i think you might like RIM…
Seriously?
well, it has a FCF yield of under 5, no debt, cash of like 1.5B…substitute that with CSCO and well, its cheap…really cheap…
Yeah but does RIMM have any switching costs? Is it nearly as entrenched as Cisco is? Is their clientele risk-averse corporate customers that have a lot invested in their infra?
i don’t think i know that but I don’t own the stock…but it appears you might…
I dont own the stock either. I’m just posting here if anyone more knowledgeable about routers has any insights.
i once asked our IT guy about routers and Cisco…it doesn’t appear it matters who makes the routers, but seriously, i’m not sure what a router actually is lol…there is this girl at my work, one day she looks good with her high heels and stuff, the next, not so good when its just normal…what gives?
I’m so sad I missed out on SAM when it was at 72. I stared at it for like a week but didn’t buy. T.T
Guys, Remember I discussed OSG when I first started posting back in later November, its now up 21% since that time. Although I do expect shorts will come back in with more pressure. The short interest in the stock is 30% of the free float, thats insane!
@ubermensch They’re barely breaking even. Very slim margins, revenues have tanked, they’ve got a crap load of debt. I haven’t seen what you posted back in November, but I’d imagine even a Level 1 candidate will tell you this is a crap stock! @Palantir SAM looks a great bet! Or would’ve been at 72 anyway. Do you guys create models for your analysis?
models are in my head…got to do models for work but for my own investments, not anymore…i think the mistakes come from big qualitative things or just plain misunderstanding…or worst, psychological biases like thinking you understand something when you don’t…models can’t prevent that but in fact I think puts you into false comfort…
chad, shipping is the most cyclical industry you will ever come across. You cant compare them to businesses operating in a stable industry. For example, you’d be a fool to have invested in OSG in 2008 when its ships were earning 200k a day - that’s about a 950% margin on each ship (break-even operating costs are about 21k). Would you tell me at the time it was an awesome company to own? Margins are down now no doubt but it was expected - shipping follows well defined cycles. A company like this has to be valued on its liquidity position and equity cushion. Its debt/equity ratio is about 0.5 compared to its peers like FRO which debt of 2x its equity. Just a couple of months ago it acquired a $900m revolving credit facility. I am also guessing the bank is pretty confident in its knowledge of the company to provide it with such a large credit line. One of its directors has been accumulating shares since September with prices ranging from about $16/share all the way down to $10. So far he has spent around $6.1m. There are a couple more insiders who have spent over a $1m each over the past couple of months. There are two explanations to this - either that’s clever accumulation or they are just stupid amateurs who don’t understand the market. I would think the former explanation makes more sense. Think about this - the guys who made killings on mining, steel etc. stock didn’t buy them when metal prices were selling at their peaks. They bought them when prices were low and margins were thin. When the companies usually had poor earnings and probably high P/Es
ok, so you got a company levered up to the anus in a capital heavy industry in a severe downturn…if you want to play the break up of this company, you buy the debt,not the equity…even in this case, its risky… in terms of takeovers, problably won’t happen cause the whole industry is in shambles… but…if they do make it through the downturn, you better be right about shipping rates, but from what I hear, there is a glut… go palantir go!
Frank, there is a glut now like there was a shortage in 2008. What we do know is conditions change, fundamentals change. And OSG is NOT ‘levered up to its anus’. It is financially comfortable with a current ratio of 2.44. Also over the last six months insiders have purchased 1.7m shares that’s about 7.6% of the available float. What does that mean? There’s a huge short interest in the stock and it seems like this could be a good contrarian play
you’re emotionally attached to this stock… your first argument does’t even make sense…fundamentals will change how? just cause there was a shortage before doesn’t mean things will return, and if they do, no saying they will be profitable second argument makes no difference…i trust the short sellers more than insiders… what is their interest coverage on average over the last 5 years?
I agree, why don’t you just buy their debt? Maybe convertibles?
I love defense. It will be the last US industry left standing. While we there are threats about spending less I think a much more likely scenario is that all this recent twittering in the middle east gets us involved in another war. I just can’t decide if it will be a hot or cold one. It already appears to me that we are at war with Iran. It just looks more like it did with the Soviet Union. Welll, guess what, we spent tons then on R & D and I bet we will too. You wanna bet the CIA and Department of Defense is happy about that recent spy plane hacking. Secondly, if we are fighting a war someone else will be doing it soon for us or with our weapons. This will mean that regimes everywhere are gonna need to stock up on whatever guns and tech they can get their hands on. You think Israel isn’t working on getting the most state of the art stuff they can buy? You wanna bet the saudi royal family isn’t? Oh man. I bet its great to be an arms dealer in that part of the world. So I know the big players, but who are the smaller growth companies in defense.
Re: model building. I don’t build any models. I just rather focus my time on evaluating qualitative aspects of the business, and I use real basic models and keep it as simple as possible. I prefer to look for businesses with enduring value - especially those that can be run well with a totally different management team - I’m basically interested in institutions that can stand the test of time. Usually I just do 10*FCFE+Cash-Debt to come up with a conservative valuation. The most complicated I get is a one stage DCF with a conservative growth rate.
i’m much more sophisticated, i used DCF for infinite periods… stand the test of time, didn’t you buy MSFT? BRK.B isn’t going to be the same without Buffet, don’t even try to argue that…
I’m confident MSFT will stand the test of time. Same with BRK.B. If anything, BRK is very much designed to stand the test of time, you think WEB’s masterpiece is not going to be around 100 years from now? Think about it’s underlying firms, it should not be treated as an investment firm.