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    Value Investing Q1 2019 Letters & Reports

    April 04, 2019

    Value Investing Q1 2019 Letters & Reports

    Q1 2019 Letters & Reports

    Posted: 03 Apr 2019 04:32 AM PDT

    Investment Firm Date Posted
    ARP - On Productivity April 3
    Howard Marks Memo April 3
    JPM Guide to the Markets April 3
    Knight Frank - Wealth Report April 3
    Spree Capital April 3
    Vltava Fund April 3
    submitted by /u/Beren-
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    Aircraft leasing

    Posted: 03 Apr 2019 05:45 PM PDT

    Anyone own shares or have knowledge about this industry?metrics I should pay close attention to?

    I'm Going to start looking into this market because it seems surprisingly under-appreciated and yet fairly profitable. The demand is expected to rise along with the entire airline Industry. Almost 50% of global aircrafts are already leased. China India Indonesia and the us are leading the passenger growth in the industry.

    Leasing companies relieve airlines of the financial burden of buying and owning the airlines themselves. They provide insurance and maintenance crews for them as well but I believe the airline is actually liable for costs associated with repairs.

    DCF method won't be applicable because it's such a capital intensive industry.

    Companies I'm looking into include. Airlease,aercap, aircastle and a few others.

    submitted by /u/you_who_sleep
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    Help understanding truck leasing company accounting

    Posted: 03 Apr 2019 01:31 PM PDT

    Hi all,

    I am currently looking at valuing a truck leasing company, but am having trouble with some of the accounting related to the debt financing of the vehicles.

    The business uses leverage to acquire the truck fleet, part of which is collateralized by the vehicles, part of which is unsecured. However, when thinking about the cash flows generated by the business, I am having trouble understanding how this flows through.

    Lets say they earn $3B in EBITDA, and have depreciation expense of $2B (no amortization). The EBIT would be $1B (lets assume no taxes), and therefore NOPAT is $1B. If you add back the $2B in depreciation, you have $3B in gross cash flows. Their CapEx on fixed assets is quite small, lets assume $300M, and the change in working capital (defined as current assets-cash-current liabilities, which does NOT include the additions to vehicles) is $30M. The math for FCF here works out to $3B-$300M-$30M=$2,670M. That seems like an insane number for 1 year's worth of FCF on $3B of EBITDA with a business with huge fleet expenses. However, the fleet expenses are in cash flows from investing, and are classified as non-current assets.

    My question is, where in the FCF calculation would you factor in the fleet spending, and how would you forecast the accounting for that (i.e. do you forecast additions to debt to offset that on the balance sheet)? Would i include it as part of CapEx in the FCF calculation?

    Thanks in advance.

    submitted by /u/shyRRR
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    Thoughts on how this applies in low interest rate environments...

    Posted: 03 Apr 2019 11:14 AM PDT

    Hi all, I was reading Klarman's intro to Security Analysis and came across this nugget:

    Another standard is to invest when a security offers an acceptably attractive return to a long-term holder, such as a low-risk bond priced to yield 10% or more, or a stock with an 8% to 10% or higher free cash flow yield at a time when "risk-free" U.S. government bonds deliver 4% to 5% nominal and 2% to 3% real returns. Such demanding standards virtually ensure that absolute value will be quite scarce.

    This seems to coincide with Graham's mechanical recommendation that stocks should have an earnings yield twice that of AAA bonds (although he specified the yield never be less than 10%).

    Anyway, I'm wondering if, in such low interest rate environments, a FCF yield that is twice the risk free rate really offers an "acceptably attractive return to a long-term holder".

    In Canada, the risk free rate seems to be 1.96%--using Klarman's logic, would a FCF yield of 3.9% really be an attractive yield (assuming the stock's fundamentals were strong)?

    Apologies if this is a silly question--many thanks for your time!

    P.S. I'm thinking of using a required yield as a screen, then performing DCFs to reach an estimate of each security's intrinsic value.

    submitted by /u/SavCItalianStallion
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    Demystifying Aviation Economics

    Posted: 03 Apr 2019 04:20 AM PDT

    Sam Zell - A Guide to the Risky Art of Ressurecting Dead Properties

    Posted: 03 Apr 2019 04:22 AM PDT

    Writeup on Howard Hughes Corporation

    Posted: 03 Apr 2019 04:19 AM PDT
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