Author Topic: Futures Limit Down  (Read 13471 times)

kab60

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Re: Futures Limit Down
« Reply #20 on: March 23, 2020, 01:57:10 PM »
I think the fear on here is quiet interesting since decent to good Companies are 50-75 pct. off since their most recent highs and yet it sounds like risk has increased.

Which companies do you like the best?  I don't follow that many, so I'm likely missing out on potential ideas.

I agree with your general point that the amount of general posts here has swamped company-specific posts for awhile.  It's been hard to get any conversation going about specific companies.
I don't even know where to begin. I think the ground is littered with bargains.

I'm not saying you're wrong.  I'm genuinely interested in understanding the companies you're referring to.
Lots of mega caps and sleep well at night stocks seem cheap; Berkshire, Google, Altria.

I think ALT managers have a bright future and like KKR where apart from earnings there's some tangible value in their investments (which have taken a hit, obviously). Espescially with low rates. Unlike say BAM you don't have to have a strong opinion on malls.

Also like retailers (ugh!) like Ulta Beauty - and an asset light (but sub prime heavy!) play on retailers like Alliance Data Systems. The last one has been expensive for me, but hopefully it'll be a multibagger from here.

I also like car dealerships. Auto Nation and Ashbury Automotive are cheap and well run in the states, but they also have a bit of leverage. Their new car sales will be hurt in a recession, obviously, but they're making around 40-45 pct. of their GP on service, which is resilent. I like both, but have invested in Vertu Motors and Cambria Automobiles in UK instead - they're simply cheaper.

Vertu with around half of the market cap in net cash and coming out of a large investment cycle (thus harvesting FCF now), Cambria arguably a better business and with a fine balance sheet but bigger capex cycle ahead (perhaps some will be postphoned). I also really like Clipper Logistics in the UK (a play on retail and ecommerce), which I've written up, as well as St. James Place (money manager with sticky capital, high ROIC, asset light).

My biggest position is Berkshire, second biggest is Linamar, which is a founder-led Canadian auto parts, industrial and and agri company. 2019 was a tough year for them, and they did close to 700m in FCF vs. a market cap of 1,6b today. Guided for another 500-700m this year.

That was a couple of weeks before auto OEMS closed shop, they themselves will be shut down for some time, but I think the world will go on in 6-8 weeks, and I expect them to keep throwing off cash and diversify further (latest is into medtech - hopefully something less cyclical!). Trades around 0,3xBV and will probably do mid/high teens ROE if things start hitting on all cylinders at some point. Insiders have been buying.

All can be debated - well not really, most have gotten killed - but they're pretty simple business that are easy to understand and should be here in 5-10 years if they don't go bust before then. No idea about the upside, I'm mostly trying to figure out the downside, because if they get through to the other side, I'll much prefer to own 10 plus ROE businesses with fat dividends and half-resilent earnings and net cash should at 1,5xev/ebitda (Vertu) than hold cash - volatility be damned.


KJP

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Re: Futures Limit Down
« Reply #21 on: March 23, 2020, 02:29:43 PM »
I think the fear on here is quiet interesting since decent to good Companies are 50-75 pct. off since their most recent highs and yet it sounds like risk has increased.

Which companies do you like the best?  I don't follow that many, so I'm likely missing out on potential ideas.

I agree with your general point that the amount of general posts here has swamped company-specific posts for awhile.  It's been hard to get any conversation going about specific companies.
I don't even know where to begin. I think the ground is littered with bargains.

I'm not saying you're wrong.  I'm genuinely interested in understanding the companies you're referring to.
Lots of mega caps and sleep well at night stocks seem cheap; Berkshire, Google, Altria.

I think ALT managers have a bright future and like KKR where apart from earnings there's some tangible value in their investments (which have taken a hit, obviously). Espescially with low rates. Unlike say BAM you don't have to have a strong opinion on malls.

