Value Investing Hypotenuse Capital vs Copperfield Research |
- Hypotenuse Capital vs Copperfield Research
- One of Peter Lynch’s Top Metrics Shows Stocks Getting Cheaper
- Should non-professional Value Investors leave stock picking to the pros (or just invest in a low cost broad market fund)?
- 2018 theses: consensus or still contrarian?
- Why I think Oil producers will outperform in 2018.
- Once Hungry Investors Pass on Meal-Kit Startups
- January 2018 Data Update 2: The Buoyancy of US Equities
- WACC - Diluted shares and book value of debt when you have convertible debt
- Do you care the buffett indicator?
- Resources on operational improvement strategies taken by activists/PE?
| Hypotenuse Capital vs Copperfield Research Posted: 09 Jan 2018 10:09 PM PST I read Hypotenuse Capital's Q3 report in last quarters thread and started following Tucows (TCX) as a result. Copperfield Research, which appears to be a front for a bigger hedge fund, issued a pretty detailed report of accounting irregularities and management issues here: Right before the report was issued there was some pretty heavy selling. Thought i'd share, excited to read Hypotenuse Capital's Q4 letter [link] [comments]  |
| One of Peter Lynch’s Top Metrics Shows Stocks Getting Cheaper Posted: 09 Jan 2018 03:52 PM PST |
| Posted: 09 Jan 2018 01:52 PM PST I have been reading about Value Investing for over a decade and put some serious money behind my analyses over the past few years. I've had some success but a side of me wonders if this is just dumb luck and if I should just invest in a low cost index fund. Thinking about both sides here: Value investors would claim that there is a misalignment of incentives amongst the professionals. They would claim that professional investors are more concerned with fees than performance. Additionally, the clients that the professionals have can be fickle and will not put up with short term losses despite the professional having a sound investing rationale. As a result, there are opportunities to profit when the market misprices a security and the professionals miss the error. On the flip side, Wall Street has buildings of people whose full-time job is to evaluate securities. These people are well trained in performing security analysis and understanding the markets, and have resources that most non-professionals wouldn't have (ex. Bloomberg terminals, large financial data sets, access to management, etc). While most can agree that the markets are not purely efficient, trying to find and profit from the inefficiencies is difficult because you are competing with professionals who are trying to do the same. All that said, I would like to pose the following two questions to the group: Is it reasonable to expect a non-professional value investor to do well (ex. beat the S&P 500) provided the value investor:
Are there any non-professionals here who have beaten the market over the long haul? If so, how do you know that it wasn't dumb luck or a rising tide that lifted all boats? Note: Edited for formatting... [link] [comments]  |
| 2018 theses: consensus or still contrarian? Posted: 09 Jan 2018 08:51 PM PST As i read through investor letters and general market commentary (eg GMO) for 2018, there seem to be a few common themes that are repeatedly recommended. My question is, at this point are these consensus already, or still value/contrarian? Examples:
Thx [link] [comments]  |
| Why I think Oil producers will outperform in 2018. Posted: 09 Jan 2018 08:55 AM PST I think these two videos sum up why oil is heading higher over the next 2 years: https://www.youtube.com/watch?v=67dd6ID2FAk&t=2s https://www.youtube.com/watch?v=Vo7APGJbfF4&t=5s They're a couple of months old but the thesis is still on track. Main points in my own mind being: 1) The market is currently under supplied as shown by rapidly falling global inventories and US inventories. 2) We're approaching normalized inventory levels and are on track to hitting those levels by around Q3 of this year (from when oil was $100 a barrel). Not saying we get to $100 a barrel oil but even $70 would be a big jump with the way oil producers are being valued. 3) Shale oil growth is constrained for a number of reasons. It has a very high decline rate of 70% for the first year of production so you need to drill more wells every year just to make up for declines in previous years. There are capacity constraints in terms of pipelines, fracking sand, well pumps that need to be available to grow production which, will require higher margins for servicing companies who have been squeezed hard. Most importantly, there's a big question around availability of tier 1 acreage and how many spots are available before the economics drastically decline for shale oil. I still think shale grows in a big way next year but I don't think it's capable of increasing production at will as some analyst would imply. 