Ahnuld check out Eqstra. A south african leasing and logistics company. Potentially trading at less than 1x earnings. They are in the process of moving assets (and thus debt) of their books to OEMS and banks and then refinance debt.

Seems like a nice business, although in a somewhat bad environment now. Too scared to buy though, because i cannot really see what I might be missing there. FWIW all managers are buying stock as well.

its my opinion, also the forward curve is at about $48 for that timeframe.

Rolls is tough. I see potential but havent pulled the trigger. Few questions:

When do you see FCF inflecting?

What do you make of recent MRO choppiness?

What part of the backlog is at risk?

Do you think they cut the dividend and is this a near term headwind?

What do they do with non-aero assets? Hope for a cycle turn?

I hate the idea of investing in companies that are so dependent on factors that are completely out of their control such as oil prices. Unless you can prove out that reasonable IRRs can be earned even under 100% doomsday scenarios, i'm just not interested. For example, if I find an idea where i can earn 20% IRR even if oil drops to $10-15/barrel, that's what it will take to get me interested. Ahnuld, your decision tree approach to valuing the stock and finding a +EV situation is logical, but i question where you come up with those %s and why you think they are realistic.

There are so many other investment options out there with companies that are much more in control of their own destiny that i'd rather bet on.

I say $10-15/barrel because i believe that's the ballpark marginal cost of production of the lowest cost producers in the world (middle east).

yeah that's what googling told me too on starz except the CEO info. The only issue from a long term perspective is that I don't see too many people paying for more than one or two and netflix is the big banana in that marketspace. (the reason I say one or two is b/c there's actually too much content, you can just buy one of them and none of the others and you won't run out of things to watch). I don't know how many subs they need to be profitable but WWE is doing fine in the stock realm with their network. I agree they definitely are a takeover option because a bunch of places will be looking just to be in survival mode. (they are also available on amazon soon)

regarding CF. Everyone expects farming to be down next year pretty good across the board, only real argument I can see right now is simply betting against the pessimism. Even good companies are gonna take a hit. Farmers tend to cut back when the $ cuts back--they're not like everyone else in business.

Not sure what to make of rolls only because I can't remember the last time I saw anyone driving one. I tend to prefer the Volkswagen type of investments in that realm (ie stocks that go down for reasons I don't give a **** about) I'm gonna avoid the higher debt ones in that realm anyway since I think it wouldn't take much for that industry to get a 2008 type thing happening again. I will never understand people getting long loans on a flipping car though nor giving them one who probably can't afford it. People are dumb.

RYCEY is not a car company

thanks again ahnuld

you're not alone and i get this viewpoint. but at least with this stock your exposure isnt to oil prices per se but activity levels in canada and the bakken (where NAL operates). for activity levels to stay this low you are pretty much saying all the north american oil is above marginal cost for the world (because at current activity levels oil stays dropping pretty fast and goes back to 5mm a day or below). I just dont see where the make up oil comes from. I mean its not like the saudis can go from current 10.5mm a day to 14.5mm. there's not enough of that cheap 10-15$ oil to meet the deamnd of 95mm barrels a day.

but I really dont want this thread to devolve into a discussion about oil so im going to speak pretty minimally to NAL going forward save for big corporate updates or events

BCI,

Hoping for 20% IRR even in a worst case scenario is absurd. A margin of safety is nice, but that's delusional.


ahnuld,

You seem to invest in everything from thinly traded nano caps to super-liquid large caps, which I find surprising. Traditional wisdom says that smaller and less liquid companies are more likely to be mispriced, whereas in large caps it can be awfully hard to have an edge. Do you disagree with that?

no its generally true. Im not going to add much value by looking at GEs financial statements, but I wouldnt put CF or RYCEY in the same megacap category. Theres less im likely to uniquely find or understand but you still get deals in those stocks sometimes when they go out of vogue.

It more just demonstrates my lack of interest in speculating on oil prices and investing in companies that are not in control of their own destiny. That isn't my mentality towards all investments I look at.

