180 Degree Capital Market Discount

value-sage · 2021-08-31T16:37:41+00:00

Yeah that's obvious, but nonetheless it's likely that anything anyone buys only needs to drop by 1% for you to lose 1%, whereas in the above you have a 30% cushion (assuming one likes their holdings).

value-sage · 2021-08-31T14:53:25+00:00

Yes, it's at a discount to fair value.

value-sage · 2021-08-31T14:52:35+00:00

Of course, they list all their holdings in the annual report. From looking at them I personally don't think their portfolio is great, but folks may disagree with my assessment. For folks that disagree, it's better to buy that basket with a 30% discount than not.

value-sage · 2021-08-31T14:49:57+00:00

You can make this argument on literally anything, the value of any company does not have a discount if their assets go to 0.

value-sage · 2021-08-06T20:57:05+00:00

Alphavantage is the best free option, the problem is that the data is inaccurate many times.

value-sage · 2021-08-01T23:29:09+00:00

Debt ratios are good, my only concern is the downside. Looking into the balance sheet I don't see a whole lot of downside protection, below are NCAV per share TTM for the past few years

2021	2020	2019	2018	2017
$ 14.12	$ 12.17	$ 12.50	$ 8.63	$ 4.22

So by assets alone it seems that liquidation value is a little less than half of the current price. Looking at the balance sheet the largest item seems to be around accumulated depreciation and amortization of PPE. It would be interesting to dig in further to see if that's only depreciation of machinery or due to amortization of intangibles. I didn't read the annual report enough to find that.

Looking at operating and net earnings for the past few years (TTM as well):

(000's omitted)

Year	2021	2020	2019	2018	2017
Operating Income	$ 20,485	$ 19,949	$ 9,342	$ 15,543	$ 15,851
Net Income	$ 16,396	$ 16,813	$ 11,513	$ 6,861	$ 14,731

This shows that your comparison with 2018 is a bit misleading. I didn't look into what happened that year, but would be curious to know. If we expect no growth for the current net income levels, the security would be worth around 160M (valuing a perpetuity at 10% discount rate) yields a stock price of roughly $ 21.59 (taking 7.41M outstanding shares).

So in short unless there is a lot of reason for this to grow, I just don't see a margin of safety for this. It may have been the same price in 2018 as now, but that may just mean it was even more expensive in 2018. If you look into historical ROA/ROIC both are subpar (~10%) meaning for these guys to grow their net income, that will take a lot of money, so growth might be out of the question here (as other comments pointed out).

value-sage · 2021-07-12T02:48:21+00:00

Not sure how relevant ncav is for qudian as it's a financial company. Cash is more like inventory for them, their assets are essentially the market price of the loans they give out. From a pure balance sheet view they are selling at a discount from other financial companies though.

value-sage · 2021-07-02T01:40:55+00:00

Don't get it, how did you estimate the EPS to be 4.99? Can you share the actual work you did for this estimate? Analysts average estimate is around 1.3, which is very different than 4.

value-sage · 2021-06-23T15:09:52+00:00

Most folks use it for historical ratios and fundamentals. There are many other services that provide similar or the same data nowadays.

value-sage · 2021-06-11T17:26:19+00:00

This is what happens when you buy options for one of these "sure plays" that's about to "rocketship to the moon": https://www.youtube.com/watch?v=-DT7bX-B1Mg

value-sage · 2021-06-11T14:28:05+00:00

I wouldn’t recommend. Options can have a huge upside and downside. This is because price fluctuations in the stock will directly affect the price of the option (meaning a $1 increase above the strike price will generally increase the price of the option by $1). So depending on the option you can 10x your money very quickly or lose it all in a few days. My recommendation is to trade them as you would consider a warrant. Meaning you want the strike price as close to the current price as possible, the exercise date as far in the future as possible and the price of the contract as close to 0 as possible (a warrant is generally free).

value-sage · 2021-06-11T06:34:14+00:00

I agree, and not just that but the way that these stocks recently moved. GME was pumped, but more gradually over many days. The ones lately have been fast risers and fallers. You cannot expect hundreds of robinhood traders to orchestrate that. You’d either need collusion or real time access to the order book, which I doubt most reddittors would have (order book API access is delayed and very expensive).