Also like retailers (ugh!) like Ulta Beauty - and an asset light (but sub prime heavy!) play on retailers like Alliance Data Systems. The last one has been expensive for me, but hopefully it'll be a multibagger from here.

I also like car dealerships. Auto Nation and Ashbury Automotive are cheap and well run in the states, but they also have a bit of leverage. Their new car sales will be hurt in a recession, obviously, but they're making around 40-45 pct. of their GP on service, which is resilent. I like both, but have invested in Vertu Motors and Cambria Automobiles in UK instead - they're simply cheaper.

Vertu with around half of the market cap in net cash and coming out of a large investment cycle (thus harvesting FCF now), Cambria arguably a better business and with a fine balance sheet but bigger capex cycle ahead (perhaps some will be postphoned). I also really like Clipper Logistics in the UK (a play on retail and ecommerce), which I've written up, as well as St. James Place (money manager with sticky capital, high ROIC, asset light).

My biggest position is Berkshire, second biggest is Linamar, which is a founder-led Canadian auto parts, industrial and and agri company. 2019 was a tough year for them, and they did close to 700m in FCF vs. a market cap of 1,6b today. Guided for another 500-700m this year.

That was a couple of weeks before auto OEMS closed shop, they themselves will be shut down for some time, but I think the world will go on in 6-8 weeks, and I expect them to keep throwing off cash and diversify further (latest is into medtech - hopefully something less cyclical!). Trades around 0,3xBV and will probably do mid/high teens ROE if things start hitting on all cylinders at some point. Insiders have been buying.

All can be debated - well not really, most have gotten killed - but they're pretty simple business that are easy to understand and should be here in 5-10 years if they don't go bust before then. No idea about the upside, I'm mostly trying to figure out the downside, because if they get through to the other side, I'll much prefer to own 10 plus ROE businesses with fat dividends and half-resilent earnings and net cash should at 1,5xev/ebitda (Vertu) than hold cash - volatility be damned.

Thanks for the thoughts.  To the extent it's useful, I have an eye on the following:

FRP Holdings
Griffin Industrial Realty
Williams Companies
LICT Corp.
Rosetta Stone
Comcast
Black Stone Minerals (it's hard to even type that right now)
Daily Journal
Hill International
NVR

For a few of them, I've been buying a bit here and there, but largely waiting for them to get even cheaper.




Spekulatius

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Re: Futures Limit Down
« Reply #22 on: March 23, 2020, 02:42:48 PM »
I think the fear on here is quiet interesting since decent to good Companies are 50-75 pct. off since their most recent highs and yet it sounds like risk has increased. There are stocks that'll be multibaggers off these levels, still it sounds like a lot of people are almost 100 pct. cash and spend more time acting as hobby epidemiologist or prepping for zombie apocalypse. Denmark, where I live, seems to have flattened the curve after 12 days of lockdown. More countries in Europe seem to turn the corner. You Guys in the states might be last but you'll get through this as well. And all politicians seems pretty committed to use a fiscal bazooka if needed. Good luck to all.

In Germany the trend is flatting too, as seems to be the case in Italy as the hammer finally came doen. US still had more pain ahead in this department. The reason why everyone looks at headlines is because it is a headline and liquidity (or lack thereof) driven market. I do agree there are some unbelievable bargains out there, short of going into a real depression.
Life is too short for cheap beer and wine.

kab60

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Re: Futures Limit Down
« Reply #23 on: March 24, 2020, 01:07:39 PM »
I think the fear on here is quiet interesting since decent to good Companies are 50-75 pct. off since their most recent highs and yet it sounds like risk has increased.

Which companies do you like the best?  I don't follow that many, so I'm likely missing out on potential ideas.

I agree with your general point that the amount of general posts here has swamped company-specific posts for awhile.  It's been hard to get any conversation going about specific companies.
I don't even know where to begin. I think the ground is littered with bargains.

