Value Investing Druckenmiller at ECNY - May 12, 2020 |
- Druckenmiller at ECNY - May 12, 2020
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| Druckenmiller at ECNY - May 12, 2020 Posted: 14 May 2020 08:49 AM PDT |
| Posted: 14 May 2020 07:55 AM PDT I posted this two years ago about broken roll up strategies... Roll ups is a management game, capital allocation and execution decisions are made by management or management appointed advisers. One of the behaviour patterns to look for is when management takes a good thing to the extreme, like VRX. Which brings me to BYL.TO. The last two acquisitions were bought at about 2x revenue with zero or negative contribution to EBITDA. They are low quality cyclical businesses. The market rewarded this behaviour with a 25% gain, like VRX, the market is focused on the top line number ignoring quality, and BYL.TO management knows it. They acquire revenue, ignore sustainable accretion, create a synergy cost saving and growth story (5G), the market rewards them, they raise more capital, rinse, repeat. It's a positive feedback loop that's shown to be unsustainable and when it comes undone the results are devastating: major acquisition write downs, asset disposals to raise cash, litigation, etc. Their behaviour may change in the future but short term rewards are hard to ignore. I would argue that Ackman and Sequoia initially saw a good idea in VRX but swayed from core value investing when a clear pattern of bad acquisitions started to emerge. [link] [comments]  |
| Assured Guaranteed (AGO) Short - April 2018 Greenlight Presentation Posted: 14 May 2020 09:02 AM PDT |
| Intelsat Files for Restructuring Posted: 14 May 2020 06:33 AM PDT |
| CLOs: Ground Zero for The Next Stage of The Financial Crisis? Posted: 14 May 2020 06:22 AM PDT |
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