For rolls, are you forecasting any CFs? I dont have any visibility into legacy MRO CFs or future CFs.

I wont be surprised if they cut dividend and have to issue more debt.

Are you concerned about the pending class-action against STRZA? I know it's priced in with the ~13% drop on October 30. Should we still be worried?

Looking forward to your writeup on CF. It's had a tough start to 2016.

honestly Dillards down here is so ridiculous. If it trades down here long enough and they continue to use 100% of free cash flow for buy backs then in 1.5 years they are down to 25mm shares doing 400mm in fcf or $16 per share. so 4x. for a decent business with very undervalued real estate. although macys just came out with horrible same store sales for the holiday season tonight so I wouldnt be surprised if the whole sector trades down again tomorrow.

For anyone invested in Rolls its going to be a leap of faith. All of the cash flows come from the service contracts, and they dont give the public the terms on those contracts. All we have is read throughs. here's how you can be somewhat comfortable from the read throughs.

In prior cycles rolls generated decent free cash. given the growth in installed thrust you can extrapolate that it will be that much bigger in the next positive cycle (probably starts 2018)

Valueact is a well respected fund that DOES have access to the service contract information we would like to see. they have increased their position and seem happy enough with the plan Warren East has laid out.

Warren East joined on to lead the company when he didnt have to. He had already had a successful career at ARM and was a director at rolls. he had a chance to see what was going on in the company as a director and still chose to become CEO. You dont do that in unless you like what you see and think its a realistic turnaround.

and finally some of the recent headwinds in the aero division may not turn out as bad as expected. they recently got an order for 10 more A330 ceo which isnt a huge number but helps keep margins during the winddown to the neo. the big fear was too few engines delivered before it switches to the neo so a few more orders like that will help 2016 and 2017. They also recently won the first order in forever for an A380 from ana which hopefully leads to a few more without needing to develop a neo for the 380

http://atwonline.com/airframes/china...-10-a330-300s#
http://airwaysnews.com/blog/2016/01/...o-order-a380s/

I will never understand anyone bullish on Macy's (lol jim cramer has been the whole time it's gone straight down). I think it's fairly obvious it's going straight to the Sears/Radio Shack style of death over time to me.

First I ever heard of Dillards was this thread... I don't get "undervalued" real estate part. If it's a big store--there's not going to be anything that wants to buy it and go in there by the time it comes to that.

They own the land. they can sell it and lease it back themselves and have net cash of 1.4 billion vs a marketcap of 2.4 billion.

I agree with all of this. Just think it might take more pain to get there than most think.

Also - any view on how at risk their backlog is? Believe its mostly concentrated within Middle East, which has its pros and cons.

Have they said that they plan on doing this soon?

As you know HBC did this and popped their stock quite handsomely but they were out there talking it up for months before doing it .... and they have prime downtown real estate in Toronto

They own what land? Owning a parcel in downtown San Francisco is different than owning an anchor store parcel in a dying mall. If it's the latter that land is next to worthless.

DDS doesn't look like it's trading at that much of a discount to M? are you just less bearish on the department store sector than the market and choosing the cheapest one, or...?

ahnuld, would you outline your thought process how you arrive at this number? Not that I doubt it, but it would be cool if I was able to make such a calculation myself.

What I find in the annual report is that they have 247 stores where they own the buildings and the land. In the balance sheet they list the land value at 68 million (which of course is undervalued).

It just seems like a huge task to research the true value of each of these 247 parcels. I wouldn’t even know where to begin.

Also I think weatrich is right that nobody would be interested in buying the buildings, which basically means that the buildings would have to be demolished. With 247 building and assumed costs of 2 million per building (just a wild guess) we come to 0.5 billion in total costs, which is significant.

It's not really about doing something else with the land. They can just sell it to some RE company or fund and lease it back longterm. Store stays where it is. They get cash which they can use for something else like buybacks or m&a stuff. It's pretty common. The RE funds are looking for those safe investments while the return on capital for the seller might be greater than the leasing costs.