I'm not saying you're wrong.  I'm genuinely interested in understanding the companies you're referring to.
Lots of mega caps and sleep well at night stocks seem cheap; Berkshire, Google, Altria.

I think ALT managers have a bright future and like KKR where apart from earnings there's some tangible value in their investments (which have taken a hit, obviously). Espescially with low rates. Unlike say BAM you don't have to have a strong opinion on malls.

Also like retailers (ugh!) like Ulta Beauty - and an asset light (but sub prime heavy!) play on retailers like Alliance Data Systems. The last one has been expensive for me, but hopefully it'll be a multibagger from here.

I also like car dealerships. Auto Nation and Ashbury Automotive are cheap and well run in the states, but they also have a bit of leverage. Their new car sales will be hurt in a recession, obviously, but they're making around 40-45 pct. of their GP on service, which is resilent. I like both, but have invested in Vertu Motors and Cambria Automobiles in UK instead - they're simply cheaper.

Vertu with around half of the market cap in net cash and coming out of a large investment cycle (thus harvesting FCF now), Cambria arguably a better business and with a fine balance sheet but bigger capex cycle ahead (perhaps some will be postphoned). I also really like Clipper Logistics in the UK (a play on retail and ecommerce), which I've written up, as well as St. James Place (money manager with sticky capital, high ROIC, asset light).

My biggest position is Berkshire, second biggest is Linamar, which is a founder-led Canadian auto parts, industrial and and agri company. 2019 was a tough year for them, and they did close to 700m in FCF vs. a market cap of 1,6b today. Guided for another 500-700m this year.

That was a couple of weeks before auto OEMS closed shop, they themselves will be shut down for some time, but I think the world will go on in 6-8 weeks, and I expect them to keep throwing off cash and diversify further (latest is into medtech - hopefully something less cyclical!). Trades around 0,3xBV and will probably do mid/high teens ROE if things start hitting on all cylinders at some point. Insiders have been buying.

All can be debated - well not really, most have gotten killed - but they're pretty simple business that are easy to understand and should be here in 5-10 years if they don't go bust before then. No idea about the upside, I'm mostly trying to figure out the downside, because if they get through to the other side, I'll much prefer to own 10 plus ROE businesses with fat dividends and half-resilent earnings and net cash should at 1,5xev/ebitda (Vertu) than hold cash - volatility be damned.

Thanks for the thoughts.  To the extent it's useful, I have an eye on the following:

FRP Holdings
Griffin Industrial Realty
Williams Companies
LICT Corp.
Rosetta Stone
Comcast
Black Stone Minerals (it's hard to even type that right now)
Daily Journal
Hill International
NVR

For a few of them, I've been buying a bit here and there, but largely waiting for them to get even cheaper.
I'm familiar with most of those (and have a large stake in WMB since recently). How do you decide whether they're cheap enough or not? The other day, when WMB went down 30 pct. to below 9 - apparently somewhat due to forced selling from ETF's - I think that seemed like a good time to pounce. Things can always get cheaper, obviously, but I think it's too difficult to try and time the bottom and thus stay fully invested - now with a little margin on top - if I can find investments that meet my criteria.

That was possible for me before the selloff (I might have to increase my hurdle rate - I'm too easily lured I think), and it has been dead easy since S&P went down 1/3 in 4 weeks. Anyway, my question is - when we've had a day like today (up 10 pct.) - how does one ever get back in if things just shoot up? Not saying that'll happen, or that it's even likely, but doesn't one risk missing all the action because one is anchored to prices just last week (with a lot of stuff since then up 50-100 pct.)? I think I would. I already find it extremely hard not to anchor to prices that aren't around 52-week lows - as arbitrary and dumb as it is.

I know being fully invested isn't for everyone - I've been down almost 50 pct. in 4 weeks - but it takes a lot of difficult mental gymnastics out of the equation. Obviously one needs to be able to stomach some crazy volatility. And be able to find decent investments.

