specifically going for Cable operators as they have more balance sheet firepower (due to the dividends) and system architecture (getting speeds up). How would you compare the telcos and cables?


TIA
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: HJ on July 04, 2013, 08:57:38 AM
Packer, are you invested in PT currently?  Under the current macro back drop, what do you think is a fair valuation multiple for PT's domestic and Brazilian operations respectively?

Thanks for all your thoughts.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on July 04, 2013, 10:32:07 AM
Here is link to the presentation:

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/pt-portugal-telecom/10/

It is the GS presentation.

As to Malone's comments.  He was looking to cable because of the cash flows (which the telecos have in abundance) and due easier plant upgrades to provide broadband services.  Most cable cos have more debt than telcos.  Interestingly enough most cable cos don't make that much on cable (due to high content costs) but do make alot via broadband connections.  It is interesting to see that the CEO of PT has successfully competed against the incumbent cable co and won in Portugal.  I think the idea is to do the same in Brazil.

I don't have a position in PT but do have one in OIBR.  Since the CEO of PT thinks that is were the growth is and it is selling for less than PT, I felt OIBR was a better play on that theme.   In reading some sell side reports in OIBR, the triple play possibilities are not mentioned but what is mentioned is that OIBR has an old network and alot of debt.  In terms of fair multiples of EBITDA.  A good triple play company can go for 8 to 9x EBITDA (which is what OIBE is trying to become).  Malone bought out VM at multiple of  8.5x and Charter at a multiple of 9x and there has to be some upside for him to pay those multiples.

Packer


Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: PlanMaestro on July 04, 2013, 04:20:34 PM
It is interesting to see that the CEO of PT has successfully competed against the incumbent cable co and won in Portugal.  I think the idea is to do the same in Brazil.

That I liked a lot Packer, great management team. It is one of my main worries though. Triple play is a free option but still, can they do it again?

"Portugal is the only market in the world where leadership in triple play has been wrested from cable companies." – Bava
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on July 04, 2013, 04:26:58 PM
If anyone can do it, it is these guys.  At this price Oi just has to survive to pay down the debt and its will be a double.  If it turns into another PT then your talking multiples of that.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: HJ on July 05, 2013, 09:46:47 PM
You guys have some extraordinary bandwidth in the variety of business that you know.  I know nothing about Brasil, but am intrigued by this just because people here are involved with it. 

So all of this is hanging on Bava?  The stock trades like the company is going to file for bankruptcy, but in looking at the 20-F, the company cash flow still seem to be reasonable?  It seem to be quite extreme if purely on concern of business deterioration?  On the other hand, you see lines in 20-F  like

"We are subject to numerous legal and administrative proceedings. It is difficult to quantify the potential impact of these legal
and administrative proceedings. We classify our risk of loss from legal and administrative proceedings as “probable,” “possible” or
“remote.” We make provisions for probable losses but do not make provisions for possible and remote losses. As of December 31,
2012, we had provisioned R$6,421 million for probable losses relating to various tax, labor and civil legal and administrative
proceedings against us. As of December 31, 2012, we had claims against us of R$765 million in tax proceedings, R$1,579 million in
labor proceedings and R$4,076 million in civil proceedings with a risk of loss classified as “possible” for which we had made no
provisions. "

That's like more than 100% of book equity if you add up all the probable and possible.  Is this the nature of doing business in Brasil, or specific to Oi?  Is this why the stock trading this way?  Someone in the controlling group selling?  I also wonder how much of the current infrastructure are more like the RLEC assets that Verizon has been getting off (Fairpoint / Frontier), and how much is the more reasonable assets.  Not that this is anyway analogous to this situation, just wondering how much assets is "worthwhile to upgrade" vs. "sitting duck waiting to get written down one day".
 
Thank you all for sharing your knowledge and thoughts.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on July 06, 2013, 03:53:35 AM
It looks like they have reserves to cover those situations. As to similarity to FTR, OIBR is rolling out triple/quad play while FTR only has double play (telephone and internet).  Since alot of the video is migrating to the web at some point they may be able to offer the triple.  What is unique about OIBR is Bava has not only competed against the local cable co from ground zero but become number one.  He also plans to do this with Oi.  As to the stock price, Brazil is not an investment favorite and Oi does have a modest but I believe managable amount of debt (esp. given the recent ECB decision to keep rates down (the US and Japan already have this in place).  Without a plan to expand into triple play services, the market is probably correct.  In addition, Oi's competitors have less debt and so from an investment perspective may appear less risky so absent Bava, Oi does not have a constituency. 

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on July 09, 2013, 09:38:47 AM
Mr. Packer, could you please tell me the margin of safety for OiBR? I have a stake in PT, and I am interested in directly betting on Oi as well, but I am not sure what the margin of safety is here. They sold the land line tower rights for 1bn BRL, and they plan to sell the wireless towers as well. I guess they will sell and lease back. It sounds like they not only have the wireless tower's rights of use but also the ownership of the towers. I could be wrong though. So probably they could sell for, 6 bn BRL? That would still not cover a lot of the liabilities, if I assume the intangibles are worthless.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on July 09, 2013, 03:55:10 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 
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Kiltacular on July 09, 2013, 09:40:37 PM
Hello Packer,

Are you buying OIBR or OIBR.C?  Skip this post if you'd prefer not to say.

Btw, excellent write-up on AIQ.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Kiltacular 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
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman 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?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 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
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Kiltacular on July 10, 2013, 05:16:19 AM
Thanks for a thoughtful reply.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: finetrader 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.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 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
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: finetrader 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.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: tombgrt 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!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 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
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: krazeenyc 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.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on October 04, 2013, 03:43:40 AM
I know enough about telecom to be dangerous.  Small cell backhaul sounds like a promising concept.  As to STRP and its spectrum, I had valued it in the past for a client and at the time it was worth a good amount.  However, since then the prices have gone down along with demand.  At the time the plan was for Winstar to build-out or leases the licenses to have another telco build-out a fixed broadband wireless network.  I think the fixed broadband concept was overcome by events (mobile broadband networks - Clearwire).  The city spectrum is the most valuable but at the current time there is not alot of demand given the other build-outs.  There will be demand in the future but the question is will it be absorbed by the existing network spectrum or is there enough demand for a new network on a different frequencies.   Before the spin-off, IDT tried to sell what it could, primarily city network spectrum.  I would keep an eye on what these city users are doing as this may provide some clues to its potential value.  At this point, however, this spectrum is akin to buying land as a RE investment.  If you buy in the right places, it can be a multi-bagger but you have to wait for demand to develop and that can take a long time. 

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: gg on October 04, 2013, 07:01:51 AM
Packer / anyone else knowledgeable in telecom -

Do you have any thoughts on Cincinnati Bell (CBB)?

They have significant debt, but their assets include ownership of ~70% of CyrusOne (CONE) which is a data center reit they spun off in the past year or so, as well as addition their traditional telecom business.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on October 05, 2013, 05:31:40 AM
A full position is 6 to 7% and up to 10 - 12% on cost basis if it goes down further and value is increasing.  If they go up they will represent a larger % of portfolio.  My top five are typically around 60% and top 10 around 80%.   I have to constantly prune and plant to keep the price/value as low as possible.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on October 05, 2013, 05:58:06 AM
I put CBB in the legacy telco basket with a hosting firm attached.  CONE appears to be fairly if not overpriced at 13.6x EBITDA (adjusted for operating units which are not included in shares outstanding).  The other REITs are priced on yield and CONE appears to be valued this way. 

The telco industry reminds of radios a few years ago with most of the names having declines in revenues and cash flows that at some point turned.  I played that trend by purchasing the radios with growing CFs (Saga and Salem).  In the telco space, the analogies today are HCOM, GNCMA and ALSK. 

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Aberhound on October 05, 2013, 12:17:22 PM
The new hydro lines have about 1/5th the line loss compared to the current standard so I expect the Utility industry will restructure. Which utility in the US is in sunny parts of the US and has a wide east-west footprint (more time zones) plus good management willing to test and use improved technology?

I also believe it is more efficient to use the new lines to compete with the alternative of exporting LNG to avoid wasting capital and so less carbon is used. (If line loss is 1/5th you can use capital to build useful power lines and super efficient LNG generating stations instead of NG pipelines and compressor stations and a fleet of LNG ships and terminals plus the same NG generating stations in Asia. More  power lines across more time zones let you close at least 1/3rd of power generating infrastructure). Which utility would be best to champion a better approach? is Transalta (in alliance with Midwestern) a candidate?

if utilities are allowed to merge cross-state like the banking industry which utilities are likely to be the mega-utilities similar to the current mega banks?

I want to buy utilities when they are doing stupid things which makes them cheap but I need your help identifying which ones have the brains and guts to preserve and grow my capital.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: plato1976 on November 16, 2013, 11:14:29 AM
Hi, Packer:

May I ask when you sell or rebalance your portfolio, do you consider the tax effect (at all) ?
In the US, anything in a taxable account subject to short term capital gain has high marginal tax rate (for me). Not sure how to take this into consideration. Even a long term capital gain has significant switching cost (you literally pay 25%+ tax for long term gain in CA: state+fed), and when you switch basically you lose the compounding power of the part you paid for tax.

To me it seems so difficult to achieve a high return in the U.S. (after tax)

/Plato1976

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
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on November 16, 2013, 01:09:18 PM
These are pre-tax numbers primarily from IRA accounts.  I have a small non-IRA that I use a small amount of leverage to offset capital gains. 

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on November 20, 2013, 08:25:05 PM
Hi Packer,
    Of all these teleco companies that we discussed, PT, Oi, GNCMA, ALSK, TI-A, which one do you feel has the best upside and least downside?
    I am learning the teleco industry, but I sometimes get confused about those vs the cable companies and the internet companies. I think some teleco provides internet and cable service as well. How do you value these business? I see you use EV/EBITDA a lot, but I can't wrap my head around that vs price/FCF, because I don't know how to calculate FCF, because I don't know what is the proper level of capex, and when will the technology get out-dated and they have to build a new fancier network with a ton of money. Can you please share a bit of your insights?


Thank you!
MM
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on November 21, 2013, 03:42:44 AM
For cable cos, I use a higher fair valuation at 8x EBITDA versus 6.5 to 7.0x for telcos.  They also have higher revenue and EBITDA growth than the telcos.  As to the most favorable pricing in order would be GNCMA, TI-A, ALSK.  PT and Oi are pretty close to fair value versus the others.  Oi also has a large amount of dilution risk.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: gary17 on November 21, 2013, 12:58:32 PM
Thanks Packer for sharing your experiences / thoughts on this thread.

I'm wondering if you could share your view on why cable should deserve more than telcos....   is it based on what's out there in the industry or your experience.

I would've thought cable is din decline because of then Internet...

Thanks
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on November 21, 2013, 05:22:17 PM
Cable cos have more customer stickiness than POTS lines as can be seen by the revenue and EBITDA growth for cable cos in excess of the pure telecom cos.  Although basic cable subs are in decline the triple/quad play bundles cable cos provide an economic alternative for connectivity.  As a result cable cos trade at a premium to telecom cos.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: ERICOPOLY on November 21, 2013, 05:27:33 PM
Does Packer want to manage OPP? (other people's pennies... what were you thinking I meant!!).
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: phil_Buffett on November 23, 2013, 05:06:35 AM
thank you packer for the Chance to ask you something. great answers and great help.

so under your assumption with 8x ebitda for example GNCMA has a fair value of around 2b.$?

that would be a 5x bagger  8) :)

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on November 23, 2013, 05:19:26 AM
It has some great upside but it also has about $1b in debt so at 8x EBITDA I get closer to 3.6x the current price.  With all the consolidation amongst Time Warner Cable, Charter and Comcast maybe someone will start to notice the Alaskan cable/telco companies.  If not, they can quietly compound cash flows as we wait.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: phil_Buffett on November 23, 2013, 05:44:30 AM
It has some great upside but it also has about $1b in debt so at 8x EBITDA I get closer to 3.6x the current price.  With all the consolidation amongst Time Warner Cable, Charter and Comcast maybe someone will start to notice the Alaskan cable/telco companies.  If not, they can quietly compound cash flows as we wait.

Packer

packer thank you very much for your quick Response. well 3x times sounds also very very nice. i like GNCMA very much and also have Shares in ALSK but more in GNCMA. I appreciate your great work packer all the time  :) :) :)
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: tombgrt on November 23, 2013, 06:00:05 AM
Exactly Packer. I think AWN is going to surprise as well, they got a very sweet deal.

Quote from: Q3 Earnings call
Phase 3 construction, which will extend the network and cost review by the end of 2014 is well underway. Share repurchase program. During the quarter, we acquired an additional $242 of our Class A common stock at an average cost of $8.90.

We also retired an additional 19,000 shares at an average price of $9.9 per share that were withheld from end of the year employees to satisfy income tax withholding requirements. This brings our total year-to-date purchases to 1.8 million shares for approximately 15.4 million.

Depending on the company's performance, market conditions, liquidity position and subject to continued board oversight, we will likely continue to optimistically acquire shares in the open market.

Denali Media acquisition. Late last week, we announced that we closed the asset purchase agreements to acquire for $7.6 million, rebroadcast T.V. stations one of which is located in Anchorage and two of which are located in Southeast Alaska. Our plan is to provide a new statewide platform for news and information as well as the means to provide unique content and additional value to our video subscribers.

I'm wondering what other acquisitions we can expect in the future. Packer, what is your take on this? Do you think it boosts their "moat"? Let's hope they buy back a ton of shares in the next few years as well!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on November 23, 2013, 06:11:25 AM
These guys have been very disciplined over the years to stay focused on Alaska telecom/media market.  I would be surprised if they made another sizable acquisition outside of this space.  They are following the Malone playbook of re-purchasing shares with excess cash flow when re-investment opportunities are not there.  I think they will have free cash in abundance going forward.  As to moat, many of the acquisitions are making the moat wider by becoming the premier Alaskan content provider and distributor.  These guys are becoming like a Comcast for Alaska.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: gary17 on November 23, 2013, 08:21:47 AM
Packer - I am wondering if you could share your thoughts on LEAPS - noticed you had a comment about it in the other thread.   Under what circumstance would you say buying LEAPS is more favorable than commons?

thanks!

  What I take from this is making investment decisions on macro factors is like buying LEAPs, it is deceptively easy but about impossible to beat the index let alone some of your compounders or other's value oriented picks.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on November 23, 2013, 08:51:20 AM
In most cases never unless you have a panic event.  I have lost more money on LEAP purchases of undervalued stocks than other types of investments.  My largest win was when FFH had the short attack in mid-2000s.  But in that case you had a short attack and a panic decline that would correct itself if event played out as expected.  In most cases you have an undervalued security without a timeframe for it to return to IV.  Initially, LEAPs look like a nice alternative but in my experience  the timeframe to revaluation is a tough thing to estimate.

I really like the TARP warrants because they give you a much better chance of the value returning to IV due to the 5 to 7 year duration versus the typically less than 2 year period for LEAPS.  The only other option strategy I think you have done is selling calls to get a lower entry price.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: jay21 on November 23, 2013, 10:15:23 AM
Cable cos have more customer stickiness than POTS lines as can be seen by the revenue and EBITDA growth for cable cos in excess of the pure telecom cos.  Although basic cable subs are in decline the triple/quad play bundles cable cos provide an economic alternative for connectivity.  As a result cable cos trade at a premium to telecom cos.

Packer

Thanks for your contributions Packer.

Any good primers on cable cos out there or must reads?  I'm starting to dig into Liberty Global, any thoughts there?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on November 23, 2013, 10:29:28 AM
You can read 10-Ks of major players (Comcast, Cablevision, Time Warner and Charter) and look at investor presentations.  There is no tutorial I am aware of.  Liberty Global will probably provide a good flavor because it has both delivery and some content assets.  I haven't been following Liberty as I have found cheaper smaller players (like General Communications).

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: augustabound on November 23, 2013, 10:43:09 AM
Judging by the description below your avatar, you're a part of Rider Nation for tomorrow's game?  ;D

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on November 23, 2013, 10:52:36 AM
Yes I am.  I will be listening because our TV provider does not have the stations covering it down here.  I wish a major broadcaster would at least carry the Grey Cup.  Are you a part of Rider nation?  I also could not find a downloadable Rider icon like I could do for the Packers.  Should be a good and cold game this year.  The Super Bowl will also be cold this year being in the Meadowlands.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: racemize on November 23, 2013, 10:58:18 AM
I have a general question about EBIT and EBITDA multiples--how does one think about them?

For example, I presume that EBIT/EV should be comparable to pre-tax P/E, yes?  e.g., if you are willing to pay 10x pre-tax earnings with no debt, then you are also willing to pay 10x EBIT/EV?

Using EBITDA seems troublesome to me, e.g., what if they are extremely capital expensive?  I guess you can only use it for comparing companies within the same industry?  Would it make sense to create an owner earnings version, e.g., EBITDA - maintenance cap-ex / EV?

Generally, what is the advantage for EBIT/EBITDA use over say FCF or owner earnings?  What are common multiples for these metrics (e.g., as compared to P/E where < 10 is cheap, 13-15 is often "fair", >20 needs growth, etc.)

Not sure if I should post this elsewhere, but it seems like you use these multiples often, and I've never gotten a good handle on them.

Thanks!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on November 23, 2013, 11:19:51 AM
In theory EV/EBITDA becomes useful in cases where there are large amounts of investment that will be used over long periods of time and maintenance cap ex is much smaller than the initial investment.   Commercial real estate, cable and telecom are examples.  You can calculated the EBITDA - maintenance cap ex which is defined by some to be FCF.  I typically calculate the EBITDA and enterprise FCF (FCF plus interest expense) multiples for use with EV. 

The advantage over FCF is sometimes these firms are investing for future growth and current FCF is low.  General Communications is an example.  FCF is low due to investment and maintenance cap ex is small compared to initial outlay.  So to compare the value of General to other firms EBITDA is an appropriate metric.  If you want a standalone valuation, you can do a DCF where in the terminal value the future is all cap-ex is maintenance.  However, you don't need to that to see that it is cheap, you can just compare to other cable cos and use the market multiple to imply a reasonable price.  The other issue with the DCF is the large number of assumptions and the supportability of these assumptions and the amount of time to do all this versus the result.

The multiples used to determine cheapness is based upon the comps.  You can look cross sectionally at the current and historically and the current take out multiples of acquisitions.  So for cable cos the current multiples are in the 7 to 8 range with take-out multiples in the 8 to 10 range.

Packer

Packer   
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: augustabound on November 23, 2013, 11:39:27 AM
Yes I am.  I will be listening because our TV provider does not have the stations covering it down here.  I wish a major broadcaster would at least carry the Grey Cup.  Are you a part of Rider nation?

No, born and raised in Hamilton, moved to Toronto in my late 20s, now in Newmarket and have little interest in the CFL. I love NCAA more than NFL and CFL.

I remember growing up in Hamilton and all the fans seemed to be seniors.  It most definitely seemed to be a game from a generation ago. Nobody talked about it or followed it at school.
Now all those guys from high school seem to be season ticket holders.  ;D

Here's a link for all those in Green Bay who thinks that it's cold there.
http://www.cbc.ca/news/canada/saskatchewan/grey-cup-fans-camp-out-in-freezing-regina-parking-lot-1.2437790
-29C translates to -21F.
 
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on November 23, 2013, 07:04:30 PM
That is cold.  Some real loyal fans.  I wonder what the coldest Grey Cup game was?  At temperatures that cold the ground has to be like concrete and the ball like a brick.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: augustabound on November 24, 2013, 01:04:12 AM
That is cold.  Some real loyal fans.  I wonder what the coldest Grey Cup game was?  At temperatures that cold the ground has to be like concrete and the ball like a brick.

Packer

From the weather network, 1975: This was the coldest recorded Grey Cup in history. The clash between Edmonton and Montreal in Calgary featured a wind chill that felt like -30°C
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: racemize on November 24, 2013, 10:32:56 AM
Packer, since you are looking at the telecom/cable co area a lot, do you have any comment on this and how it affects your longer term thinking on the companies?

http://www.businessinsider.com/cord-cutters-and-the-death-of-tv-2013-11
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on November 24, 2013, 11:00:54 AM
I think the article is a little misleading because most folks are going from cable to high speed internet and the number of sub losses as a % of total subs is relatively small.  When they total all losses, they only include "cable cos" in their numbers not cable cos plus telcos like they should.  I think the data shows the market is mature but I think most already know that.

The only real threat they mention is wifi hot spots.  So unless you think paying cable subscribers are going to transition to mobile devices and watch TV/internet at Starbucks, there is not much of a threat.  Mobile is strarting from such a small base that it does not make sense to compare growth rates.

As Malone has stated the key is the wide pipe.  If entertainment starts to use more bandwidth you will see growth in broadband providers both telco and cable and Starbucks wifi hot spot just won't suffice.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: finetrader on November 24, 2013, 12:22:57 PM
I agree with your observations Packer.

The treat is video streaming. And I guess that's why we hear tv satellite providers looking for ways to become an internet provider. Be it by buying radio waves that would allow to send internet signal or by buying wired network.

As for cable companies, if video streaming become big I'm pretty confident they will find a way to charge more for internet services to compensate for loss on tv services. The last mile providers have always found a way to protect their revenues.

As for data (video) transmission via cell towers, I'm not an expert but my understanding is that it is quite costly to transmit large bandwidth.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: racemize on November 24, 2013, 03:09:08 PM
Yes, I'm mostly concerned with Internet replacing TV services, particularly for satellites (looking at DTV right now).  It seems like the transition will be much easier for cable companies than satellite providers, unless they pull off the cellular internet bundling...

Absolutely agree that free Wi-Fi is not a threat--seems weird that they would mention that in the article, honestly.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: meiroy on November 24, 2013, 05:56:22 PM
[quote author=Packer16 link=topic=8617.msg143115#msg143115 date=1385319654As Malone has stated the key is the wide pipe.  If entertainment starts to use more bandwidth you will see growth in broadband providers both telco and cable and Starbucks wifi hot spot just won't suffice.

Packer
[/quote]

Just to invert this, if someone like Google comes out with disruptive technology it's game over?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on November 24, 2013, 06:07:05 PM
If a disruptive technology was developed (call it super-free wifi), it could be disruptive but the infrastructure to make it work has to paid for by someone.  The data/bandwidth has to go across some network that someone has to pay for in part at least.  You also have the issue of dislodging customers tied to an existing network.  These all become issues if Google comes up with a yet to be discovered technology alot of hurdles.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Liberty on November 24, 2013, 06:16:08 PM
Google's work with fiber and wifi and such is mostly to catalyze others to improve their service (that's my understanding, anyway). I seriously doubt that they want to be in the business of becoming the world's ISP and deal with all the headaches this brings (you actually need customer service, at some point...). They'd rather keep the pressure on so the internet stays fast and relatively open so they can sell ads without having to do all that.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: meiroy on November 24, 2013, 06:24:58 PM

Google was just an example because they are, well, Google and there's already an existing example of https://fiber.google.com/about/. I actually think it's definitely in their interest to have "neutral" infrastructure, but lets not turn it into a discussion about Google...


Anyhow, the question was in general if a disruptive bandwidth technology would be a death call for the industry.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on November 24, 2013, 06:34:24 PM
I think in term of killing these firms, it would depend upon how fast the change occurs.  If you look at telecom history they have been able to co-op both wireless and internet technologies to date.  Newspapers on the other hand were hurt by the internet and did not come up with an effective response (paywalls and unique content not given away for free) fast enough to loose ad dollars.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: ageofsocrates on November 24, 2013, 06:51:50 PM
Hi Packer,

Just had a couple of questions. Hope you could share further.

Any key financial metrics that you look at ( apart from ev/ebitda)? Any checklist that you go thru first before investing? Any investing mistakes that you can share ?

Many thanks
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: investor-man on November 24, 2013, 06:58:29 PM
Hi Packer,

Thanks for taking questions. I'm a fairly accomplished engineer, so I am comfortable with math and statistics, but I'm a fairly neophyte investor. Do you have any books you recommend for coming up to speed on valuation? Beginner? Intermediate? Advanced? I've read maybe 10 value investing books that you'd expect to find on the shelves of Barnes and Noble and I'm looking for something deeper than them. Have you read Demodaran's books? Also do you feel obtaining a CFA is a worthwhile endeavor?

Thanks
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on November 24, 2013, 07:45:56 PM
The primary metrics I use for non-financial firms are EV/EBITDA, EV/EV FCF and Equity/FCF.  I also look at coverage ratios for levered firms and track trends in EBITDA, FCF and leverage ratios over time to see what the story is historically.  I also compare these trends to comps to see where they fall out against other possible investments.  The primary mistakes have been buying levered firms that blew up.  The lesson - stay away from levered firms who have low coverage and are trending worse.

As to valuation books, Damodaran's are probably some of the best.  He is a great communicator.  There is Damodaran on Valuation and his web site has alot of data and information.  At one point I think you could audit his class remotely.  If you have the chance do this as he is great speaker/communicator.  There is another book we use in business valuation (How to Value a Business by Shannon Pratt) but I think it gets into specifics that are not very useful outside of the appraisal profession.  Other good concept books include: The Intelligent Investor, Security Analysis (2nd & 6th Edition - really good footnotes), The Most Important Thing (Annotated Version), Modern Security Analysis (Whitman & Diz), You Can Be a Stock Market Genius (Greenblatt), How to Make Money with Junk Bonds (Levin) and 4 in the Little Book Series (Still Beats the Market, Valuation, Behavioral Investing and That Builds Wealth).

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: valueInv on November 24, 2013, 10:10:51 PM
Google's work with fiber and wifi and such is mostly to catalyze others to improve their service (that's my understanding, anyway). I seriously doubt that they want to be in the business of becoming the world's ISP and deal with all the headaches this brings (you actually need customer service, at some point...). They'd rather keep the pressure on so the internet stays fast and relatively open so they can sell ads without having to do all that.

And push prices down.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: valueInv on November 24, 2013, 10:15:04 PM
I think the article is a little misleading because most folks are going from cable to high speed internet and the number of sub losses as a % of total subs is relatively small.  When they total all losses, they only include "cable cos" in their numbers not cable cos plus telcos like they should.  I think the data shows the market is mature but I think most already know that.

The only real threat they mention is wifi hot spots.  So unless you think paying cable subscribers are going to transition to mobile devices and watch TV/internet at Starbucks, there is not much of a threat.  Mobile is strarting from such a small base that it does not make sense to compare growth rates.

As Malone has stated the key is the wide pipe.  If entertainment starts to use more bandwidth you will see growth in broadband providers both telco and cable and Starbucks wifi hot spot just won't suffice.

Packer

Cablecos are the most aggressive deployers of Wifi hotspots.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Liberty on November 25, 2013, 08:16:27 AM
What reassures me about cablecos is that mobile computing (phones, tablets) isn't nearly as mobile as people seem to think it is. People usually end up somewhere like home, the office, a restaurant, whatever. While you're in transit, sure you'll go cellular, but it's still way more efficient to run a wire to a building and have a wifi router there than to have a bunch of people do high-speed transfers over shared, expensive and limited spectrum, with reception always varying based on the terrain and other factors that are hard to control.

When cablecos go all-digital (which Charter is doing), that'll free up a ton of bandwidth on their lines (analog signal uses a surprising amount of capacity), allowing them to crank up internet speeds at almost no extra cost.

I think wireless will be a bigger challenger in developing countries that aren't already blanketed with cable. But in North-America, cablecos can just keep using most of the same wires and upgrade modems, switches, routers, or run fiber to a neighborhood but keep the last mile copper, etc. It's not as if that's a huge disadvantage since wireless companies need to upgrade their cell towers and run fiber to them too (in fact, I wouldn't be surprised if in some places, cell towers are connected to cableco infrastructure, though I don't know that for sure).

In short: If you're sitting on your sofa at home, streaming 1080p Netflix, you get no benefit from being connected to a cell tower rather than to cable + wifi, while the wireless company would get all the disadvantages of having people take up lots of scarce spectrum, thus reducing the number of paying subscribers they can serve per cell tower.

That's my understanding of the situation, for what it's worth, but I'm not nearly as smart as Packer so take it with a grain of salt.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: gary17 on November 25, 2013, 08:19:40 AM
I tend to agree - my only concern is the unknown unkowns - could 4G or 5G get so fast that people want to stream using 5G or 6G instead of cable... you know, download a 1080p video in 5sec instead of 5min.    the chance of that in the next 5 years is probably low, but hard to say -

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: tombgrt on November 25, 2013, 08:50:18 AM
I tend to agree - my only concern is the unknown unkowns - could 4G or 5G get so fast that people want to stream using 5G or 6G instead of cable... you know, download a 1080p video in 5sec instead of 5min.    the chance of that in the next 5 years is probably low, but hard to say -



Bandwidth usage will increase exponentially as well so I don't think that scenario is very likely in the near future, even if 6G was here in a couple of years.


Thanks for the discussion all!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Liberty on November 25, 2013, 08:58:46 AM
Bandwidth usage will increase exponentially as well so I don't think that scenario is very likely in the near future, even if 6G was here in a couple of years.


Thanks for the discussion all!

Yeah, that would be a problem if cable was at the end of its runway. Malone says that speeds could be brought to gigabit levels pretty easily. That seems believable; I don't live somewhere known for fast internet speeds, and the local cable company has a 200mbit/s package.

If you're going to handicap it, I'd say that's a negative for wireless. The cable roadmap is pretty known and low-risk, while wireless' roadmap is less clear and they're still working on getting LTE everywhere.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: gary17 on November 25, 2013, 09:49:34 AM
Got a dumb question (I'm not a tech person)

So a company like ALSK is NOT a cable
It's a phone company so it's wireline broadband will be limited.... right? cuz the telephone technology is at the end...

When we talk about cable we mean a company like GNCMA? Right? 

Thanks!!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: nodnub on November 25, 2013, 12:53:49 PM
I tend to agree - my only concern is the unknown unkowns - could 4G or 5G get so fast that people want to stream using 5G or 6G instead of cable... you know, download a 1080p video in 5sec instead of 5min.    the chance of that in the next 5 years is probably low, but hard to say -

I think we may be at that point now for many people. For example, in North America a lot of people already have faster internet access (LTE) than on their fixed cable internet connection unless they are paying top dollar to their ISP for a premium connection (100Mbps or higher).

As far as 5G and 6G:  It looks like they are a long way off.   It took a long time to develop the standards and technology involved in each mobile generation.  I think it's possible that the pace of development will quicken in the future, if there are economic benefits to faster adoption.

(wikipedia):   
A new mobile generation has appeared approximately every 10th year since the first 1G system, Nordic Mobile Telephone, was introduced in 1981. The first 2G system started to roll out in 1992, the first 3G system first appeared in 2001 and 4G systems fully compliant with IMT Advanced were standardised in 2012. The development of the 2G (GSM) and 3G (IMT-2000 and UMTS) standards took about 10 years from the official start of the R&D projects, and development of 4G systems started in 2001 or 2002

edit: the tradeoff between mobile data and cable network data will be very region-specific, depending on the mobile data speeds and cable/phoneline network speeds in those areas.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: yadayada on December 02, 2013, 01:09:08 AM
What is a good start to learn the telecom industry? I am looking into GNCMA, but feel no where near qualified to make a judgement so far. I am reading Malone's book, cable cowboys. Just start with reading 10k's? Found a book on amazon, but it seemed v technical, and had 800 pages :) . So that seems a bit too much for just one stock pick.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: augustabound on December 02, 2013, 03:05:53 AM
What is a good start to learn the telecom industry? I am looking into GNCMA, but feel no where near qualified to make a judgement so far. I am reading Malone's book, cable cowboys. Just start with reading 10k's? Found a book on amazon, but it seemed v technical, and had 800 pages :) . So that seems a bit too much for just one stock pick.

I've got an industry primer from 2007.
https://drive.google.com/file/d/0B7ZQujnVzj_9ZDNoWXZsbi16VzA/edit?usp=sharing

I've found it useful to Google "telecom industry primer" or whichever sector you're looking for. Sometimes it's easier to search by filetype in google as pdf.
Some are outdated like one from 1999.

There was one site that had 99 primers (a torrent file though)
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on December 02, 2013, 03:21:07 AM
That is a great primer.  There also are sections of The Five Rules of Successful Stock Investing which talk about the competitive landscape (moats) in Telco. 

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: tombgrt on December 02, 2013, 03:26:09 AM
That is a great primer.  There also are sections of The Five Rules of Successful Stock Investing which talk about the competitive landscape (moats) in Telco. 

Packer


Yes. It's only a few pages long but does a decent job giving the basics I guess.

I also have 2 older related primers. See attachments.

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on December 02, 2013, 03:36:17 AM
Some other nice materials.  I remember reading the Morgan Stanley piece back in TMT boom days.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: yadayada on December 02, 2013, 08:55:16 AM
What is a good start to learn the telecom industry? I am looking into GNCMA, but feel no where near qualified to make a judgement so far. I am reading Malone's book, cable cowboys. Just start with reading 10k's? Found a book on amazon, but it seemed v technical, and had 800 pages :) . So that seems a bit too much for just one stock pick.

I've got an industry primer from 2007.
https://drive.google.com/file/d/0B7ZQujnVzj_9ZDNoWXZsbi16VzA/edit?usp=sharing

I've found it useful to Google "telecom industry primer" or whichever sector you're looking for. Sometimes it's easier to search by filetype in google as pdf.
Some are outdated like one from 1999.

There was one site that had 99 primers (a torrent file though)
thx, v helpfull. Didnt think of that.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: phil_Buffett on December 09, 2013, 03:16:24 PM
packer would be interesting to hear from you books you can recommend.  :)
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: fareastwarriors on December 09, 2013, 03:20:15 PM
What is a good start to learn the telecom industry? I am looking into GNCMA, but feel no where near qualified to make a judgement so far. I am reading Malone's book, cable cowboys. Just start with reading 10k's? Found a book on amazon, but it seemed v technical, and had 800 pages :) . So that seems a bit too much for just one stock pick.

I've got an industry primer from 2007.
https://drive.google.com/file/d/0B7ZQujnVzj_9ZDNoWXZsbi16VzA/edit?usp=sharing

I've found it useful to Google "telecom industry primer" or whichever sector you're looking for. Sometimes it's easier to search by filetype in google as pdf.
Some are outdated like one from 1999.

There was one site that had 99 primers (a torrent file though)
thx, v helpfull. Didnt think of that.


