Author Topic: What are you buying today?  (Read 1668160 times)

longlake95

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Re: What are you buying today?
« Reply #5130 on: March 25, 2020, 11:34:42 AM »
Backing up the truck on puts.  Adding to existing positions on retail stores, exterminator services, dental equipment makers, a life insurer, a highly levered car maker, and long dated market puts.

The stimulus is unfortunately likely to be the last good news coming in the next few weeks.  We will see unemployment numbers tomorrow (estimate of 1.4 million job losses last week, high estimate of 4 million.  I'd guess higher than even that, and will continue to get worse).  NYC still has at least 3 weeks until peak cases, and there are new hot spots in GA, LA, TX and more.  The idea that things would be back to normal by Easter borders on the farcical. 

The decreasing new cases in Italy is a second derivative effect, and it is a good sign, though not nearly as good as the market thinks.  Cases are still increasing, and we still do not know when Italy can re-open on a partial basis, to say nothing of a return to normal.  If there is a partial return, there will likely be future outbreaks that need to be managed.  That will hopefully be manageable, however there will still be a very significant double digit hit to the economy in the good case.

$1200/person stimulus will not even cover a month of rent or mortgage for most Americans. Folks haven't even had to make one rent payment during this crisis--April 1st will be the first one.  Businesses are starting to run out of cash, and are making plans to lay off employees and are considering bankruptcy as an option.  It's basically impossible to overnight go to 0 revenue, and SBA loans and enhanced unemployment insurance might be helpful, but will not structurally fix the issues of over-capacity in many industries. 

Similar to GM in 2008, any bailouts will likely still result in bankruptcy if the business operations cannot return to a sustainable level quickly, and unfortunately, the health crisis is still likely to get much worse before it gets better.

Big picture, I think we will be facing partial lockdown for many months, as any "return to normal" will mean an overwhelmed health care system.  The stats have been remarkably similar so far, with 80% mild cases, 15% requiring hospitalization, and 5% requiring ICU.  If the health care system is overwhelmed and care must be rationed, many more of the 5% ICU and some of the 15% hospitalization cases will become deaths.  That's the importance of flattening the curve, and we will see in NY over the next few weeks what can happen if that doesn't happen.

I see a long term significant shock to the economy, and do not see any type of V shape recovery in the short or medium term.  I think we see much more pain ahead in markets, and worse, in health outcomes.  Hope I'm wrong, but I see dark clouds in the immediate future.

to be clear...are you buying puts to hedge your holdings if we go down. Or are you selling puts to back in to some positions if we go down?


alwaysdrawing

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Re: What are you buying today?
« Reply #5131 on: March 25, 2020, 11:36:20 AM »
Backing up the truck on puts.  Adding to existing positions on retail stores, exterminator services, dental equipment makers, a life insurer, a highly levered car maker, and long dated market puts.

The stimulus is unfortunately likely to be the last good news coming in the next few weeks.  We will see unemployment numbers tomorrow (estimate of 1.4 million job losses last week, high estimate of 4 million.  I'd guess higher than even that, and will continue to get worse).  NYC still has at least 3 weeks until peak cases, and there are new hot spots in GA, LA, TX and more.  The idea that things would be back to normal by Easter borders on the farcical. 

The decreasing new cases in Italy is a second derivative effect, and it is a good sign, though not nearly as good as the market thinks.  Cases are still increasing, and we still do not know when Italy can re-open on a partial basis, to say nothing of a return to normal.  If there is a partial return, there will likely be future outbreaks that need to be managed.  That will hopefully be manageable, however there will still be a very significant double digit hit to the economy in the good case.

$1200/person stimulus will not even cover a month of rent or mortgage for most Americans. Folks haven't even had to make one rent payment during this crisis--April 1st will be the first one.  Businesses are starting to run out of cash, and are making plans to lay off employees and are considering bankruptcy as an option.  It's basically impossible to overnight go to 0 revenue, and SBA loans and enhanced unemployment insurance might be helpful, but will not structurally fix the issues of over-capacity in many industries. 

Similar to GM in 2008, any bailouts will likely still result in bankruptcy if the business operations cannot return to a sustainable level quickly, and unfortunately, the health crisis is still likely to get much worse before it gets better.

Big picture, I think we will be facing partial lockdown for many months, as any "return to normal" will mean an overwhelmed health care system.  The stats have been remarkably similar so far, with 80% mild cases, 15% requiring hospitalization, and 5% requiring ICU.  If the health care system is overwhelmed and care must be rationed, many more of the 5% ICU and some of the 15% hospitalization cases will become deaths.  That's the importance of flattening the curve, and we will see in NY over the next few weeks what can happen if that doesn't happen.

I see a long term significant shock to the economy, and do not see any type of V shape recovery in the short or medium term.  I think we see much more pain ahead in markets, and worse, in health outcomes.  Hope I'm wrong, but I see dark clouds in the immediate future.

to be clear...are you buying puts to hedge your holdings if we go down. Or are you selling puts to back in to some positions if we go down?

I am buying puts as speculative bets on price declines on companies in which I own no stock.

no_free_lunch

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Re: What are you buying today?
« Reply #5132 on: March 25, 2020, 11:36:44 AM »

 why is Boeing up 30% - world not flying
 and TSLA up 10% - factories shut

and Walmart down 5% - actually open and feeding people

    stock market doesn't make sense to me!

I don't know about BA / TSLA but WMT going down makes sense.  It is over 20x earnings for a retailer.   Sure they will get a temporary bump due to hoarding but if the economy gets as bad as people believe, then walmart and competitors will eventually take huge hits as well.

