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Embraer (ERJ) five year holding period

Nerdyblop wrote:

semis and big tech overvalued? the ones that provide the best value are in these two spaces imo. they’ve appreciated a lot, but so have their earnings/fcf, and guidance.

you can’t be serious. MU will be profitless within 2-3 years and scraping the bottom of the barrel to remain solvent, as they do every 3-5 years. NVDA is probably 3-4x its actual value as they trade at 50x trailing juiced up earnings. when crypto bubble pops, NVDA is going to be quartered, if its lucky. semis are the best example of a value trap. semis look cheapest when they’re actually the most expensive. semi (and memory) pricing makes semis more similar to commodity companies than anything close to resembling blue chips.

big tech is harder call but the day will come when AMZN’s competitors actually compete. i think that process is starting now with WMT becoming an actual online competitor and with incumbent retailers forced to invest in e-commerce or die. my AMZN use has fallen maybe 50% over the past year as their search results blow due to it being a marketplace versus a traditional retailer. pricing is the same on BBY but i don’t have to deal with the marketplace and getting 10,000 results for a very specific search query.

SaaS is still overvalued relative to true growth opps. its revaluation day will come. tencent and baba have stupid valuations for much of the same reason as AMZN. priced for perfection. will they lead for a few decades? very likely, will they do so with no competition forever? no. all gaming stocks are stupidly valued. 3x historical. AAPL is probably overvalued given ultimate size versus economy and trading 50% above historical. i like GOOG long-term as i think the Pixel will pick away at iPhone market share, it has a good chance at leading self-driving, should remain dominant in search and could see wearables actually work if they can get Pixel working for them. that said, it could use a valuation reset to 25x too despite its solid outlook becuase of its size. massive companies should not and cannot trade at 50%-100% of the market valuation forever. all tech companies are given the benefit of the doubt that they and they alone will dominate the future despite new companies being much more likely to find themselves as the victors.

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agree with MLA. just put your money is FB

"You want a quote? Haven’t I written enough already???"

RIP

you are cherry picking on the semis. those are obvi overvalued. i know at least 2 semis that are cheap historically/relatively and growing 10%+ historically and through guidance.

i dont like amazon. baba is the better play imo. but i dont like baba eitehr too expensive. relatively cheap though to comps.

goog is pretty good but its on the slightly expensive side. replacing it with fb soon.

i did just sell out of a gaming co, its getting expensive.

aapl. im selling out soon.

I love my cheese. I got to have my cheddar.

all semis are overvalued. MU and NVDA are poster children for their subcategories. it’s a chip/memory pricing issue. they will all look expensive when pricing makes nearly all of them unprofitable.

Overvalued based on what? You can’t look at semis as a super cyclical industry anymore with new emerging tech. That was one of the reasons why many people got it wrong last few years. They failed to notice the change. 

so recessions don’t exist anymore?

They do but I doubt it’s gonna happen in 2018 with rates where they are and tax cuts. By historical standards most of the companies, especially in the US are overvalued.

not according to WB

qb wrote:

Turning to the stock market, Buffett says values aren’t that high given the level of interest rates. Plus, he says, the ramifications of the corporate tax cut haven’t begun to be fully appreciated. A “silent holder” in American businesses has been asking for 35% of profits forever, he says. Now that holder is asking for just 21%. “That makes the remaining stock more valuable.”

"You want a quote? Haven’t I written enough already???"

RIP

gundlach would disagree. but personally i dont think its baked in yet. we will see a lot of upward revisions on earnings. 

rates will not stay this low for long imo. federal reserve has more of an incentive to raise rates. even more so than last year and they raised it 75 bps. i remember a while back people spoke about the great rotations bonds moving to stocks. now i believe it will be stocks moving to bonds as rates rise. the chinks are selling out of us bonds. also i disagree on semis being commodities. they are very research oriented and patent *****s.

mla can you elaborate on semiconductors. just very curious on it. from what i know everyone has great hopes due to iot. and new devices needing more computing power. 5g. yada yada yada. are you saying that the prices they are charging are too high, and rev and eps will fall? and again they are not all overvalued.i can promise you that. i have checked them hisrotically. i know at least 2.