Not sure how useful this is but I have a primer on Banking.

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on December 09, 2013, 04:35:38 PM
The latest book I read and am giving to the folks who work for me for Xmas is "The Manual of Ideas".  The other greats are "The Most Important Thing Illuminated", "Intelligent Investor" w/o Jason Zwieg's notes, The Little Book the Builds Wealth, How to Make Money in Junk Bonds, The Little Book of Behavioral Finance and You Can Be a Stock Market Genius.  There are also nice histories like The Great Wave, Devil Take the Hindmost, Benjamin Graham on Investing and The Crash and Its Aftermath.

Packer

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: one-foot-hurdles on December 09, 2013, 09:10:31 PM
What is a good start to learn the telecom industry? I am looking into GNCMA, but feel no where near qualified to make a judgement so far. I am reading Malone's book, cable cowboys. Just start with reading 10k's? Found a book on amazon, but it seemed v technical, and had 800 pages :) . So that seems a bit too much for just one stock pick.

I've got an industry primer from 2007.
https://drive.google.com/file/d/0B7ZQujnVzj_9ZDNoWXZsbi16VzA/edit?usp=sharing

I've found it useful to Google "telecom industry primer" or whichever sector you're looking for. Sometimes it's easier to search by filetype in google as pdf.
Some are outdated like one from 1999.

There was one site that had 99 primers (a torrent file though)
thx, v helpfull. Didnt think of that.


Not sure how useful this is but I have a primer  for Banking.

tx fareastwarriors
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: MrB on December 10, 2013, 12:37:43 AM
What is a good start to learn the telecom industry? I am looking into GNCMA, but feel no where near qualified to make a judgement so far. I am reading Malone's book, cable cowboys. Just start with reading 10k's? Found a book on amazon, but it seemed v technical, and had 800 pages :) . So that seems a bit too much for just one stock pick.

I've got an industry primer from 2007.
https://drive.google.com/file/d/0B7ZQujnVzj_9ZDNoWXZsbi16VzA/edit?usp=sharing

I've found it useful to Google "telecom industry primer" or whichever sector you're looking for. Sometimes it's easier to search by filetype in google as pdf.
Some are outdated like one from 1999.

There was one site that had 99 primers (a torrent file though)
thx, v helpfull. Didnt think of that.


Not sure how useful this is but I have a primer  for Banking.

tx fareastwarriors

http://equity-research.com/reports/
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: phil_Buffett on December 10, 2013, 01:02:46 AM
The latest book I read and am giving to the folks who work for me for Xmas is "The Manual of Ideas".  The other greats are "The Most Important Thing Illuminated", "Intelligent Investor" w/o Jason Zwieg's notes, The Little Book the Builds Wealth, How to Make Money in Junk Bonds, The Little Book of Behavioral Finance and You Can Be a Stock Market Genius.  There are also nice histories like The Great Wave, Devil Take the Hindmost, Benjamin Graham on Investing and The Crash and Its Aftermath.

Packer



thanks packer  :) :)
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: valueInv on December 10, 2013, 06:08:02 AM
What is a good start to learn the telecom industry? I am looking into GNCMA, but feel no where near qualified to make a judgement so far. I am reading Malone's book, cable cowboys. Just start with reading 10k's? Found a book on amazon, but it seemed v technical, and had 800 pages :) . So that seems a bit too much for just one stock pick.

I've got an industry primer from 2007.
https://drive.google.com/file/d/0B7ZQujnVzj_9ZDNoWXZsbi16VzA/edit?usp=sharing

I've found it useful to Google "telecom industry primer" or whichever sector you're looking for. Sometimes it's easier to search by filetype in google as pdf.
Some are outdated like one from 1999.

There was one site that had 99 primers (a torrent file though)
thx, v helpfull. Didnt think of that.


Not sure how useful this is but I have a primer  for Banking.

tx fareastwarriors

http://equity-research.com/reports/

Nice!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: yadayada on December 10, 2013, 06:59:41 AM
What is a good start to learn the telecom industry? I am looking into GNCMA, but feel no where near qualified to make a judgement so far. I am reading Malone's book, cable cowboys. Just start with reading 10k's? Found a book on amazon, but it seemed v technical, and had 800 pages :) . So that seems a bit too much for just one stock pick.

I've got an industry primer from 2007.
https://drive.google.com/file/d/0B7ZQujnVzj_9ZDNoWXZsbi16VzA/edit?usp=sharing

I've found it useful to Google "telecom industry primer" or whichever sector you're looking for. Sometimes it's easier to search by filetype in google as pdf.
Some are outdated like one from 1999.

There was one site that had 99 primers (a torrent file though)
thx, v helpfull. Didnt think of that.


Not sure how useful this is but I have a primer  for Banking.

tx fareastwarriors

http://equity-research.com/reports/
http://www.youtube.com/watch?v=zuognicaN04
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: wknecht on December 15, 2013, 10:17:10 AM
Hi Packer - Thanks for taking the time to answer so many questions on this thread.

I was wondering, do you still own LICT?

I started a position in this recently, but reading through the FTR thread has raised my skepticism quite a bit. Granted, LICT has less debt, and is not increasing leverage by paying huge dividends like FTR. Reading the LICT reports though, I found myself making similar arguments as those on the FTR thread. But LICT seems to be doing a pretty decent job of stabalizing revenue by diversifying away from wirelines. So I guess I'm wondering how they've performed as a business relative to your expectations and competitors, as well as your thoughts on their prospects of continuing to replace wireline revenue?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on December 15, 2013, 11:06:25 AM
I do.  They have done a good job stemming the decline it is about 0% now on a revenue comp basis.  The only other competitors with positive revenue comps are ALSK, GNCMA and HCOM.  So on a relative basis they are doing well.  However the 3Q numbers versus the YE 2012 numbers do show a deterioration from an increase in revenue to flat and from a flat EBITDA to a declining EBITDA of 8% annually.

It sells for less than 3x EBITDA but this is really a private company where the exit event timeframe is unknown.  I have not increased my position due to its illiquid nature, the lack of revenue growth versus other comps and finding other more liquid names to invest in.  If your timeframe is LT (over 5 years+) this will be a good investment (if at some point they can increase revenues) but if you need any liquidity I would find something else.

Packer   
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: wknecht on December 16, 2013, 06:41:49 AM
Thanks I see.

Another very general question - how much do the USF and ICC reforms concern you from the perspective of LICT?  There doesn't seem to be too large of an effect so far ($1.4mm in revenue for 9q ended 9/30), but the implementation period is pretty extended. Do you hear first hand perspectives around the impact of these on RLECs generally?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: SwedishValue on December 18, 2013, 05:04:12 AM
Packer, I am very impressed with your approach and long-term returns.

I was wondering how much of your portfolio is SHLD and how do you go about estimating intrinsic value in the business?

Greetings from Sweden.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: tombgrt on December 18, 2013, 05:08:42 AM
I think he meant he owns AIQ, which is like SHLD in terms of volatility.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on December 18, 2013, 05:50:18 AM
Yes I do own AIQ, I don't own SHLD except through ownership of Fairholme.  I really don't understand SHLD and how the RE value can be realized in part because I have never seen anyone in the past do this.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on December 18, 2013, 05:54:26 AM
As to USF and ICC, I have seen declines with all RLECs.  I don't have first hand knowledge but in my mind the winners will be the ones who can grow the new services business (internet, TV, wireless, broadband) faster than the USF and ICC revenue declines.  The ones who appear to be doing this are ALSK, GNCMA and HCOM and possibly LICT and FRP if they can go from negative comps to positive.


Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: gary17 on December 19, 2013, 01:11:36 AM
Hi Packer
Not sure if this question has been asked before.... for certain type of capital intensive businesses you've indicated that it's more appropriate to look at EBITDA instead of EPS... so in this case is there an equivalent of "ROE" figure that you look at to measure profitability... and if you think it's worth looking at this figure for the past several years. Thanks!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: racemize on December 21, 2013, 06:18:40 AM
Hi Packer, you have kind of answered this already, but I was hoping for some more specific numbers, if you don't mind:

1) How often are you wrong? (e.g., thesis was not correct, and had to exit at break-even or loss)
2) How often are you wrong and it causes significant loss, e.g., >50% permanent loss?
3) How volatile are is your yearly performance (e.g., lows and highs)?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on December 21, 2013, 06:30:23 AM
As for alternative RoE factor, I like FCF (Firm)/(FA+NWC) or EBITDA/(FA + NWC).  The former when the firm is not investment mode and the later when it is.  I think the cash flow based return on assets formulas are more appropriate than the earnings formulas when you are dealing with high cash flow types of businesses. 

If you look at the radio/TV firms they will have very low RoEs but high FCF/(FA+NWC) because they generate alot of cash on small asset base.  These are hidden the actual earnings due to amortization expenses.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: gary17 on December 21, 2013, 06:37:13 AM
Thanks - much appreciated.
Part of the reason I ask is I was talking to a friend of mine whose family runs a publicly traded company... and to avoid their distributors thinking that they are too profitable, they get the company accountants to use different accounting rules to make the EPS / ROE smaller - that led me to think about EBITDA you've been telling us about on this board...  sure enough, they hide it through D and A.

I assume FA = fixed asset and NWC = net working capital.

cheers
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: LC on December 21, 2013, 07:16:37 AM
That is fascinating garychen17. Another interesting thing to look out for, thanks for that information.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on December 21, 2013, 07:36:18 AM
I make alot of mistakes.  As to losses, I think the best way to think about them is pre-2008/2008 losses and post 2008.  The pre-2008/2008 losses where primarily in subprime finance, options on sub-prime finance and small oil and gas companies.  I guess I was the guy who ran though a dynamite factory with a match and only got a burned hand.  What preserved my capital at the time was Fairfax, Berkshire, Western Sizzlin and some larger RE finance firms like Redwood.  I was down 51.4% in 2008.  My loss rate (losing positions) was pretty high close to 100% on sub-prime finance and oil and gas.

After 2009, the losses can from LEAP ideas that did not work out (FTR, NRG and EXC calls), LNET (30% loss), FRE/FNM Preferreds (this was a panic mistake - now I am in at higher price), Oi (got out with a 3% loss) and Oil and Gas (I recently sold SD to buy a better prospect).   I did not invest much in the LEAP calls (they were a 100% loss) however I did take about a 25% loss on about a 3% position (SD) and a loss on and a 50% on about a 4% position in the FRE/FNM pfds.  Note that these were losses generated in bull market and if the market declines I expect much higher losses.  So lets say 4 errors out of maybe 25 top holdings so that is about 16% - but this is in a bull market.  Only one had a loss of greater than 50% (FRE/FNM preferreds). 

As to volatility here are my returns since 2003:

2003         58.4%
2004         30.1%
2005         20.4%
2006         49.3%
2007          56.2%
2008          -51.4% (ouch)
2009          108.9%
2010          26.7%
2011          8.3%
2012          63.6%
2013 (YTD) 140.3%

It looks alot more like Munger's/Guerin's partnership returns than Buffett's in term of volatility.

Packer




 
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: racemize on December 21, 2013, 07:53:30 AM
Thanks Packer, very interesting.

You probably already knew this, but I just put your annual numbers in my cash allocation model (some of the reason I'm asking this question), and holding any amount of cash would have been detrimental, assuming you would have only used it in 2008, and otherwise held it.  If there had been two of the 2008s, it might have been closer.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: gary17 on December 21, 2013, 07:58:12 AM
Racemize
I haven't been following your models - but I think what you are finding is that the risk of lost opportunity for growth far out weights the risk of a deep market correction.... so even if 08 could repeat at anytime, it's far better to stay invested as fully as possible than try and time the market for a correction..... ?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: wknecht on December 21, 2013, 08:01:17 AM
Man...would obviously need to run the numbers to confirm, but looks like another member of the 1mm sigma club.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: racemize on December 21, 2013, 08:01:42 AM
Racemize
I haven't been following your models - but I think what you are finding is that the risk of lost opportunity for growth far out weights the risk of a deep market correction.... so even if 08 could repeat at anytime, it's far better to stay invested as fully as possible than try and time the market for a correction..... ?

That's what I'm working on, and you can see some results/discussion in the "Why Hold Cash?" thread.  I'm almost done with data collection, but it'll take me a while to write the essay.

Mostly, what you said is correct, but for some volatile portfolios (e.g., occasionally for Pabrai), holding cash does make sense.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: yadayada on December 21, 2013, 03:18:20 PM
hmm isnt that like a 41% return or something (assuming your constantly evenly invested)? Very nice.
You think you could prevent some of those losses in 2008 in hindsight? Any important lesson you learned from that? Maybe see what sentiment is like and try to pick less risky stocks when everything is overheating.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: siddharth18 on December 22, 2013, 09:25:06 AM
2003         58.4%
2004         30.1%
2005         20.4%
2006         49.3%
2007          56.2%
2008          -51.4% (ouch)
2009          108.9%
2010          26.7%
2011          8.3%
2012          63.6%
2013 (YTD) 140.3%

Very impressive Packer! That's like 30x in 10 years - did I calculate it right?

Did you ever feel (around 2006-2007) that things were very overvalued and that you'd rather hold SOME cash instead of all equities? That of course collides with the idea that a person running <$10M would always have something, somewhere that's undervalued he can buy.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on December 22, 2013, 09:58:01 AM
It is 30x but it is over 11 years and the first year coincides with the bottom of the tech/telco bust. 

No I held a number of O&G stocks and financials and they did not look expensive on a valuation basis but come to find out the underlying economics of both (high and rising O&G prices and low default rates in financials) were at peak values.  I should have normalized the earnings and probably would have seen more of the overvaluation.

As I look at my portfolio toady I have hopefully adjusted for peak earnings.  This is part of the rationale for selling SD.  The autos have nice demand now but my calcs there is still some more pent up demand to work through.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: gary17 on December 22, 2013, 04:05:19 PM
Packer
I'm wondering what are your thoughts on Buffett's buy and hold strategy.

If you look at some of the "good " companies that you have owned...and assume you don't sell them and use margin or your other source of income to fund new ideas, would you have done worse, better or the same?

Thanks
Gary 
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on December 22, 2013, 04:55:53 PM
I think it the best strategy for large sums of money because the growth in BV or CF is the most important factor driving stock prices.  If you can find a good capital allocator with a large enough focus market these can provide great returns.  My portfolio is no where near the size that would favor this approach.  I like to take advantage of my small size when I can.

There are some contributors here like gio who look for these types of companies.   There is also the index developer by Murray Stahl who tracks owner-operators.   They have a tendency to be fairly values and are only bargained priced in general panics (2008).  The leverage BRK has via float makes this good strategy great.  I would not consider any of my holdings having both a good capital allocator combined with market with a long runway.  I have tendency to not want to pay high prices in excess of 10x FCF or 7x EBITDA so these firms are rarely in my sweet spot and when they are I usually can find something cheaper.

I have considered using something similar the Morningstar Moat ETF as a cash alternative when I can't find something to invest in.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: investor-man on December 22, 2013, 06:07:17 PM
It is 30x but it is over 11 years and the first year coincides with the bottom of the tech/telco bust. 

No I held a number of O&G stocks and financials and they did not look expensive on a valuation basis but come to find out the underlying economics of both (high and rising O&G prices and low default rates in financials) were at peak values.  I should have normalized the earnings and probably would have seen more of the overvaluation.

As I look at my portfolio toady I have hopefully adjusted for peak earnings.  This is part of the rationale for selling SD.  The autos have nice demand now but my calcs there is still some more pent up demand to work through.

Packer

I'm curious, did you sell SD and buy FIATY? After T-bone1's post about SD I've been losing sleep over my SD shares, especially given their drop since they released earnings
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: twacowfca on December 22, 2013, 06:21:12 PM
I make alot of mistakes.  As to losses, I think the best way to think about them is pre-2008/2008 losses and post 2008.  The pre-2008/2008 losses where primarily in subprime finance, options on sub-prime finance and small oil and gas companies.  I guess I was the guy who ran though a dynamite factory with a match and only got a burned hand.  What preserved my capital at the time was Fairfax, Berkshire, Western Sizzlin and some larger RE finance firms like Redwood.  I was down 51.4% in 2008.  My loss rate (losing positions) was pretty high close to 100% on sub-prime finance and oil and gas.

After 2009, the losses can from LEAP ideas that did not work out (FTR, NRG and EXC calls), LNET (30% loss), FRE/FNM Preferreds (this was a panic mistake - now I am in at higher price), Oi (got out with a 3% loss) and Oil and Gas (I recently sold SD to buy a better prospect).   I did not invest much in the LEAP calls (they were a 100% loss) however I did take about a 25% loss on about a 3% position (SD) and a loss on and a 50% on about a 4% position in the FRE/FNM pfds.  Note that these were losses generated in bull market and if the market declines I expect much higher losses.  So lets say 4 errors out of maybe 25 top holdings so that is about 16% - but this is in a bull market.  Only one had a loss of greater than 50% (FRE/FNM preferreds). 

As to volatility here are my returns since 2003:

2003         58.4%
2004         30.1%
2005         20.4%
2006         49.3%
2007          56.2%
2008          -51.4% (ouch)
2009          108.9%
2010          26.7%
2011          8.3%
2012          63.6%
2013 (YTD) 140.3%

It looks alot more like Munger's/Guerin's partnership returns than Buffett's in term of volatility.

Packer

Yes, but the saving grace is that you avoided margin, unlike Guerin, and didn't get wiped out in the downturn.  The leaps gave you upside and a floor.  Thus, you lived to fight another day.  Congratulations.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Green King on December 22, 2013, 09:08:40 PM
I make alot of mistakes.  As to losses, I think the best way to think about them is pre-2008/2008 losses and post 2008.  The pre-2008/2008 losses where primarily in subprime finance, options on sub-prime finance and small oil and gas companies.  I guess I was the guy who ran though a dynamite factory with a match and only got a burned hand.  What preserved my capital at the time was Fairfax, Berkshire, Western Sizzlin and some larger RE finance firms like Redwood.  I was down 51.4% in 2008.  My loss rate (losing positions) was pretty high close to 100% on sub-prime finance and oil and gas.

After 2009, the losses can from LEAP ideas that did not work out (FTR, NRG and EXC calls), LNET (30% loss), FRE/FNM Preferreds (this was a panic mistake - now I am in at higher price), Oi (got out with a 3% loss) and Oil and Gas (I recently sold SD to buy a better prospect).   I did not invest much in the LEAP calls (they were a 100% loss) however I did take about a 25% loss on about a 3% position (SD) and a loss on and a 50% on about a 4% position in the FRE/FNM pfds.  Note that these were losses generated in bull market and if the market declines I expect much higher losses.  So lets say 4 errors out of maybe 25 top holdings so that is about 16% - but this is in a bull market.  Only one had a loss of greater than 50% (FRE/FNM preferreds). 

As to volatility here are my returns since 2003:

2003         58.4%
2004         30.1%
2005         20.4%
2006         49.3%
2007          56.2%
2008          -51.4% (ouch)
2009          108.9%
2010          26.7%
2011          8.3%
2012          63.6%
2013 (YTD) 140.3%

It looks alot more like Munger's/Guerin's partnership returns than Buffett's in term of volatility.

Packer

Sorry about before. This is some great insight and experience thx.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: siddharth18 on December 23, 2013, 11:56:40 AM
It is 30x but it is over 11 years and the first year coincides with the bottom of the tech/telco bust. 

No I held a number of O&G stocks and financials and they did not look expensive on a valuation basis but come to find out the underlying economics of both (high and rising O&G prices and low default rates in financials) were at peak values.  I should have normalized the earnings and probably would have seen more of the overvaluation.

As I look at my portfolio toady I have hopefully adjusted for peak earnings.  This is part of the rationale for selling SD.  The autos have nice demand now but my calcs there is still some more pent up demand to work through.

Packer


Congrats on that's an insane rate of return. I can't help but be amazed at the power of compounding. I'm just going to shoot some questions; feel free to answer none/some/any/all:

Did you dabble in distressed debt or overseas equities at any point?

After 10 years of successful investing, what sorts of challenges (if any) do you face at this level? Has spotting opportunities gotten easier over the years compared to your early years? Do you HATE any aspect of investing?

Do you wish you had access to a certain market where you see (or previously saw) opportunities but couldn't invest for one reason or another? (Like Indian equities that's limited to Indian residents or institutional access so you could buy credit default swaps or over-the-counter derivatives)?

What are your plans for the next 10 years? Do you hope to open a hedge fund? Do you plan on retiring after hitting a certain net worth?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on December 23, 2013, 07:15:01 PM
I currently have been looking overseas as there appears to be more bargains there than in the US today.  In the past, I have invested in Brazil and some Russian oil companies and now have holdings in Italy and Greece and am looking at firms in Australia and S. Korea.  I have not bought distressed debt but have purchased some equity of firms who have gone through BK (NTL, Magellan Health, RCN and Hawaiian Telecom) and equity of some of these holders (AIQ an Oaktree holding).

Same challenges as 10 years ago -  buying when others don't like a company.  I do have some purchase constraints on some microcaps that have small amounts of volume but my sweet spot is higher on the market cap scale.  The issue I have had with microcaps has been getting out.  My best performing microcap (Acme Communications) was a liquidation so that was not an issue.  I don't hate any aspect of investing per se but the hardest part is watching a good idea getting cheaper (which happens most of the time with me) if the market is going up.

In terms of market access, I have switched brokers so now I can buy most international equities that I did not have access to previously.  At this point, my universe is large enough and not totally explored. 

Next 10 years I don't know.  At some point I may start a fund but I need to get my 2 kids through college first.  In addition, I like what I do with folks I enjoy working with so retirement is a way off yet.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: plato1976 on December 23, 2013, 07:28:29 PM
Packer, may I know which broker you are using for international investing ?
Thanks!

I currently have been looking overseas as there appears to be more bargains there than in the US today.  In the past, I have invested in Brazil and some Russian oil companies and now have holdings in Italy and Greece and am looking at firms in Australia and S. Korea.  I have not bought distressed debt but have purchased some equity of firms who have gone through BK (NTL, Magellan Health, RCN and Hawaiian Telecom) and equity of some of these holders (AIQ an Oaktree holding).

Same challenges as 10 years ago -  buying when others don't like a company.  I do have some purchase constraints on some microcaps that have small amounts of volume but my sweet spot is higher on the market cap scale.  The issue I have had with microcaps has been getting out.  My best performing microcap (Acme Communications) was a liquidation so that was not an issue.  I don't hate any aspect of investing per se but the hardest part is watching a good idea getting cheaper (which happens most of the time with me) if the market is going up.

In terms of market access, I have switched brokers so now I can buy most international equities that I did not have access to previously.  At this point, my universe is large enough and not totally explored. 

Next 10 years I don't know.  At some point I may start a fund but I need to get my 2 kids through college first.  In addition, I like what I do with folks I enjoy working with so retirement is a way off yet.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on December 23, 2013, 07:54:15 PM
I use Fidelity.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: gary17 on December 23, 2013, 08:06:44 PM
Hi Packer, thanks for sharing all this -
seems like your approach is like Ben Graham but yet I see you noted before you are doing concentration (like Buffett)?  If this is the case, how do you protect yourself from a concentrated position that turns out to be wrong... 

In my mind the Graham approach is buying a basket of cheap stocks - and chances are there will be some real good winnings
and then there's buffett who buys concentrated positions on good companies...  Perhaps what you have done is a nice medium between the two if I am understanding this right... 

Thanks
Gary 


I currently have been looking overseas as there appears to be more bargains there than in the US today.  In the past, I have invested in Brazil and some Russian oil companies and now have holdings in Italy and Greece and am looking at firms in Australia and S. Korea.  I have not bought distressed debt but have purchased some equity of firms who have gone through BK (NTL, Magellan Health, RCN and Hawaiian Telecom) and equity of some of these holders (AIQ an Oaktree holding).

Same challenges as 10 years ago -  buying when others don't like a company.  I do have some purchase constraints on some microcaps that have small amounts of volume but my sweet spot is higher on the market cap scale.  The issue I have had with microcaps has been getting out.  My best performing microcap (Acme Communications) was a liquidation so that was not an issue.  I don't hate any aspect of investing per se but the hardest part is watching a good idea getting cheaper (which happens most of the time with me) if the market is going up.

In terms of market access, I have switched brokers so now I can buy most international equities that I did not have access to previously.  At this point, my universe is large enough and not totally explored. 

Next 10 years I don't know.  At some point I may start a fund but I need to get my 2 kids through college first.  In addition, I like what I do with folks I enjoy working with so retirement is a way off yet.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: argonaut on December 23, 2013, 08:12:35 PM
Hi Packer,

I too, really appreciate your sharing this information and have started going through Damodaran's online valuation course (very interesting!)...can you share more of how you decide when to sell one of your positions? When it reach full valuation or ?

Thanks,

Marc
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on December 23, 2013, 08:18:58 PM
I try to focus on above average business in terms of return on capital but not necessarily LT compounders that are cheap.  These firms are generating alot of cash flows and may not have as many re-investment opportunities as LT compounders but I am not paying for the growth so any growth is gravy.  I do stay away from capital destroying industries and firms like retail, steel, pulp and paper and mining.

Packer   
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on December 23, 2013, 08:27:39 PM
I sell when I can find something selling for at least double the upside.  Today I sold a stock with about a 40% upside for one with a 300%+ upside.  The stock purchased is in a good industry with above average RoC and is located in Greece but has 95% of sales outside Greece.  So there is more location risk for the stock purchased but the price paid more than made up for this risk and the new purchase is in a better industry than the firm sold.  When my stocks have approach fair value, so far I have been able to find cheaper inventory to stock my shelves with.

Packer 
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Yours Truly on December 23, 2013, 08:38:13 PM
How many stocks do you hold on average? And how much weight do you give to your top 3 positions?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: FiveSigma on December 23, 2013, 09:01:21 PM
Packer, let me guess - it's Coca Cola Hellenic you bought :)
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on December 24, 2013, 04:03:29 AM
Right now I hold about 24 stocks with the top 3 representing 42% of value, top 5 58%, and top 10 78%.  Most of my time and value is in the top 10 stocks.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: LC on December 24, 2013, 08:47:36 AM
Packer, let me guess - it's Coca Cola Hellenic you bought :)

That is what I first thought, but I believe they moved their headquarters and listing from Greece to London!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: LC on December 24, 2013, 09:00:32 AM
Packer,

For the high cash flow business model, typical of levered firms such as equipment leasing/telecoms etc. I know you like when those businesses operate within a protected environment such as in Hawaii or Alaska, or under a strong regulatory environment in the case of AIQ. This strikes me as having a moat around those cash flows, so they can safely handle their level of debt.

Have you looked at the same business model but replacing this niche/protective environment with the benefits of huge scale? Do you think the same results can be obtained? Something along the lines of URI where they don't operate in a protected environment but instead benefit from some economies of scale instead. I think it is harder to find a bargain this way because these large, scaled-up companies are more visible to investors/analysts and have a higher probability of being more fairly priced. I am wondering your thoughts and what your experience has taught you in this case.

Also, what is on your Christmas list?  ;D
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: plato1976 on December 24, 2013, 10:25:07 AM
Really appreciate your sharing !

In your investment history, is there a case that an initially small position (not on top10 list) turned out to be a huge win and impacted the portfolio performance in a material way. In other words, if you just have held your top10 or top5 positions, would the result be much different ?
(I am wondering if your performance would have been even more stellar if you had just held your top 5 positions...)


I currently have been looking overseas as there appears to be more bargains there than in the US today.  In the past, I have invested in Brazil and some Russian oil companies and now have holdings in Italy and Greece and am looking at firms in Australia and S. Korea.  I have not bought distressed debt but have purchased some equity of firms who have gone through BK (NTL, Magellan Health, RCN and Hawaiian Telecom) and equity of some of these holders (AIQ an Oaktree holding).

Same challenges as 10 years ago -  buying when others don't like a company.  I do have some purchase constraints on some microcaps that have small amounts of volume but my sweet spot is higher on the market cap scale.  The issue I have had with microcaps has been getting out.  My best performing microcap (Acme Communications) was a liquidation so that was not an issue.  I don't hate any aspect of investing per se but the hardest part is watching a good idea getting cheaper (which happens most of the time with me) if the market is going up.

In terms of market access, I have switched brokers so now I can buy most international equities that I did not have access to previously.  At this point, my universe is large enough and not totally explored. 

Next 10 years I don't know.  At some point I may start a fund but I need to get my 2 kids through college first.  In addition, I like what I do with folks I enjoy working with so retirement is a way off yet.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on December 24, 2013, 12:33:11 PM
I have bought some Intralot - a Greek gaming machine and lottery operator.   As to scale model that can be an advantage.  I have looked and like one company Emeco which is a depressed equipment leasor in Australia.  I am blessed with everything I would want or require (God, great wife and family and good job and friends) so I don't have any thing on my Christmas list.

In terms of bottom stocks outperforming, I can't think of any as I typically will try to load up on stocks I think have outstanding upside.  My highest % gainers have only been 5 to 7x gainers.   

Packer 



Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: yadayada on December 24, 2013, 06:22:20 PM
Interesting, ill look into those :) . How do you screen for ideas? Now that i have a decent understanding of how to value a company, I find screening for ideas the hardest in this market.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: LC on December 24, 2013, 08:44:44 PM
Interesting, ill look into those :) . How do you screen for ideas? Now that i have a decent understanding of how to value a company, I find screening for ideas the hardest in this market.

I am having a hard time as well...I'm taking out the "cheapness" screening tools (low P/E, P/B, etc.) and looking for quality company, then using my own analysis to determine cheapness. So I've been screening for sales growth, acceptable debt levels, and decent margins. Then I go from there, and see if any stock price increases this year has been due to p/e expansion along with the S&P or due to continuously improving business.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on December 24, 2013, 08:56:37 PM
I dont' have a screen per se but I look at companies that pass a screen to see if a bargain exists.  I also look on an industry basis (by looking at the industry comps) to see if a bargain exists.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: frommi on December 24, 2013, 09:17:47 PM
Where do you get the data of european companies? My greatest problem investing somewhere else as the US is getting quality data cheap. Or do you use a bloomberg at work for that?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: tombgrt on December 25, 2013, 08:50:59 AM
I have bought some Intralot - a Greek gaming machine and lottery operator.   


Had a quick glance (have to get ready for our christmas dinner.. ;)). Revenue cagr of over 8% since 2007 if you assume revenue of 1.5b EUR for 2013, EBITDA actually lower. I assume much of that growth comes from an increased online presence? How does this compare to other gaming/betting companies? Management also seems to own a very significant stake. The stock does seem to correlate heavily with the Greece stock market which is probably why the bargain (assuming it is) exists, although it has hit a low of 0.67€ in 2012 with ASE (Athens Stock Exchange) hitting an equally low bottom compared to today's price.

I obviously have yet to look properly at this name but what metrics do you deem most relevant here Packer? TIA and happy holidays!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: yadayada on December 25, 2013, 09:47:39 AM
what is up with their tax rate? isnt corporate tax rate only like 20 or 25% in greece? the give alot of their ebit away to taxes.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on December 25, 2013, 10:32:47 AM
For Intralot, the investor presentation provides alot of data.  Since 2006, the revenue has shifted from  Greece/Turkey to the RoW, from 42% of revenues in 2006 to about 8% in 2102.  The number of contracts has increased from 20 to 84.  The primary metrics I am looking at are EV/EBITDA and FCF yield.  These types of companies trade for 8 to 9x EBITDA typically.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: phil_Buffett on December 26, 2013, 05:21:17 AM
For Intralot, the investor presentation provides alot of data.  Since 2006, the revenue has shifted from  Greece/Turkey to the RoW, from 42% of revenues in 2006 to about 8% in 2102.  The number of contracts has increased from 20 to 84.  The primary metrics I am looking at are EV/EBITDA and FCF yield.  These types of companies trade for 8 to 9x EBITDA typically.

Packer

packer the presentation was very nice. thank you for the idea. intralot will reduce cap ex in the future and will have a bigger fcf. so if i take the fcf or the ebitda and calculate it, this Company is very undervalued. great idea packer  :)
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: hardcorevalue on December 26, 2013, 03:29:59 PM
Hi Packer,

I'm looking at Intralot. In regards to EV/EBITDA calculations level how are you factoring in the large share of minority earnings. Woudn't the consolidated income number show up in EBITDA and overstate the true number?

Thanks very much, great results!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: krazeenyc on December 26, 2013, 04:35:35 PM
what is up with their tax rate? isnt corporate tax rate only like 20 or 25% in greece? the give alot of their ebit away to taxes.

they're in gaming.

Packer, curious how do you find these companies? :D

More important pertaining to Intralot, what are you modeling as maintenance cap ex.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on December 26, 2013, 05:24:06 PM
In terms of the minority interest, the fair value is recorded at acquisition based upon the proportion of the price paid for the total.  So if Intralot buys 90% of venture @ $100 then $10 is recorded on the books as a minority interest.  Then the accumulated earnings is added to the MI line every year.  Based upon the list consolidated subs the largest % interest appears to US-based Intralot Inc. which Intralot owns 85% and the Turkish sub at 45%.  They do not break the IS out by country so it is hard to tell how to make an adjustment.  If we assume US is most of America segment the adjustment would be $3m in NI in 2012.

Packer   
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: yadayada on December 26, 2013, 07:41:56 PM
what is up with their tax rate? isnt corporate tax rate only like 20 or 25% in greece? the give alot of their ebit away to taxes.

they're in gaming.