KJP

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Re: Futures Limit Down
« Reply #24 on: March 24, 2020, 01:36:37 PM »
I think the fear on here is quiet interesting since decent to good Companies are 50-75 pct. off since their most recent highs and yet it sounds like risk has increased.

Which companies do you like the best?  I don't follow that many, so I'm likely missing out on potential ideas.

I agree with your general point that the amount of general posts here has swamped company-specific posts for awhile.  It's been hard to get any conversation going about specific companies.
I don't even know where to begin. I think the ground is littered with bargains.

I'm not saying you're wrong.  I'm genuinely interested in understanding the companies you're referring to.
Lots of mega caps and sleep well at night stocks seem cheap; Berkshire, Google, Altria.

I think ALT managers have a bright future and like KKR where apart from earnings there's some tangible value in their investments (which have taken a hit, obviously). Espescially with low rates. Unlike say BAM you don't have to have a strong opinion on malls.

Also like retailers (ugh!) like Ulta Beauty - and an asset light (but sub prime heavy!) play on retailers like Alliance Data Systems. The last one has been expensive for me, but hopefully it'll be a multibagger from here.

I also like car dealerships. Auto Nation and Ashbury Automotive are cheap and well run in the states, but they also have a bit of leverage. Their new car sales will be hurt in a recession, obviously, but they're making around 40-45 pct. of their GP on service, which is resilent. I like both, but have invested in Vertu Motors and Cambria Automobiles in UK instead - they're simply cheaper.

Vertu with around half of the market cap in net cash and coming out of a large investment cycle (thus harvesting FCF now), Cambria arguably a better business and with a fine balance sheet but bigger capex cycle ahead (perhaps some will be postphoned). I also really like Clipper Logistics in the UK (a play on retail and ecommerce), which I've written up, as well as St. James Place (money manager with sticky capital, high ROIC, asset light).

My biggest position is Berkshire, second biggest is Linamar, which is a founder-led Canadian auto parts, industrial and and agri company. 2019 was a tough year for them, and they did close to 700m in FCF vs. a market cap of 1,6b today. Guided for another 500-700m this year.

That was a couple of weeks before auto OEMS closed shop, they themselves will be shut down for some time, but I think the world will go on in 6-8 weeks, and I expect them to keep throwing off cash and diversify further (latest is into medtech - hopefully something less cyclical!). Trades around 0,3xBV and will probably do mid/high teens ROE if things start hitting on all cylinders at some point. Insiders have been buying.

All can be debated - well not really, most have gotten killed - but they're pretty simple business that are easy to understand and should be here in 5-10 years if they don't go bust before then. No idea about the upside, I'm mostly trying to figure out the downside, because if they get through to the other side, I'll much prefer to own 10 plus ROE businesses with fat dividends and half-resilent earnings and net cash should at 1,5xev/ebitda (Vertu) than hold cash - volatility be damned.

Thanks for the thoughts.  To the extent it's useful, I have an eye on the following:

FRP Holdings
Griffin Industrial Realty
Williams Companies
LICT Corp.
Rosetta Stone
Comcast
Black Stone Minerals (it's hard to even type that right now)
Daily Journal
Hill International
NVR

For a few of them, I've been buying a bit here and there, but largely waiting for them to get even cheaper.
How do you decide whether they're cheap enough or not? The other day, when WMB went down 30 pct. to below 9 - apparently somewhat due to forced selling from ETF's - I think that seemed like a good time to pounce.

...

Anyway, my question is - when we've had a day like today (up 10 pct.) - how does one ever get back in if things just shoot up? Not saying that'll happen, or that it's even likely, but doesn't one risk missing all the action because one is anchored to prices just last week (with a lot of stuff since then up 50-100 pct.)? I think I would. I already find it extremely hard not to anchor to prices that aren't around 52-week lows - as arbitrary and dumb as it is.