I love my cheese. I got to have my cheddar.

it’s a cyclical business involving massive capex to get plants up and running and then those plants become severely underutilized in down times, causing some to temporarily close. semi companies are not unlike auto companies in that way. MU is one of the most impacted by this as they are representative of the marginal commodity chip producer.

R&D in new semi manufacturing is unrelated to the capital flows to operate the business. 1) outlook improves creating future supply shortage. 2) you spend several billion to create a new facility. 3) facility takes a couple of years to be operational. 4) new capacity comes online but business cycle turns, pushing semi prices down and forcing some semi producers to cut production or facilities, 5) see 1 again. does this sound like a commodity company to you? it sounds like an oil sands operator to me. any technological advantage only partially soothes the pain of this cycle.

while IoT will probably drive demand going forward, chips used for IoT are generally quite basic relative to the past (computers, mobile devices, etc) and are likely to be commoditized more than semis of the past given the sheer quantity and general low price point required.

the only way to say the trading pattern for semis has changed relative to all history is to assume that the near future is completely different than all of history. wasn’t the dawn of the PC revolutionary enough relative to IoT? wasn’t the dawn of the mobile phone enough relative to IoT? i don’t see IoT somehow having a more material impact on semis than those two past advances. it’s still a supply and demand equation with crap tons of capex required to meet supply.

I generally agree with MLA but tech / semis are outside of my depth so I have nothing meaningful to add.

#FreeCVM #FreeTurd #2007-2017

Listen to United’s 4Q17 call, it’s a long one (1:46) but a great in depth overview of airline networks in the first 36 minutes (Scott Kirby’s section) if you’re casually interested in how these things work.  Great ERJ read through based on what I’ve been saying about “filling in the cracks” as the next foot to fall in aerospace as well.  MUGA (Make United Great Again) tagline dropped by Scott Kirby.

#FreeCVM #FreeTurd #2007-2017

Isn’t ERJ getting low balled at the current price based on the original analysis? And BA has been killing it.. I vaguely remember negative view on BA in the original discussion. 

klaudnine wrote:

Isn’t ERJ getting low balled at the current price based on the original analysis? And BA has been killing it.. I vaguely remember negative view on BA in the original discussion. 

Yes.  Regarding BA I definitely missed that one.  I think the run up is unjustified but markets seem to disagree.  Anyhow, listen to the call.  Basically reinforces this:

https://www.bloomberg.com/news/articles/2018-01-23/embraer-says-boeing-a...

#FreeCVM #FreeTurd #2007-2017

cool thanks!

What we thinking? 

Will depend on how this JV plays out in terms of orders but looks positive to me.  Nice for people who like Boeing but not Boeing’s valuation.  Looking at comparables, the JV with Airbus has been great for Bombardier.  A nice cash takeout offer would have been a nice way to bookend everything but the tradeoff here is getting to participate in upside.  This makes a lot more sense as I couldn’t visualize how Embraer could have survived on the remaining units if it sold commercial.  I still think Embraer offers a nice compelling opportunity, especially if they can form a military JV with Boeing as well which seems to be in the works.  We’re also seeing a recovery in business jets and most of the big capex is now behind Embraer.  Another thing to keep in mind is they are net long the dollar (by a small amount) meaning as they sell in the dollar but have some Real costs, the relative strength of the dollar vs the real is helping their margins.

#FreeCVM #FreeTurd #2007-2017

Eyooooh!  This comes after a long dry spell.  I think this will definitely be the beginning of a nice surge.