Packer, curious how do you find these companies? :D

More important pertaining to Intralot, what are you modeling as maintenance cap ex.
yeah but it used to be low. And ladbrokes WH etc have 30%i think.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on December 26, 2013, 07:50:25 PM
The company sell equipment/services around the world so they may have more of an average tax rate of where they sell the equipment/services.  I have started an Intralot thread in the ideas section to keep Intralot conversation in one place.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: jeremykgold on December 26, 2013, 09:56:47 PM
As an example for how you come across companies, how did you come across AIQ? It seems at least with companies I've seen you recently talk about (NXST, Gray, etc), you're looking for companies with undervalued or yet to show yet cash flows? But is it just through various reading that you come across these?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: phil_Buffett on December 30, 2013, 04:54:16 AM
packer emeco Looks really interesting. a lot of fear about this Company. very depressed Price. trades under Liquidation value. i like it
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: ZenaidaMacroura on December 30, 2013, 10:01:04 PM
Sorry if this is redundant, but what are you top 5 largest holdings?  How much fiaty?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on December 31, 2013, 03:46:11 PM
Top 5 at YE are: AIQ, FIATY, FNM/FRE pfds, GNCMA and Intralot.  We will see how 2014 goes.  I know it will not be as good as 2013.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: argonaut on December 31, 2013, 04:30:36 PM
Hi Packer,

I'm curious are you still in Glacier Media or did you move that capital into one of your top 5?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on January 01, 2014, 10:52:53 AM
I am going to give Glacier some more time.  I have only been in the position for a few months.  I have moved on from SD though.  I waited a few years and no one saw the value so maybe the value there is not as big a first presented.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: ZenaidaMacroura on January 01, 2014, 12:18:38 PM
Given AIQ's cash generation, what is your estimation of fair value?  At what point will it become to dear to hold?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: plato1976 on January 01, 2014, 12:59:31 PM
I feel SD is different from Glacier
SD is about its reserve potential - it's harder to predict or even to track;
Glacier is easier to at least track its progress

I am going to give Glacier some more time.  I have only been in the position for a few months.  I have moved on from SD though.  I waited a few years and no one saw the value so maybe the value there is not as big a first presented.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on January 01, 2014, 01:12:40 PM
You are correct on the Glacier SD differences.  I initially bought SD based upon Ward's and FFH's conviction that value was there.  However, I did not have an edge other than other's convictions, a mistake.  I held on through the change in management and thought maybe they saw something there and would be able monitize it and that did not occur.  So we sit here now with a company whose assets have been through 2 management teams and no value enhancement.  The latest is Leon Cooperman saying there is hidden growth in the well production data.  I find it hard to believe Leon Cooperman, he is great value investor but not a geologist as far as I know, has an advantage over the 2 management teams and the other majors who probably have looked over SD's assets and passed.  This is just too hard for me to figure out if it can be figured out, so I sold.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: argonaut on January 01, 2014, 06:08:48 PM
Thanks for your thoughts on Glacier. It will be interesting as US business slowly improves to hopefully see some head north. I assume we will see 4Q their debt reduced by a chunk of the recent real estate sale and eagerly look forward to see if they have managed their ebitda higher.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Myth465 on January 01, 2014, 08:22:29 PM
Hey Parker which Canadian O&G stock did you guy.
I am building a basket there.

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on January 01, 2014, 08:36:18 PM
It was not Canadian it was Russian.  I guess I have been watching too much of Jim Rogers who turned positive on Russia last year.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: PJM on January 01, 2014, 11:24:34 PM
packer emeco Looks really interesting. a lot of fear about this Company. very depressed Price. trades under Liquidation value. i like it

There is a good write up on EMECO on alphavulture blog
http://alphavulture.com/2013/11/20/emeco-holdings-a-net-net-in-disguise/
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Phaceliacapital on January 03, 2014, 01:07:33 AM
Packer,

I took some time yesterday to go through this thread and want to say thanks for the time you already put in to answer everyone's questions. What struck me the most is that you mention your DD is just around 10 hours, however, when you open/discuss an idea you are very able to answer a wide variety/range of questions without a lot of time in between. I think this is very very impressive, to say the least.

Would you consider the ability to do that kind of DD in just 10 hours to be a result from your year long experience in the markets? How drastically would you say your framework has improved over the years? Or would you relate it to above average intelligence? Or a combination of both?

I wish I could form investment ideas in around 10 hours!

Also another question, how often do you look at the fixed income side for ideas? For instance, I do not hold a position in Intralot equity, but their bonds look very interesting from a "we're a greek company so we have to pay a high coupon, although greek revenue is just 5%" kind of perspective.

Thanks in advance.

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on January 03, 2014, 04:44:37 AM
Experience is cumulative in investments and most of the ideas are either good ideas others have (FIATY, Awilco, CIDM,GM, FRE/FNM Pfds, AIQ) or extensions of models in similar industries I have studied before (LIN, GNMCA, TI, Intralot).  I also like to focus on recurring revenue models of media (TV/radio), telcos/cable, leasing cos and gaming equipment/operations companies.  I have gone into other areas when I have found bargains (autos and O&G).  I am an average guy who has fun with investments and uses a value lens to observe the market.

I look at the fixed income side to help me with my equity selection.  Since most of the firms I like have debt, I use the market value of the debt to tell me if I am buying into a dangerous situation.  I like the situation that Intralot is in now (cheap equity and debt selling for above par).  I also like to see the debt prices increase as this typically tells you the creditworthiness is increasing.  As to investing in the debt, I typically do not.   As many times the debt is callable and if the situation is getting better, the debt we debt will be re-fied with additional cash flow to the equity.  This happened to the radio/TV stocks a few years ago and may happen with Intralot today if the economics improves.

Packer


Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: phil_Buffett on January 03, 2014, 06:10:06 AM
packer would be interesting to hear from you if you now already invest in emeco or not.

and what be interesting to know, what you are thinking about Eurobank properties.

thanks  :)
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on January 03, 2014, 11:38:31 AM
Haven't investing in Emeco yet.  I have invested in Lukoil which is cheaper. 

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: phil_Buffett on January 03, 2014, 11:40:22 AM
ok great thanks packer. iam Little bit fearful about russia. too much politics for me.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: phil_Buffett on January 03, 2014, 11:51:57 AM
packer do you think that the margin of safety in lukoil is so big, that it allows potential political conflicts and is still undervalued?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on January 03, 2014, 11:53:12 AM
That is why the price is cheap but listening to Jim Rogers and friend of mine who has friends over there convinced me to look into it.  Also, Wertham Capital (a referral from the Manual of Ideas book) appears to bullish on Russia.  The bear case is the same as it always has been but the bull case has some interesting new aspects - Putin releasing dissidents, joint gov't corporate JVs in R&D, repaired infrastructure and a huge need for Russia's resources from China.


Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: frommi on January 03, 2014, 11:54:59 AM
Haven't investing in Emeco yet.  I have invested in Lukoil which is cheaper. 

Packer

Thanks Lukoil fits perfectly into my portfolio, next funds will be allocated into that.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: phil_Buffett on January 03, 2014, 12:07:18 PM
That is why the price is cheap but listening to Jim Rogers and friend of mine who has friends over there convinced me to look into it.  Also, Wertham Capital (a referral from the Manual of Ideas book) appears to bullish on Russia.  The bear case is the same as it always has been but the bull case has some interesting new aspects - Putin releasing dissidents, joint gov't corporate JVs in R&D, repaired infrastructure and a huge need for Russia's resources from China.


Packer

thanks packer for the idea. i will look more closely into it. on the first glance russia makes me fearful and now i think exactly this could be the error and why it is maybe a good Investment. because i was too fearful.  i remember that li lu also said lukoil is cheap in his last Video at the University.

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: tombgrt on January 03, 2014, 12:31:18 PM
Jim Rogers, Li Lu and Jim Grant all agree that Russian oil stocks are cheap... At the very least this looks interesting. Thanks for the heads up all.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: fareastwarriors on January 03, 2014, 01:40:15 PM
Jim Rogers, Li Lu and Jim Grant all agree that Russian oil stocks are cheap... At the very least this looks interesting. Thanks for the heads up all.

When did Li Lu make those comments? any links?

Thanks.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: phil_Buffett on January 03, 2014, 05:04:15 PM
Jim Rogers, Li Lu and Jim Grant all agree that Russian oil stocks are cheap... At the very least this looks interesting. Thanks for the heads up all.

When did Li Lu make those comments? any links?

Thanks.

i think it was here fareastwarriors

http://investingonsale.com/tag/li-lu/
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: yadayada on January 03, 2014, 05:32:21 PM
packer what do you think about Chorus . A new zealand telecom. Trading at about 3x earnings, or 1x ebitda. They get into some trouble with the government. But apparantly they can borrow with zero interest from the government. They are rolling out a network that will cost about 1.7 billion NZ$ by 2019 I think. It looks really cheap based on the 2013 numbers, but didnt read up on anythign yet.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: rayfinkle on January 03, 2014, 07:01:01 PM
Yada a that looks interesting...I'm going to dig in
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on January 03, 2014, 08:34:55 PM
Took a quick Look at Chrous.  It is interesting that they are building out a fiber network in NZ.  The overall EV/EBITDA is about 4x.  However, the EBITDA is expected to continue to decline in FY2014.  When the trend turns up I will be more interested.  It appears the legacy pricing will be reduced and may cause more pressure on EBITDA until the fiber network growth is greater than legacy copper decline.  One to keep an eye though.  Thanks.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: leftcoast on January 03, 2014, 09:27:28 PM
Jim Rogers, Li Lu and Jim Grant all agree that Russian oil stocks are cheap... At the very least this looks interesting. Thanks for the heads up all.

When did Li Lu make those comments? any links?

Thanks.

i think it was here fareastwarriors

http://investingonsale.com/tag/li-lu/

Well, it looks like he agreed Russian oil stocks were cheap in the 1990s. :)  Says nothing about today. And even then, it says he sold them at a 90% discount to intrinsic value because he didn't feel adequately compensated for the geo-political risk. (Of course, that was Russia in the 1990s.)
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Compounder on January 04, 2014, 03:17:21 PM
Took a quick Look at Chrous.  It is interesting that they are building out a fiber network in NZ.  The overall EV/EBITDA is about 4x.  However, the EBITDA is expected to continue to decline in FY2014.  When the trend turns up I will be more interested.  It appears the legacy pricing will be reduced and may cause more pressure on EBITDA until the fiber network growth is greater than legacy copper decline.  One to keep an eye though.  Thanks.

Packer

Chorus owns all the copper wire lines in NZ and is also committed (by contract) to investing ~$3b in rolling out fibre across the country. Given it is essentially a monopoly the returns they are permitted to earn are regulated by the Commerce Commission (which is an independent body). Imho the key questions one needs to answer are (a) What returns will the commission let it earn in the future on its copper wire (b) if it can't earn enough on the copper to fund the fiber investment, how much capital will it need to raise, dilution, etc and (c) What returns will the commission let it earn on its $3b fiber investment after its all rolled out
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: luck on January 07, 2014, 09:45:08 AM
hi packer-

thanks for all your posts.  wondering if you're still long the $COF warrants?   $COF seems to have advanced quite a bit.  the high end of the fair value range for $COF to me seems to around $100 - but i could be off.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on January 07, 2014, 04:27:32 PM
I sold the COF warrants to purchase Intralot.  COF is near fair value and may get additional competition from P-to-P networks who can provide the same cash for a lower costs.  Credit card rates are close to 20% and P-to-P rates are closer to 15%.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: luck on January 26, 2014, 07:16:25 AM
hi packer-

given gm dividend and warrants not having dividend protection (at least i don't believe so), wondering if you are you sticking with them, rotating into the common, or perhaps selling?  thanks in advance.

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: plato1976 on January 26, 2014, 08:59:30 AM
may I know how you reach this number $75 ?

hi packer-

given gm dividend and warrants not having dividend protection (at least i don't believe so), wondering if you are you sticking with them, rotating into the common, or perhaps selling?   my take on the common is that it has upside to $75.  thanks in advance.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: luck on January 26, 2014, 05:18:08 PM
thx for the comment plato.  i think my higher end of the fair value range was a bit overexuberant after looking at my calculations from awhile back.  will take a look at it again shortly.   
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on January 26, 2014, 06:47:30 PM
I was close to selling but will hold on given the pullback.  I have a FV of GM of around $55 so the warrants still have nice upside.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: luck on January 28, 2014, 05:12:37 PM
hi packer-

Just reading about Li Lu of Himalaya Capital investing in Aereo and also came across this article:

http://www.bloomberg.com/news/2014-01-28/how-t-mobile-and-aereo-will-change-your-life.html

"The U.S. Supreme Court has agreed to hear a lawsuit brought by broadcasters, who say Aereo’s runaround is illegal. Broadcasters are worried that cable operators will build their own Aereos, threatening $4 billion in retransmission fees, which are expected to double by 2017. At the same time, Aereo challenges the cable industry’s ability to bundle channels into costly take-it-or-leave-it packages. And Aereo could also upset the comfy network-affiliate model by making, say, CBS’s New York programming available to Los Angeles viewers.

Aereo’s CEO, Chet Kanojia, may be less colorful than Legere, but his aim is similar: to disrupt the cozy status quo that is lucrative for the big players yet leaves customers unsatisfied.


Given your cable industry knowledge, wondering what your thoughts are on potential disruption?  thanks in advance.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on January 28, 2014, 06:47:02 PM
The most damage is going to be in big cities and to distributors in those cities.  The large cable cos will figure out ways to make money with this and the small guys like GNCMA should be unaffected.  I recently sold my TV holdings as they approached fair value.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: luck on February 07, 2014, 07:45:16 AM
hi packer-

some great thoughts on the $DXM thread about risks related to the debt.  wondering if you've  ever looked at yellow media,  $YLWDF? 

to me,  it looks cheap on an EV/EBITDA basis.  however, not sure how fast they will be able to move to digital and also how aggressively they will pay down the debt with the free cash flow.  what got me interested in this was the new CEO & goldentree asset management's involvement.  thanks in advance.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: jm25 on February 07, 2014, 10:47:17 AM
hi packer-

some great thoughts on the $DXM thread about risks related to the debt.  wondering if you've  ever looked at yellow media,  $YLWDF? 

to me,  it looks cheap on an EV/EBITDA basis.  however, not sure how fast they will be able to move to digital and also how aggressively they will pay down the debt with the free cash flow.  what got me interested in this was the new CEO & goldentree asset management's involvement.  thanks in advance.

If looking at Yellow, could always play it with the warrants.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on February 07, 2014, 06:58:50 PM
I have looked at these in the past and took a quick look at Yellow.  The primary reason I have not pursued this is the declining customer count revenue and EBITDA.  These leveraged "melting ice cube" types of companies are like swimming against the current and in most cases I have been swept away in BK. 

An analogy is in the telcos but some of them having increasing revenue and EBITDA (GNCMA, ALSK and HCOM) and some having increases Q-over-Q (FRP) but most continue to decline (the rest of the telcos).  If I could find a directory company with increasing revenue and EBITDA I would be interested but I have yet to find one.   

This may turn out to be a good investment, I don't know.  All I know is I have tried to invest in these types of companies and have been carried away to BK (a weakness of mine) so now I stay away because I can find increasing revenue and cash flow business in mature/declining industries.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: CorpRaider on February 09, 2014, 04:01:56 PM
Issat you posting about leverage over on bogleheads?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on February 09, 2014, 07:17:45 PM
That is me.  Those folks appear to be more interested in discussing those types of items and I am receiving some nice contrary views.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: yitech on February 09, 2014, 08:06:20 PM
That is me.  Those folks appear to be more interested in discussing those types of items and I am receiving some nice contrary views.

Packer

I just checked it out. Personally, I think 20% is conservative enough. I used more myself. Buffett does much more using insurance float though it's uncorrelated to the stock markets and he doesn't get any margin calls! His long-term bullish short puts (insurance float on protecting stock downfalls) on a basket of three indices are correlated with the stock markets though. But he doesn't have to post collaterals on these puts! I think a bit of leverage is fine if you are aware that you may need to dial it down when markets get volatile. In the long run, it does enhance returns... as Eric can attest...

OK, I should stop here before I getting yelled at for promoting leverage.

PS: Above is relevant only to stock markets... If you are take margin to long debt, you are effectively short credit spreads or creating a short CDS position, so you should watch over credit spreads of whichever debt you are long assuming margin interest rate stays constant. But margin debt are floating rate debt based on LIBOR or Prime, so you may want to invest in floating rate debt to partially hedge against yield curve mismatching. You can check out Ray Dalio's all-weather strategy... though it hadn't worked out too well last couple of years due to the volatility of yield curves caused by the anticipation(guessing) of Fed tapering.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: gary17 on February 09, 2014, 09:01:54 PM
i think use of leverage also has to do your current age / job situation

for me - because my portfolio is small enough that the leverage loss would be about my year worth of after tax salary so it'll hurt, but not the end of the world.... and i feel that instead of borrowing money for a bigger house in the overpriced vancouver market or a new car, i'm using that fund to buy good business with a good margin of safety - i think there's enough safety in my personally circumstance.

also, i think when we start talking about leverage, we are talking more about trading stock - i rather think of it as borrowing to buy a business - just like how a company would borrow money to finance growth. 

just my 2 cents  Gary
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: jouni1 on February 10, 2014, 05:32:31 AM
the bogleheads forum seems just like every other investment forum online; someone posts an opinion that differs from the commonly accepted one on that particular forum, and the intelligent and oh-so-funny almost personal attacks start.

if those "wait for a bear market and ask again" guys knew about packer's returns, would they consider themselves as funny as they do now? it always surprises me how fast people come yelling "you're wrong" when they actually mean "i do things differently".  ::)

on the topic of leverage, i think a smart person has nothing to lose using some. under 20% shouldn't hurt anyone with a long term view and i have been using more than that for the last 8 years or so.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: CorpRaider on February 10, 2014, 05:36:22 AM
That is me.  Those folks appear to be more interested in discussing those types of items and I am receiving some nice contrary views.

Packer

That makes sense.  I just wondered if it was you or another Packers fan and how much weight I should ascribe to the comments (if it is the guy from the state farm commercials, I might have to add some salt).  I read posts over there but haven't ever signed up to write posts.  Be sure not to tell them your investment record or they won't respond to you, because you cannot exist.  heh.  I like that Mel guy who posts about the midcaps.   Seems like he's sort of hitting on the same issues Arnott and Greenblatt have with your standard market cap weighted index.  I'm into the rob arnott and joel greenblatt type better indexing discussions over there. 
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: fareastwarriors on February 10, 2014, 06:11:05 PM
the bogleheads forum seems just like every other investment forum online; someone posts an opinion that differs from the commonly accepted one on that particular forum, and the intelligent and oh-so-funny almost personal attacks start.

if those "wait for a bear market and ask again" guys knew about packer's returns, would they consider themselves as funny as they do now? it always surprises me how fast people come yelling "you're wrong" when they actually mean "i do things differently".  ::)

on the topic of leverage, i think a smart person has nothing to lose using some. under 20% shouldn't hurt anyone with a long term view and i have been using more than that for the last 8 years or so.


I agree. They are definitely not fans of any active management. But I also their advice is right for most average people. They have jobs and don't want to spend nights reading 10k's/etc.  They should keep their investments simple and keep costs as low as possible.  I think they are doing lots of good.


But I do think Bogleheads forum offer lots of great advice on personal finance /taxes/etc.

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: CorpRaider on February 11, 2014, 10:56:21 AM
W/r/t to the leverage discussion (sorry, I haven't signed up for bogleheads and really don't think its going to be worth it to me), I agree with your assessment.  One thought I've had was to find a CEF that could/would lever up say 20-30% via preferreds (auction rate preferreds would be nice) and that would invest in perhaps one of the RAFI indexes or even just a small cap value index (or heck even the S&P).  Hopefully, it would have low to reasonable fees and a somewhat responsive management that would do something if the discounts got insane and intransigent.  I've looked, but haven't been able to find one (there are some reputed "clones" but I don't like that uncertainty).  SOR would work fine if they employed some leverage and pimco's stocks plus one (PGP maybe) is sort of in the neighborhood but the NAV premiums are just stupid.  Also it is a global index tracker, so not spot on.  I know you're familiar with CEFs given our discussion of the munis.  Have you ever found anything like this?  It seems to me as though it would be a nice way to implement the leveraged strategy because there would be no risk of margin calls, probably simply a risk of cutting off distributions to the common in case of a 2008ish event...
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on February 12, 2014, 04:49:47 PM
At one point John Neff ran a dual purpose fund and leveraged CEF.  It was liquidated years ago though.  I will let you know if find any.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: wknecht on February 20, 2014, 07:29:40 AM
Interesting LICT development: http://www.prnewswire.com/news-releases/lict-announces-receipt-of-non-binding-acquisition-proposal-246339371.html (http://www.prnewswire.com/news-releases/lict-announces-receipt-of-non-binding-acquisition-proposal-246339371.html). I wonder what the offer price was.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on February 20, 2014, 08:43:43 AM
Yes it would.  LICT is pretty cheap but I know I lack of marketability is baked into the price.  I also saw that a sub put a bid in for some the broadcast licenses that FCC is auctioning.


Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Ham Hockers on February 20, 2014, 09:03:25 AM
not sure if anyone sent this around previously

http://www.businessweek.com/news/2014-01-15/gabelli-back-in-airwaves-bidding-after-130-million-settlement
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: gary17 on March 10, 2014, 08:45:29 PM
Hi Packer
I am wondering if you have looked at China Mobile (CHL - ADR) -   ebitda of about $20B USD  - practically no debt, so there is no lever... I am wondering what is the fair ebitda multiple for a wireless provider with no debt in a growing economy?  China slow down is a real concern but I think telecommunication is now a necessity -    be really interested to hear your thoughts.
TIA
Gary
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: PJM on March 10, 2014, 10:03:39 PM
Hi Packer
I am wondering if you have looked at China Mobile (CHL - ADR) -   ebitda of about $20B USD  - practically no debt, so there is no lever... I am wondering what is the fair ebitda multiple for a wireless provider with no debt in a growing economy?  China slow down is a real concern but I think telecommunication is now a necessity -    be really interested to hear your thoughts.
TIA
Gary

Gary - Just to keep in mind that the NPC announced last week that China will speed up 4G mobile network programs, build 100M fiber optic networks in cities and extend broadband connectivity to villages. This should help CHL that already has more than 700m subscribers.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Kiltacular on March 13, 2014, 09:44:12 PM
Packer, you looked at the Doosan preferred (000155)?  I have bought the Hyundai pref. around these prices but only that one.  Someone posted a good list on another thread: http://ify.valuewalk.com/wp-content/uploads/2014/02/moi201401_ideas-korea.pdf

Many still appear to be cheap and I'm curious if you have sifted though some of these.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on March 14, 2014, 03:51:07 AM
Hi Packer
I am wondering if you have looked at China Mobile (CHL - ADR) -   ebitda of about $20B USD  - practically no debt, so there is no lever... I am wondering what is the fair ebitda multiple for a wireless provider with no debt in a growing economy?  China slow down is a real concern but I think telecommunication is now a necessity -    be really interested to hear your thoughts.
TIA
Gary

Gary,

This does look cheap at 3.0x EBITDA along with MBT (a Russian phone company).  One thing these centrally focused governments are good at is building large telco networks.

Packer

Gary - Just to keep in mind that the NPC announced last week that China will speed up 4G mobile network programs, build 100M fiber optic networks in cities and extend broadband connectivity to villages. This should help CHL that already has more than 700m subscribers.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on March 14, 2014, 03:55:27 AM
Packer, you looked at the Doosan preferred (000155)?  I have bought the Hyundai pref. around these prices but only that one.  Someone posted a good list on another thread: http://ify.valuewalk.com/wp-content/uploads/2014/02/moi201401_ideas-korea.pdf

Many still appear to be cheap and I'm curious if you have sifted though some of these.

I have looked at a few but they have increased since I started looking.  Some of the ones I like are LG Corp (003555), SK Corp (003605), Lotte Chilsung (005305) and Hyundai HCN (126560).

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: gary17 on March 14, 2014, 06:55:01 AM
Hi Packer
I am wondering if you have looked at China Mobile (CHL - ADR) -   ebitda of about $20B USD  - practically no debt, so there is no lever... I am wondering what is the fair ebitda multiple for a wireless provider with no debt in a growing economy?  China slow down is a real concern but I think telecommunication is now a necessity -    be really interested to hear your thoughts.
TIA
Gary



Gary,

This does look cheap at 3.0x EBITDA along with MBT (a Russian phone company).  One thing these centrally focused governments are good at is building large telco networks.

Packer

Gary - Just to keep in mind that the NPC announced last week that China will speed up 4G mobile network programs, build 100M fiber optic networks in cities and extend broadband connectivity to villages. This should help CHL that already has more than 700m subscribers.

Thanks Packer
I'm impressed how much you know about the telecom industry, even development in china. I need to stop watching the plane search on cnn and get some real reading done!   ;D
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Palantir on March 14, 2014, 09:04:55 AM
I am curious, to Packer or anyone else - I understand that EBITDA multiples are used to value small telcos, but for the VOD or VZ's of the world, is that still a relevant measure? It seems that they have much less growth CapX, so I would think FCF might be the better way to look at it...
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: HJ on March 14, 2014, 06:20:17 PM
I also have a pretty basic question related to the EV/EBITDA metric to Packer or anybody else:  What is embedded in the EV/EBITDA valuation metric.  What are the basic assumptions that are driving a generic FCF model for the cable / telecom business?  To arrive at a 5x ev/ebitda multiple for a generic telecom company vs. a 7x for cable, what are the underlying assumptions that get you there?  Is the difference as simple as 5%+/- revenue growth rate vs. a flat growth rate in a generic FCF models?

I know it's an impossible task, but I'm still trying to square away a 5-7x ebitda multiple in these businesses vs. a 10% pretax operating income in consumer products, vs a 11-12x P/E for banks.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on March 14, 2014, 07:57:25 PM
I like use FCF if the firm is in a mature market with little or now growth.  In these case FV is about 10x FCF.  Using the Graham formula 8.5 + 2G provides a nice FCF benchmark.  If the firm is growing (like cable cos and GNCMA, CNSL and SHEN), I use EV/EBITDA as they require capital to grow with the goal being that at maturity the cap ex will tail off and you can use FCF.  I typically do not perform projections so for growing firms with negative FCF, I use EV/EBITDA.  The 6x - 7x for telco is based upon acquisition multiples (which I track) as is the 8x for cable cos and 9x for TVs.  At these multiples the acquirers can obtain enough synergies to make the deal work economically.   

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: indythinker85 on March 16, 2014, 04:38:12 PM
Packer, you looked at the Doosan preferred (000155)?  I have bought the Hyundai pref. around these prices but only that one.  Someone posted a good list on another thread: http://ify.valuewalk.com/wp-content/uploads/2014/02/moi201401_ideas-korea.pdf

Many still appear to be cheap and I'm curious if you have sifted though some of these.

I have looked at a few but they have increased since I started looking.  Some of the ones I like are LG Corp (003555), SK Corp (003605), Lotte Chilsung (005305) and Hyundai HCN (126560).

If you had to pick 3 or 4 of your favorite S Korean prefs would they be the ones you mentioned above?

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Kiltacular on March 18, 2014, 03:39:46 PM
Packer, you looked at the Doosan preferred (000155)?  I have bought the Hyundai pref. around these prices but only that one.  Someone posted a good list on another thread: http://ify.valuewalk.com/wp-content/uploads/2014/02/moi201401_ideas-korea.pdf

Many still appear to be cheap and I'm curious if you have sifted though some of these.

I have looked at a few but they have increased since I started looking.  Some of the ones I like are LG Corp (003555), SK Corp (003605), Lotte Chilsung (005305) and Hyundai HCN (126560).

Packer

Packer,

Thanks for your reply
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: indythinker85 on March 19, 2014, 09:44:47 PM
Packer, you looked at the Doosan preferred (000155)?  I have bought the Hyundai pref. around these prices but only that one.  Someone posted a good list on another thread: http://ify.valuewalk.com/wp-content/uploads/2014/02/moi201401_ideas-korea.pdf

Many still appear to be cheap and I'm curious if you have sifted though some of these.

I have looked at a few but they have increased since I started looking.  Some of the ones I like are LG Corp (003555), SK Corp (003605), Lotte Chilsung (005305) and Hyundai HCN (126560).

Thank you will continue my search!

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: frommi on March 20, 2014, 09:34:26 PM
Packer i really like your approach. But i have a really tough time to put more than 5% into positions like intralot or lukoil. Do you discount these non-developed world companies heavily when you compare them to US/EU holdings, or do you have a max position size? Or do you have so much of these ideas?
I am asking because for example Lukoil is so cheap according to what i thought would be a good rule, even when i discount it quite heavily i should put nearly 11% of my capital into it and this is with  22 current positions.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on March 21, 2014, 03:27:22 AM
It depends.  For Intralot, most of there operations are outside Greece primarily in the US and developed Europe so I don't look at them as an EM company.  Lukoil is more difficult.  I have about a 5% position by cost in each.  The Intralot has increased but Lukoil has declined.  Russia is more difficult but I think the trials are reflected in the current price and that is fine with me as an investment there will provide a return for the risk.   My larger concern is where the stock price does not reflect the risk.  The positive about the Russian companies is Putin is not nationalizing firms and does not have a history of this type of thing beyond one political rival versus places such as Venezuala, Bolivia, Ecuador and Argentina.  The real question is do you get potential return for the risk (in this case yes) and how much risk do you want to take on (which is a personal issue).  I have 2 of these high "risk" situations in the portfolio today - Lukoil and Freddie and Fannie pfds which I have limited to about 15% of the total portfolio.

Packer 
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: One World Trader on March 22, 2014, 08:35:09 AM
Hi Packer

What do you like that is selling this week?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: no_thanks on March 22, 2014, 09:47:36 AM
Hey Packer,

I just saw that Heritage Global Inc. is being spun out by its parent company Counsel Corp.  I believe you are also in the valuation industry, and was wondering if it looks like a good deal to you.

Thanks.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Liberty on March 22, 2014, 10:41:35 AM
Hi Packer,

I was wondering if you had looked at Liberty Global? I know it's probably not cheap enough for you (it's certainly not GNCMA level), but I'm curious to know what you think of the assets, management and their M&A strategy? Any obvious problems you're seeing?

I'm looking at it from a "good business at a fair price" point of view. It seems like one that could keep compounding for a long time just by scaling up - running the TCI playbook in the fragmented European market - and buying back shares with the FCF -- a buy and forget about it kind of business..

Thank you in advance.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on March 22, 2014, 10:54:09 AM
In terms of Heritage Global they are in a different business than I am in.  They perform auctions and liquidation sales. The business I am in is the same as Duff and Phelps.  The margins are much lower than the valuation business primarily due to the buying and selling of liquidation items.

Packer 
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: no_thanks on March 23, 2014, 02:44:02 PM
Ah, my mistake.  Thanks for the response. 
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on April 01, 2014, 07:25:32 PM
I looked at Liberty Global and as you state they are good long-term investment (with compounding ability) in worldwide cable.  I owned it back when it was in financial distress as United Global Com and Malone came in to the rescue of the common shareholders.  Since then, the price has been too high for me.  I cannot evaluate it versus other compounders as they are out of my circle of competence.  It has a great history and capital allocator at its helm.

Packer 
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Liberty on April 02, 2014, 07:14:59 AM
Thank you, I appreciate your response.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: no_free_lunch on April 12, 2014, 07:07:24 PM
Packer, I know you are a big fan of howard marks.  Has this translated into you buying into oaktree and/or do you have an opinion on the stock?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on April 12, 2014, 07:57:12 PM
I do like his thinking however OAK is too expensive for me now.  I would rather invest in GP Strategies where I can get a discount to NAV plus the asset manager for free.  If OAK ever did decline in value I probably would be interested but I think they trade at like 9% of AUM adjusted for LP investments.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: EliG on April 12, 2014, 08:59:57 PM
I was close to selling but will hold on given the pullback.  I have a FV of GM of around $55 so the warrants still have nice upside.

Hi Packer,

Are you still holding GM B warrants? Would you consider adding more at the current price? If not, how low they have to go to pique your interest?

Thank you in advance.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on April 13, 2014, 04:02:29 AM
As to adjustments for penetration I typically exclude from my potential buying pool those companies whose revenues and cash flows are declining and far those whose revenue and cash flows are increasing at a faster rate.  I don't specificly increase the multiple for these higher growing firms so I may miss some of the growth value but I see free growth is part of the margin of safety I get along with a cheap price.

I do like the warrants here but you need to do your own DD.  The recalls are providing a perfect buying opportunity as they have a temporary impact on profitability.

Packer 
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: tombgrt on April 13, 2014, 05:02:10 AM
Packer, what is your opinion on the current risks of holding the GM warrants instead of the common stock? A 25% share drop would half the warrants while it would take a 50% share price increase (more or less) to double the value of the warrants. This is always the risk with leverage but at this point and in this market, maybe one should prefer to take on less leverage. What i'm trying to say is that I don't feel you get compensated enough for taking the warrants, let alone at a stock price of $40!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on April 13, 2014, 05:27:22 AM
You are correct about the leverage but I am not smart enough to know the time to get out of the common and into the warrants.  I think we are in the early to mid innings of the car replacement cycle and GM has some great products and very little leverage.  The warrants provide cheap leverage about a 1.4% borrowing rate and have another 5 years to go.  So although they will "amplify" a bumpy ride I think the ride is in the right direction.  If you use $55 as FV for GM the warrants should be worth $37 and they are trading at $15.  This does not include future growth which is financed at 1.4% a pretty nice security.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: tombgrt on April 13, 2014, 05:50:20 AM
That's a great way of looking at it, thanks! Any losses are more than likely to be temporary indeed...

I saw you posted in the HRT topic as well. Do you own it or is not not up alley? I feel like such as a "lurker" or copycat having already stolen your GNCMA/ALSK and AIQ ideas but I can't help but see the obvious values here compared to many other companies out there. I'm sure many of your followers here feel the same way and feel somehow indebted. I sure do! ;)
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on April 13, 2014, 06:20:16 AM
I think HRT is cheap but have been focusing on more companies that have good cash flows and away from resource "potential" companies.  It is great when you can get both like Lukoil.  HRT also has cash flow from Polvo (about $67m in 2003) but also has G&A expenses that will consume most of that cash flow ($59m based upon Q4 operating expenses annualized).  I may re-examine this once I can get a feel if the operating expenses going forward are going to be lower.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: no_free_lunch on April 13, 2014, 09:34:47 AM
Quote
I feel like such as a "lurker" or copycat having already stolen your GNCMA/ALSK and AIQ ideas but I can't help but see the obvious values here compared to many other companies out there. I'm sure many of your followers here feel the same way and feel somehow indebted. I sure do! ;)

+1
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: jay21 on April 13, 2014, 09:59:24 AM
Packer are you buying the GM class B warrants here?

I do like the warrants here but you need to do your own DD.  The recalls are providing a perfect buying opportunity as they have a temporary impact on profitability.