I agree with you re: going to all cash.  I didn't do that for the reasons you mentioned.  But I start adding much too early, before I understood the seriousness of the likely fallout from the virus.  So, I slowed my buying considerably (though I did buy a bit of WMB between 9 and 10 for the reasons you mentioned).  If I missed a buying opportunity with some of my cash, I'm OK with that, but I recognize I cannot time the bottom or perhaps even recognize it until it's long since past.  That's why I do have general price targets for many of the ones I mentioned.

Spekulatius

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Re: Futures Limit Down
« Reply #25 on: March 24, 2020, 02:44:13 PM »
I agree with you re: going to all cash.  I didn't do that for the reasons you mentioned.  But I start adding much too early, before I understood the seriousness of the likely fallout from the virus.  So, I slowed my buying considerably (though I did buy a bit of WMB between 9 and 10 for the reasons you mentioned).  If I missed a buying opportunity with some of my cash, I'm OK with that, but I recognize I cannot time the bottom or perhaps even recognize it until it's long since past.  That's why I do have general price targets for many of the ones I mentioned.

The problem with investing based on fundamental  right now is that we have no clue what the fundamental are looking like right now, much less in the future. We can anchor on past valuations but that is a poor guide when the ground shift beneath our feet. It seems to me more like an environment where a trader or macro investor does well.

There will be a time when the bleak fundamental become clearer and most likely thats a better time for fundamental value investing.
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kab60

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Re: Futures Limit Down
« Reply #26 on: March 24, 2020, 03:26:49 PM »
I don't know about that, Spek. People always tend to think they live in extraordinary and uncertain times, and now it's a virus from China that is on everyones mind. All these lockdowns will obviously have an effect, some companies will go bust, but most will live on, and soon enough it'll be over and we'll probably find something else to fuss about. Or we'll all be dead!

LC

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Re: Futures Limit Down
« Reply #27 on: March 24, 2020, 03:41:14 PM »
So I am no scientist but from the armchair perspective, I think a realistic possibility is by May June July (call it late spring/summer), COVID is on the retreat and life is returning to "normal". I put that in quotes because I don't really know what normal will look like, but for lack of a better term let's call it post-quarantine.

Then the flip side is that come November/December, what if we see the emergence of another related, highly infectious and deadly respiratory virus?

To me this is a higher-than-zero probability sequence of events. So IF we do see a waning over the summer, it may be prudent to hold off from taking full risk until we see what the winter brings.
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TwoCitiesCapital

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Re: Futures Limit Down
« Reply #28 on: March 24, 2020, 03:46:27 PM »
So I am no scientist but from the armchair perspective, I think a realistic possibility is by May June July (call it late spring/summer), COVID is on the retreat and life is returning to "normal". I put that in quotes because I don't really know what normal will look like, but for lack of a better term let's call it post-quarantine.

Then the flip side is that come November/December, what if we see the emergence of another related, highly infectious and deadly respiratory virus?

To me this is a higher-than-zero probability sequence of events. So IF we do see a waning over the summer, it may be prudent to hold off from taking full risk until we see what the winter brings.

That's part of my reason for not seeing a V shaped recovery. Social distancing works in that it helps to keep from overwhelming the healthcare system - it will also prevent herd immunity which means this comes back fall/winter barring a vaccine.

Each wave will be less impactful than the one before - but will still be impactful until a vaccine comes out or until we reach herd immunity.

Even barring bankruptcies and the slow rsmo up of the travel industry and etc, this will weigh in future growth and economic activity. The other stuff just exacerbates it.

We're not going back to 2019 economic activity, earnings, or multiples in the next 2-3 years IMO.


kab60

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Re: Futures Limit Down
« Reply #29 on: March 24, 2020, 03:49:25 PM »
But is this virus even terrifying? Doesn't seem very frightening when looking at the numbers. And it seems the potentiel issue is bad prepping (like lack of sanizer, face masks, testing etc,) which risks overwhelming healthcare system. Pretty sure most countries will have stocked up and be 10xbetter prepared next time.