Boeing, Embraer Split $2.3 Billion Aircraft Order From United

  • United buys 25 E-175s, 4 Boeing 787-9s to replace older planes
  • Deal a boost to recent Boeing-Embraer alliance for smaller jet

By Anurag Kotoky and Justin Bachman

(Bloomberg) – 

Boeing Co. and Embraer SA won orders valued at $2.3 billion from United Airlines in a boost to an alliance the two planemakers announced earlier this month.

United Continental Holdings Inc. will buy 25 Embraer E-175 planes and four Boeing 787-9 Dreamliners, it said in a statement Monday. At list prices, the Embraer jets are worth about $1.2 billion in total, while the widebodies are worth $1.1 billion excluding customary discounts. Deliveries are set to start in the next two years.

#FreeCVM #FreeTurd #2007-2017

splain yoself fool

"You want a quote? Haven’t I written enough already???"

RIP

I had no idea this was posted in 2016.  Time flies when getting woke in the water cooler. Cool that the op has a holding period

igor555 wrote:

splain yoself fool

Well, 2016 was two years ago and five years would be 2021.

#FreeCVM #FreeTurd #2007-2017

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"You want a quote? Haven’t I written enough already???"

RIP

Are you more or less convicted two years in? 

It’s tougher sledding than I thought but I think my conviction is about the same.  2019 is first deliveries for KC390 (military cargo) and delivery ramp for the new generation of E Jets (Commercial).  They also have the tailwind of the Boeing JV.   My biggest question mark is just in the seeing how the value creation of the Boeing JV plays out (with the agreement still uncertain) although broadly I’m on board.  I mean, this quarter’s results were basically tanked because of a freak flight test accident on development that is 96% complete with the KC390 that basically forced them to absorb the cost of another aircraft into the test flight lineup while also pushing off realization of revenue for first delivery to 2019 and causing them to eat costs on supplier contracts and fixed cost front.  Orders were strong at Farnborough and I’m genuinely on board.

#FreeCVM #FreeTurd #2007-2017

It’s just so hard as an investor to be patient through these development periods which take several years plus the cash burn during production ramp.  It’s not something you see in many industries.

#FreeCVM #FreeTurd #2007-2017

Black Swan wrote:

It’s just so hard as an investor to be patient through these development periods which take several years plus the cash burn during production ramp.  It’s not something you see in many industries.

Definitely seems that way to me. Foreign to me 

Black Swan wrote:

It’s just so hard as an investor to be patient through these development periods which take several years plus the cash burn during production ramp.  It’s not something you see in many industries.

thats something that can provide alpha though - your ability to hold & lack of constraint of needing to provide a return this month/quarter/year to generate $ for your firm/investors.

'A flute with no holes, is not a flute. And a donut with no hole, is a danish'

Yayyywork wrote:

Black Swan wrote:

It’s just so hard as an investor to be patient through these development periods which take several years plus the cash burn during production ramp.  It’s not something you see in many industries.

thats something that can provide alpha though - your ability to hold & lack of constraint of needing to provide a return this month/quarter/year to generate $ for your firm/investors.

But it also means the outperform in the out years has to be huge 

Black Swan wrote:

It’s just so hard as an investor to be patient through these development periods which take several years plus the cash burn during production ramp.  It’s not something you see in many industries.

“Everyone has the brainpower to make money in stocks. Not everyone has the stomach.”
Peter Lynch

personally, i can deal with cyclical prices, but i cannot stomach cyclical fundamentals.

I love my cheese. I got to have my cheddar.

Nerdyblop wrote:

Black Swan wrote:

It’s just so hard as an investor to be patient through these development periods which take several years plus the cash burn during production ramp.  It’s not something you see in many industries.

“Everyone has the brainpower to make money in stocks. Not everyone has the stomach.”
Peter Lynch

personally, i can deal with cyclical prices, but i cannot stomach cyclical fundamentals.

I mean, it’s basically the same thing.  But the fundamentals are great, these guys have <1x net leverage.

#FreeCVM #FreeTurd #2007-2017