Packer 

You are correct about the leverage but I am not smart enough to know the time to get out of the common and into the warrants.  I think we are in the early to mid innings of the car replacement cycle and GM has some great products and very little leverage.  The warrants provide cheap leverage about a 1.4% borrowing rate and have another 5 years to go.  So although they will "amplify" a bumpy ride I think the ride is in the right direction.  If you use $55 as FV for GM the warrants should be worth $37 and they are trading at $15.  This does not include future growth which is financed at 1.4% a pretty nice security.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: cobafdek on April 16, 2014, 11:07:55 PM
Packer, regarding the art of trading, a few questions on your trading style:

1. Do you have a General Rule on scaling into an investment?  Assume you've found a great bargain, established an upper limit price, and wish to allocate 5% of your portfolio to it.  Do you go all in?  Or do you space the trades out over time (weekly? monthly?), hoping to average down?  If the latter, how many trades to reach your predetermined percentage allocation?

2. If/When you deviate from your General Rule, what factors will alter the pace and amount of your buying?

3. Somewhere above in this thread, you mentioned that your top 10 stocks represent 80% or so of your portfolio.  Concerning the rest of the stocks with smaller allocations, did these fail to become one of the Top-10 because the market moved too fast for you to scale in?

4. Is there any science to back up yours, or anybody else's, particular art of trading?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on April 17, 2014, 09:52:03 AM
As to rules I initially buy either a 1% or 3% depending upon price then wait to see what happens.  Sometimes appreciation will cause some positions to grow then if some fall further I will be buy more.  I have bought up to 15% if the price is good and the business is a good business.  I have used the Kelly formula to make sure my positions do not too big.  What drives my buy and sell is valuation (the pitch that is thrown).  I usually sell something and replace it something cheaper or safer.  No science but mainly art here.  As to short/mid term trading that is where is know I am below average so I am the wrong person to ask.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: yadayada on April 17, 2014, 10:59:37 AM
Packer, what are your thoughts on Emeco holdings? The mining equipment leasing company. And if you dont like it (if you looked at it), what is the main reason?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on April 17, 2014, 12:17:24 PM
I still like it.  The main risk here is a default but as they were able to refi recently that risk has been reduced quite a bit.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: ukvalueinvestment on April 17, 2014, 12:23:25 PM
Refi was expensive though - 10% coupon.  I think it's probably cheap but risk/reward isn't as great as one might think.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on April 17, 2014, 12:28:38 PM
If they refi the debt which they should be able to do once they lease up more equipment.  They have written down the equipment in Indonesia to 0 and still sell at a nice discount to BV.  The only way this will not go way and only up a little is if the mining business has a long downturn.  From the looks of the some of the mining equipment manufacturers like Joy Global, I would bet against a long-term mining downturn.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: yadayada on April 17, 2014, 02:16:48 PM
oh and something that might be in your street is lombard risk. Software company that looks cheap already with 5 year average contracts providing software for banks. Havent made a thread yet because im still trying to buy it and it is a micro cap :) .
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: cobafdek on April 17, 2014, 02:32:32 PM
Thanks for the above, Packer.  It confirms what I suspect, that value investors don't dwell much on "trading strategies" (if that's what we should call them).  Your last statement was reminiscent of Jim Rogers in Jack Schwager's "Market Wizards" book on traders, where in the interview Rogers insists that Schwager is interviewing the wrong man because he is an awful trader (or words to that effect).

Another question:  what is your batting average? 

Using baseball parlance, your quoted 10-year track record is about 27% annually.  Let's consider this statistic more akin to "slugging percentage" or something similar.   But of the number of times you've pulled the trigger and bought a stock, what percentage do you get a positive return (anything from a measly 1% to a 10-bagger or more).  Perhaps this stat could be called a batting average, or maybe on-base-percentage.

Richard Pzena (in an interview from a book by Kazanjian, I think) says that even with all the extensive research he does, his batting average is about .600.  So was your CAGR achieved with a similar "batting average."
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Daytripper on April 26, 2014, 09:10:13 PM
Hey Packer and the rest of the board,

I've read the contents of this topic 3 times now, and many thanks to all of you for your contributions. I have a couple of questions about ALSK.

ALSK is one dirt-cheap stock, based either on earnings or pps.  They also made a significant dent in LT debt last year.  Any thoughts on why the insiders are continually selling their shares?  Those shares cost them zilch, and they are giving them away for not much more than zilch.

Am I wrong to assume that the in-flows from the AWN agreement could leave this company debt-free in 4 years, if management chose to pay-down the debt?

My last question is this: I'd like to own some cable or telco in Alaska.  If you didn't have either company in your holdings, would you prefer ALSK or GNCMA, and why (price/earnings/CF/EBITDA/management/industry).

I'm leaning towards ALSK because I can see GNCMA eventually buying them out.  Thank you.

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on April 26, 2014, 09:42:49 PM
I think between GNCMA and ALSK, GNCMA is the better positioned company.  They have the big pipes and customers and control AWN.  This even get better with the new FCC proposal of folks paying the cable cos for fast access and GNCMA are the fast access guys in Alaska.  Although ALSK is cheaper by 0.2x EBITDA turns in my latest calc, I still like GNCMA because I think it should trade at a larger premium to ALSK and the other RLECs.  I do not think the regulators will allow ALSK and GNCMA to merge as it would reduce competition significantly.  Getting AWN approved was based upon having both AT&T and Verizon as wireless competitors.  I don't know why they are selling you may want to see if they have a pre-planned selling program.  If so this allows management to monetize some of their stock for living expenses and things like kids education.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: gary17 on April 26, 2014, 09:46:43 PM
another uncertainty with cable cos though is this whole aereo lawsuit - it's now gone to the supreme court...  i agree it's nicely priced but i still think it has some risks attached to it...

on the other hand......    AIQ seems quite attractively priced..... probably the same as GNCMA? But the 'long term picture' seems clearer than GNCMA....   that's just my take.......      Gary
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on May 12, 2014, 08:53:17 AM
Hi Packer,
    I've been looking into a few cable companies recently, but couldn't understand the industry. How do they upgrade their cable bandwidth? Is it possible to do so with very minimal capex, or do they have to dig up the ground and relay new cables? I think if they can increase the bandwidth significantly by minimal capex, then it will definitely provide a lot of FCF. Otherwise I wonder if they will have to keep spending a lot of capex to stay in the game?
    In addition, could you please tell me why P/E is not as great a valuation metrics as EV/EBITDA? I think one reason is that different companies have different leverage and that must be considered. The other factor is how frequent the cable companies must upgrade in order to compete? How would you factor that?

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on May 12, 2014, 08:01:53 PM
The cable cos do not have to dig up their lines but can put more powerful switches and routers at each end to enhance bandwidth.  Some of telcos and cable overbuilders (RCN, etc.) have built out fiber connections to the curb and to the homes.  This is the ultimate bandwidth solution but is only economical in dense urban areas.  I think a good part of the cable profitability issue is more with increase access charges for content. 

P/E includes both amortization (not a real economic charge) and depreciation which may be greater than cap-ex if a build-out is completed.  I like P/FCF better as it removes theses accounting distortions.  EV/EBITDA allows for comparison across firms of different debt levels and also does not include the amortization distortion.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on May 15, 2014, 12:21:27 PM
The cable cos do not have to dig up their lines but can put more powerful switches and routers at each end to enhance bandwidth.  Some of telcos and cable overbuilders (RCN, etc.) have built out fiber connections to the curb and to the homes.  This is the ultimate bandwidth solution but is only economical in dense urban areas.  I think a good part of the cable profitability issue is more with increase access charges for content. 

P/E includes both amortization (not a real economic charge) and depreciation which may be greater than cap-ex if a build-out is completed.  I like P/FCF better as it removes theses accounting distortions.  EV/EBITDA allows for comparison across firms of different debt levels and also does not include the amortization distortion.

Packer

Thank you Packer. I heard some telecos are allowed to depreciate much faster than their actual towers' lifespan. Is this true for cable companies as well?
The trick with P/FCF is how would you adjust the D and A and assign the proper level of D and A to it. It is certainly not zero.
It is confusing to see why GNCMA would want to build fiber across Alaska. Isn't it better if they just upgrade their cables and squeeze more FCF for now?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Kiltacular on May 16, 2014, 08:43:43 AM
http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/inlot-at-intralot/180/

Packer...any interesting insights from the Intralot quarter?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on May 17, 2014, 06:27:50 AM
Not very much.  The increased revenues and EBITDA was either slightly up or down depending upon whether you include FX.  Assuming FX over the LT is a net neutral, the results are slightly positive and the valuation still compelling (it is getting cheaper as we speak).  I get a net FCF of Euro56m based upon the Intralot 2103 FCF less interest expense.  There is some good upside if the 9.75% debt can get re-fied.  It is selling at a premium to par so this could add Euro12m to FCF if it is re-fied at 6%.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: WolfOfMainStreet on May 17, 2014, 08:15:26 AM
Hello Packer,

I'm not an investor yet (mainly because college is eating up a lot of time) but I'm still trying to learn as much as I can from the forum. I was just reading your comment on the 400% man post regarding VPRT and RRD. You said that when a business is having a lot of acquisitions or when it has a lot of intangibles you like to use FCF/(WC+FA) instead of ROE. I can see how ROE wouldn't apply in an acquisition situation because sometimes the SE changes (in stock swap deal) and the NI can be distorted due to different expenditures. In my notes I also defined the formula components as: FCF = Net operating CF - Capex - Dividends (received or paid?), WC = Total current assets - total current liabilities (should I take out liabilities?), and FA = buildings, real estate, equipment (PPE). Conceptually I see this as measuring how good the capital cash generating assets are at generating cash (Free cash flows). I also called it "Cash return on capital". Does that seem right to you? I'm only finishing my first accounting class in college so I apologize for any silly mistakes.

Also, using the above definitions I applied the formula FCF/(WC+FA) to the TTM numbers of VPRT and RRD. VPRT came out to be 0.26 and RRD was 0.11. Maybe my numbers are wrong but it looks like VPRT is better at generating cash with its capital cash generating assets. When I took out liabilities from WC VPRT was 0.15 and RRD was 0.11.

Thanks,
Wolfie
 :D
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on May 17, 2014, 08:41:34 AM
This is my take on cash return on investment.  For VPRT you have FCF (CFO less cap ex - you do not subtract dividends because they are discretionary) of 58m divided by fixed assets of 380m less negative WC of 46m (I think the number is closer to zero because some of this is non-recurring) so the cash RoI is 25%.  For RRD the FCF is $483m divided by $1430m of PP&E plus WC of $670m (current assets - current liabilities + ST debt + excess cash (notice cash balance increased last year by about $600 million and the requirements for cash, A/R and inventory, did not increase)) so the cash return on investment is 23%.  This is being generous for VPRT because some the current liability levels going forward are not going to be so large (so the investment will be more) so its RoI ls less than RRD's.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Kiltacular on May 18, 2014, 10:11:31 AM
Not very much.  The increased revenues and EBITDA was either slightly up or down depending upon whether you include FX.  Assuming FX over the LT is a net neutral, the results are slightly positive and the valuation still compelling (it is getting cheaper as we speak).  I get a net FCF of Euro56m based upon the Intralot 2103 FCF less interest expense.  There is some good upside if the 9.75% debt can get re-fied.  It is selling at a premium to par so this could add $12m to FCF if it is re-fied at 6%.

Packer

Packer,

Thanks for update.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: mbrock77 on May 21, 2014, 11:42:41 AM
Hi Packer,

Given that you’ve mentioned LICT before, I was wondering if you had any thoughts their recently released Q4 and FY 2013 numbers and/or the sale of their DFT subsidiary?

http://www.lictcorp.com/press.htm

Revenue is still increasing, although EBITDA is down 6% yoy. Guidance is good, though, and they are looking for increased revs ($100m) and EBITDA ($41m) for 2014.

Not sure how to think of this DFT sale and what they may do with the cash, however much it may be. Any thoughts? It looks like from some of the old filings that DFT may have been about a fifth or so of their total lines.

-Max


Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on May 21, 2014, 07:58:26 PM
They are moving along nicely.  As to the DFT sale this may have been the best way to exit.  It looks they have looked at other MBOS and rejected them I assuming on price.  They could pay down some debt.  I was a little disappointed about the FCC auction however they are price conscience which is nice.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: mbrock77 on May 27, 2014, 10:46:27 AM
Well, in case anyone cares, LICT released Q1 2014 numbers on Friday and they look pretty good. Both regulated and non-regulated revenue increased and, post-DFT sale and assuming 2014 guidance is accurate, debt is down to 1.1x EBITDA and EV/EBITDA is around 3x (at current share price). Book value increased 6% q/q and to $4,220.

http://finance.yahoo.com/news/lict-corporation-reports-first-quarter-193500308.html
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: JAllen on May 27, 2014, 11:48:27 AM
Well, in case anyone cares, LICT released Q1 2014 numbers on Friday and they look pretty good. Both regulated and non-regulated revenue increased and, post-DFT sale and assuming 2014 guidance is accurate, debt is down to 1.1x EBITDA and EV/EBITDA is around 3x (at current share price). Book value increased 6% q/q and to $4,220.

http://finance.yahoo.com/news/lict-corporation-reports-first-quarter-193500308.html (http://finance.yahoo.com/news/lict-corporation-reports-first-quarter-193500308.html)


Was thinking of starting an LICT thread after the great Q1 results (slowing ILEC voice line declines and regulated revenue increases) and 10% higher EBITDA projected for 2014.


Here are some recent highlights:


Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: mbrock77 on May 31, 2014, 04:18:46 AM
Ok, last LICT post (at least on this board), I promise. Fyi, from the annual:

During 2013, the company repurchased 639 shares, or 2.8% of our outstanding shares, at an average price of $2,378 per share. During 2014, given our decreased leverage, we are planning a more significant acquisition of shares.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: yadayada on June 01, 2014, 04:19:44 PM
Packer what are your thoughts on Softbank, since they should fall within your area of expertise right? It seems that merger could be very interesting, together with the added bonus of the alibaba stake.

+future growth potential of 4g service in terms of RPU
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on June 02, 2014, 02:41:15 PM
Softbank is a little bit off my sweet spot.  It is growing and the valuation appears to reflect that so I have not delved much further than that.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: yadayada on June 02, 2014, 03:48:56 PM
Softbank is a little bit off my sweet spot.  It is growing and the valuation appears to reflect that so I have not delved much further than that.

Packer
yeah I think the alibaba stake makes this. last years net income was 586 billion on a 8.9 trillion market cap. But Alibaba total value is estimated between 150-200 billion$ (not unreasonable for a high ROIC business that is growing that fast). they own 33%, so taht is 50-66 billion$ or 5-6.7 trillion yen. That would leave their remaining business a multiple of 3.7-6.6 on earnings. I havent really studied it in dept tho.

And then there are also synergies with their latest sprint-tmobile merger (if that goes through) that could be significant. This could be several hundred billion yen.

Plus added growth of 4G revenue.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: yadayada on July 10, 2014, 07:44:22 PM
packer im curious, you said you have a 10% stake in GNCMA and it is your 2nd largest holding, what is your largest holding?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on July 10, 2014, 07:48:36 PM
It currently is AIQ.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: argonaut on July 14, 2014, 12:11:15 PM
Hi Packer,

Thanks for your continuing thoughts and ideas. I recall that you exit a stock either when it has appreciated closer to fair value or have something better or the situation changes (e.g. OIBR)...I am curious on intralot (it's now back down and wondering if you sold or are holding?) and GPIV33 thoughts (it's been a quick ride up and yet it's still below FV...)

Thanks
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on July 14, 2014, 06:44:26 PM
I am holding Intralot as I think it is cheap but I am not as excited as when I bought as they have not shown an ability historically to turn EBITDA into FCF as of yet.  They have a plan we will see how it works out.  I will give them the standard 2 to 3 years to see if the plan will work.  I continue to like GP Investments despite some flawed analysis out in the blogosphere about them.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: plato1976 on July 14, 2014, 11:34:16 PM
Hi, Packer:

In some sense even GNCMA cannot convert EBITDA into FCF - there is no guarantee its growth capex will pay off;
AIQ is good in the sense it's really paying off debt and will one day generate huge FCF (hopefully)


I am holding Intralot as I think it is cheap but I am not as excited as when I bought as they have not shown an ability historically to turn EBITDA into FCF as of yet.  They have a plan we will see how it works out.  I will give them the standard 2 to 3 years to see if the plan will work.  I continue to like GP Investments despite some flawed analysis out in the blogosphere about them.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on July 15, 2014, 05:47:13 AM
You are correct about GNCMA and investments but they have a great track record of increasing cash flow with there investments and they have been disciplined about where not to expand.  Intralot does not have this historical record but it price today shows this.  Currently, most of Intralot's OCF profitabilty is coming from JVs.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: argonaut on July 15, 2014, 06:39:01 AM
Thanks Packer for the update.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: west on July 22, 2014, 10:22:27 AM
Packer,

What is your typical process for researching an industry?  Do you spend a lot of time reading industry magazines?  Are there any other sources you use to understand an investment better?

Thanks.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on July 27, 2014, 07:12:18 PM
I like to look at all the major firms and there relative valuation on an international basis and identify the main drivers of revenue growth and profitability for these firms.  I ask why is this firm more profitable or has more revenue growth than others?  I also look at prices paid for acquired firms in the industry.  I don't read industry magazines but do track news associated with these firms and read in-depth industry and company specific research reports to put the valuations in a frame of reference.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: west on July 30, 2014, 10:12:00 AM
Packer, I originally brought this question up in the Namura Shipbuilding thread, but I'm thinking it's probably more appropriate here.

I've recently been going through Damodaran's material.  He regularly emphasizes the difference between "valuing" a company and "pricing" a company.  For the Japan stocks I've posted, including Namura Shipbuilding, if you value them through a DCF or just by normalizing their earnings and then dividing that number by a relatively high discount rate, they're all really undervalued.  In fact, many have a negative EV, but are still very profitable.

However, some of the companies perhaps aren't under-priced based on industry comps.

Now Damodaran says that firms that are undervalued will eventually become properly valued.  (He also mentions that the benefit of investing in under-priced firms is their prices have a tendency to revert to what they should be quicker.)

To get to the question, wouldn't this "all undervalued companies will be eventually become properly valued" line of thinking require a shift in how the market prices companies eventually, or in what multiples the market uses to price companies?  Does this actually "price multiple shift" happen in reality in a long enough time horizon, or are firm's like Namura Shipbuilding more than likely bound to be under-priced forever, or at least undervalued until some external action like them being acquired happens?

Thanks.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Phaceliacapital on July 31, 2014, 06:52:56 AM
Packer,

given your experience in business valuations. What do you believe to be key metrics to value fabless semiconductor companies such as Melexis or Knowles?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on July 31, 2014, 04:32:43 PM
west,

I look at cyclical companies different that more steady state companies.  They key with cyclical companies is to estimate a normalized level of free cash flow or earnings then apply a reasonable multiple to the cycle average.  With steady state the multiples have a tighter bound than the more cyclical companies.  Another approach is to use BV if the company is at a cyclical low.

Shipping is a cyclical industry so the key to value is normalized level of earnings which in most cases will be different than current history.  Cyclicals can be cheap when the have high multiples based upon  trough earnings and expensive when priced on peak earnings. 

I typically will not invest in cyclicals because I am not up on the revenue cycles.  The current exception is in autos.  I think there is pent-up demand which is being played out now and the valuations don't give credit for this continued play-put of the auto replacement cycle.  You need to know where in the cycle you are to accurately analyze cyclicals.

If Namura is competitive then the price will reflect the changes its cash flows and book value over time.  A declining company is much more difficult because it is like a melting ice cube and you have to estimate the decline in cash flow/value in the future which can be a challenge.
 

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on July 31, 2014, 05:23:07 PM
The fabless semiconductor business is a great business.  These companies are typically priced high.  What you need to find out is what devices are these chips designed into and how long are they typically designed into these devices.  Also how diversified is the customer base.  Typically analog or processing chips have more "lock-in" than digital or memory chips.  In terms of financial metrics, FCF is probably the best as these firms typically have little cap-ex.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: 60°North Investments on August 22, 2014, 11:21:12 AM
I thought I'd better ask here first before opening a new thread for a relatively small question as this is, so hope Packer you're able to help (someone else can naturally jump in as well), thanks!

Having read Mauboussin's Capital Allocation pdf (http://www.valuewalk.com/wp-content/uploads/2014/08/document-1036635381.pdf), btw a great read, I was left with a minor question regarding the calculation of ROIIC. On page 48 he states the definition of ROIIC as: (year2 NOPAT - year1 NOPAT) / (year1 invested capital - year0 invested capital). Now what I'm wondering is, how do you calculate this on a, say, rolling 3 or 5 year period? If we have FY2014 results and then history as well, what years should one use in all the spots (i.e. 2014 NOPAT - 2012 NOPAT and so on) for the rolling numbers? Might be a silly question but hoping to have this cleared.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: rayfinkle on August 23, 2014, 05:54:55 PM
I thought I'd better ask here first before opening a new thread for a relatively small question as this is, so hope Packer you're able to help (someone else can naturally jump in as well), thanks!

Having read Mauboussin's Capital Allocation pdf (http://www.valuewalk.com/wp-content/uploads/2014/08/document-1036635381.pdf), btw a great read, I was left with a minor question regarding the calculation of ROIIC. On page 48 he states the definition of ROIIC as: (year2 NOPAT - year1 NOPAT) / (year1 invested capital - year0 invested capital). Now what I'm wondering is, how do you calculate this on a, say, rolling 3 or 5 year period? If we have FY2014 results and then history as well, what years should one use in all the spots (i.e. 2014 NOPAT - 2012 NOPAT and so on) for the rolling numbers? Might be a silly question but hoping to have this cleared.

the formula gets at incremental return for incremental investment... you can do that over any time period--just be sure to be eyes wide open on whether you need annualized figure or no
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: merkhet on August 23, 2014, 09:05:44 PM
I thought I'd better ask here first before opening a new thread for a relatively small question as this is, so hope Packer you're able to help (someone else can naturally jump in as well), thanks!

Having read Mauboussin's Capital Allocation pdf (http://www.valuewalk.com/wp-content/uploads/2014/08/document-1036635381.pdf), btw a great read, I was left with a minor question regarding the calculation of ROIIC. On page 48 he states the definition of ROIIC as: (year2 NOPAT - year1 NOPAT) / (year1 invested capital - year0 invested capital). Now what I'm wondering is, how do you calculate this on a, say, rolling 3 or 5 year period? If we have FY2014 results and then history as well, what years should one use in all the spots (i.e. 2014 NOPAT - 2012 NOPAT and so on) for the rolling numbers? Might be a silly question but hoping to have this cleared.

the formula gets at incremental return for incremental investment... you can do that over any time period--just be sure to be eyes wide open on whether you need annualized figure or no

You should usually do that over some years and keep context in mind. Some investments don't pay off immediately -- like a gigawatt factory (TSLA) that might take years to get to capacity or building out coax for a cable company.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: 60°North Investments on August 23, 2014, 11:16:24 PM
Thanks for the replies merkhet and rayfinkle! I'm afraid I'm still not quite sure whether I'm doing something wrong or is it just the numbers. In the pdf Mr. Mauboussin says that for Wal-Mart he has 1 year ROIIC (for fiscal 2014) of -2%, 2% for rolling 3-year period and 21% for rolling 5-year period. I took the numbers (although I can't for example exactly match his average invested capital of USD 145.8 billion for Wal-Mart in fiscal 2014 (I get 141 billion) or the NOPAT for same year (his 18.8b vs. my 18b), anyone has an idea how he gets those 145.8b and 18.8b?

Anyway, here's how I'm trying to do it now. 1 year ROIIC: (FY2014 NOPAT - FY2013 NOPAT) / (FY2013 IC - FY2012 IC). That's exactly like he proposes so I assume that's the correct formula?

So is it correct then that to get a 5-year rolling ROIIC I need to calculate first 1 year ROIIC for 5 years, with the last one being in this case = (FY2010 NOPAT - FY2009 NOPAT) / (FY2009 IC - FY2008 IC). Then I have 5 ROIICs and simply calculate the 5-year rolling number as the sum of those 5 ROIICs divided by 5?

Without managing to know how Mauboussin exactly calculates his (average) invested capital and NOPAT (this one I especially struggle understanding how it can be so different from what I get..) it's impossible to arrive at his example ROIICs for Wal-Mart and that way see whether I'm doing something wrong. Thus asking for help here.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on August 24, 2014, 06:13:51 AM
This looks like an incremental return on invested capital calculation so you may want to think about how long an investment takes to pay-off for Walmart.  Clearly the shorter periods don'r reflect this so the focus should be on the longer term numbers.  You may want to annualize the numbers to make them comparable so for three years annualize the result as follows:

((1+ return)^(1/3))-1

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on September 23, 2014, 06:48:38 PM
Are you still bullish about the Korean preferreds after Hyundai's $10 bn bid on a land parcel?
I am worried that corporate governance is a real issue here. ::)
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on September 23, 2014, 07:07:28 PM
I still am and you have to put this into context.  Although I don't like what they paid, they had over $6 billion in excess assets cash and investments and if they can get advantageous financing this may not be a bad deal buying real estate in a city center of an EM city.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: simplefocus on September 23, 2014, 10:12:15 PM
Hi Packer,

I'm in the process of moving my account to Fidelity so I could buy some Korean preferred shares. Which ones are you most bullish now?  What are their expected returns?  Thanks.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on September 24, 2014, 03:22:01 AM
My largest positions which I think are all less than 55 cent dollars are posted in the Investment Ideas section. 

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: west on September 30, 2014, 07:58:52 PM
Packer, do you have a resource you recommend that talks about what different industries tend to use for their comp variables?  For example, it's my understanding that companies in the auto parts industry tend to be valued with EV/Sales.  Whereas, say, EV/EBITDA is more common in the broadcast and telecom industry.

Thanks!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: matjone on October 01, 2014, 06:46:43 AM
You've said you stick with smaller stocks because you think there is too much competition in large caps and have said that even smart managers will have a hard time doing better than average with them.  So, say you had to invest in funds - what size would you say is the point where it becomes pretty unlikely that a good manager can outperform?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on October 02, 2014, 07:10:29 PM
In terms of comp ratios, I haven't run across a definitive guide but 5 Rules for Successful Stock Investing by Pat Dorsey and industry analyst reports can provide some guidance.  I think as you study an industry you can pick pretty quickly what metric is used as it used quite often by analysts and others in the industry.

As to size and outperformance, I think once get over a few billion for US equities it gets pretty hard.  There are some exceptions in some industries today like some autos and financials but for the most part I think the large and mid-cap space is pretty efficient in the US.   Look at firms like Longleaf and Sequoia (with great processes) and compare them to value indicies and you will see the outperformance if it exists is small.  I think a "lazy portfolio" of small value tilted securities will probably capture most of the premium offered by value types of stocks. 

Packer 
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: tede02 on October 02, 2014, 07:31:12 PM
Packer, my question is......... are you happy to see your team pummel the Vikings this evening? ;D  I'm in the MNPLS area and have the game on.  Your welcome for playing against Christian Ponder. ;)  Couldn't help myself seeing this thread.   

Best,

Ted
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on October 03, 2014, 03:44:26 AM
I am glad the Packers won and will take any win in this competitive season but it will be interesting to see how they can play against the Vikings starter QB.  That in my mind will be the real test. 

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: KCLarkin on October 03, 2014, 08:34:04 AM
Look at firms like Longleaf and Sequoia (with great processes) and compare them to value indicies and you will see the outperformance if it exists is small.

This probably has more to do with institutional constraints than market efficiency.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: fareastwarriors on October 03, 2014, 08:48:51 AM
Look at firms like Longleaf and Sequoia (with great processes) and compare them to value indicies and you will see the outperformance if it exists is small.

This probably has more to do with institutional constraints than market efficiency.

Sequoia has a 1% drag due to management fee too. That additional 1% is very difficult to overcome...
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: KCLarkin on October 03, 2014, 09:03:54 AM
Sequoia has a 1% drag due to management fee too. That additional 1% is very difficult to overcome...

Plus 15-20% cash for the last 6 years.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: frommi on October 15, 2014, 10:10:44 AM
Packer can you help me and look into http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/fcfp-vs-fcfev/msg193224/?topicseen#msg193224 (http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/fcfp-vs-fcfev/msg193224/?topicseen#msg193224) and help me?

Thanks in advance!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: west on October 25, 2014, 10:04:09 AM
Packer, earlier in this thread you said:

Quote
I don't read industry magazines but do track news associated with these firms and read in-depth industry and company specific research reports to put the valuations in a frame of reference.

I recently got access to more professional research data like CapitalIQ, Bloomberg, etc.  Is this where you get your industry research reports from?  Are those reports just the "Primers" that I've seen floating around the web?

Thanks in advance for your help!  I swear I'll stop asking all these questions one day ;D
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on October 26, 2014, 02:18:22 PM
Bloomberg itself tracks alot of industry data and there are many analyst reports available also which can provide background.  Bloomberg also has a function RV which provides comparison to comparable firms.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Laxputs on November 04, 2014, 10:19:53 PM
May I ask what your current portfolio holdings are? Or your top 10 positions which are not so illiquid you are still trying to build positions in?

TIA.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on November 06, 2014, 08:16:15 AM
Not much has changed. I purchased some more Intralot at about Euro 1.25.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: argonaut on November 06, 2014, 09:36:02 AM
Can I ask as you avg down if you have a rule of thumb .. Eg for each 30% drop you avg 50% more of the original holding? Eg how much in percent more did you pick up at 1.25?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on November 06, 2014, 10:56:53 AM
I don't have a rule per se other than seeing if for some reason the value has declined, which in this case it did not.  I bought too much at the higher prices so this at least reduced my cost basis.  In this case I bought about 33% of the original purchase price in value.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: JoelS on November 15, 2014, 09:14:37 PM
Packer, do you categorize holdings or actively look for "work outs" or have you ever been in a "control situation". If not, is this something you might consider doing in the future? One further qs if I may, what methods, if any, have you found to reduce volatility in the down years, without compromising upside? Thank you in advance for any answers and thank you for this thread.

Joel
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: investor-man on November 16, 2014, 06:27:53 AM
Hi Packer,

Thanks again for taking the time to answer all of these questions! I met you in NYC a few months back and we were discussing your use of the Kelly Formula to choose a maximum on the size of a position. You said you always use 50/50 as your probabilities. I'm curious if you ever adjust those probabilities if your conviction goes up. For example, right now in my portfolio Fiat is approaching it's max based on a 50/50 probability with the Kelly formula -- Kelly tells me 20% at the current price/FV. But my conviction has gone up a bit, and if I adjust to 60/40, Kelly tells me to let it run up to 32%. Either way for tax purposes I'm going to keep all of my holdings in Fiat around for at least the next four months, but I'm curious what you do in situations like this.

Thanks,
investor-man
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on November 16, 2014, 06:50:54 AM
I haven't invested in many workouts as I don't feel I have any particular advantage over others here.  I am planning on investing in NNN property funds to reduce my volatility going forward.  Today you get a 7% yield plus rent appreciation of 2% with another 1% for accretive purchases.

For the Kelly formula, I don't adjust the probabilities as I am looking for an objective percentage allocation.   I use this as a warning sign (a risk control tool) when my portfolio is getting too concentrated.  If you can withstand the volatility, you will be OK.  You may also want to see if there are other investments that have similar upside that you can purchase with a partial sale of the position.  I have done this within the past 12 months with AIQ and GNCMA when they have become larger parts of the portfolio.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: WeiChiLoh on November 18, 2014, 07:20:05 AM
Hi Packer,

What do you think of this idea of mine? https://www.dropbox.com/s/tgbzuvpw7qnvi4x/Haw%20Par.pdf?dl=0

I am still learning, but I am hoping if I can get some feedback from a veteran.

Thanks!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: west on November 21, 2014, 02:25:19 PM
Packer, where do you generally get comparable transaction multiples from?

I recently got access to CapitalIQ and I've used it for finding some transaction multiples.  However, I've noticed it doesn't have everything.  For example, Versar (a company I'm invested in) recently bought the firm J.M. Waller.  All of the details for the transaction were very publicly disclosed.  However, it's not in the CapitalIQ database as far as I see.

Is there another (better?) resource you use to find these multiples?  If not, how do you compensate for CapitalIQs lack of complete information?  TIA.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on November 21, 2014, 07:44:45 PM
I use Cap IQ and Bloomberg as a starting point and confirm/correct add to the data with financial disclosures and press releases.  There can be implicit assumptions in Cap IQ data I have used in the past. 

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: west on November 21, 2014, 10:51:15 PM
I use Cap IQ and Bloomberg as a starting point and confirm/correct add to the data with financial disclosures and press releases.  There can be implicit assumptions in Cap IQ data I have used in the past. 

Packer

Huh.  I didn't know Bloomberg had a way of looking at prior transactions.  Is there an easy, um... I think you call it a Bloomberg command to access this?  Or is it more complicated than that?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on November 22, 2014, 04:04:16 AM
On Bloomberg find the subject company then use the CACS command and you should get a screen with a comps tab that includes related transactions.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: usdtor05 on November 23, 2014, 08:13:14 PM
Hi Packer,

I have been struggling with something for a long time and wondering if you could help me out.

I am assuming Sprint is going to be pushing pricing down heavily and fighting with a very cheap unlimited plan. My question is can Verizon, AT&T, T-Mobile compete on the data side with their spectrum (understand the auction just took place and could change this).

I am still on Verizon because I always felt Sprint was crappy but to the extent they get their network in ok shape and offer a very cheap unlimited plan, that starts to be interesting. I think they have been pretty explicit in saying that they are going to compete on price/unlimited data but I can't wrap my head around if with their networks, the other guys could come down and fight them with a similar (maybe slightly more expensive plan given their better networks) plan but also unlimited data.

Seems like we are moving towards more and more data and therefore Verizon plans would just get more expensive..I know mine has.

Appreciate your thoughts in advance here.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on November 27, 2014, 07:53:04 AM
I am not sure if I can add  more than what you have already stated but when I switched from an unlimited data plan to a Verizon metered plan, I actually saved money.  I think it depends upon what you do with the phone.  I just surf the web so it doesn't take up to much bandwidth.  If you are streaming Netflix, it is a different story.  What may happen is the bandwidth heavy users go to Sprint and Verizon is left with low and moderate bandwidth folks.  I am not sure how many folks are low/moderate users like me vs. the heavy users and how that changes over time.  If the low/high ratio is low and stays low than Verizon should do well, however, if Sprint gets these cost conscience high bandwidth it may not be the best situation for them.  Sprint will have an advantage if there is spike in the high bandwidth users without a corresponding increase in bandwith which is the opposite of what has happened in the past, for most users bandwidth has always ran ahead of use.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Liberty on November 27, 2014, 10:57:35 AM
Hi Packer,

Apologies if you have already written about this topic (I haven't seen it). I was curious to know if you were looking at the upcoming tracking stock by Liberty Global for their Latin America assets? There aren't many details yet so it's too early to value, but I'm curious to know if you have an opinion on the cable industry in the area and whether it's a good environment to rerun the TCI playbook (for the third time) and consolidate the industry there.