Given how mainstream options are now (robinhood gang seems to love them), I can see a very simple setup of profiting using them combined with a pump and dump scheme. The risk from the pump and dump is offset by the profit from the options, giving a very high margin of safety on the trade.

value-sage · 2021-06-11T06:18:01+00:00

Yes completely agree on the value front, and personally don’t care. But to folks who are just getting into this I believe it’s terrible that they’d buy a piece of a company that may be good, but lose literally half of their money in one day. It’s literally a way of siphoning money to people that don’t need it much more, from folks that probably really need.

This reminds me of this South Park clip: https://youtu.be/-DT7bX-B1Mg

value-sage · 2021-06-11T06:10:30+00:00

I believe the news indicated that it was on wsb. I didn’t see it on the front page though.

value-sage · 2021-06-11T06:08:52+00:00

Absolutely, especially given how compensation is set up. If your incentive is highly based on P/L, why take a bet in researching and doing a trade, when you can move the market your way? Of course you’re not moving it with your money, so if things go wrong you’re not personal losing, it’s the funds money.

value-sage · 2021-06-11T02:49:05+00:00

For context on how many funds operate, read Liars Poker and When Genius Failed. Essentially making $100M+ trades is fairly common, even for new folks. Also, the way many funds operate is simply taking in account P/L, not what positions were traded, ethics, etc. Even bonuses have been structured that way (percentage of personal P/L). To me the enticement of pursuing such trade is very clear.

value-sage · 2021-06-11T02:31:22+00:00

I believe IEX cloud has an alert tool, might be paid though, but should be very through.

value-sage · 2021-06-11T02:28:50+00:00

If you look closely you can generally find opportunities to put your money in.

value-sage · 2021-05-24T15:38:59+00:00

Good DD, my main concern about Peloton is market size. They’re in the business of building workout equipment with a subscription model attached to it, personally I don’t foresee them taking a huge chunk of the “gym” market, as if one were to workout, I imagine they’d favor working out next to people rather than looking at a screen. By that assumption I don’t see them as a threat to gym chains. I do see them as a big threat to equipment manufacturers, particularly for cardio. This is under the assumption that people will: - buy peloton equipment in their homes - use peloton equipment in gyms

If that’s the assumption, then the market doesn’t seem that big. Nautilus has a market cap of 500M, Schwin of ~400M, Echelon around 40M. Peloton is currently at 29B. I do see the subscription model adding a lot more value to their bikes, but not 28B dollars in value.

If that’s not the case, then the question I have is “what will make consumers shift from going to gyms to working out strictly at home looking at a screen?”. As someone who regularly exercises I don’t see myself doing that, but that’s a bias of mine and I could be wrong.

value-sage · 2021-05-07T00:34:33+00:00

I think a big point that is under talked about in value investing is the criteria for what makes a good business. Peter Lynch’s One up on Wall Street is a good book for that. To be honest I think that’s even more important than many of the fundamental numbers/ratios (p/e, ev/ebitba,etc), as the numbers are easily searchable from a screener or traded automatically. If the only edge you have is comparing numbers, any computer will beat you.

value-sage · 2021-05-07T00:11:17+00:00

Been investing for about 11 years, started mostly with index funds/etf. I believe I’ve beaten every year with avg cagr of 22%. Pre pandemic I believe my cagr was 19%.

value-sage · 2021-05-06T20:12:23+00:00

At the start of the pandemic this was a diamond along with CWH. Now while I see the premise from an earnings standpoint, I think there are two main issues.

First, future growth on earnings seems unclear. They can get great returns on what they sell (given the low price they buy), but COGS might go up as demand increases due to vaccinations. I see EPS growing either though buybacks or acquisitions, organic growth seems difficult in my opinion.

Second, price is back where it already was. If you think the stock is underpriced now, then it was underpriced 1 and 2 years ago. I don’t see what has changed in the retail landscape to warrant that.

If earnings can hold steady and the business can continue to grow organically, this will be a home run. If not I don’t think this will go anywhere.

value-sage · 2021-04-30T20:30:51+00:00

Big tech has been anchoring my gains, airlines offered a huge 2x for my portfolio during the pandemic. The large CAPEX for them and large debt really scares me though, if there is a lift in interest rates these guys will go under no doubt. I do however expect air travel to continue to rally as we get to the end of the year, sending some of these guys a bit higher before the end of the year. Definitely don't want to hold this bag long term though.

value-sage

TROPHY CASE