4) OPEC and Russia want higher oil prices. Several OPEC members don't have the capacity to increase production or are rapidly declining (Venezuela, Algeria, Angola). The ones who can increase production are Saudi Arabia, Kuwait and UAE but they're in no rush as they already have a huge base and generally benefit the most from oil quotas. Saudi Aramco IPO also plays into this. Same basic premise for Russia which needs to get their economy back on track for 2018 elections. All in all the 1.8 million barrel "cuts" is closer to 1 million in reality and unlikely to be rapidly reversed. https://oilprice.com/Energy/Energy-General/OPEC-Wont-Compensate-For-Small-Supply-Outages.html 5) The rest of the world outside of OPEC and USA/Canada make up about 40% of global oil production and most of that is offshore or oil sands. These are basically considered the highest cost methods of production and they have the longest lead times to produce once an investment decision is made. This means that when oil prices fell in 2014 new projects kept coming online in a big way. 2018 is the last year for major projects coming online from before oil prices fell. Moving into 2019 and forward you're going to start seeing very large declines at around 5% a year. 2019 still has some smaller projects so total declines will be in the range of 1 million barrels but 2020 and forward you're looking at about 2 million barrels a year in declines that need to be replaced. 6) Geopolitical risk in order of likelihood: -Venezuela (imminent hard default or possible coup causes oil production to tank -1.8 million barrels per day) -Iran (Sanctions are reinstated by the trump administration - 800,000 barrels per day) -Libya (Upcoming elections causes civil war to resume - 950,000 barrels per day) -Nigeria (Rebels reinstate bombing of pipelines - 500,000 barrels per day) -Saudi Arabia (Houthis hit oil facility with missile - Unknown) -Middle East (Outside possibility for another regional war - Unknown) -Natural disasters, unforeseen events, terrorist attacks, etc. That's a lot of potential barrels that could disappear and suddenly we need all of OPECs withheld production just to avoid a massive deficit. I personally think Venezuela is just a matter of time. http://www.argusmedia.com/news/article/?id=1603657 7) If world oil demand keeps growing at roughly 1-1.8 million barrels a year in demand that's a huge amount of additional oil that needs to be produced when you factor in global declines from 3-4 years of minimal capex and lack of spending on new oil discoveries. I think the tide really starts to turn in April/May when we have minimal builds in Q1 compared to historical averages. by end of Q3 we've drawn a huge amount of oil and people realize shale can't fill the void and look to OPEC. OPEC decides to slowly unwind their cuts in order to keep prices high as people notice that from 2019 onward world needs significantly higher oil production to fill years of low capex. Oil price spikes back to $100 a barrel in 2019 or 2020 assuming there isn't a global recession by that time. The great thing about now is that oil stocks are priced like oil is going to head back down to $50 because that's what investors have come to expect. The main narrative is that shale oil will flood demand over $60 a barrel and most managers will buy into that until it becomes apparent there is a shortage. I like Canadian oil producers because they're the most beaten down due to recent pipeline issues with keystone and a lack of takeaway capacity. However, the differential will shrink because gulf refiners are set for heavy oil (Venezuela and rest of OPEC are primarily heavy and they're declining) and railway operators can soak up excess capacity until new pipelines come on in 2019. Heavy oil is also mostly fixed costs so while it has a higher break-even the variable cost is a lot lower than shale or conventional which provides operating leverage. My top picks are Whitecap Energy, Gear Energy, and Baytex Energy from least risky to most risky. I think Whitecap and Gear are a reasonably safe bet to double over the next 2 years and Baytex could possibly go up 4X-8X. All of them are cash flow positive and have little near term liquidity issues. Baytex has a lot of debt but nothing due until 2021. Cheers [link] [comments]  |
| Once Hungry Investors Pass on Meal-Kit Startups Posted: 09 Jan 2018 08:49 AM PST |
| January 2018 Data Update 2: The Buoyancy of US Equities Posted: 09 Jan 2018 06:10 PM PST |
| WACC - Diluted shares and book value of debt when you have convertible debt Posted: 09 Jan 2018 11:40 AM PST For WACC you definitely want to use diluted shares outstanding (FDSO). But what goes into the diluted shares - let's says options and two bonds, one convertible and one non-convertible. Do I convert the one bond to shares and add that in to shares outstanding? If I do that do I then decrease my book value by the amount outstanding for the bond (decreasing the weight of cost of debt to wacc). Not sure if there's a standard here. I did read that to "do it right" you need to split the equity from the debt on the convertible. Not sure I really want to do that though. [link] [comments]  |
| Do you care the buffett indicator? Posted: 09 Jan 2018 06:59 AM PST Which is at same level as the dot com bubble now (Wilshire total market cap divided by GDP)
Warren Buffett on FORTUNE (2001) *emphasis mine. [link] [comments]  |
| Resources on operational improvement strategies taken by activists/PE? Posted: 09 Jan 2018 09:18 AM PST I want to understand the types of operational strategies that are taken by activists and PE firms to increase the value of their target companies. Is there a resource out there that might provide a comprehensive treatment of the approaches/playbook acquirers typically take when focusing on value generation via operational improvements (rather than financial engineering side of things)? Also interested in any material that has a deeper analysis of historically successful/unsuccessful campaigns that where taken by various investors. An analogous to "The Manual of Ideas" (framework) & "More Money Than God" (history), but with an operational focus. [link] [comments]  |
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