Thank you.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: cameronfen on December 11, 2014, 06:07:42 PM
Hi Packer,

I think it has been mentioned that you are long Asia Standard and Shun Ho Resources.  Why are you long Shun Ho Resources and not Shun Ho Technology?  I think the P/E on Technology is lower.  Thanks,

Cameron
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on December 11, 2014, 06:37:02 PM
As to LatAm cable cos, I think they are nice businesses like they are in the rest of the world.  Thanks for the heads up on the Liberty spin-co that will includes LatAm cable.  I have owned NET, a Brazilian cable co in the past when it was selling for less than 5x EBITDA.  NET has been in essence been purchased by TelMex so I no longer follow it that closely.

As to Shun Ho Resources, I like to hold the same shares as the operator and in this case it is Shun Ho Resources versus Shun Ho Technology and the discount to NAV and EBITDA multiples are about the same.

Packer

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Liberty on December 11, 2014, 08:11:08 PM
Thank you Packer!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: cameronfen on December 12, 2014, 06:38:45 PM
Thanks for your help!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: west on December 13, 2014, 05:17:02 PM
I think you've mentioned, either in this thread or one of your idea ones, that you sometimes have to do credit analysis on a company.  Are there any books you recommend on this topic?  TIA!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on December 13, 2014, 08:09:32 PM
Yes, one good book is How to Make Money with Junk Bonds by Robert Levine.  It also provides guidelines for option adjusted spreads for various junk bond ratings.

PAcker
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: JoelS on December 14, 2014, 10:05:09 AM
Packer, how do you compare first world markets v second tier? i.e. If you have a 70c dollar in the US v a 30c dollar in Greece, which do you choose? How do you assess the country risk? It seems time is often not on your side with these second tier market investments because the country may default implicitly or explicitly. TIA. 
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on December 14, 2014, 04:11:44 PM
I think it depends upon the situation.  There are many corporate credits in Greece that are higher quality than the sovereign.  This is not a typically situation.  Some examples are Intralot and Coca Cola Hellas.  These bonds trade at a tighter yield than the sovereign and in some cases have large portions of their revenue not in Greece.  If Greece goes to the drachma, some companies would be hurt less or even helped including firm who have sales abroad and cost in Greece.  Intralot and Lukoil (as oil and refined product prices are set by world markets not just Russian markets) are examples of these types of companies.  Ones where there would be issues are banks as they are directly exposed to devaluation issues.     

I try to stay away from the basket cases like Venezuala and Argentina but still think the Greeks will pull this one out. 

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: plato1976 on January 01, 2015, 05:50:03 AM
Hi, Packer, Happy new year!
A general question on maintenance CAPEX.
For companies with high debt (usually that means these companies/industries need significant CAPEX), how do you decide the maintenance CAPEX level. Companies tend to understate their maintenance CAPEX and attribute their high CAPEX to growth, which doesn't materialize eventually and turned out whatever supposed to be growth was indeed maintenance CAPEX. Sometimes, so called growth CAPEX is actually mandatary to replace the old business which is declining, so all these CAPEX should be treated as maintenance CAPEX at the best.

I think it depends upon the situation.  There are many corporate credits in Greece that are higher quality than the sovereign.  This is not a typically situation.  Some examples are Intralot and Coca Cola Hellas.  These bonds trade at a tighter yield than the sovereign and in some cases have large portions of their revenue not in Greece.  If Greece goes to the drachma, some companies would be hurt less or even helped including firm who have sales abroad and cost in Greece.  Intralot and Lukoil (as oil and refined product prices are set by world markets not just Russian markets) are examples of these types of companies.  Ones where there would be issues are banks as they are directly exposed to devaluation issues.     

I try to stay away from the basket cases like Venezuala and Argentina but still think the Greeks will pull this one out. 

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on January 01, 2015, 06:39:23 AM
One way is to look at history, has cap-ex created growth or just a slower decline of cash flows.  GNCMA is a good example of a company in a declining industry that has been able to increase revenues and cash flows while others have been in slow the decline mode.  In that case you can look at the slow the decline cap-ex/sales versus the grower and select some number between these two.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: JoelS on January 20, 2015, 06:05:27 PM
Packer, one of your key criteria seems to be private market value/takeout value.. Would that be fair to say? If so, is this something that you have worked out over time through experience, or something that you have recently begun to look for based on theory? How do you incorporate it into your analysis?.. Toby Carlisle's book 'Deep value' indicates that a key driver of performance is to purchase stocks at or below an acquirer's multiple.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on January 21, 2015, 07:26:20 PM
Comp takeover multiples in certain industries can provide nice benchmarks if a takeover is a viable exit strategy.  In the TV/radio business this is true along with the telco/cable companies.  These are typically used in with comp companies to estimate a fair multiple for company under study.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on January 24, 2015, 08:59:42 AM
Packer, I see you track a lot of teleco/cable companies. Some of the stocks did well last year, like GNCMA. Some didn't, like ALSK and PT.
In hindsight, would you be bullish at the beginning of 2014 for these companies? What went wrong with ALSK and PT?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on January 24, 2015, 10:16:53 AM
PT/Oi was invovled in fraud so much the CEO of the combined firm resigned.  This was a highly levered equity that was cheap without fraud.  With fraud who knows.

ALSK is an interesting one in that its leverage with be reduced with the AWN sale and is amongst the cheapest telcos.  It is at disadvantage to GNCMA.   It should trade in line with other RLECs like LICT and New Ulm who trade for 3.5x and 4.5x, respectively.   

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: JAllen on January 24, 2015, 03:28:25 PM
Packer:


Do you think LICT should trade at a 2X-3X EV/EBITDA discount to RLECs like Frontier, that have declining revenue and higher debt?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on January 24, 2015, 05:06:50 PM
The RLEC story is dependent upon revenues and EBITDA increasing over time.  LICT and some of the RLEC have steady to slightly up revenues at this point.  If this is an industry wide trend (which I think it is) you will see FTR and others follow.  In some of my day job work, we have seen some evidence that industry insiders think the decline is over and they are buying based upon that premise.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on January 26, 2015, 09:34:25 AM
PT/Oi was invovled in fraud so much the CEO of the combined firm resigned.  This was a highly levered equity that was cheap without fraud.  With fraud who knows.

ALSK is an interesting one in that its leverage with be reduced with the AWN sale and is amongst the cheapest telcos.  It is at disadvantage to GNCMA.   It should trade in line with other RLECs like LICT and New Ulm who trade for 3.5x and 4.5x, respectively.   

Packer

I see. So you think ALSK's investment thesis is still intact and should play out over 1-2 years?
What's your best ideas for 2015? I am running out of ideas right now.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on January 26, 2015, 12:48:43 PM
Packer, have you studied Liberty Global and other Malone companies? Any thoughts there? How would you compare Liberty Global with ALSK and GNCMA?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Liberty on January 26, 2015, 04:28:28 PM
Packer, have you studied Liberty Global and other Malone companies? Any thoughts there? How would you compare Liberty Global with ALSK and GNCMA?

He gave an answer on Global downstream of this:

http://www.cornerofberkshireandfairfax.ca/forum/strategies/ask-packer-no-seriously-ask-him-anything-(aha)!/msg163359/#msg163359
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on January 26, 2015, 09:23:33 PM
Packer, have you studied Liberty Global and other Malone companies? Any thoughts there? How would you compare Liberty Global with ALSK and GNCMA?

He gave an answer on Global downstream of this:

http://www.cornerofberkshireandfairfax.ca/forum/strategies/ask-packer-no-seriously-ask-him-anything-(aha)!/msg163359/#msg163359

Thank you!  :)
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: kab60 on February 24, 2015, 02:49:53 PM
Did you check out Hawaiian Telcom? Seems to be around ev/ebitda of 5. Net debt/ebitda 2.2 and insider buying.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: krazeenyc on February 24, 2015, 06:42:53 PM
Did you check out Hawaiian Telcom? Seems to be around ev/ebitda of 5. Net debt/ebitda 2.2 and insider buying.

I've been looking at HCOM too.  I'd love to hear Packer's thoughts on this name as well. I'm not sure how to think about it. They're in the midst of a major capex spending spree to lay fiber and they have a long runway for growth in both broadband internet and cable tv (they're only breakeven on tv right now).  But, the large majority of the ebitda is being generated by voice landlines that are in terminal decline.  Are they automatically not an acquisition target b/c of their large voice business? Is their cable tv business far too small to be an acquisition target at this point? What multiple should they trade at?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on February 24, 2015, 07:50:01 PM
I get a multiple closer to 4.4x EBITDA for HCOM.  I like them and think with the cable connection they should be able to offset decline of voice lines quicker than other telcos.  In addition, in HI there is only one other cable provider and HCOM to provide video and broadband connectivity.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Munger_Disciple on February 25, 2015, 11:21:37 AM
Packer,

It looks like HCOM competes with Time Warner Cable in Hawaii. Given the scale of TWC/Comcast, their programming costs will be significantly cheaper than HCOM's. Isn't this a problem for HCOM's cable video business?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on February 25, 2015, 11:29:01 AM
HCOM provides the cable over the same cable as internet and phone and gets some nice incremental margins for the video.  It will add to profitability as long as they do not sell for a loss which I do not think they are doing.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: kab60 on February 25, 2015, 12:01:58 PM
Thanks for the feedback, Packer. There's a nice interview (although a bit old) with the CEO of HCOM and the general market situation (dec '13) here: http://www.hawaiibusiness.com/is-hawaiian-telcoms-iptv-rollout-a-game-changer/ - according to the interview, Hawaiian Telcom has a 15-year franchise for IPTV services on Oahu. Does that mean that TWC are not allowed to build out their own fiber network (and have to stick with coax?). That would seem strange.

Anyway, seems like they expect most of the fiber growth capex to be done by the midlde of 2016 (around $40m/year), where the company expects to have built out 240,000 to 250,000 households (160k today). They're getting around 2.500 new vid subscribers/quarter and from the look of their website and offers it doesn't seem like they dump prices as Packer also mentioned.

Latest investor presentation, jan 15, here: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NTY5NDg2fENoaWxkSUQ9MjcwMzczfFR5cGU9MQ==&t=1 (http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NTY5NDg2fENoaWxkSUQ9MjcwMzczfFR5cGU9MQ==&t=1)

Also, not sure how you get a multiple of 4,2 - care to share? According to latest presentation it's at 4,8. I don't suppose you're invested here seeing the current opportunity in Ntelos?

Edit: According to the interview fiber buildout should be done mid 2016. Growth capex is is around 40 pct of all capex, 93m ltm, and they also build out mobile cell sites, so 40m might be a bit overstated.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: rogermunibond on February 27, 2015, 10:41:33 AM
With Docsis 3.0/3.1 there's really no need for TWC to build out FTTH, they might lay fiber back haul but that's another story.

Part of the attraction to CHTR and LBTYA to someone like John Malone is precisely the point that technology has made copper coax competitive with fiber for most residential users.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Scorps on April 15, 2015, 01:06:22 PM
Hi Packer,

I was wondering if you have a position in CTCM and what you think of it at these levels?

Thanks!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on April 17, 2015, 06:06:00 AM
CTCM is interesting but risky given the fact that a new media restricts foreign ownership of Russian media companies to 20%.  If they can figure out how to get around this then it will be a good investment.  However recently I have heard some comments that management may be looking to take the company private, not a good scenario so today this is too risky for me.  If you like Russian media/telecom you may want to look at MBT.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Scorps on April 17, 2015, 06:09:45 AM
Thanks Packer!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: RhubarbXIV on April 17, 2015, 09:21:05 AM
CTCM is interesting but risky given the fact that a new media restricts foreign ownership of Russian media companies to 20%.  If they can figure out how to get around this then it will be a good investment.  However recently I have heard some comments that management may be looking to take the company private, not a good scenario so today this is too risky for me.  If you like Russian media/telecom you may want to look at MBT.

Packer

Packer,
Two questions:
1. Where did you hear about management looking to go private? I saw they engaged UBS as adviser, but not much else on the topic.
2. How do risky is the prospect of a takeunder, really, given today's valuation?

Disclosure: My fund is long CTCM
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Poor Charlie on April 17, 2015, 11:28:50 AM
I think CTC is one of the most interesting ideas for larger (non-microcap) companies today.  It is a hairy idea with a large amount of uncertainty but I see enough risk/reward for a 5% position. 

Assuming $75m in balance sheet cash and $100m in free cash generation between now and the deadline gets you 25% of the current market cap.  In theory if they are going to get shut down they could also runoff/sell their programming inventory and their non-Russian assets which gets you over 50% of the market cap.  There are of course liabilities against that and I realize things are never this simple, especially in Russia, but some combination of a liquidation/sale ($200m cash + sale at 2.5X EBITDA = current MC) gets you a decent recovery on the downside.  On the upside this is VERY cheap and they could either (a) sell it for a reasonable price or (b) continue to operate it if the 20% law gets repealed or they find a workaround.  I don’t believe a full out expropriation is in the cards otherwise it would have been done already.  IMO downside is $2 and upside is $12 against current price of low 4s.

I should note that I would not be in this if MTG was not in the same boat as me.  They have demonstrated/stated that they will act in the best interests of all owners and they have a good amount of money at stake.

Feel free to comment
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on April 17, 2015, 12:01:51 PM
I agree it is cheap.  However, there was an Apr 1, 2015 story by Bloomberg who spoke to CTC Media's founder.  His opinion was the most reasonable solution was for the company to go to private via delisting and has was investigating investment into the new private company.  The company may structure around this but it appears there is one plan to take the company private and if you look at the IB target prices for CTC they are not much higher than the current stock price so CTC could obtain a fairness opinion to do this transaction with little upside for the current shareholders.

I am curious if you know of any plans MTG has for this and do you think MTG would fight for minority shareholders if they were given an opportunity to invest in the new private co?

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Poor Charlie on April 17, 2015, 01:31:09 PM
I agree it is cheap.  However, there was an Apr 1, 2015 story by Bloomberg who spoke to CTC Media's founder.  His opinion was the most reasonable solution was for the company to go to private via delisting and has was investigating investment into the new private company.  The company may structure around this but it appears there is one plan to take the company private and if you look at the IB target prices for CTC they are not much higher than the current stock price so CTC could obtain a fairness opinion to do this transaction with little upside for the current shareholders.

I am curious if you know of any plans MTG has for this and do you think MTG would fight for minority shareholders if they were given an opportunity to invest in the new private co?

Packer

I vaguely remember hearing about the founder saying something to that effect (if you have the article would you mind posting it) but my understanding is that he is non-Russian.  I don’t think MTG would sign up for this given it would mean they would have to divide up the 20% which would cut MTG’s stake meaningfully.  IMO a 10% (or thereabouts) stake in the new entity would not be worth it given that (a) they would be junior to a Russian partner who has demonstrated they are willing to screw their partners and (b) they would face legal / reputational issues irrespective of the fairness opinion. 

I think the most likely suitor would be a Russian oligarch who tries to buy the company or take control via a buyout of MTG’s 39%.  MTG was already approached by Kovalchuk (Bank Rossiya / Gazprom Media) to buyout their 39% but they said no.  This, along with the hiring of Tsukanova, speaks to their commitment to find the best deal for all shareholders.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: DavidVY on May 04, 2015, 01:30:34 PM
What do you think of Qualcomm?

Is the Samsung issue overhyped? Seems like Samsung's chips arent performing as well as Qualcomms.

Koreans are fiercely nationalistic (remember korean cola? lol), so is this a temporary issue or a long-term structural issue for qualcomm
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on May 05, 2015, 07:08:13 PM
I don't follow QCOM so I can't provide any intelligent comment.  It is too large (market cap) for me at this point.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Eye4Valu on May 05, 2015, 09:27:00 PM
Packer: In your opinion, which security (e.g. individual stock) offers the best risk-reward proposition in the market today? Why?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on May 07, 2015, 01:38:40 PM
Probably either Emeco, Intralot or Taeyoung E&C Preferreds.  The details are on the subject threads.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Eye4Valu on May 07, 2015, 02:11:54 PM
Thanks! Will check those out.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: tombgrt on May 08, 2015, 02:59:31 AM
Thanks Packer. I'm somewhat surprised by your strong interest in Emeco. Like most of your positions, it's heavily debt leveraged which offers the potential of big gains. It also has strong operational leverage if conditions change for the better. The bull case seems to revolve exactly around the industry turning and improving again.
My question is, how do you get comfortable with this uncertainty? Debt leverage is great for high equity returns when you have very stable and predictable EBITDA/FCF but with commodity related businesses, it's basically a double edged sword.

Where would you expect EBITDA to land for Emeco in a few years if things improved? Or do you simply see it as a play on commodities where you just have to wait and see if and when it pays off? I can see it being a serious multi-bagger but I assume you also have to be comfortable with the chance of losing most/all of your capital if the recovery doesn't materialize.

The recent Rentco acquisition (currently still hanging) is also a bit odd and should show the uncertainty of management towards the future. Foolish or a smart way to hedge further industry pain?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on May 08, 2015, 03:52:32 AM
Of the 3 companies Emeco has the most uncertainty but that is where sometimes the greatest gains come from.  I am down about 50% in the position today but with activism of Black Crane I feel the shareholders will be given a fair shake in any recovery.  They have deferred the Rentco acquisition twice and are now in discussion with Orion for horizontal acquisition in the equipment rental space.  If the Orion merger takes place then the potential is there for some additional upside.  Businesses like this in the US trade at much higher multiples (8x EBITDA for United Rentals) so the upside potential is there.  With Orion acquisition you have a potential catalyst to unlock the value.  We will see.  One caution, Emeco's debt trades in the 70s, so this is an exception (which I may regret) to my rule of buying the equity of firms whose debt trades at a significant discount to par.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: tombgrt on May 08, 2015, 06:37:59 AM
Hey Packer, thank you for the quick reply! Will look into it a bit more.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Homestead31 on May 10, 2015, 04:52:46 PM
Packer - how do you think about unrealized losses?  i believe you were down 50% in intralot at one point too.  do you sell for tax losses ever? what are your thoughts on maintaining your conviction in the face of a market that disagrees with you?  how often do you check your portfolio? do you just not check prices so you can ignore the volatility, or do you just have the emotional ability to sit through the short time unrealized losses?  i know pabrai has said he won't sell for at least 2 years no matter what if the quality of the business has not been degraded.  how do you feel about that?  any other thoughts appreciated as well!

thanks
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on May 11, 2015, 03:51:44 AM
Since most of money is in retirement accounts, I do not do tax loss selling but that is a good idea.  In terms of conviction, I recheck my thesis and valuation and pretty much follow the Pabrai rule of not selling until after at least 2 years if the valuation has not changed.  The cases I have sold, the valuation has changed or I have found another stock that has higher appreciation potential.  I do a portfolio check every week and recalc valuations.  In most of the stocks that have had significant appreciation, the stock has declined after I bought it.  I focus on the valuation number not the price as my anchor in the investment seas.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: plato1976 on May 15, 2015, 08:41:39 AM
Hi Packer, Do you think AIQ at 20 a buy as attractive as Intralot b/c it's in the U.S.?

Of the 3 companies Emeco has the most uncertainty but that is where sometimes the greatest gains come from.  I am down about 50% in the position today but with activism of Black Crane I feel the shareholders will be given a fair shake in any recovery.  They have deferred the Rentco acquisition twice and are now in discussion with Orion for horizontal acquisition in the equipment rental space.  If the Orion merger takes place then the potential is there for some additional upside.  Businesses like this in the US trade at much higher multiples (8x EBITDA for United Rentals) so the upside potential is there.  With Orion acquisition you have a potential catalyst to unlock the value.  We will see.  One caution, Emeco's debt trades in the 70s, so this is an exception (which I may regret) to my rule of buying the equity of firms whose debt trades at a significant discount to par.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Phaceliacapital on May 18, 2015, 07:46:08 AM
Regarding your rule of buying equity where debt trades significantly below par, any opinion on Intelsat? Leveraged at 7.5x EBITDA but nearly all bonds are trading at or even above par.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on May 18, 2015, 07:58:15 AM
AIQ and Interlot are both attractive with Intralot having more upside and risk due to Greek and EM exposure. 

I looks interesting.  I will take a look.  Thanks.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Phaceliacapital on May 18, 2015, 08:59:16 AM
There's a not so old writeup on VIC in case you're interested.

I think it's striking that bonds are trading at these levels with such a leverage.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: ageofsocrates on May 18, 2015, 10:32:34 AM
Hi Packer,

Just had a quick question to ask related to valuation. In the earlier posts, you mentioned using enterprise value to ebitda to screen stocks. Why not use enterprise value to free cash flow instead? does this strategy screen poorly?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: one-foot-hurdles on May 19, 2015, 04:13:09 PM
Regarding your rule of buying equity where debt trades significantly below par, any opinion on Intelsat? Leveraged at 7.5x EBITDA but nearly all bonds are trading at or even above par.

Just started looking at this one, down 7% today
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: ageofsocrates on May 22, 2015, 08:19:08 AM
Hi Packer,

Just had a quick question to ask related to valuation. In the earlier posts, you mentioned using enterprise value to ebitda to screen stocks. Why not use enterprise value to free cash flow instead? does this strategy screen poorly?

Hi Packer,

just to add in to my question. Any filters do you use when identifying companies and how do you normalize earnings?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on May 22, 2015, 08:39:13 AM
EBITDA is applicable to firm in a life stages.  FCF is most relevant in the mature phase.  In most cases if you find a cheap MVIC/FCF company it is also cheap on an MVIC/EBITDA basis.  I really use this metric to look at companies in a similar industry (content for example) and find the cheapest and try to understand if the discount is warranted. 

I do look at normalized metrics in cyclical industries.  The nice thing about EBITDA is that it is not as volatile as FCF.  You just need to be careful in understanding the use of EBITDA in comparisons.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: kab60 on June 03, 2015, 01:06:51 PM
Did you look at Cellcom Israel? Thought you might find it interesting. Not sure what the debt trades at.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on June 04, 2015, 03:33:59 AM
I haven't looked at Cellcom recently.  I will take a look.  Thanks.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Phaceliacapital on June 23, 2015, 12:40:10 PM
Packer, I have a quick question regarding business valuation.

When valuing a construction company (contractor business), do you consider performance bonds as liabilities and thus do you add these to calculate the company's EV?

Thanks!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: constructive on June 23, 2015, 01:41:04 PM
Packer, I have a quick question regarding business valuation.

When valuing a construction company (contractor business), do you consider performance bonds as liabilities and thus do you add these to calculate the company's EV?

Thanks!

I wouldn't. Work in progress is a business risk, but not a liability. They are a liability for the insurance company who writes the policy.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Phaceliacapital on June 23, 2015, 02:24:11 PM
So in your response the construction company only pays its "insurance premium" but is not liable for the actual amount of the performance bond should something happen?

Does it always work like this?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: constructive on June 23, 2015, 02:54:33 PM
So in your response the construction company only pays its "insurance premium" but is not liable for the actual amount of the performance bond should something happen?

Does it always work like this?

The contractor has to execute the construction contract. If they don't execute the contract, the performance bond pays out directly to their client. Then the insurance company attempts to collect from the contractor, but typically it only gets to this point because the contractor has already gone bankrupt.

The actual risk is much less than the performance bond amount. Contractors are typically paid and deliver work incrementally over time. If a contractor breaks the contract, the owner would only be able to make a claim for damages, not the entire amount of the performance bond.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on June 23, 2015, 03:52:27 PM
Constructive had a great response.  When we look at construction companies, we view a lot of the non-operating items like deposits and construction bonds as working capital and thus not added or subtracted from the EV as we would do with non-operating assets like investments in securities.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Mephistopheles on June 23, 2015, 08:47:55 PM
So in your response the construction company only pays its "insurance premium" but is not liable for the actual amount of the performance bond should something happen?

Does it always work like this?

The contractor has to execute the construction contract. If they don't execute the contract, the performance bond pays out directly to their client. Then the insurance company attempts to collect from the contractor, but typically it only gets to this point because the contractor has already gone bankrupt.

The actual risk is much less than the performance bond amount. Contractors are typically paid and deliver work incrementally over time. If a contractor breaks the contract, the owner would only be able to make a claim for damages, not the entire amount of the performance bond.

Now I know why your handle is constructive, ba dum psh!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Phaceliacapital on June 23, 2015, 11:21:11 PM
Thanks, very informative!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: theantilibrary on June 25, 2015, 12:55:34 PM
Hi Packer,

I read your recent interview with Beyond Proxy (congrats BTW!). You referred to David Abrams' comments on "compound mispricings", (depressed derivatives [most likely calls or LEAPS] of depressed stocks, if I understood correctly) ... I was just wondering where you found those comments of his? I have barely been able to find any public commentary from David Abrams, anything you can share would be very much appreciated.

Thank you!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on June 25, 2015, 01:10:19 PM
It is from the Security Analysis (6th edition) I believe where he wrote commentary on a section of Security Analysis.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: theantilibrary on June 25, 2015, 02:40:51 PM
Thanks Packer!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Pelagic on June 27, 2015, 10:23:46 AM
Hi Packer,

I read your recent interview with Beyond Proxy (congrats BTW!). You referred to David Abrams' comments on "compound mispricings", (depressed derivatives [most likely calls or LEAPS] of depressed stocks, if I understood correctly) ... I was just wondering where you found those comments of his? I have barely been able to find any public commentary from David Abrams, anything you can share would be very much appreciated.

Thank you!

Great question, I was interested in this comment myself and thank you Packer for clarifying where it came from. Having just re-read Abrams' introduction I still find it a little light on detail though. What confuses me is this, if a stock is undervalued, are it's derivatives also implicitly undervalued? This would seem to be the case since the price of the underlying is used to price the option you're faced with a garbage in, garbage out situation, where undervalued security implies an undervalued option as well, although high volatility can erode this edge by increasing the option's price. However, Abrams' seems to be saying there are situations where the options are somehow mispriced beyond the fact they're based on a mispriced security. The setup I see being most opportune for a value investor is an undervalued stock with relatively low volatility, since the options are priced on a distribution that is a function of volatility, the actual chance of a move outside the normal range is likely to be greater than the options market is implying.

 Interested if you could shed a little more light on this Packer, or anyone else, thanks!

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on June 27, 2015, 10:51:15 AM
I think the mispricing of stocks and derivatives can be related but are not necessarily dependent.  You may see for example a fairly priced or highly priced call option (implied volatility higher than historical volatility) on a stock if enough participants recognize the stock as being undervalued and anticipate a catalyst occurring before the option expire.  Options are tricky because you need to get the pricing and timing right to profit.  What a double mispricing tells me is sentiment is pretty bad or the derivative could be misunderstood like Korean preferreds.  There can be technical reasons for cheap options like a large demand for short sales which can drive up borrowing costs, this happened to FFH calls in the 2000s.  Cheap put options can happen when there is large demand for the other side of the bet like Nikki puts in the early 1990s or subprime CDS before the financial crisis.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: theantilibrary on July 10, 2015, 07:10:17 PM
I feel a little stupid asking what I'm afraid is probably a very basic question, but how does one accurately assess whether an option is mispriced in relation to the underlying security? This idea of a "compound mispricing" is very attractive, but I have to admit that I have almost no experience with options/derivates and therefore I don't know how to assess whether a given option is mispriced relative to the underlying security. Packer's examples in the prior post such as instances of high demand for short sales or cheap puts when people are super optimistic (the Nikkei example) make sense for getting a general idea of when certain derivatives may be undervalued, but is there a more rigorous way to determine the extent of over or underpricing? I'm not familiar with the calculations that might be involved.

To create an example, if I think that GM common stock is undervalued, how would I go about determining whether certain call options are possibly undervalued even more in relation to the common? (And yes I'm aware of the A, B, and C warrants... I was just using GM call options as an example because I currently think the common looks quite inexpensive). Looking at prices earlier today I saw that the Jan 2016 42 strike calls were trading at the same price as the 40 strike calls with the same expiration date, so clearly the 40s were undervalued compared to the 42s, but how would I know whether paying $0.15 for either is relatively cheap in comparison with the common? (This is just an example, I have no particular thoughts on this option in particular). Does anyone have a good method of calculating relative under/overvaluation of options in relation to their underlying securities?

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on July 10, 2015, 07:31:21 PM
There are two ways to judge the value of an option.  First, you can compare its implied volatility to the historical volatility.  If the implied is less and there is no obvious reason for this decline in volatility going forward is one way.  The other is to calculate an intrinsic value of an option assuming a fair value stock price and compare upside potential.  See attached spreadsheet.  Using this method you can compare relative upside versus the common as a "cheapness" metric.  You track this metric over time to see if relative upside is high or low.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: theantilibrary on July 11, 2015, 10:28:59 AM
Thanks Packer, very much appreciated.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Fowci on July 11, 2015, 01:13:09 PM
There are two ways to judge the value of an option.  First, you can compare its implied volatility to the historical volatility.  If the implied is less and there is no obvious reason for this decline in volatility going forward is one way.  The other is to calculate an intrinsic value of an option assuming a fair value stock price and compare upside potential.  See attached spreadsheet.  Using this method you can compare relative upside versus the common as a "cheapness" metric.  You track this metric over time to see if relative upside is high or low.

Packer

This is a great spreadsheet. But as far as I can tell, you are using call option formulae to value warrants? This overstates the value of warrants because it doesn't account for dilution (that if it's ITM, those who exercise give money to the company and receive shares and so everyone is diluted).  Depending on number of warrants this can be negligible (more warrants = more important) but I thought I'd raise it because I spent a week toiling in excel to come up with a working formula to price warrants.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on July 11, 2015, 01:21:52 PM
You are correct.  If the dilution is less than 10 percent the effects are small.  I can post a warrant with dilution model next that I have at work.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Fowci on July 11, 2015, 01:31:03 PM
You are correct.  If the dilution is less than 10 percent the effects are small.  I can post a warrant with dilution model next that I have at work.

Packer

No problem - just letting you know in case you weren't aware of the issue. I built an ugly spreadsheet with iterative calculations to price warrants and I was banging my head against a wall for a few days.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Hielko on July 12, 2015, 11:49:04 AM
I wonder how you would do that since the current stock price should also incorporate the possible dilutive effect of the warrants. So you would have to value the warrants without knowing the "true" current stock price, or you would have to value the stock without knowing the value of the warrants. Seems like a tough problem.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on July 12, 2015, 11:56:52 AM
It is easier if you have an estimated equity value that is distributed across the securities (warrants and common stock).  A closed form solution has been derived assuming a current stock price.  The formula is iterative as value of the warrant is dependent upon a stock price and probable dilution, based upon expected dilution at expiration.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Fowci on July 12, 2015, 02:09:08 PM
I wonder how you would do that since the current stock price should also incorporate the possible dilutive effect of the warrants. So you would have to value the warrants without knowing the "true" current stock price, or you would have to value the stock without knowing the value of the warrants. Seems like a tough problem.

You need to enable iterative calculations in excel (under options/formulas).

The two papers I found most useful were:

http://www.fintools.com/wp-content/uploads/2012/02/WarrantsValuations.pdf
(Specifically, the "Galai-Schneller Model with dividend yield" on page 2. This is how I built the BSM modified model)

http://www.pwc.com/en_US/us/audit-assurance-services/valuation/publications/assets/pwc-valuing-warrants-dilution-downround-protection-dwight-grant.pdf
(I found the section "Plain Vanilla Warrants and Dilution" good for intuition and some details about why you should use volatility of the company, not the stock price once warrants are issued).

This is also useful as a walkthrough (at the end) of how the iterative process works.
http://faculty.darden.virginia.edu/conroyb/derivatives/warrants.pdf

CEFs the are trading at a discount sometimes buy back shares and issue warrants at the same time so they don't disappear. You're often trading against retail investors when this happens, so can have a bit of an advantage if you know how the warrants should be priced.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on July 21, 2015, 05:51:33 PM
I personally never had this happen to me.  One factor you can look for a large stake by a strategic investor or they are on the board.  This can protect your interest.  NTLS has this dynamic.  The largest holder is also CoB.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: jobyts on July 21, 2015, 11:58:29 PM
Packer,

I'm thinking of a cloning of some of the CoBF members as a strategy. An advantage of cloning CoBF members is that we know exactly why they bought and sold, compared to the Wall street gurus. Would you mind sharing your ticker symbols in your portfolio, preferably with the percentage allocation. May be the top 5? Ignore this request if you think I'm asking too much. I started looking at your posts to extract the information, but it is spread across 170 pages  ???
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: CorpRaider on July 22, 2015, 12:25:45 PM
Yo Pack,

Saw that Van Eck launched and international version of the MOAT etf.  Thought you might want to monitor it as I know you like(d) the MOAT etf at one time.  Ticker is MOTI.

Thx.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: cmakam on July 24, 2015, 09:52:58 PM
Hi Packer,
You have indicated a typical position size for you is 5-7 percent and you dollar cost up to 10-12 percent of portfolio.
1)   Do you buy the initial 5-7 percent in one shot? Any reason you choose a particular approach?
2)   When you Dollar cost average after the initial purchase, how do you phase in the balance of the 7-12 percent?
3)   At what point do you stop investing in a position (assuming you still believe the original thesis), if at all?
4)   Typically at what percentage of the initial purchase price do you max in the investment (i.e. the 10-12 percent)
-cmakam

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on July 25, 2015, 11:23:45 AM
Currently the top 10 includes: Dhando Holdings, Genl Comm, Ntelos, Alliance Healthcare, Broadstone Net Lease, Intralot, GP Investments, Lotte Chilsung pfd, KIH pfd & Shun Ho Resources.  Be aware that I sometimes sell and buy lower priced names so this group will change.