ERICOPOLY

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Re: What are you buying today?
« Reply #5133 on: March 25, 2020, 11:51:01 AM »

 why is Boeing up 30% - world not flying
 and TSLA up 10% - factories shut

and Walmart down 5% - actually open and feeding people

    stock market doesn't make sense to me!

I don't know about BA / TSLA but WMT going down makes sense.  It is over 20x earnings for a retailer.   Sure they will get a temporary bump due to hoarding but if the economy gets as bad as people believe, then walmart and competitors will eventually take huge hits as well.

Yeah but...

I wanted a gift for my son's birthday which is in two days.  I want to buy him camping supplies.

Can I go to REI?  No, it isn't an essential business.
Can I go to Walmart?  Yes, it is essential because they sell groceries, hardware, and have a pharmacy.  And... yes, camping gear.


They are going to get so much more business now in all categories -- it's not just about hoarding toilet paper, pasta, and milk.
« Last Edit: March 25, 2020, 11:52:50 AM by ERICOPOLY »

Foreign Tuffett

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Re: What are you buying today?
« Reply #5134 on: March 25, 2020, 11:58:50 AM »

 why is Boeing up 30% - world not flying
 and TSLA up 10% - factories shut

and Walmart down 5% - actually open and feeding people

    stock market doesn't make sense to me!

I don't know about BA / TSLA but WMT going down makes sense.  It is over 20x earnings for a retailer.   Sure they will get a temporary bump due to hoarding but if the economy gets as bad as people believe, then walmart and competitors will eventually take huge hits as well.

Yeah but...

I wanted a gift for my son's birthday which is in two days.  I want to buy him camping supplies.

Can I go to REI?  No, it isn't an essential business.
Can I go to Walmart?  Yes, it is essential because they sell groceries, hardware, and have a pharmacy.  And... yes, camping gear.


They are going to get so much more business now in all categories -- it's not just about hoarding toilet paper, pasta, and milk.

Yes, this is exactly right. I got off a phone call a few hours ago with someone who was complaining that their local Walmart was sold out of a multitude of non grocery items. This includes camping type stuff, as survivalist types have gone into panic mode and bought up all the guns, ammo, hunting supplies, camping stoves, flashlights, etc.

cherzeca

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Re: What are you buying today?
« Reply #5135 on: March 25, 2020, 12:08:06 PM »
that's for prepping, not for camping.  ;)

kab60

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Re: What are you buying today?
« Reply #5136 on: March 25, 2020, 12:11:33 PM »
More AMA Group... Price chart makes one puke, but I think it's a potential 5-10 bagger, and unless I've completely missed something, I think I've rarely seen a selloff as crazy as this one. Might wanna write it up.

I am a little bit concerned about the debt covenants. My stomach is weaker than yours, I puked this out when it was  0.57AUD, now at 0.175AUD.

It trades like an option now.
Well, you did well selling. I averaged down a couple of times - and doubled it today. Ugh. Someone mailed me to get my view, quick view here (all very back of the envelope):

From the recent CC (from the CEO): We have a net leverage ratio where we can't exceed 3.25 in the first year. That doesn't get tested until the end of this year. And everything is on the basis of around run rate and those sorts of things. So we're comfortable with that at the moment. And based on those, so no concerns on that.


So I think end of last Q they had around 300m drawn on their 375m debt facilities and 50m cash so 250m net debr vs guidance of some 75m ebitda. So obviously close and obviously things have evolved for the worse with corona-virus (if you go to AMAs website they sent out a note to customers, clients etc.), but they're still in business - this isn't retail. And there might be pent up demand from hails storms that hit Australia.

But I think what's important here is the comment on run rate which I assume means that they'll be able to include, among other things, 17m in expected synergies (they have alluded that it will be higher, so perhaps they can bump it up). Either way I think there's a real risk that they breach those covenants - but I also expect lenders to be willing to waive those given the special circumstances. Very few banks will want to write off a loan six months in - and optically it would look extremely bad.

As for valuation, with a marketcap of 125m and 250 net debt the price of AMA is below the price of the Smart Capital acquisition (where rumour was others were willing to pay around 320m I seem to recall) PLUS the old Ama Group. Blackstone was close to buying the whole thing for some 10xebitda while right now - if things go as planned - they might do plus 100m ebitda in their fiscal 21 so around 3,5xev/ebitda.

I know it sounds almost stupid, but that would potentially imply equity upside of some 600 pct. from here. There is real risk of permanent capital impairment, but I think the risk is severly overstated and would expect them to get a waiver if they trip covenants. Last resort perhaps call Blackstone again? And I don't think things are all that dire. This is smash repair shops that should be extremely resilent since insurance pays, AND they had good answers on the call as to what needs to be improved (and it seems pretty easy to fix). CEO owns a ton of stock, three insider buys since beginning of march - post results.
« Last Edit: March 25, 2020, 12:46:08 PM by kab60 »

kab60

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Re: What are you buying today?
« Reply #5137 on: March 26, 2020, 07:47:20 AM »
CAMBRIA Automobiles - 2,3xEV/ebitda, midteens ROIC, founderled

petec

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Re: What are you buying today?
« Reply #5138 on: March 26, 2020, 08:48:48 AM »
SPG JEF FIH - but all small.
FFH MSFT BRK BAM ATCO LNG IHG TFG CGT DC/A

cherzeca

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Re: What are you buying today?
« Reply #5139 on: March 26, 2020, 08:57:07 AM »
I bought a 2 year leap on FAS, super leveraged play on banks.  small investment.  doing well last few days of course, but I expect banks to recover to prior levels during the holding period