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    Home Unlabelled Value Investing I’m Ray Dalio. Ask me anything! Answering questions from 11:30 AM - 1:00 PM EDT.

    Value Investing I’m Ray Dalio. Ask me anything! Answering questions from 11:30 AM - 1:00 PM EDT.

    June 01, 2018

    Value Investing I’m Ray Dalio. Ask me anything! Answering questions from 11:30 AM - 1:00 PM EDT.

    I’m Ray Dalio. Ask me anything! Answering questions from 11:30 AM - 1:00 PM EDT.

    Posted: 31 May 2018 08:18 AM PDT

    Reading 'Applied Value Investing'. If financial statements have already specified the deductions for doubtful accounts, why would you add back that number? And on top of that, shouldn't you be further deducting from the accounts receivables?

    Posted: 01 Jun 2018 02:55 AM PDT

    Feedback on Investing Analogy write-up ?

    Posted: 31 May 2018 07:25 PM PDT

    Sorry if this doesn't 100% fit the sub and I can remove if it breaks the rules, but I'm looking for feedback on my write-up on comparing cricket and investing. I want to be able to show my mum (Lame I know but she takes an interest in what I do with my time and I want her to understand how I think/feel on investing), whilst also selfishly improving my own writing skills. Any feedback if it does/doesn't make sense or what can be improved is greatly appreciated! As per below:

    Like the baseball analogy used by Buffett, I often find myself comparing investing to cricket in certain ways as well. Whilst my comparison might not make as much sense as Buffett's, nor will it be objectively as good as his, I originally wrote this in order to express my ideas more clearly whilst also being able to show my Aussie mother who has more of an understanding of cricket compared to baseball.

    Now imagine you get to be a batsman. The goal is obviously to score runs (make money) and there will be no stumps to hit, so you can only get out by taking a swing and getting caught out.

    In investing and in cricket, you are given a multitude of opportunities and how to react to these opportunities is completely up to you. You may decide to be a player who is aggressive, looking to score off every ball, but this comes with increased risk of getting yourself out of the game.

    Play more defensively however, by choosing not to swing at balls that don't provide a good chance to provide runs (risk vs reward) and simply waiting for a bad ball (a good investment opportunity) to come up, and you reduce your chances of getting out of the game. This is the way I want to play.

    We are given a number of balls to face yet we don't have to swing at any of them. We can leave all we want to wait for the half tracker to punched along the ground to the boundary.

    I imagine batting against the opening fast bowler as investing in a frothy or at least fairly valued market. Whilst opportunities are there of course, they're are hard to come by, require great consideration and run the larger risk of getting yourself out.

    Whereas investing in the bottom of a market cycle would be the equivalent of waiting for that medium pacer to slow things down a bit and to provide more opportunities for runs and returns.

    While I consider myself as a defensive minded player, I don't keep the same mindset 100% of the time, I patiently bide my time, effectively wait for the 2nd and 3rd string bowlers to come on and pick them off.

    If you run and range of outcomes with a number of players, playing purely aggressive only, some might hit it out of the park and score insanely high, but at a higher risk of blowing up that which is a risk I'm not prepared to take.

    And sure a defensive player might cop a few balls that don't turn out anywhere near expected, but our aim is to at least be aware of these black swan events as Nassim Nicholas Taleb calls them, in order to mitigate any potential damage.

    Whilst we might not know what bowlers are next to come (and what returns to expect in the future), as Howard Marks says:

    "We might not know where we're going , but we ought to have a fair idea of where we are" – Howard Marks

    I don't think I've nailed this analogy 100%, but hopefully it makes at least some sense to you and the people I want to know what I'm doing and how I invest.

    Either way, I'm just trying not to get out

    submitted by /u/RadiantLog
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    The Rise of Creditor-on-Creditor Violence

    Posted: 31 May 2018 12:37 PM PDT

    GNC -

    Posted: 31 May 2018 01:26 PM PDT

    Currently GNC is trading at only 1.16X operating cash flows. Can the distressed experts please chime in?

    Operating income is robust, debt is being paid down, and there is plenty of free cash flow.

    Maybe someone has spent some more time on this already and can explain what the risk factors are to be aware of. The Harbin financing deal was supposed to be instrumental to keep the company alive, but the public hasn't taken the bait. Is the market correct?

    If February, they announced: China's state-controlled drugmaker Harbin Pharmaceutical Group Holding Co (600664.SS) will buy an about 40 percent stake in U.S. nutritional supplements retailer GNC Holdings Inc (GNC.N) for $300 million and are in talks for a joint venture in China, the companies said.

    $300m at 40% is a market cap of $750m, that is a stock price of about $9, currently trading at $3.25.

    Newly issued convertible perpetual preferred shares with a conversion price of $5.35 and a 6.5% annual coupon payable in cash or in kind. The investment is expected to be used by GNC to, among other things, repay outstanding debt and for general corporate purposes, further enhancing GNC's capital position

    This paragraph states a $5.35 conversion price.

    Some more notes from the 10Q. They extend a 2019 note to 2021, conditional on repayment of at least $50m. The existing $150m is due 2019 (but that is what Harbin came in for, right). They also took on $375m of debt due 2022. Rates are not great, between 4.3-10.6%. The term loan requires payment of 75% of excess cash flow until it is further paid down.The reported fair value of their outstanding Notes has appreciated nearly 50% since 3 months earlier. I don't know how to check the secondary markets for their debt, can anyone confirm the valuation of their debt?

    Even after the Harbin deal there will be a little over $1b of debt on their books. The company peaked at $355m of operating cashflows, down to $199m in TTM, If operating cash flows continue to deteriorate then it will be harder to service the $1b of debt.

    And there does happen to be a growth story here, GNC is entering China, India, and Australia. Their China partner, Harbin, is currently doing $1.8b USD per year in revenues (and declining).

    GNC is a trustworthy brand on the one hand, on the other hand as a commodity seller they compete poorly with Amazon. If the public trusts the brand and the in-house products of GNC, and chooses to keep buying it from other places (like Amazon, China, etc), then the company can successfully shed off more and more physical real estate, while increasing net margins overtime. They have more than 5000 stores, and are closing 200 this year.

    Do you think GNC is in a death spiral, why, why not?

    submitted by /u/JustCallMeAtom
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    How to enter an over value stock (i.e: Visa)

    Posted: 31 May 2018 09:02 AM PDT

    I am finding it difficult to decide on a good entry point for a stock like Visa. It has great fundamentals but if I look at the DCF, it is relatively over valued. In such cases, what do you do?

    1. Look for other investments and wait for a dip of Visa below its intrinsic value.
    2. Bet slightly below trading price knowing that great fundamentals will push the stock higher?
    3. Sit on cash, look at treasuries etc. since everything seems to be over valued.

    Thanks for your responses.

    submitted by /u/yebidepoj
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