As to purchase and sale, it usually takes me a few times to get to 5 - 7 percent.  The increases in positions is due to buying cheaper stocks after sales of stocks with half the potential upside.  I stop buying when it becomes a large portion of my portfolio relative to other positions.  Max percentage is based upon relative upside but is typically 10 to 15%.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: cmakam on July 25, 2015, 01:05:50 PM
Thanks Packer, a few follow ups:
1) Do you basically keep a position weighting in the portfolio constant at 5-7% while investing  up to 10-12 % (at cost) as the stock price declines ?
2) If sufficient upside opportunity exists, do you take a 5-7% position to the 10-12% weighting even without the position decreasing in price?
3) If I understand the adding and decreasing logic (from half upside to full upside position) correct, does it mean your position sizing could fluctuate quite a bit for a relatively high beta stock between position initiation and final exit?
4) Am thinking the logic behind adding/decreasing a position is to ensure a value bias. Is this done primarily as a risk control measure or to leverage volatility (or both)?
5)It is probably hard to measure but off the top of your head, if you did not use the value bias adding/trimming strategy but held the position constant, how much impact might that have had on portfolio returns?
6) Do you factor in absolute downside risk in portfolio sizing?
-cmakam
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Homestead31 on July 27, 2015, 06:59:28 AM

As to purchase and sale, it usually takes me a few times to get to 5 - 7 percent.  The increases in positions is due to buying cheaper stocks after sales of stocks with half the potential upside. 

Packer

Hi Packer - would you mind expanding upon this a bit?

in other words, you say "half the potential upside" but i'm curious how you define upside - ie over what time period?

for example, if you own something b/c of a discount to NAV and you think it should trade at NAV you could define the upside right now.  however, if you own a compounder, it is a bit trickier.  would you look at a compounder and say, "i think it can grow 15% a year for X years and deserve a Y multiple at the X year mark, and I will PV that value at a Z% discount rate, and then define the upside as the current discount to the PV?

any thoughts on how you think about current value vs future value when considering a sale are appreciated!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on July 28, 2015, 04:13:02 AM
In response to questions (list):

1) Yes
2) Yes, but this depends upon whether other holdings have reduced margins of safety (via increase in price or reduction in IV)
3) Yes, but in practice I only make switched when there has been large changes in relative fair values
4) It is done in part for risk control as I am increasing my average margin of safety with each switch, however, this does not decrease volatility in general.
5) I do not track but I have sold one 10 bagger so I am looking to hold a portion of these types of stocks in the future if I can identify them as such upfront.
6) Yes for volatile industries (like mining services today) I will limit to 3%.

Thanks I will look at the new Moat holding.  Funning thing with the moat index is that it is now lagging the S&P 500 so I am wondering if its popularity may have reduced its effectiveness.

Broadstone is a value oriented NNN private REIT with competitive fees (cheaper (%of AUM) than all REITs for its size and less than many large NNN REITs).  Fees are important for REITs because every % point that goes to management is one less % point that goes to investors combined with the fact that a large part of the return will come from dividends (most likely over 50%).  They have a website which can provide more details than I can provide here.

Potential upside is based upon valuation today not future valuation.  At this point I have not included future appreciation in my buy/sell framework other than I may hold onto a compounder longer than a non-compounder.  I am thinking through this now and will include at some point in my approach as I have made some mistakes in selling compounders too early.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: cmakam on July 28, 2015, 09:59:32 PM
Thanks Packer....
-cmakam
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Homestead31 on July 29, 2015, 01:11:45 PM

Potential upside is based upon valuation today not future valuation.  At this point I have not included future appreciation in my buy/sell framework other than I may hold onto a compounder longer than a non-compounder.  I am thinking through this now and will include at some point in my approach as I have made some mistakes in selling compounders too early.

Packer

Thanks for your response - just to flesh it out a bit - as i understand it, when you say valuation today do you mean the P/E or P/FCF or EV/EBITDA etc based on T12M E / FCF / EBITDA?  Meaning that you don't think to yourself, "todays E/FCF/EBITDA is a bit depressed at the moment, but margins will expand over the next ~2 years as X,Y,Z happens so I will base my value on "normalized" E/FCF/EBITDA

Or do you mean something along the lines of "there are 5 companies in this industry - 4 of them trade at 15x FCF, but 1 of them trades at 11x FCF because [insert condition such as temporary problem, limited float, no research coverage etc].  I think all 5 should trade at 15x, so i'm going to put a 15x on the current FCF and that is what i consider IV even if there is a temporary problem"

thanks again - i realize this is more art than science, but any further thoughts are appreciated
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: stahleyp on July 30, 2015, 07:57:50 AM
keith, are you out of alsk now?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on July 30, 2015, 04:26:03 PM
I think it is a combination of the two situations.  The only exception is in cyclical industries where I estimate a normalized cash flow or earnings level.  Yes, I still have ALSK.  It is cheap as a growing RLEC with only one competitor.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: simplefocus on July 30, 2015, 07:45:54 PM
Hi Packer,

It looks like you still own AIQ.  AIQ has been dropping signicantly in the last few weeks. What's your thought on the drop?  What's your valuation of AIQ?  If you have some dry powder, will you add to your current position?

Thanks.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on August 01, 2015, 06:40:33 PM
I have no idea what is causing the drop.  One key item in my mind is the growth of the pain management business as this could tip the scale to cash flow growth.  My valuation is in the mid to high $30s @ 7x EBITDA.  As to adding it depends upon what other opportunities you have.  At this point this is becoming one of my higher upside ideas.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: plato1976 on August 02, 2015, 04:28:20 PM
Hi, Packer:

Using 7x EBITDA early this year indicated a near 50 valuation. Just wondering what changed from that point to now

Thanks!

I have no idea what is causing the drop.  One key item in my mind is the growth of the pain management business as this could tip the scale to cash flow growth.  My valuation is in the mid to high $30s @ 7x EBITDA.  As to adding it depends upon what other opportunities you have.  At this point this is becoming one of my higher upside ideas.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on August 02, 2015, 04:37:52 PM
I think the difference is primarily due to using the mid-point of guidance and a $52m minority interest treated like debt.  It was also an approximation.  Using 7x from my spreadsheet using these assumptions is about $40.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Homestead31 on August 03, 2015, 07:33:36 AM
  I also have a competition of stocks in the portfolio versus new prospects every few weeks, to see if a switch makes sense.


Packer

going way back to the beginning here....

Packer - i'm just curious - when you say you have a competition every few weeks, does that mean that you don't look at prices in between?

thanks
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Homestead31 on August 03, 2015, 08:47:59 AM
Took a quick Look at Chrous.  It is interesting that they are building out a fiber network in NZ.  The overall EV/EBITDA is about 4x.  However, the EBITDA is expected to continue to decline in FY2014.  When the trend turns up I will be more interested. 

Packer

Hi - thanks again for all your time.  Could you talk about how you view momentum, both in terms of business momentum and stock price momentum?

from the above it seems you are clearly focused on positive business momentum, but the flip side of that is that when biz starts to turn, prices will go up, so you will "miss" the cheapest stock.

how do you think about that?

thanks
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on August 04, 2015, 04:16:38 AM
As to periodic review, I update relative value spreadsheet every week and will take occasional action on this.  As to momentum, I exclude companies with declining revenues unless I think it is cyclical and we are nearlng the bottom of the cycle.  I like growth as it increases the value of the firm while I am holding it.  As to TIER,  this is an odd-lot sale.  I do not invest in this area so I have no opinion.  There are others on this board who are better qualified to answer your question.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Homestead31 on August 04, 2015, 09:31:00 AM
As to periodic review, I update relative value spreadsheet every week

Packer

thanks for your response. 

How many names are on your relative value spreadsheet?  Is this basically like your "watch list" of companies you would like to own at the right price?  and are you basically always trying to add companies to this list, but then only owning the best/cheapest 15 or so?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on August 05, 2015, 06:45:29 PM
I have a few hundred but only a small number are interesting at any one time.  I do increase the size as I research new adjacent market segments.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: HJ on August 07, 2015, 02:02:51 PM
Packer,
     Would love to hear your thoughts on the local broadcasters.  Are you still involved?  What's your thoughts about the consolidation that has gone on in the last couple of years with the industry, implications to profitability, spectrum auction, cord cutter impact, how does OTT thin bundle impact them, etc., etc.  The stocks have all run up since you started talking about them on the board.  I finally decided to take a leap in the middle of the media selloff last couple of days.  Any insights appreciated.  Which is your favored names at this point?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on August 08, 2015, 12:07:06 PM
I have started to look at some of the media names.  In terms of valuation, I like the way Malone looks at recurring revenue businesses, namely, buy at 5x EBITDA, buy-back shares at 7x EBITDA and sell at 10x EBITDA or higher.  When I started looking at these name the where alot under 5x EBITDA and I sold once they were above 10x EBITDA.  Now you have some names around 7x (like Viacom) so I am starting to do research.  If anything approaches 5x I would be a buyer. 

The growing recurring telcos are cheaper now with NTLS at 5.2x, Alaska Telco at 4.9x and General Telco at 6.5x.  The broadcast firms are closer to 10x to 13x 2015/2016 EBITDA.  I use 2015/2106 average EBITDA due to the election cycle in the US. 

At his point there are some nice leveraged FCF buys (like Viacom @ 7.5x FCF) but no unleveraged EBITDA screaming buys and the growing telcos are cheaper on a unleveraged basis.  Given how these things play out, there may be more bargains in the future, time will tell.

The consolidation has been good and generated nice cost savings.  The auctions will provide some nice revenue also.  As to OTT, I think the content providers will be fine but the syndicators with little or no original content will feel the brunt of the loss due to OTT.  Similar to radio where the syndicators have suffered but the specialty or local stations, like Salem or Saga, will continue to do fine.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: HJ on August 09, 2015, 10:33:05 AM
Packer,
     Tanks as usual for your reply. 
     I guess I got quite optimistic on the Incentive Auctions coming up next year.  The name I got myself bulled up on is Sinclair.  They just got very big from acquisition, and don't have much loyalty to a lot of the stations, especially the ones that don't rank high in the local markets.  Even though the CEO sounded tough, and in fact tried to sue FCC to slow down the auction, I somehow got it in my head that it's all for show.  Their CFO on the earnings call said that using the government's medium value, they can get $2 billion from the auction while having very small impact to their runway ebitda.  This is against an enterprise value of $6 billion, and not a particularly high ev/ebitda starting point.  Putting this together with a growing affiliation fee and moderate political ad assumption, you kind of get to a 5-6x valuation some point next year.
     I'm relatively new to media/telecom investing, and didn't know Malone's valuation algorithm, but it's certainly a fascinating industry with all the changes that has been and will be going on.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: cmakam on August 14, 2015, 08:41:08 PM
Hi Packer,

A portfolio management detail question :

1)You have explained a  typical position is 6-12% at cost.
2)You have also said you don't like to a position to get too big as a percentage of portfolio.

My question is as follows :
Lets say you initiate a position at 6% of portfolio,then based on sufficient undervaluation take it to 12% at cost.

For our discussion let us assume this portfolio position stands at 9% at current valuations (12% at cost).

a)How high do you let it go as a percentage on a valuation basis (20-30%?)before you begin to trim it down?
b)Do you begin to trim as early as 12% at valuation (due to moving from higher price /value positions to low price/ value positions)?
c)Do you have an absolute max you allow a position to get to at valuation?
d)Any insights on how you arrived at max investment at cost per position,max percentage of a holding at market value?

-cmakam

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on August 15, 2015, 12:27:52 PM
As to the auctions when they happen some of these firms will be interesting.  By my calcs, Sinclair will be priced at 6.5x EBIDTA of projected 2015/2016 EBITDA if they can net $2 billion.  However, at this point the final rules and auction are TBD. My estimated upside is about 66%.

As to sizing questions:

1. I sell as the prices rise relative other stocks I am looking at.  At this point I have always had other stocks in wings to sell as position rises to over 15%. 
2.  Yes but it depends upon relative pricing
3&4.  My top % is based upon the Kelly formula described up thread.  This % declines as the upside declines so it has a built in sell signal.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: cmakam on August 15, 2015, 02:53:10 PM
Thanks Packer...
-cmakam
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: simplefocus on August 22, 2015, 06:47:30 AM
Hi Packer,

The market is looking very interesting lately.  What are you buying recently?  Here are some of the stocks that I'm looking at currently.  Can you provide your opinion? 

I don't like O&G in general but the risk reward ratio is enticing.
1) PWE
2) BXE
3) DIS
4) AAPL
5) GM
6) CHTR
7) BABA

Thanks.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on August 25, 2015, 05:17:04 AM
The stuff I have been buying includes BXE and a SPAC warrant (ROIQW).  Of your list I have an opinion on 2 or 3.  I looked at PWE but I am only focused on low cost producers for O&G as I am not convinced about a large upward bounce.  BXE wins in either scenario.  PWE only in the O&G up scenario & will probably have more upside in a bounce but could be 0 also.  I like GM and hold the warrants. The others are too expensive for my style of investing.  They may be great compounders but that is outside of my circle of competence.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: rijk on August 25, 2015, 06:05:13 AM
hi packer,

the roiqw warrants will only pay out if they pass a majority  shareholders vote, whereby spac investors have the right to a $10.- redemption

stock price is around $10.60 now, doesn't that kind of indicate that current stockholders are not all that excited about the india deal and

will therefore most likely ask for a refund?

how did you determine the risk/reward?

regards
rijk
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: simplefocus on August 25, 2015, 06:23:42 AM
Thanks, Packer!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on August 25, 2015, 06:28:02 AM
You are correct but with the higher offer for the warrants of 0.50 dollars plus .05 shares, the warrants have a value of $1.  If you look at the top shareholders they are warrant holders also.  So I look at these as a package.  So you can get the redemption of the remaining cash which will be less than $10 today or you can hold you shares & warrants which are worth $11.60 if you redeem your warrants for cash & stock.  I think the warrants are much more valuable than $1 redemption value.  You are getting a growing tower cash flow stream from a known consolidator in the Indian telcom market and paying about 12x EBITDA for 20 to 30% EBITDA growth in a growing market.  The resulting company will sell at discount to the largest Indian tower company, Bharti Infratel, at 13.4x EBITDA.  These both sell at discounts to other EM and NA tower companies who trade at 17 - 22x EBITDA.  You can ask aren't the NA and other EM tower companies selling at inflated prices?  I think they are close to fair value due to the tower companies having a long term leases (like bonds) on the growing telecom infrastructure of these countries. 

You are correct on the risk but the market is putting 50/50 odds and I think I am closer to 80 to 90%.  If I am wrong, this is probably a zero but I think the incentives are there to make this deal get done.  Historically, the average SPAC success rate is close to 70%.  I am a little higher due to the sweetened warrant package.

Packer 
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: rijk on August 25, 2015, 06:52:06 AM
ok, that makes sense
thanks!
rijk
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: farbelow on August 30, 2015, 03:55:06 AM
It seems trivial, but I cannot find the answer on the Internet. And the subject does state 'ask anything'. How do I find more information on private companies in Canada? I am trying to find the owners of Photon Control R&D Ltd. and DCD Management ltd, with whom Photon Control Inc has related party transactions.

Thank you.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Hielko on August 30, 2015, 12:45:09 PM
@Packer16; About the ROIQ warrants, don't you think that the problem is that it is not a package deal? You can vote for the deal and still redeem your shares while keeping your warrants. You basically need that all the funds that own shares and warrants to keep their shares. They can maybe redeem one fund (since they can do a 1M share private placement), but if two funds think "I'm going to bet that I'm the only fund that is going to redeem shares" you have a problem. Or a fund could decide to sell their warrants if they think this is going to happen and redeem themselves. Plenty of volume in the warrants to liquidate some large positions the past month.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on August 30, 2015, 01:30:00 PM
The deal also has a clause the no more than 15% of the shares can be redeemed so there is some risk that your shares will not be redeemed.  So if I am an arb my options are disapprove deal and get about $8.0 in proceeds ($125m in trust fund) or approve the deal and get $11 in proceeds ($0.5 + 1.05 shares) with the risk of selling for below $7.14 (at which point redemption is a better option).  Also if you look at the latest SEC holdings disclosure many of these arbs still hold millions of these warrants.

I also see the warrants as a fulcrum security that the sponsor can continue to sweeten to get the arbs buy-in.  Given the 3 month average volume is only about 53,000 per day, I think volume is a big problem to sell these things.  There are over 20 million warrants outstanding and unless the arbs are selling in off market transactions, I do not see how they get rid of them.  Most of the large arbs have like millions of these warrants and I do not see that type of volume yet.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Hielko on August 30, 2015, 02:08:34 PM
@Packer16: As an arb you can approve the deal and still elect to redeem shares. I think that this is a very attractive option because you get $10/share without risk and ~$1/warrant with little risk (since you get 0.05 shares/warrant). The problem is that just one or two funds max can go for this option, otherwise two many shares will be redeemed for the transaction to go through. So I don't really think the warrants can act as a fulcrum security since you can always vote for the deal, redeem shares and keep your warrants. Actually, the more value is transferred to the warrants the lower the value of the shares post-transaction which would increase the incentive to redeem.

Seems to me that this is a bit like a prisoners dilemma problem were shares+warrant holders as a group will get the best result if everybody cooperates. But if someone betrays the group he will get an even better result, but when too many players betray the group everybody is worse of. The problem is that the game theory optimal decision in the prisoners dilemma is to be an asshole and hope that everybody else is too trustworthy. But I'm guessing that a lot of fund managers aren't the trusty type, so from this perspective I think there is a high risk that this deal doesn't go through.

The only exception might be that there will be big negative repercussions on future deals if they don't cooperate, but I don't know what those would be. In multi-round prisoners dilemma game, a cooperate strategy is optimal as long as you retaliate against players who betray you.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Hielko on August 30, 2015, 02:19:03 PM
PS. I think there are 12 million warrants outstanding since all the founder warrants will be forfeited. Most funds that have disclosed their ownership in ROIQ(W) have between 400K and 1M warrants. You need just one or two funds who have sold their warrants to have a problem, and with a couple of 200K+ volume trading days that easily could have happened I think.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on August 30, 2015, 02:39:39 PM
But how can the jerk do well and others not if they all are of the same ilk?  These guys know that they are all out for number 1 so the fear of not trusting everyone else might make them not redeem.  I see the upside of one guy being maybe $11.00 and the downside being $8 for all if enough redeem.  Why would you take the chance of gaining a $1 if you can lose $2 if enough folks follow you?  The only way would be if you knew that less than 15% would follow you & I don't think anyone can know that.

From the latest BB screen I have seen many multi million share holdings (unless the BB is wrong).  If you look at ROIQ's price, the lowest it has been since the IPO is $9.60.  I do not see the incentive to redeem unless you think the stock will sell for less than $7.14.  Why would the arbs want to lock in a loss of at least $1.65?

The other aspect is I don't think this an overvalued SPAC offering.  It is slightly undervalued based upon the comps and the seller is retaining all of his equity so based upon these indications it should not at least initially lead to declining share price.   

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Hielko on August 30, 2015, 02:59:29 PM
I think the incentive to redeem is pretty clear: if you think the stock could trade below $10 post-transaction the redemption feature is attractive. You aren't giving away your warrant upside if you redeem, so I don't follow why you think they would be locking in a loss. And if you really don't trust the other guys you should be selling your warrants and redeeming/selling your shares.

So you have to ask who is selling those warrants the past month. Is it an fund that is long warrants only (good) or a fund that is also long shares (bad). Someone is selling, and it must be someone who isn't very optimistic about the deal going through. The problem is that someone who is long shares in a large quantity and long warrants would be in the best position information wise to know what's going to happen if they want to redeem shares. They know that the deal will fall so they would be willing to sell warrants at a very low price. I think we could be seeing that, but other explanations are possible as well.

I got my shareholder/warrant holder data from the 13-HR filings, guess that's also Bloomberg's source. So it should look something like this:
Quote
   stock   warrants   units
ARROWGRASS CAPITAL PARTNERS   601,100    602,100    -
HIGHBRIDGE CAPITAL MANAGEMENT   500,000    -   -
BLUEMOUNTAIN CAPITAL MANAGEMENT   642,555    642,555    -
Polar Securities Inc.   791,418    348,800    -
GLAZER CAPITAL   115,551    -   -
CNH PARTNERS LLC   945,000    1,050,000    -
GLG Partners LP   400,000    400,000    -
BASSO CAPITAL MANAGEMENT, L.P.   350,168    269,538    2,000
BERKLEY W R CORP   336,442    191,240    -
Ionic Capital Management LLC   15,107    -   -
CAPSTONE INVESTMENT ADVISORS, LLC    525,000    -   -
Pine River Capital Management L.P.   -   1,150,000    -
FIR TREE INC.   1,235,900    1,060,900    -
Archer Capital Management, L.P.    -   800,362    -
MOORE CAPITAL MANAGEMENT, LP   550,000    550,000    -
MILLENNIUM MANAGEMENT LLC   -   -   250,000
Davidson Kempner Capital Management LP   -   -   1,050,000
Hudson Bay Capital Management LP   400,000    -   -
Castle Creek Arbitrage, LLC   -   400,000    -
Yakira Capital Management, Inc.   152,281    -   -
DEUTSCHE BANK AG   644,415    451,945    49,063
TD ASSET MANAGEMENT INC    -   -   1,050,000
Tower Research Capital LLC   -   -   242
K2 PRINCIPAL FUND, L.P.    17,875    -   -
Sum   8,222,812    7,917,440    2,401,305
This accounts for 85% of the outstanding shares.

And yes, I think It looks like a decent deal. But with the shares trading at $10 almost exactly the market doesn't appear very excited.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on August 30, 2015, 03:18:31 PM
You are locking in the loss because the company does not have the cash to redeem at 10.00.  It only has enough cash to redeem at 8.00 if the deal fails and the SPAC is wound up.  So redemption greater than 15% results in either a wind down or look for another deal and eat up more cash.

Given the small amount of volume I am not sure It says much about the deal.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Hielko on August 30, 2015, 03:23:45 PM
ROIQ has 125 million in the trust account and 12.5 million shares outstanding (excl. founder shares). In the Ascend prospectus they also estimate that the per-share redemption amount is $10.00, so the stock is trading almost exactly at the redemption price.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on August 30, 2015, 03:50:30 PM
You are correct. So I guess the math is accept 10 or possibly 11.00 in stock and cash via the warrants.  Now it comes down to whether it will be best economically for the shareholders, more risky than I originally thought.  We will know soon enough there is an extension proposal submitted on Friday.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: matjone on August 31, 2015, 11:35:24 AM
where do you guys see the 15% condition?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Laxputs on August 31, 2015, 11:43:16 AM
Packer, you didn't mention Asian Standard in your top 10. What keeps it from making it to that list? TIA.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on August 31, 2015, 11:54:13 AM
For Asia Standard, the price keeps falling so it drops out.  I still like it a lot.  The 15% may not be a stated condition but it is an assumption in the original deal presentation.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Hielko on September 01, 2015, 05:02:39 PM
There is actually an 18% number with exact share count in deal prospectus
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: RedDaruma on September 13, 2015, 05:24:36 PM
Packer,

I'm new to the board and wanted to ask you about the idea I juat posted on Investment Idea section:VVI.

This comapny has a recreation business and, depending on the EV/EBITDA multiple for the segment, the other segment seems to be freebie at the current market cap for the entire cmpany. I'm assuming 8x, as the segment generates somewhat recurring type of cash stream, albeit it's volatile. Any idea for appropriate multiple the segment? TIA


 
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on September 13, 2015, 07:54:48 PM
I took a look at your VVI valuation and I have 2 comments.  Good approach BTW.  First, you need to capitalize corp expense of $7.5 million at lets say a 10% cap rate so the corp overhead is about $75 million.  It may be higher but I used the adjusted corp expenses here. 

As to multiples, I would value attractions business at 10x versus 12x for comps because comps own their attractions.  As to GES, I would probably value it at closer to 5 to 6x.  The organic growth of 2% is pretty weak is a good business climate.  If we get a recession this growth could easily turn negative (see 2010 results).  Most of the comps in this segment are private but to give you a sense of the volatility, listen to Howard Mark's interview with Joel Greenblatt at Wharton site.  At about 24:40 Joel describes his investment in this space and how it lost him some money.  I am not saying it will happen here but the industry IMO is too volatile to assign a high multiple to.   With these changes, today's value is pretty close to FV.

Packer 
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: RedDaruma on September 13, 2015, 08:25:27 PM
I took a look at your VVI valuation and I have 2 comments.  Good approach BTW.  First, you need to capitalize corp expense of $7.5 million at lets say a 10% cap rate so the corp overhead is about $75 million.  It may be higher but I used the adjusted corp expenses here. 

As to multiples, I would value attractions business at 10x versus 12x for comps because comps own their attractions.  As to GES, I would probably value it at closer to 5 to 6x.  The organic growth of 2% is pretty weak is a good business climate.  If we get a recession this growth could easily turn negative (see 2010 results).  Most of the comps in this segment are private but to give you a sense of the volatility, listen to Howard Mark's interview with Joel Greenblatt at Wharton site.  At about 24:40 Joel describes his investment in this space and how it lost him some money.  I am not saying it will happen here but the industry IMO is too volatile to assign a high multiple to.   With these changes, today's value is pretty close to FV.

Packer

Thank you, Packer. I thougt I have given an enough discount for the attractions business vs comps due to their size. I really appreciate your perspective. Also, could you explain why I should capitalize the corporate expense?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on September 13, 2015, 08:47:22 PM
Because as a shareholder of VVI you have to pay the corporate expenses out of the cash flows you receive.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: RedDaruma on September 14, 2015, 09:08:23 AM
Thank you for pointing out, Packer. I was missing SOTP 101 here.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: RedDaruma on September 19, 2015, 07:33:52 AM
Packer,

I think it should be different in each industry/situation but I was wondering if you have any "fair EV/EBITDA or FCF valuation" level in your mind for a company with particular characteristics? (e.g. a company with a stable recurring rev should trade at least 10x etc.) TIA
 
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: simplefocus on September 19, 2015, 10:22:56 AM
Hi Packer,

What's your thought on AIQ?  Oaktree is out, so does it affect on your outlook of this company?  Do you still hold the shares?  Thanks.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: RedDaruma on September 21, 2015, 02:54:28 PM
Packer,

On capital allocation, is there any metrics that you use to see if a company is allocating capital wisely on share
buybacks/payin down debt? I check the change in ebitda/capex for capital spending decisions. TIA
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: argonaut on September 23, 2015, 09:44:01 PM
Hi Packer,

I own GPiv33 too and in reals its up nicely but in dollars much, much less...are you continuing to hold it because you think it will continue to grow or is there a macro play on currency at work?

It seems that with some of these where you switch for greater upsides do you ever sell at a loss (if you have one, you may not :)) and move it to something that has more upside? E.g I assume you still feel intralot has significant upside vs some of the newer names?

Do you hedge any of the overseas positions?


Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Homestead31 on September 24, 2015, 11:34:54 AM
Hi Packer - earlier you said:

  "I typically do not perform projections "

could you expand on that a bit?

are you just looking for what you consider to be "normal" industry multiples based on comps, history, and M&A and then looking for businesses that are below a "normal" multiple and "stable?"  Are you spending most of your research time on understanding if the business is indeed stable and then just waiting for mean reversion of the multiple?

And if you are not making projections, does that mean you do not look at businesses with temporary problems?  and project what they would look like in a year or 3 when they've worked past their problems?  this seems to be the approach that many value investors take?

thanks so much for this very information thread
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on September 24, 2015, 08:07:07 PM
Packer,

I think it should be different in each industry/situation but I was wondering if you have any "fair EV/EBITDA or FCF valuation" level in your mind for a company with particular characteristics? (e.g. a company with a stable recurring rev should trade at least 10x etc.) TIA

I use industry metrics but cap what I will pay to about 50% of the industry average or 10x EBITDA for  a growing firm. 
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on September 24, 2015, 08:13:35 PM
AIQ is a tough one as I know the asset is cheap.  I am going to try to find out Oaktree's reason for selling and try to lobby for incentives to prevent this from becoming a subsidiary of Chinese company that becomes a value trap, although some can rightly say it looks like that today.  One incentive is to have management purchase shares or have the $1.5 million of incentives they are getting from the new majority owner vest only if the stock price closes above the Oaktree sale price to ensure that everyone's incentives are aligned.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on September 24, 2015, 08:20:19 PM
As to GP Investments, I still hold unhedged.  I think it is a cheap asset manager and a way to play the eventual Brazil recovery.  They even recently launched a SPAC in the US which is an interesting idea.  I am not sure I would be able to hedge effectively and the cost in Barzil may be high. 

Yes I do sell at a loss if I can find a greater upside even though I should do it more often than I do.  I suppose I have the get back to even bias that most also have.  I still think Intralot has some runway as well as Autohellas in Greece.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: argonaut on September 24, 2015, 08:44:49 PM
Thanks Packer! I appreciate your thoughtful response. I know you tend to stick to the smaller players...However as LNG continues to drop...at a certain price would it become interesting? It looks like they are on track for their big projects...which would decrease their leverage and bring profits in over the next few years.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: influx on September 25, 2015, 12:38:18 AM
The stuff I have been buying includes BXE and a SPAC warrant (ROIQW).  Of your list I have an opinion on 2 or 3.  I looked at PWE but I am only focused on low cost producers for O&G as I am not convinced about a large upward bounce.  BXE wins in either scenario.  PWE only in the O&G up scenario & will probably have more upside in a bounce but could be 0 also. 

What is your
1. Investment horizon..holding period..or exit reason/strategy for BXE?
2. How big is BXE in terms of % from your portfolio if I may ask?


Thank you
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: RedDaruma on September 25, 2015, 04:37:18 AM
Packer,


I think it should be different in each industry/situation but I was wondering if you have any "fair EV/EBITDA or FCF valuation" level in your mind for a company with particular characteristics? (e.g. a company with a stable recurring rev should trade at least 10x etc.) TIA

I use industry metrics but cap what I will pay to about 50% of the industry average or 10x EBITDA for  a growing firm.

Much appreciated as always!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on October 01, 2015, 07:37:49 PM
LNG - I have not looked into in detail but I am focusing on cheap low cost gas producers who should benefit from LNG.

BXE is a play on incremental cost of production as it is very low and possibly the sale of assets to reduce debt and reveal the hidden low cost Spirit River asset.  Exit is when Spirit River value is realized in stock price.  Size is about 5%.

I have been tracking these but at this point they are to expensive for my taste.  I like the business so if any of them decline I will definately take a look.

Packer

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on October 01, 2015, 07:52:27 PM
Hi Packer - earlier you said:

  "I typically do not perform projections "

could you expand on that a bit?

are you just looking for what you consider to be "normal" industry multiples based on comps, history, and M&A and then looking for businesses that are below a "normal" multiple and "stable?"  Are you spending most of your research time on understanding if the business is indeed stable and then just waiting for mean reversion of the multiple?

And if you are not making projections, does that mean you do not look at businesses with temporary problems?  and project what they would look like in a year or 3 when they've worked past their problems?  this seems to be the approach that many value investors take?

thanks so much for this very information thread

I am finding normalized multiples applied to normalized cash flows so there may be some aspect of projections in these normalizations.  I do not like to pay for growth so if I can get it with a cheap multiple then that is great but I do not factor it into my IV calculation for a company today.  Some of the growth is incorporated into the multiples I apply to get IV.  So for some industries like TV broadcasting applying a 9/10x multiple of EBITDA assumes some underlying growth.  I also use a lack of cash flow growth as a filter to remove companies I am not interested in investing.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Eye4Valu on October 01, 2015, 08:54:23 PM
Packer-What do you peg the odds that Green Bay wins the Super Bowl this year? They're looking pretty good again!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Homestead31 on October 04, 2015, 09:02:14 AM

[/quote]

I am finding normalized multiples applied to normalized cash flows so there may be some aspect of projections in these normalizations.  I do not like to pay for growth so if I can get it with a cheap multiple then that is great but I do not factor it into my IV calculation for a company today.  Some of the growth is incorporated into the multiples I apply to get IV.  So for some industries like TV broadcasting applying a 9/10x multiple of EBITDA assumes some underlying growth.  I also use a lack of cash flow growth as a filter to remove companies I am not interested in investing.

Packer
[/quote]

so basically it sounds like normalized multiples on normalized margins on current revenue for the most part... does that sound right?

thanks again
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on October 06, 2015, 08:06:20 AM
As to Packers and superbowl odds, I am not objective but I hope they make it and win versus the Patriots. 

Homestead - that is the approach.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Homestead31 on October 06, 2015, 08:30:07 AM
it sounds so simple when you say it like that!! haha
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: simplefocus on October 30, 2015, 07:00:33 PM
This board has been running wild with VRX.  I know you might not have a vested interest in this, but I'm wondering if you have an opinion.  Thanks.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on October 30, 2015, 07:21:24 PM
I do have an indirect interest, I own Sequoia.  As to VRX, I have been watching from the stands and am not sure how much I can add to what has been said.  The key question in my mind is how extensive are the problems at Philidor in terms of other distributors.  If Philidor is it, then at today's price it is cheap.  If there is more then there may be more downside.  A final point that reduced my enthusiasm are Munger's comments.  He usually is right.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on January 29, 2016, 06:31:49 PM
Packer, if you can only buy one cable company, would you pick GNCMA, CHTR, LILA or LBYTk?
Right now GNCMA's EV/EBITDA is the lowest, but the EBITDA consists of a large wireless component, which should trade at a low multiple.
On the other hand, the ability to offer triple plays or quad plays seem to be very attractive.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: frommi on January 29, 2016, 10:47:54 PM
Packer, if you can only buy one cable company, would you pick GNCMA, CHTR, LILA or LBYTk?
Right now GNCMA's EV/EBITDA is the lowest, but the EBITDA consists of a large wireless component, which should trade at a low multiple.
On the other hand, the ability to offer triple plays or quad plays seem to be very attractive.

I am not packer but maybe you should look at CABO, too. They increased prices by 10% and added a 1GB option for all customers last quarter and this is not in the numbers at the moment. Very good board, monopoly in its market, underlevered and trades for roughly 8x2016 EV/EBITDA. But probably too expensive for packer. :)
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on January 30, 2016, 06:42:39 AM
If l look at the group (GNCMA, CHTR, LILA, LBTYA and CABO) at today's prices, I like GNCMA.  GNCMA is selling at 6.4x EBITDA while CHTR is at 9.5x and CABO at 7.9x.  The US firms all have about the same margins (EBITDA 33% to 37%) and GNCMA and CHTR the same historical growth over the past 3 to 5 years (about 10%).  The foreign ones have higher margins in part due to lower content costs.  In terms of positioning, GNMCA has a monopoly on hard wire and an advantaged position in wireless.  The others clearly have good hard wire positions with not much in wireless.  Although wireless is not a direct threat today, it may be tomorrow and provides growth today.

The foreign firms trade at 7.6x for LILA and 8.6x for LBTYA.  These also have John Malone at the helm. For foreign cable, I like the Korean players like Hyundai HCN trading at 1.7x EBITDA.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: fa21212 on January 30, 2016, 07:44:50 AM
Packer,

Thank you for the excellent insight. Is there a tool that you use to quickly identify foreign firms and their valuations? Are you using CapitalIQ or something else? Any insight is greatly appreciated.

Faisal
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: hardcorevalue on January 30, 2016, 08:31:54 AM
Sorry if this has been asked Packer but what broker are you using for these Korean companies (Fidelity)? IBKR doesn't seem to offer it to Canadians.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: prevalou on January 30, 2016, 08:43:36 AM
If l look at the group (GNCMA, CHTR, LILA, LBTYA and CABO) at today's prices, I like GNCMA.  GNCMA is selling at 6.4x EBITDA while CHTR is at 9.5x and CABO at 7.9x.  The US firms all have about the same margins (EBITDA 33% to 37%) and GNCMA and CHTR the same historical growth over the past 3 to 5 years (about 10%).  The foreign ones have higher margins in part due to lower content costs.  In terms of positioning, GNMCA has a monopoly on hard wire and an advantaged position in wireless.  The others clearly have good hard wire positions with not much in wireless.  Although wireless is not a direct threat today, it may be tomorrow and provides growth today.

The foreign firms trade at 7.6x for LILA and 8.6x for LBTYA.  These also have John Malone at the helm. For foreign cable, I like the Korean players like Hyundai HCN trading at 1.7x EBITDA.

Packer

What annoys me about GNCMA is growth potential: ebitda by home passed is very high and penetration rate is high too. Have they milked the cow ?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: smathew on January 30, 2016, 11:46:14 AM
Packer,
For Hyundai HCN is there any catalyst ? Carlyle is seems to have invested in 2006 and still holding on . 
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on January 30, 2016, 03:32:06 PM
If l look at the group (GNCMA, CHTR, LILA, LBTYA and CABO) at today's prices, I like GNCMA.  GNCMA is selling at 6.4x EBITDA while CHTR is at 9.5x and CABO at 7.9x.  The US firms all have about the same margins (EBITDA 33% to 37%) and GNCMA and CHTR the same historical growth over the past 3 to 5 years (about 10%).  The foreign ones have higher margins in part due to lower content costs.  In terms of positioning, GNMCA has a monopoly on hard wire and an advantaged position in wireless.  The others clearly have good hard wire positions with not much in wireless.  Although wireless is not a direct threat today, it may be tomorrow and provides growth today.

The foreign firms trade at 7.6x for LILA and 8.6x for LBTYA.  These also have John Malone at the helm. For foreign cable, I like the Korean players like Hyundai HCN trading at 1.7x EBITDA.

Packer

Thank you Packer. GNCMA's EV/EBITDA ratio is lower but over 50% of the EBITDA comes from wireless. Shouldn't wireless trade at 3-4x EV/EBITDA? If we say the cable business trades at 8 and wireless trades at 4, then the combined company should trade at 6x EV/EBITDA, which is exactly where it is today.
Am I missing something?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on January 30, 2016, 05:20:17 PM
As to identification, I put together industry valuation sheets to monitor valuation.  When I find something interesting I will dive in deeper.

I buy the Korean stocks via Fidelity

As to growth potential, I think the monopoly position has enhanced the position of GNCMA.   They have recently purchased local TV stations and have been good capital allocators.  If they cannot find growth they will buy-back shares so although overall growth will slow value per share will increase.

The wireless business can have high multiples but it depends upon the margins and the competition.  The major carriers trade from 6.5x (Sprint) to 9.2x (T-mobile) EBITDA.  The wireless margins for GNCMA are the highest in the firm and higher than other wireless carriers.  GNCMA has an infrastructure built-out already so adding wireless is a small incremental cost leading to high incremental margins and the lack of competition keeps competitive pricing in check. 

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: jay21 on January 30, 2016, 05:29:10 PM
Packer - The PE firm connected to GNCMA (Searchlight) is also connected to CHTR and LILA (through minority ownership of the PR sub). A nice qualitative point to back your capital allocation thoughts imo.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on January 30, 2016, 08:32:20 PM
As to identification, I put together industry valuation sheets to monitor valuation.  When I find something interesting I will dive in deeper.

I buy the Korean stocks via Fidelity

As to growth potential, I think the monopoly position has enhanced the position of GNCMA.   They have recently purchased local TV stations and have been good capital allocators.  If they cannot find growth they will buy-back shares so although overall growth will slow value per share will increase.

The wireless business can have high multiples but it depends upon the margins and the competition.  The major carriers trade from 6.5x (Sprint) to 9.2x (T-mobile) EBITDA.  The wireless margins for GNCMA are the highest in the firm and higher than other wireless carriers.  GNCMA has an infrastructure built-out already so adding wireless is a small incremental cost leading to high incremental margins and the lack of competition keeps competitive pricing in check. 

Packer

Thank you for the insights! Another question, why do you think cable cos should trade at 8x EBITDA but wireless usually trade at 6-7x? Is that because wireless has a lot more capex needs to constantly upgrade from 1G to 2G to 3G and to 4G, but cable co's capex to increase bandwidth is a lot easier and a lot less capex intensive? Or is it mainly because cable co's competition is a lot less intense? Usually what's the normal level of maintanence capex for wireless vs cable in terms of a percentage of revenue?


Thank you!  :D
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: prevalou on January 30, 2016, 11:28:05 PM
With the alaska economy tied to oil prices, is there a risk churn will increase at GNCMA, squeezing margins ?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on January 31, 2016, 06:36:49 AM
In general, wireless is more competitive and thus has lower margins for the same cap-ex.  Part of the competition is high cap-ex (similar to cable) but it is also in pricing.  You can see that margins of the carriers (VOD, USM, S & TMUS) have declined over time as the price cuts have more than offset the cost reductions due to scale.   But in Alaska it is different as the competition is less intense than in the lower 48.  Verizon was going to launch but I do not think they are in any hurry as Alaska is small potatoes for them and most of the other national carriers.

Oil prices will effect GNCMA but I would rather be in monopoly position in a market that will be temporarily hit with low oil prices than a much more competitive market that may not.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on January 31, 2016, 08:33:26 AM
With the alaska economy tied to oil prices, is there a risk churn will increase at GNCMA, squeezing margins ?

I asked my oil friend in Conoco phillips. He said Alaska's per barrel production cost is similar to the middle east, so I think Alaska would be one of the last ones affected by oil cuts.
With that said, if Packer thinks this can go to $30 but currently it is above $15, I have to be careful because I am strictly looking for 2x or more.

So packer, it sounds like you have avoided buying CHTR, LBTYK, LILA and CABO all because of the high valuation? Based on these companie's debt levels, the equity would have  to fall a lot to get to a 6x EV/EBITDA.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: prevalou on January 31, 2016, 10:01:44 AM
Oil prices impact the budget (very high in Alaska). The budget deficit (maybe 10% of gdp) could  lead to state employees  cuts, reduction of state expenses, a new income tax or reduction in royalties paid to the population. Even if Alaska has a substantial  rainy day fund, all this could hit for the long term a state already in recession
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Graham Osborn on February 01, 2016, 11:03:46 AM
With the alaska economy tied to oil prices, is there a risk churn will increase at GNCMA, squeezing margins ?

I asked my oil friend in Conoco phillips. He said Alaska's per barrel production cost is similar to the middle east, so I think Alaska would be one of the last ones affected by oil cuts.
With that said, if Packer thinks this can go to $30 but currently it is above $15, I have to be careful because I am strictly looking for 2x or more.

So packer, it sounds like you have avoided buying CHTR, LBTYK, LILA and CABO all because of the high valuation? Based on these companie's debt levels, the equity would have  to fall a lot to get to a 6x EV/EBITDA.

While I can't find a posted average (and it varies by extraction method), I find it very difficult to believe Alaska's average marginal cost per barrel is anywhere close to the Middle East.  Saudi Arabia and Iran can get down to $2/ bbl in some fields (again this does not include fixed costs like new rigs, welfare programs, etc).  They are in the same kettle of fish as Canada setting aside extraction mix and the currency situation.  That's why Canadian firms like TGA and BNKJF even bother signing overseas PSAs.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Graham Osborn on February 01, 2016, 03:03:29 PM
As to identification, I put together industry valuation sheets to monitor valuation.  When I find something interesting I will dive in deeper.

I buy the Korean stocks via Fidelity

As to growth potential, I think the monopoly position has enhanced the position of GNCMA.   They have recently purchased local TV stations and have been good capital allocators.  If they cannot find growth they will buy-back shares so although overall growth will slow value per share will increase.

The wireless business can have high multiples but it depends upon the margins and the competition.  The major carriers trade from 6.5x (Sprint) to 9.2x (T-mobile) EBITDA.  The wireless margins for GNCMA are the highest in the firm and higher than other wireless carriers.  GNCMA has an infrastructure built-out already so adding wireless is a small incremental cost leading to high incremental margins and the lack of competition keeps competitive pricing in check. 

Packer

The industry comps are super efficient.  I've been increasingly drawn to historical self controls simply b/c I don't trust the M&A comps.  It's like living in a rich neighborhood where each new neighbor feels the need to spend an extra half mil on an expensive/ pointless set of turrets etc.  I guess that's the Thiel argument that ultimately the spreads are gone and you can only make money through directional bets or luck.  GNCMA is trading at the highest EBITDA multiple since 2002.  Their tang book has cratered over the same interval and LT debt has skyrocketed concordantly with rev.  Death triad.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on February 03, 2016, 07:53:47 PM
The main reason industry comps are efficient is competition in their markets which is much less in GNCMA's case, even for wireless.  GNCMA has changed quite a bit from 2002, where it was a competitor in its markets to the dominate competitor in most of their markets.  This can be seen by their increased cash flow margins, revenue and cash flows in a market where most competitors in more competitive markets have seen declines. 

The cash flow multiple is actually cheaper today than in 2002, per Bloomberg.  The one trend I saw in GNCMA that I like versus other telcom comps is growth in CF/share per Value Line.  Bottom line, now GNCMA is being priced like a telco but has the economics closer to a cable co.  BTW the coverage ratio is above 4x which implies better than BB rating so I am comfortable with the debt level.

Packer   
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: sae85400 on February 08, 2016, 07:09:52 AM
Packer I noticed you posted returns through 2013, was curious how you did that last 2 years?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on February 08, 2016, 07:19:29 AM
Not as well as in the past 8.5% in 2014 and 0.6% in 2015.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on February 14, 2016, 11:53:31 AM
Packer, have you taken a look at VDTH? The EBITDA growth is very very strong, but I don't quite understand the moats for that company and for satellite broadcasters in general.
For cable cos, I understand that they are mostly monopolies in their local markets, but how would satellite broadcasters compete with cable cos? It is surprising to me that even in the US as of today, these two co-exist.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: JoelS on March 16, 2016, 02:30:59 PM
Packer,

I have "The Great Crash and its aftermath" in my hands and noticed your recommendation on this forum. Have you altered your investment strategy at all, in light of what you learnt from the book? If yes, how?

Cheers,
Joel
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on March 16, 2016, 05:48:07 PM
Packer, have you taken a look at VDTH? The EBITDA growth is very very strong, but I don't quite understand the moats for that company and for satellite broadcasters in general.
For cable cos, I understand that they are mostly monopolies in their local markets, but how would satellite broadcasters compete with cable cos? It is surprising to me that even in the US as of today, these two co-exist.

I have and have a few reservations, namely, I can purchase cheaper satellite TV operators like SKY Perfect for a lower EBITDA multiple and the thesis is predicated upon subscriber growth.  As to where satellite TV can do better than cable, it is in rural areas in the developed world and larger areas in the developing world as they have little telecom/cable infrastrutcure.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on March 16, 2016, 05:50:31 PM
Packer,

I have "The Great Crash and its aftermath" in my hands and noticed your recommendation on this forum. Have you altered your investment strategy at all, in light of what you learnt from the book? If yes, how?

Cheers,
Joel

I have not altered my strategy but I did learn which industries did well and not so well in a depression and how toady is different than the 1930s when folks were losing their life savings to bank failures.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on March 23, 2016, 09:32:48 AM
Hi Packer,
    I've seen a number of cable companies boasting that their return on invested capital is over 30%, but I don't know how to calculate that number.
    One approximation that I can apply is to use Adjusted OIBDA/(net PPE + accumulated depreciation), but I understand that some PPEs were added 20+ years ago, so the gross PPE number is artificially low, and the result of this calculation gives an ROIC number artificially high. But even with this kind of calculation, LBYTK's ROIC is about 24%, not 30%+.
    I wonder what's your thought on this?


Thanks,
MM
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Graham Osborn on March 31, 2016, 05:49:23 PM
Packer,

I have "The Great Crash and its aftermath" in my hands and noticed your recommendation on this forum. Have you altered your investment strategy at all, in light of what you learnt from the book? If yes, how?

Cheers,
Joel

I have not altered my strategy but I did learn which industries did well and not so well in a depression and how toady is different than the 1930s when folks were losing their life savings to bank failures.

Packer

I haven't read the book but will check it out.  Just remember though - the big difference between the 1930s-40s and the 2000s-10s was the presence of concerted central bank intervention to redistribute losses in the latter case.  Redistribute, not reduce.  Because central banks neither create nor eliminate real economic value, they cannot change the ultimate outcome but only the kinetics.  I like to think of what we are seeing now as the slow-motion version of what happened in '29.  The ultimate destination is the same, but we are taking the scenic/ anesthetic route.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on April 06, 2016, 09:08:29 PM
Packer, do you think cableco's focus on EBITDA instead of net earnings is appropriate? I think this is only true when depreciation is not real. I think that's the case for real estate.
Cable is kind of like real estate but not exactly so. A house bought 40 years ago is worth much much more today. Not sure if a cable laid down 40 years ago is still worth anything today?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: fareastwarriors on April 08, 2016, 04:12:50 PM
I do have an indirect interest, I own Sequoia.  As to VRX, I have been watching from the stands and am not sure how much I can add to what has been said.  The key question in my mind is how extensive are the problems at Philidor in terms of other distributors.  If Philidor is it, then at today's price it is cheap.  If there is more then there may be more downside.  A final point that reduced my enthusiasm are Munger's comments.  He usually is right.

Packer

Packer, do you still own Sequoia Fund? Did you sell or buy more?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on April 09, 2016, 06:24:10 AM
In general, EBITDA can be used in situations where there is a large one-time outlay where the benefits will be seen over years and there is customer lock-in.  Real estate is the extreme example.  Cable has some of these characteristics also however, there are more frequent "one-time" outlays but there is customer lock-in.  EBITDA also removes the non-cash amortization costs for consolidating industries.

As to Sequoia, I still own it.  I was planning on going to the annual meeting & maybe asking for a change to the management agreement with a lower fee with possibility of the fee going back to historical levels if they outperform at historical margins.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: jay21 on April 11, 2016, 08:10:23 AM
Any thoughts on the broadcasters? Seems to be the type of security you would look at

Thanks
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on April 13, 2016, 09:52:41 AM
In general, EBITDA can be used in situations where there is a large one-time outlay where the benefits will be seen over years and there is customer lock-in.  Real estate is the extreme example.  Cable has some of these characteristics also however, there are more frequent "one-time" outlays but there is customer lock-in.  EBITDA also removes the non-cash amortization costs for consolidating industries.

As to Sequoia, I still own it.  I was planning on going to the annual meeting & maybe asking for a change to the management agreement with a lower fee with possibility of the fee going back to historical levels if they outperform at historical margins.

Packer

Thank you! In order for EBITDA to make sense here, we have to see that actual capex is far lower than Depreciation. I do got it for the Amortization cost.
If the actual long term capex is in line with long term depreciation, then only Amortization can be added back to earnings.

Another question, regarding return on invested capital, I wonder if it makes more sense to use
EBITDA/(PPE plus accumulated D&A)?

Lastly, I asked a question about US cable franchise asset item. No one seems to know. Could you please help me take a look?
http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/us-cable-company's-franchise-value/


Thank you!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on April 13, 2016, 09:54:47 AM
Packer, I also have a question about the competitive landscape of the cable industry.

From CABO's 10-k, it says:
"
In addition, a number of municipalities have announced plans to construct their own data networks with access speeds that match or exceed those of our own through the use of fiber optic technology. While historically municipalities in many of the markets we serve have been subject to state laws that restrain municipalities from providing broadband coverage through government-owned networks, the FCC issued an order preempting these laws in March 2015. An appeal of this order is pending in the U.S. Court of Appeals for the Sixth Circuit. In addition, in some cases, local government entities and municipal utilities may legally compete with us without obtaining a franchise from a state or local governmental franchising authority (“LFA”), reducing their barriers to entry into our markets. Affirmation of the FCC preemption ruling and the entrance of municipalities as competitors in our markets would add to the competition we face and could lead to additional customer attrition.
"

As we know, when deregulation happened for the airlines in the 1970s, competition suddenly became intense, and a lot of airlines went ch 11.
I wonder if the cable competitive landscape is changing. What's your take on this?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: dwy000 on April 13, 2016, 11:31:52 AM
No expert but interested observer...

I think you are referring primarily to broadband competitive landscape (as opposed to cable which would take into account OTT and cord shaving/cutting etc.).

Personally, I think the government effectively killed - or at least heavily stifled - brand new broadband competition when they included cable in the Title II regulations of the FCC last year.  Under that, the FCC has the ability to manage, cap or even dictate pricing on broadband, even though they say they have no intention of doing so.  In addition, it requires owners of networks to give access to 3'd parties to resell.  Building out a fiber network is hugely expensive and requires a very long time horizon for payback.  It would be very difficult for any rational company entering this space to make the case for the upfront investment without having full control (or visibility) into the pricing or usage for that product. 
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on April 14, 2016, 08:50:30 AM
No expert but interested observer...

I think you are referring primarily to broadband competitive landscape (as opposed to cable which would take into account OTT and cord shaving/cutting etc.).

Personally, I think the government effectively killed - or at least heavily stifled - brand new broadband competition when they included cable in the Title II regulations of the FCC last year.  Under that, the FCC has the ability to manage, cap or even dictate pricing on broadband, even though they say they have no intention of doing so.  In addition, it requires owners of networks to give access to 3'd parties to resell.  Building out a fiber network is hugely expensive and requires a very long time horizon for payback.  It would be very difficult for any rational company entering this space to make the case for the upfront investment without having full control (or visibility) into the pricing or usage for that product.

In that case, why is the title II order being appealed by cable companies?

Could you please help me understand these two paragraphs here?
https://www.sec.gov/Archives/edgar/data/1632127/000143774916026995/cabo20151119_10k.htm

Franchising. We are required to obtain franchises from state or local governmental authorities to operate our cable systems. Those franchises typically are non-exclusive and limited in time, contain various conditions and limitations and provide for the payment of fees to the local authority, determined generally as a percentage of revenues. Failure to comply with all of the terms and conditions of a franchise may give rise to rights of termination by the franchising authority. The FCC has adopted rules designed to expedite the process of awarding competitive franchises and relieving applicants for competing franchises of some locally-imposed franchise obligations. This development, which is especially beneficial to new entrants, is expected to continue to accelerate the competition we are experiencing in the video service marketplace.
 
Rate Regulation. FCC regulations prohibit LFAs or the FCC from regulating the rates that cable systems charge for certain levels of video cable service, equipment and service calls when those cable systems are subject to “effective competition.” In 2015, the FCC revised its rate regulations to create a presumption that all cable systems are subject to the effective-competition exemption unless proven otherwise. That decision has been appealed to a U.S. Federal court, and we cannot predict the outcome.



How does Franchising work? Is this basically a business license? How is Franchising asset recorded on the balance sheet? I know TWC-CHTR merger will result in Franchising asset written up to 60 bn. That's quite a lot.

Rate Regulation: The language above seems to show that FCC said all cable systems are subject to effective-competition exemption, which means all cable systems can not be regulated for the rates. That's a good things for cable companies isn't it? Why is this being appealed?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on April 14, 2016, 09:12:59 AM
I think my question about the effective competition is too dumb.
https://www.fcc.gov/document/commission-adopts-effective-competition-order

Based on the order, I think it is likely that the order is being appealed not by cable companies but by cable's competitors or local authorities.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: dwy000 on April 14, 2016, 11:11:50 AM
Again, I'd preface this that I'm not an expert just an avid observer.

Regarding franchises - these are typically historic and date back to when the cable companies got permission from state and local governments to rip up streets and lay cable for TV (largely back in the 70's and 80's).  The local governments typically got either upfront fees or ongoing royalties for the franchise license.  When you buy a local cable company you are effectively buying their franchise rights and it often requires the local/state authority to approve the transfer.  With most of the basic capex infrastructure having been depreciated, a good chunk of purchase price is allocated towards the value of the franchise (better that than goodwill because you can depreciate it).  That's probably the majority of the write-up in the TWC merger.

Because the local and state authorities were in charge of allocating and handing out franchises, it really undermined the ability of the FCC to encourage competition.  Especially relevant when the business switched from local, cable provided TV to include broadband.  As you can imagine, a local cable company can have very close ties to the state/local government which can help limit awarding of add'l franchises.  So the FCC came in over the top and tried to undermine or eliminate the local/state authorities in terms of franchise offerings.  Note that satellite providers usually don't have to have the local franchises because they aren't local or ripping up streets.  But they do provide "effective competition" which eliminates the FCC ability to govern pricing of cable tv.  Yet another reason for FCC to want Title II.

Note in the 2nd paragraph regarding rate regulation that it does not capture broadband, just video.  Broadband was always in this netherworld in that it wasn't considered cable and it wasn't considered telecom (telecom being governed under Title II).  In 2015, the FCC classified broadband under Title II, effectively giving it the same regulatory oversight that it has over telephone companies (which is very, very broad and onerous).  The argument was largely to ensure net neutrality but they went beyond just putting in a net neutrality rule and imposed Title II.

If you haven't, you should read Cable Cowboy.  A lot of the historic franchise stuff is really interesting and gives a great background as to how we got where we are today.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on April 17, 2016, 11:11:58 AM
Again, I'd preface this that I'm not an expert just an avid observer.

Regarding franchises - these are typically historic and date back to when the cable companies got permission from state and local governments to rip up streets and lay cable for TV (largely back in the 70's and 80's).  The local governments typically got either upfront fees or ongoing royalties for the franchise license.  When you buy a local cable company you are effectively buying their franchise rights and it often requires the local/state authority to approve the transfer.  With most of the basic capex infrastructure having been depreciated, a good chunk of purchase price is allocated towards the value of the franchise (better that than goodwill because you can depreciate it).  That's probably the majority of the write-up in the TWC merger.

Because the local and state authorities were in charge of allocating and handing out franchises, it really undermined the ability of the FCC to encourage competition.  Especially relevant when the business switched from local, cable provided TV to include broadband.  As you can imagine, a local cable company can have very close ties to the state/local government which can help limit awarding of add'l franchises.  So the FCC came in over the top and tried to undermine or eliminate the local/state authorities in terms of franchise offerings.  Note that satellite providers usually don't have to have the local franchises because they aren't local or ripping up streets.  But they do provide "effective competition" which eliminates the FCC ability to govern pricing of cable tv.  Yet another reason for FCC to want Title II.

Note in the 2nd paragraph regarding rate regulation that it does not capture broadband, just video.  Broadband was always in this netherworld in that it wasn't considered cable and it wasn't considered telecom (telecom being governed under Title II).  In 2015, the FCC classified broadband under Title II, effectively giving it the same regulatory oversight that it has over telephone companies (which is very, very broad and onerous).  The argument was largely to ensure net neutrality but they went beyond just putting in a net neutrality rule and imposed Title II.

If you haven't, you should read Cable Cowboy.  A lot of the historic franchise stuff is really interesting and gives a great background as to how we got where we are today.

Thank you for the explanation! I have read Cable Cowboy but I bet I got out much less out of it than you did.
"they do provide "effective competition" which eliminates the FCC ability to govern pricing of cable tv.  Yet another reason for FCC to want Title II."
Why does competition eliminate a regulator's ability to regulate pricing?
Is that because some court or some lawmaker would say, there is already effective competition so you should not regulate prices?

Does Title II introduce any bad impacts on the cable companies? Please excuse my dumb questions. I think net neutrality make it easier for NFLX and HULU to take businesses from tradition cable's video customers.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on April 17, 2016, 11:42:15 AM
I am still pretty puzzled by Title II's impact on cable cos' business.
http://www.netcompetition.org/congress/the-multi-billion-dollar-impact-of-fcc-title-ii-broadband-for-google-entire-internet-ecosystem

This article seems to say that Title II will enable broadband to charge metered rates like the wireless data providers, and this will create a huge liability for Google and other websites. I can't understand why.
1. I don't understand why Title II will enable broadband to charge metered rates.
2. Even if they do, the users will end up paying for the internet data, not the websites, right?


Sorry if I am asking too many dumb questions.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: dwy000 on April 18, 2016, 11:45:59 AM

"they do provide "effective competition" which eliminates the FCC ability to govern pricing of cable tv.  Yet another reason for FCC to want Title II."
Why does competition eliminate a regulator's ability to regulate pricing?
Is that because some court or some lawmaker would say, there is already effective competition so you should not regulate prices?

The FCC had (still have) the ability to regulate cable pricing if it believed that there was a lack of effective competition.  I don't know if they ever used it to set pricing though - I'm not aware of it happening.  But the onus was on the cableco to prove there was effective competition.  The recent change basically acknowledges the ubiquitous competition from satellite and IPTV in that it now assumes that there is effective competition and the onus is shifted to the FCC to prove there is not if they want to regulate pricing.
"Does Title II introduce any bad impacts on the cable companies? Please excuse my dumb questions. I think net neutrality make it easier for NFLX and HULU to take businesses from tradition cable's video customers."

I guess it depends upon who's viewpoint you're looking at it from.  Title II provides very broad and deep regulatory powers to the FCC over broadband.  It's not just pricing, it's access (incl. net neutrality), minimum service levels, quality levels, required coverage etc.  And importantly, it can require that competitors be allowed to access/resell an incumbent's infrastructure at prescribed pricing (kind of like the MVNO's who buy services in huge bulk and then sell it at retail). 

When the FCC redefined broadband to fall under Title II they claimed that they had no intention of imposing pricing regulation or most of the other stuff that they can now do.  But we all know how long government promises last....  It was supposed to be imposed to regulate net neutrality, which they could have done on it's own.  Imposing Title II to address net neutrality is like having a howitzer to hunt for sparrows.  You just know it will get used at some point (personal opinion).

Title II in itself does not permit the cableco's to charge metered rates.  They could have done that any time they wanted because pricing wasn't regulated.  The issue with metered rates is more indirect.

Net neutrality was an issue because the Netflix, YouTube and Hulu's of the world were (still are) taking up an inordinate amount of bandwidth usage.  It's estimated that on a weeknight at 8pm Netflix can be 20-25% of all internet usage.  And that creates bottlenecks.  Selling preferred access to these big users is great if you are a Netflix lover but is unfair if you some little internet company who now gets put at the back of the line because you can't afford access.

The cableco's argue that with limited bandwith access, there needs to be some sort of governance or everybody suffers.  So why shouldn't the biggest users pay more than the limited users.  Previously this was Netflix paying Comcast.  With that being disallowed it means it is more likely to be the end user watching a ton of Netflix who has to pay for it.  And the way to do that it with metered pricing.  Just like you see with wireless.   But that has a host of knock on impacts.  If you can watch a TV show on Hulu and it uses up all your monthly data, or you can watch it On Demand on Comcast where it doesn't use of data (because it's cable), it's going to make life very difficult for Netflix and Hulu.  Yeah, you can cancel your cable but your internet cost to watch all that TV will skyrocket - and make cable much more appealing.

Note that as part of the Charter/TWC merger, Charter has agreed to NOT impose tiered pricing for broadband for 3 years.  I'm guessing for the above reason.  Cable could seriously hurt all those OTT and streaming providers any time they wanted by imposing such pricing.  By agreeing not to for 3 years it increases competition for a while. 

So it's all a big circular gameboard strategy.  But in my view, it's very difficult to lose as the cable company who provides the broadband access.  You're going to get your dues one way or the other and have a very, very competitive product. 
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on April 21, 2016, 08:14:32 AM
Thank you dwy000 for your great responses!
Could you please share some thoughts on MVNOs?

I remember I saw somewhere before that congress mandates discount rates for MVNOs in the US. How about other parts of the world?

It is surprising to see that the article below says Sprint and T-Mobile actually welcomes MVNOs and help them set it up.
http://www.fiercewireless.com/special-reports/mvno-explosion-will-latest-wave-virtual-operators-survive-0

If this is the case, it sounds like US cable cos with MVNOs to offer quad play will have a better chance to success than mobile operators also offering DSLs. Unless, as you said regarding Title II, if Cable cos are forced to setup some kind of virtual cable network like MVNOs and sell it at a discount to the mobile operators. Is that possible?

In Europe, Liberty moved toward MVNO for a while and then acquired Base in Belgium. Not sure why they wanted to become a mobile operator now.



UPDATE:
I read Liberty Global's acquisition of Base in Belgium again and I think it is a good strategy to reduce the number of mobile competitors from three to two, and it may also cross sell cable products to Base customers, so it is probably a good thing.

However in other parts of Europe they will still focus on MVNO. Why is that?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: dwy000 on April 21, 2016, 09:36:36 AM
Thank you dwy000 for your great responses!
Could you please share some thoughts on MVNOs?

I remember I saw somewhere before that congress mandates discount rates for MVNOs in the US. How about other parts of the world?

It is surprising to see that the article below says Sprint and T-Mobile actually welcomes MVNOs and help them set it up.
http://www.fiercewireless.com/special-reports/mvno-explosion-will-latest-wave-virtual-operators-survive-0

If this is the case, it sounds like US cable cos with MVNOs to offer quad play will have a better chance to success than mobile operators also offering DSLs. Unless, as you said regarding Title II, if Cable cos are forced to setup some kind of virtual cable network like MVNOs and sell it at a discount to the mobile operators. Is that possible?

In Europe, Liberty moved toward MVNO for a while and then acquired Base in Belgium. Not sure why they wanted to become a mobile operator now.



UPDATE:
I read Liberty Global's acquisition of Base in Belgium again and I think it is a good strategy to reduce the number of mobile competitors from three to two, and it may also cross sell cable products to Base customers, so it is probably a good thing.

However in other parts of Europe they will still focus on MVNO. Why is that?
Sorry for long replies.  I start typing and all these thought bubbles just streams out...

The international stuff is really interesting and I'm sure there are strategic overlaps with what is going on in the US but I can't even pretend to know the driving factors there.  Smarter people than me on this board (including Packer) play actively in this and are probably better positioned to opine.  My philosophy on the international side (and I have very little skin in the game there) is "trust Malone and hang on for the ride".

MVNO's have been a fascinating game to watch.  They were a complete disaster in the 90's and 00's.  MVNO's, CLEC's, overbuilders all had similar strategies (I'm sure someone will nail me on the differences but I'm just meaning very big picture).  They could target select customer groups and geographies with appealing characteristics, leverage use of the incumbent's infrastructure, selectively build out where it made sense and try to arbitrage the pricing.  Unfortunately it all fell apart largely for 2 reasons:  a) even leveraging someone else's infrastructure, the set up and base costs were enormous and it required huge volumes to cover these and profit.  You could only get that volume thru massive marketing spend and price discounts (they had no differentiating value prop).  For the most part, the incumbents weren't going to let that happen;  b) they didn't control the infrastructure.  They were relying on their primary competitor for the underlying technology and technical service.  Even with regulation, that's a tough road to hoe.

The change in attitude in recent years by Sprint and T-Mobile has been for different motivations.  3-5 years ago, T-Mobile and Sprint woke up to their dire long term straits.  Wireless is a volume business with massive base costs and tough competition.  Both TM and S were too small to compete with Verizon and AT&T and had 2nd rate network coverage.  In a downward cycle they didn't have the network to compete with the big guys and didn't have the customer base to generate the cash to support/upgrade the network.  They were desperate to get volume onto the network to generate cash.  MVNO's are one way to do this even though, ironically, the target customers of MVNO's tend to be the low end of the market where TM and S play.  So in order to get that volume, they had to shift from fighting against MVNO's to supporting them with all of the existing infrastructure (again, more income if you rent that out too).  They were trading margin for volume.  (As an aside, T-Mobile was the first to go all-in in the race to take down pricing in hopes of driving the needed volume to get to cash flow breakeven and permit upgrade of the network.  Sprint is in the desperate fast-follower state and may not make it.)

For broadband, it may be too early to tell since the Title II just came into effect recently.  But for anyone thinking about laying fiber to the home in hopes of competing with the cablecos it just adds another risk and uncertainty to an already long term and difficult payback model.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: bobozou on April 22, 2016, 06:25:53 AM
Packer - do you have a good method of translating DART filings from korean to decipherable english?  TIA
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on April 22, 2016, 07:01:49 AM
Yes open in Google browser and hit translate to English.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on May 01, 2016, 10:16:35 AM
In terms of competition of Cable, I saw from Punchcard blog that "The high cost of laying cable makes it impractical to create a competing network."
But isn't it similar for teleco and wireless companies? How come there was intense competition in the wireless industry?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on May 01, 2016, 11:51:50 AM
Another question about Cable. A lot of people say cable has very high return on invested captial, but the article below shows otherwise. Any thoughts on this?

http://www.techpolicydaily.com/internet/whos-making-money-internet-comparing-roic-across-internet-sectors/
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: tombgrt on May 25, 2016, 09:04:44 AM
Interessed in the above as well!

Also Packer, coul you tell us in the Energy sector, which are your highest conviction ideas at the moment?

Wat are your current thought on intralot? Still following? What are your thoughts on the evolution of minority intrests?

TIA
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: winjitsu on May 26, 2016, 07:24:38 PM
In terms of competition of Cable, I saw from Punchcard blog that "The high cost of laying cable makes it impractical to create a competing network."
But isn't it similar for teleco and wireless companies? How come there was intense competition in the wireless industry?

I think with cable the problem is last mile, wiring up cable to every single individual household, whereas wireless uses spectrum and can broadcast out to an area. That being said both telcos and wireless have pretty strong competitive advantages... from my purely US-centric point of view:

AT&T was the definition of telco monopoly. It took pretty heavy regulation to break that monopoly down (with all this CLEC, LEC, Regional Bell stuff). If the monopoly wasn't broken down, I wouldn't be surprised if we ended up like Australia (https://www.reddit.com/r/explainlikeimfive/comments/40m0t8/eli5why_is_australian_internet_so_bad_and_why_is/)

And I don't think competition in wireless is that high. There are 3 major companies that basically dominate the entire space (VZ, ATT, T-Mobile, Sprint is headed towards insolvency at this rate and will probably merge, US Cellular a very small regional player). Limited spectrum (though did anyone see the Dish short thesis from Kerisdale??), high capex costs, no new entrants & stable marketshare (with the exception of T-mobile taking sprint customers).
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: sampr01 on May 27, 2016, 05:49:26 AM
Hi Packer,

If you are still following AIQ, what your thoughts on last quarter results.
Thanks
Yes open in Google browser and hit translate to English.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on May 27, 2016, 11:04:28 AM
Cable questions - Wireless competition depends upon country.  Some is very intense US but has been consolidating while other in EMs has much less and higher margins.  The ROIC in the attached article is based upon NI not the right metric to use of a cash flow business.  The correct metric is CFO less maintenance cap-ex.

O&G - I like Gear the best.  Others that are cheap with not as good management are Bellatrix & RMP.  I am looking at the other new Don Gray company Petrus.

AIQ - Now that we are past the purchase, the company needs convince the market that they are not going to be hosed by the Chinese control investors.  They are starting with the recent presentation.  See 8-K for details.  They also have some nice upside in China if the new board member who is the CEO of the largest private pay hospital chain in China can get AIQ into the radiology department.  We will see.

Intralot - just waiting to see if new management can do something more than old management.  They are cheap but they need to prove beyond buying back stock that they can grow value.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: tombgrt on May 27, 2016, 11:11:29 AM
Thanks Packer, appreciated! Didn't know about Petrus, will have to look it up.

What is your take on the potential of more dilution at Gear given the bank facility? Semi annual review coming up. At current stock price dilution could be severe.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: simplefocus on May 31, 2016, 07:59:15 AM
Do you still own BXE?  If so, what's your position compared to your overall portfolio?  Orange and Baupost are selling, so does their selling change your view on BXE?  Thanks.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: argonaut on June 01, 2016, 10:06:16 AM
GNCMA is down by a third since January but they still seem to be executing though slowly on their plan. Are you continuing to hold to see how this year plays out or did you get out?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on June 01, 2016, 03:13:02 PM
Gear - If there is some, I think it will be small.  In the last round (IMO a time of more peril), the dilution was only 10% at the 2P NAV.  Management is focused on preventing dilution.

BXE - We will see here.  I have position sized slightly smaller than Gear on cost about 50% based upon current price.  It is the cheapest of Can NG guys out there will a low-cost position.

GNCMA - This one baffles me as the two closest comps (SHEN & CNSL) are in much more competitive markets and sell at multiples that would imply a 100% upside from here for GNCMA.  There may be some issues with Alaska oil but I am optimistic about the oil prices so these things should work themselves out.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Eye4Valu on July 20, 2016, 08:07:19 AM
Packer-Since you value companies on a professional basis, I was wondering if there is any useful literature on valuing companies as opposed to the usual stuff that people recommend for investors, e.g. Security Analysis, Intelligent Investor, etc.) In other words, let's suppose I was interning at your company. Is there anything you would recommend that I read? Thanks!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: tede02 on July 21, 2016, 06:14:06 AM
Packer-Since you value companies on a professional basis, I was wondering if there is any useful literature on valuing companies as opposed to the usual stuff that people recommend for investors, e.g. Security Analysis, Intelligent Investor, etc.) In other words, let's suppose I was interning at your company. Is there anything you would recommend that I read? Thanks!

Further on this, Packer, how long have you been doing business appraisals?  How did you get into the profession?  Do you have an education background in accounting or finance? 

Best,

Ted
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on July 24, 2016, 08:38:19 AM
To give you some color on the work I do as an appraiser, it is primarily focused on private business, intangible assets and unusual securities associated with unusual assets.  Given this a good part of valuations I perform would not be applicable to public assets.  Not with standing this, there is a book called "Valuing a Business" by Shannon Pratt which is the private company valuation equivalent to Security Analysis without Ben Graham's flair in the use of the English language.  The other book which I really like "The Most Important Thing" as it gets at the behavioral aspect of investing.  The CFA also has industry guides which provide some nice industry specific considerations.  I also like all of the books Aswath Damodaran has written & his web site is execellent.  Two recent book have been the "Ground Rules" book about Buffett's partnership letters and Concentrated Investing.

As to the business valuation, it is a nice business to be to make a living in as asset management is difficult with a small amount of assets and the stress of money moving in and out of a fund.  I have been in the business valuation field for about 20 years and entered after an MBA and working at PW in Los Angeles in the mid 1990s.  I have a EE undergrad degree and an MBA from UCLA. 

Packer 
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Eye4Valu on July 24, 2016, 09:20:00 AM
Appreciate it Packer!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: kab60 on August 10, 2016, 02:08:18 AM
Did you take a look at Townsquare, and what do you think? Who are the 'best' peers, and what do they trade at? I kinda like their local radio niches, but am not so sure about the rest. Serup looks interesting though with Oaktree as a signifikant shareholder among other things.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: InspireByReason on August 13, 2016, 08:44:53 PM
Hey Packer,

I have been on the sidelines for quite some time at the corner and part of the reason I decided to finally take the plunge and get an account was because of this post. I've noticed your presence on a lot of other value investing websites and appreciate you giving so freely of your time & knowledge. Here's the questions:

Q1: Do you ever use owner's earnings? If you do what is the best resource for understanding why it is important, if you don't what do you use in its place?

Q2: Do you use a checklist? How long is it?

Q3: What's your annual rate of return up to now?

I'll leave it at that, thanks again!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: RedDaruma on August 26, 2016, 06:52:05 AM
Hi Packer.

I wanted to ask you about this question, as you are familiar with both Energy space and private valuation. Do you have any idea how much asset impairments on offshore drilling equipment I have to assume in the worst case? I'm looking at ATW right now and taking a liquidation analysis. I wonder 50% discount is large enough.

Thank you very much for you time on this.
RD
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on August 27, 2016, 05:41:16 AM
I do like Townsqure, it is cheap & the debt is priced at LIBOR plus 325 so it has a BB+ credit spread.  In terms of comps on the radio side you have SGA, SALM & BBGI and on live event side Live Nation.

I typically use free cash flow for most of the businesses I look at or nornalized cash flow (EBITDA). In term of checklist, I think of it more as a filter and ensure that the firms are no too levered and somehow growth will continue.  To certain extent it is a process of exclusion once cheap firms are located.  Annual return over a longer period is about 29%/year since 2000 but the past year has been tough as I have materially underperformed (down about 5%) due to O&G names which have failed to recover, Korean preferreds declining, Dhando swandiving and a some of my generally cheap stock declining (like GNCMA and AIQ).  At some point I think sentiment will change for these names.

It depends upon the specifics of the equipment and the contracts they have to lease.  If they do not have leasing contracts then the equipment will be stacked and generate no revenue until demand increases.  If they cannot find contracts, they can sell as scrap.  I like looking at the bonds to get an idea of how the assets are being priced.  If the bonds are at distressed levels, YTM>8% then if you want to invest here then the bonds are the place to go.  Currently, Atwood's bonds are trading at a YTM of 16%.  In looking at Atwood's fleet status, it looks like there is a cliff approaching for many of the rigs on contract now.  If these can be leased then they will able to service their debt if not then BK.  That IMO is the key question here.

Packer

 
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: RedDaruma on August 29, 2016, 04:24:46 AM
I do like Townsqure, it is cheap & the debt is priced at LIBOR plus 325 so it has a BB+ credit spread.  In terms of comps on the radio side you have SGA, SALM & BBGI and on live event side Live Nation.

I typically use free cash flow for most of the businesses I look at or nornalized cash flow (EBITDA). In term of checklist, I think of it more as a filter and ensure that the firms are no too levered and somehow growth will continue.  To certain extent it is a process of exclusion once cheap firms are located.  Annual return over a longer period is about 29%/year since 2000 but the past year has been tough as I have materially underperformed (down about 5%) due to O&G names which have failed to recover, Korean preferreds declining, Dhando swandiving and a some of my generally cheap stock declining (like GNCMA and AIQ).  At some point I think sentiment will change for these names.

It depends upon the specifics of the equipment and the contracts they have to lease.  If they do not have leasing contracts then the equipment will be stacked and generate no revenue until demand increases.  If they cannot find contracts, they can sell as scrap.  I like looking at the bonds to get an idea of how the assets are being priced.  If the bonds are at distressed levels, YTM>8% then if you want to invest here then the bonds are the place to go.  Currently, Atwood's bonds are trading at a YTM of 16%.  In looking at Atwood's fleet status, it looks like there is a cliff approaching for many of the rigs on contract now.  If these can be leased then they will able to service their debt if not then BK.  That IMO is the key question here.

Packer

Thank you, Packer. I was actually looking at ATW's 6.5% 2020 bonds. Its balance sheet looks pretty solid and their assets have to be sold for less than 50% of its current book value before the debt would be worthless. If they can make it to maturity, then I think the total expected return would be ~15% pa at the current quote. I knew that >50% of their contracts is expected to face renewals over the next 12-18 month. I was wondering if there is anything that puts the floor for the asset impairment but it seems depend on those renewals. Probably I have to look at what happened for their past renewals.   
RD
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on September 13, 2016, 11:23:04 AM
I do like Townsqure, it is cheap & the debt is priced at LIBOR plus 325 so it has a BB+ credit spread.  In terms of comps on the radio side you have SGA, SALM & BBGI and on live event side Live Nation.

I typically use free cash flow for most of the businesses I look at or nornalized cash flow (EBITDA). In term of checklist, I think of it more as a filter and ensure that the firms are no too levered and somehow growth will continue.  To certain extent it is a process of exclusion once cheap firms are located.  Annual return over a longer period is about 29%/year since 2000 but the past year has been tough as I have materially underperformed (down about 5%) due to O&G names which have failed to recover, Korean preferreds declining, Dhando swandiving and a some of my generally cheap stock declining (like GNCMA and AIQ).  At some point I think sentiment will change for these names.

It depends upon the specifics of the equipment and the contracts they have to lease.  If they do not have leasing contracts then the equipment will be stacked and generate no revenue until demand increases.  If they cannot find contracts, they can sell as scrap.  I like looking at the bonds to get an idea of how the assets are being priced.  If the bonds are at distressed levels, YTM>8% then if you want to invest here then the bonds are the place to go.  Currently, Atwood's bonds are trading at a YTM of 16%.  In looking at Atwood's fleet status, it looks like there is a cliff approaching for many of the rigs on contract now.  If these can be leased then they will able to service their debt if not then BK.  That IMO is the key question here.

Packer

Hi Packer,
    When you look at companies, do you think it is ok that GNCMA's management bonus incentive is not aligned with shareholders but still invest in it? I know every company has some kind of issues. So what issues do you think kill the entire investment thesis?
    The concerns I have with GNCMA are the following:
    http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/gncma-general-communications/msg272011/#msg272011



Thanks!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: scorpioncapital on September 14, 2016, 01:25:30 PM
I am struggling with an issue of preference over no debt companies with lower yield or higher debt companies with higher yield to shareholder BUT total yield is the same across debt+equity. What do you think is the better deal?

E.g.
Company A has no debt and 7.5% fcf yield.
Company B has 50% debt and 7.5% yield on total debt+equity but 15% return to YOU, the shareholder.

Assuming you calculate the second won't go bankrupt, what would be the deciding factor?


Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Spekulatius on September 14, 2016, 05:07:39 PM
I am struggling with an issue of preference over no debt companies with lower yield or higher debt companies with higher yield to shareholder BUT total yield is the same across debt+equity. What do you think is the better deal?

E.g.
Company A has no debt and 7.5% fcf yield.
Company B has 50% debt and 7.5% yield on total debt+equity but 15% return to YOU, the shareholder.

Assuming you calculate the second won't go bankrupt, what would be the deciding factor?

it depends on he sure you are about the business and the fact that they won't  go bankrupt. For me, both are more or less identical, the first is safe, but has lower owner earnings, the second one is more risky (due to leverage). If Think the business is very safe (think utility), then the second company with a reasonable amount of debt is better.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: scorpioncapital on September 14, 2016, 05:19:41 PM
Thanks. I saw a study on the web some time ago saying that lower return without debt actually does the same or better as higher return with debt from a historical share price performance but can't remember the link. I did find this - http://people.stern.nyu.edu/adamodar/pdfiles/country/levvalue.pdf
Slide 13 looks especially on topic.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on September 15, 2016, 06:32:54 AM
With respect to GNCMA, although I do not like related transactions like this I look at materiality.  In the case of the plane, the impact is 0.1% of revenues based upon cost paid (it will be less if offset by commercial cost for transportation). 

With respect to firms with debt it depends. I think making generalities can be misleading.  For cyclical firms I would stay away from debt.  For more steady firms prudent use of debt is a key way returns are provided.  I use John Malone's use of debt as an example of prudent use of debt.  I also use bond pricing to determine if debt is too much or too little.  One thing you can look for is a large spread between the debt rate and the FCF yield a firm generates as they are both associated with same underlying cash flow stream.

Packer

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: scorpioncapital on September 15, 2016, 08:01:30 AM
With respect to GNCMA, although I do not like related transactions like this I look at materiality.  In the case of the plane, the impact is 0.1% of revenues based upon cost paid (it will be less if offset by commercial cost for transportation). 

With respect to firms with debt it depends. I think making generalities can be misleading.  For cyclical firms I would stay away from debt.  For more steady firms prudent use of debt is a key way returns are provided.  I use John Malone's use of debt as an example of prudent use of debt.  I also use bond pricing to determine if debt is too much or too little.  One thing you can look for is a large spread between the debt rate and the FCF yield a firm generates as they are both associated with same underlying cash flow stream.

Packer

Thanks Packer. I love the idea to compare debt to firm FCF. In the company I'm looking at they are almost the same figure. But I see that if debt is variable, this is an excellent test of pricing power as interest rates rise! I was reading somewhere that LBO firms love to over-leverage firms initially and they KNOW they are over-leveraging, which suggests if you see an LBO situation you can be almost certain they have taken on too much debt by design (what that design may be is another question!) :)


Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: muscleman on September 15, 2016, 10:25:03 AM
I am struggling with an issue of preference over no debt companies with lower yield or higher debt companies with higher yield to shareholder BUT total yield is the same across debt+equity. What do you think is the better deal?

E.g.
Company A has no debt and 7.5% fcf yield.
Company B has 50% debt and 7.5% yield on total debt+equity but 15% return to YOU, the shareholder.

Assuming you calculate the second won't go bankrupt, what would be the deciding factor?

This is just like your home mortgage. If you have stable income, the banks will allow you to put down 20% and they will take very little risk. If you have unstable income then they won't lend to you.

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: undervalued on September 15, 2016, 04:55:32 PM
Packer, have you look into CBI (engineering and construction companies)? I think the stock is very cheap based on cash flow. Company estimates earnings will be $4 this year. Could you share your insights?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: no_free_lunch on November 03, 2016, 11:08:18 AM
I wonder if you have any thoughts on Verizon?  I know that you follow a number of telecom companies so have a good sense for valuations.  This is obviously not the kind of upside you usually seem to go for but nevertheless from what I can tell it seems very cheap at current levels.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on February 26, 2017, 05:48:36 PM
In reply to the questions on CBI, it is in the too hard pile at this point for me.  It is cheap but you have the overhang of the Westinghouse sale & there are other firms closer to my circle that are cheap now.  An interesting one in the cement space is the Buzzi Unicem savings shares.

As to Verizon, I think it is fairly valued @ 6.8x EBITDA and 40x FCF (2016) or 20x (2015).  The larger telecom I like now are the savings shares of Telecom Italia.   

Packer 
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: CleverLongboat on March 17, 2017, 05:23:23 PM
Hi Packer, took a long and intensive look at Telecom Italia and also found it somewhat difficult to value. Lots of competition in the Italian mobile space, not sure if they can really increase rates. Capex increases to bring greater broadband penetration not necessarily a net positive, especially if competition from other players heats up. I can see the long argument but curious to hear what you like about them.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on March 18, 2017, 07:02:00 AM
The key here IMO is the fibre to the regions outside the regions that are already wired (the largest 15 cities).  There is no legacy cable infrastructure in Italy.  As far as I can tell the only 2 folks venturing outside these areas (140 cities) are a  TI/Fastweb JV, TI itself & Enel.  The only real competitor here is Enel who is laying cable to make its meters smart.  So the question is will TI make a decent return on the fiber versus the competition who is laying fiber for a different purpose and says it will run a "wholesale" telco on the side.  TI also has an advantage as it is the only incumbent who has access to these customers today with fiber.

As to wireless competition, Illiad is entering the market but does not have the same cost advantage it had when it entered the French market against Orange so we will see.  Remember you also have TIM, Wind & Vodafone already competing in Italy and keeping prices low.   

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: wescobrk on March 18, 2017, 08:09:50 AM

Sorry this is off topic but what happened to Ericopoly? He use to have his own separate category.
Hopefully he posts again, soon. I enjoyed his posts.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: MarkS on April 12, 2017, 12:08:22 PM
Hi Packer,

I noticed that at one point you liked Townsquare Media (TSQ).  The stock has moved up a little after a good quarterly report but still looks pretty cheap.     I've also notice that a decent number of institutions have added to their positions or started new positions during the last quarter.   http://www.nasdaq.com/symbol/tsq/institutional-holdings
Do you still like the company and would you start or add to a position at the current price?

Thanks
Mark
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on April 16, 2017, 08:00:46 PM
Yes I still do like TSQ and the current price of 7.9x EBITDA & 6.1x FCF is not very demanding.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: MarkS on April 17, 2017, 04:44:45 AM
Thanks, Packer

Mark
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: gurpaul88 on April 17, 2017, 07:42:13 AM
Yes I still do like TSQ and the current price of 7.9x EBITDA & 6.1x FCF is not very demanding.

Packer

Hey Packer just curious about your thesis on this one. Any thoughts on Oaktree as a major holder? TIA!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: cmakam on July 10, 2017, 05:23:03 PM
Hi Packer,

Any thoughts on IGT ?

Their FCF is about 500m on mcap (now) of 3.8 B.

-cmakam
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on July 23, 2017, 08:27:12 PM
I like TSQ but I have a less than glowing impression of Oaktree given what happened at AIQ.  They acted like a typical PE firm not a minority shareholder friendly partner.  Although IMO Oaktree has taken advantage of minority shareholders, I would not count on Oaktree to look out for the minorities if their interest is different than the minority shareholders interest.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: RedDaruma on August 13, 2017, 12:11:14 PM
Hi Packer,

Currently working on TSQ, and I was wondering how you think about the obsolescence risk for radio/TSQ? I don't think >10year old cars will be able to become WiFi ready overnight but I think the general perception is that traditional radio will be taken over by steaming. I know you are well aware of obsolescence risk for the companies you own so I was wondering how you think about this one. Also, is there any moat on the business other than local monopoly?

Thanks,
RD
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: shalab on August 13, 2017, 04:05:22 PM
Packer - wanted your opinion on SBGI (Sinclair) as well as GNCMA/ALSK

thanks!
shalab
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on August 31, 2017, 07:37:08 AM
As for radio obsolescence, I think radio will evolve with the radio companies using the new technologies (streaming) given enough time to adapt.  I think most of the radio firms have done this.  As to whether folks want their own stream or someone to curate the stream like radio does toady depends upon taste.  I think there is room for both and although custom streaming may be good of awhile for some I think the variety of curation also has its appeal.  As to wifi in cars, I think this will work in cities but not in suburban and country areas where radio is currently the strongest.

I still like the TV broadcasters at these levels.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: SnarkyPuppy on September 08, 2017, 01:57:19 PM
Packer- I made a separate thread in the General Discussikn section but would be helpful to get your direct feedback as I know you were looking into Korean prefs over the past few years.  My understanding is Fidelity was the last brokerage in the states to allow purchase of direct Korean listed securities - I talked to a rep and he seemed pretty informed on the topic and told me the SEC shut down the "loophole" they were using 6-7 months ago. 

Are you still involved w these and have you found a way of purchasing directly? 
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on September 08, 2017, 02:02:18 PM
This is unfortunate.  I still hold the preferreds that I think are cheap. I have gained exposure to preferreds through the fund I run Bonhoeffer which has access to Korea via the broker we use.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: racemize on September 08, 2017, 03:11:40 PM
This is unfortunate.  I still hold the preferreds that I think are cheap. I have gained exposure to preferreds through the fund I run Bonhoeffer which has access to Korea via the broker we use.

Packer

What broker do you guys use?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on September 09, 2017, 06:05:00 AM
The broker is Maxim but the minimum commission is pretty high for a small portfolio.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: SnarkyPuppy on September 09, 2017, 07:18:51 AM
Thanks for the reply - it is too bad as there are simply obvious mispricings on GARPy type businesses in SK.   Suppose the difficulty in even having access to the market accounts for a small portion of the wide discounts.   Thinking about buying the Weiss Korea Opportunity Fund which trades at a slight discount to NAV (likely ~= NAV once accounting for PM fees)
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: RedDaruma on September 27, 2017, 11:05:20 AM
Hi Packer,

I just finished reading Maritime Economics, which you recommended at MOI Summit 2017. Are there any books you recommend for other industries?
Best,
RD
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: NormR on November 11, 2017, 10:23:30 AM
The Bonhoeffer Fund (https://beta.theglobeandmail.com/globe-investor/inside-the-market/hedge-fund-inspired-by-valour-driven-by-value/article36925278/)  (Sorry for the paywall.)
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: mhdousa on January 02, 2018, 08:20:36 AM
Hey Packer -

Someone on Reddit is curious about your background (or at least the speculation is that this is about you)!
https://www.reddit.com/r/SecurityAnalysis/comments/7mhfze/how_to_dig_into_hedge_fund_managers_background/

-M
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: fareastwarriors on January 10, 2018, 04:19:01 PM
Hi Packer,

What do you think about Entercom Communications and other radio stocks?

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on January 17, 2018, 05:16:26 AM
I still like the radio stocks.  The Entercom deal is good as long as the acquisition does not dilute the sports/news talk culture of their existing stations.  This will gain scale but in these firms you need to careful that you don’t create syndicated vs. customized networks which hurt the model in the long term.  I still like TSQ & SALM for their tight communities.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Mondegreen on January 23, 2018, 04:23:12 PM
Hi Packer,

Back to the topic of investing in South Korea again (sorry), are you aware of any reason not to open accounts directly with South Korean brokers?

I have found two with English websites so far and commissions seem very reasonable:

NH Investment & Securities
https://www.nhqv.com/eng/index.html

Samsung Securities
https://english.samsungpop.com/index.jsp

Am I missing something obvious?

Thanks very much for doing this,
Mondegreen
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on January 27, 2018, 06:07:39 AM
No reason you cannot.  The constraint I had was I was using IRA money that Korean firms could not facilitate.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Snorky on February 21, 2018, 08:42:01 AM
Hey Packer,

i would like to know, how you determine how much something is worth to you ?!
I know that you cant precisely determine the intrinsic value of a business, its more a
range of value.

But lets say, how much you would pay for a business, that has FCF/Owners Earnings of 1000$ per year
during the rest of his life (no growth, but no decline also).

If you cant answer the question for yourself, what more and which Information do you Need for the answer?

Thanks a lot :)

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: LC on February 21, 2018, 11:02:39 AM
You would need to know the interest rate and life expectancy
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: savant on February 24, 2018, 09:04:56 AM
Hi Packer - given your significant and global exposure to the telecom / cable space I'm wondering if you have every looked at indian listed Tata Communications. Currently trades at 8x EBITDA post spin-off of its real estate assets.

~32% of the revenues comes from traditional voice business which has been declining and has a margin of 6% and the remaining from data business which has runs at EBITDA margins of 20-21% with revenue CAGR of 15% over the past 5 years.

Thanks
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on February 28, 2018, 05:37:39 AM
In terms of what a business or security is worth to me, it is the same as it would be to others (except for some tax attributes) & thus the price.  The value of business is the cash flows it can return to me and thus the value is equal cash flow/discount rate.  The discount rate varies depending upon the variability of the cash flow.  If it is as consistent as a bond it can be the treasury rate and alot higher if it is uncertain,

I will take a look at Tata.  Thanks.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Snorky on March 01, 2018, 03:09:19 AM
Thank you for your answer. So 10-15% is an appropriate discount rate in your eyes for a relative stable small cap business with cyclical cash flows ?! Would you prefer 10 or go more conservative and take 15 ?!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on March 01, 2018, 04:51:24 AM
The discount rate depends upon the business you are talking about, whether it is levered & other company specific risk associated with cash flows (like key man risk).  Also if it is a private business there may be a discount for lack of marketability if you are purchasing a minority interest in the business.  You can PM with the details & I can provide you some further guidance if you do not want to disclose the details here.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: SnarkyPuppy on March 18, 2018, 10:00:32 AM
Quick question Packer-  notice you invest heavily in international stocks.   How do you think about currency exposure impacting your investment returns?   I'm always faced with the challenge of either 1)  exposing myself to currency volatility (which I have no opinion on and is generally completely removed from the businesses fundamentals) or 2)  locking up capital to hedge out currency volatility (dampens returns i.e. capital opportunity cost).   

Would very much appreciate any thoughts on your framework for thinking about currency risk.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: thefatbaboon on April 05, 2018, 11:22:57 PM
Packer,

I think you might still be invested in Gray...

Any ideas about why we've still had no announcement of retransmission renewals for the remaining "big" two deals that were referred to as already being delayed on the Q4 call and expected to be completed within a week or two?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on April 06, 2018, 06:44:18 AM
As to currency risk, I include any possible depreciation risk in my estimate of value (reduce it by expected depreciation for currencies like the SA rand).  For more stable currencies I do not make any adjustment. To determine stability I look at changes in currency since 2000.

I still am invested in Grey & I have no more information than anyone else on re-trans deals.  These guys have typically made good deals.  Maybe the uncertainty here is an explanation for recent price decline.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Snorky on April 06, 2018, 05:24:53 PM
The discount rate depends upon the business you are talking about, whether it is levered & other company specific risk associated with cash flows (like key man risk).  Also if it is a private business there may be a discount for lack of marketability if you are purchasing a minority interest in the business.  You can PM with the details & I can provide you some further guidance if you do not want to disclose the details here.

Packer

Send you a PM.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: tombgrt on April 16, 2018, 03:20:04 AM
Hi Packer,

I was wondering if you already had a look at ABS-CBN. It's right up your ally: dominant television broadcaster in the Philippines.

Looks cheap and they are currently at multi-year lows with a 3% dividend yield. Majority owned and run by founding family with decent track record.

Country (and currency) risk might be a bit high though.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on April 16, 2018, 09:01:50 AM
I have looked at it & I like the sector but I like GMA Networks better as they have better programming in terms or ratings that ABS-CBN & is cheaper.  They do not have the cable assets of ABS-CBN so one may expect them to be cheaper.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: tombgrt on April 16, 2018, 09:38:48 AM
Yes, I saw GMA Networks as well. Will look into them thanks!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Pondside47 on June 11, 2018, 03:41:43 PM
I still like the radio stocks.  The Entercom deal is good as long as the acquisition does not dilute the sports/news talk culture of their existing stations.  This will gain scale but in these firms you need to careful that you don’t create syndicated vs. customized networks which hurt the model in the long term.  I still like TSQ & SALM for their tight communities.

Packer

Packer, do you like ETM better now 2~3x projected 2020 FCF and the Founding family just bought something like $16m shares in the last few months?  ;)
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Spekulatius on June 15, 2018, 12:22:27 PM
ETM looks to free cash flow breakeven at best, unless you count reduction in receivables as cash flow. It‘s not clear to me if they make it.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on June 15, 2018, 02:05:34 PM
I still like ETM.  The question in my mind is whether the integration of the CBS stations will prevent the decline of revenues or better yet increase revenues.  Both sports radio & news radio are genres that work well for radio & are harder for the internet to displace vs. other genres.

The reason for the low FCF is the large amount of restructuring cost, almost $10m in 1Q & other WC items.  IMO that is why you need to look at EBITDA as the cap-ex is minimal and the amortization is non-cash. 

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Spekulatius on June 15, 2018, 02:56:59 PM
Rough number last quarter:

Revenue :$300.5M
Station operating expenses:$255M
corporate :$19M
Interest :$23.5M

total expense:$297.5M

FCF before tax:$3M


This excludes all restructuring expenses, which is very generous. Unless they can reduce their station expense and/or overhead or increases their revenues, this is going to be a donut.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on June 15, 2018, 07:31:07 PM
You are missing the seasonality in the cash flows.  The Q1 numbers are less than 1/3rd of the Q2-Q4 numbers in 2017.  Also 2018 will include election bump in revenues.  The debt is also trading at par so the debt market is not concerned.  If this was a zero the debt would not be traded at par.  See debt footnote disclosure for some insight on the debt pricing.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: kab60 on June 16, 2018, 01:08:45 AM
Agree with Packer here - plus, there has been a ton of insider buying.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Spekulatius on June 16, 2018, 04:59:09 AM
You are missing the seasonality in the cash flows.  The Q1 numbers are less than 1/3rd of the Q2-Q4 numbers in 2017.  Also 2018 will include election bump in revenues.  The debt is also trading at par so the debt market is not concerned.  If this was a zero the debt would not be traded at par.  See debt footnote disclosure for some insight on the debt pricing.

Packer
My bad, I looked at last years numbers for seasonality and it seem that we can expect a ~22% revenue bump, half of which should drop to the bottom line. This would roughly mean $30-35M in FCF during Q2-Q3, but even with that, it seem FCF yield is a whole lot closer to 10% for thr equity rather than 20%.

The big concern of course is that there are now so many alternatives to radio entertainment when you are in a car. Sirius of course, streaming music (Amazon music free for prime members, which is what I use, Pandora etc). If this is a melting ice cube, even if slowly, the stock won’t do well.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on June 16, 2018, 10:07:30 AM
The only difference for ETM is they are not in the music genre but the sports radio & news genre, which should be more immune to competition you have mentioned.  I think this should prevent the melting and if you add in political & the pay down of debt you can get an interesting investment.  IMO the melting ice cube is the consensus here so the variant perspective is going long.  IMO the debt markets are typically smarter money than the equity markets.  We will see.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: hillfronter83 on June 16, 2018, 12:10:35 PM
The only difference for ETM is they are not in the music genre but the sports radio & news genre, which should be more immune to competition you have mentioned.  I think this should prevent the melting and if you add in political & the pay down of debt you can get an interesting investment.  IMO the melting ice cube is the consensus here so the variant perspective is going long.  IMO the debt markets are typically smarter money than the equity markets.  We will see.

Packer

I like to listen to local sports talk shows while commuting to work. I find it entertaining listening to talk shows focusing on my local sports teams, especially during playoff or big free agency signing, etc. It's hard to replace this with podcast or others since it's only interesting within a short period time. Nobody is interested to hearing last year's game analysis or drafts. Isn't Sirius a radio business, that just caters to different customer basis?

I don't know much about advertising business. But management has been saying that radio provides highest ROI for your advertising money.

Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: tradevestor on June 21, 2018, 09:53:50 PM
Where can I find the quotes on any corporate bond?  I checked Fidelity, but it doesn't appear to have all of them.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on June 22, 2018, 02:27:12 AM
The FINRA quote center is here:  http://finra-markets.morningstar.com/BondCenter/Default.jsp

The only other source I use is Bloomberg but that requires a subscription.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: RedDaruma on July 06, 2018, 05:58:19 AM
Hi Packer,

I noticed you own several companies with governance issues. Are there any good readings or case studies from which I can learn about the success/failure of corporate governance restructuring? TIA
RD
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: tombgrt on July 09, 2018, 04:31:01 AM
Hi Packer. Are you still holding Intralot? I sold out a few months back but am considering buying back in some again as it is much cheaper now (sold most around 1.35 around break even) and management is finally really buying back and cancelling shares at a decent rate and not just window dressing/signalling as they did before. Seems like they can buy back 2% per month. IGT sold off quite a bit last few weeks as well and doesn't seem expensive either. Is new EU regulation weighing on the sector?
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on July 11, 2018, 06:45:39 AM
RD - As to corporate governance, I know of any book that has case studies.  The only area I look for is clues to changes in corporate governance over time from actions.  KT Corp is an example where the previous 2 CEOs had governance issues & the new guy has cleaned house, done good capital allocation & stayed clean in a situation where others did not - the corruption during the recent Park presidency.

tom - I am still holding & feeling the pain.  It appears there are rumors out there & the bonds have declined (not a good sign but I do not know the volume so I cannot tell if this is real price or not).  The backdrop of legalization of sports betting in the US should help them tremendously & they do still sell at significant discount to the comps & the recent capital allocation decision to buyback stock & retire is good.  We will see but the market is still skeptical these guys can create anything worth close to the comps.

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: tombgrt on July 11, 2018, 08:00:47 AM
Thanks Packer!
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: RedDaruma on July 11, 2018, 01:23:51 PM
Thank you, Packer. If you look at Japanese companies (big ones at least), there are many of them declaring the improvement in governance with the new CEO. Too bad, most of the cases they are promoted internally in the companies with bad culture in the first place. I have been looking at TIA as related to this but, considering the similarity b/w Europe and Japan, I think bringing outsiders (Genish, not to mention Elliot) would be encouraging.

Thanks again,
RD
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: tradevestor on August 14, 2018, 06:18:42 PM
Hi Packer,

Are you still following Ocean Yield? They are likely to lose the fpso contract, curious what your thoughts are.

Thanks.
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: Packer16 on August 17, 2018, 10:32:53 AM
I still like them.  They have diversified so the FPSO loss will have a smaller impact.  They have added more tankers, container & dry bulk ships diversifying the ship base with more ship types & customers.  I have not invested primarily due to Norwegian withholding tax & having only IRA funds to invest.   

Packer
Title: Re: Ask Packer - No Seriously, Ask Him Anything (AHA)!
Post by: tradevestor on August 17, 2018, 07:34:30 PM
Thanks, Packer!