RE: ARCP


you cant buy triple nets for 9% cap rates as far as I know. more like 6-7%

whats their debt/assets

whats p/nav?

when did they take on all this variable debt in the first place? Any management teams taking of variable debt/mortgages over the past few years should be fired for imcompetence when 10 yr loans were available for 4%

Have never really followed potash much but today POT seems like a steal.

In @ 36.75

That occured well before 2008, as that is what got them into trouble during the 2008 implosion when all their funded businesses went broke. So they have been spending their earnings over the past 4 years buying back stock and paying down the variable debt using their carryforward losses. They paid that debt all off last quarter, so now they are concentrating on buying back stock and getting back to NAV.

Management has mentioned several times that they're buying triple net properties at 8.5-9% cap rates that are medium-term net leases. A lot of these deals are on properties off market, sourced internally with little to no competition. They did say on the longer-term net leases they're seeing ~7.5% cap rate.

Upon closing of the announced M&A transactions, debt/real estate (at cost) will be ~49%. Net debt to EBITDA will be ~7.4x, compared to the current Net debt to EBITDA of ~7.1x for Realty Income (O). They mentioned on their latest investor/analyst day that they're hesitant to use equity to raise capital to pay for acquisitions moving forward until their shares are priced at a multiple similar to their comp set, so it makes sense that on a pro forma basis, they plan to use more debt (and be more levered) in the short term in comparison to competitors.

As for P/NAV, they don't report what the current value of their real estate portfolio is, just their investments at cost as it is stated on their balance sheet...Can you explain why this is an important valuation metric in this scenario? Especially in the case of a company that will look completely different in a year? On a pro forma basis, they will have ~$9.5mm in real estate, ~$4.6mm in debt, and ~396,000 shares outstanding by the end of 2014. While this does not include cash and other assets, this would mean a NAV/share of $12.37, or a P/NAV of 1.18 today.

under IFRS reits need to do a fair value NAV each year, based on market based discount rates, so its a real metric. when using historical prices, obviously like you pointed out its pretty much useless. I forgot the US hasnt transitioned to IFRS yet.

50% of assets funded through debt is pretty normal, not too aggresive. you dont want to see them go materially above that, but its comfortable.

this makes no sense post 2009. they could have refinanced the debt at any point after, like in 2011 or 2012 when rates were dirt cheap.

They did with some of the debt, but they were also way too leveraged so they forfeited their BDC status and concentrated on using their carryforward losses to conduct massive payments of debt and buying back of stock. You can see from the balance sheets that they paid off a lot of debt very quickly (from having over 4 billion in 09 to having a present debtload of less than 750 mil today).

In the last quarterly report, management indicated that the present debt was all low interest and managable, so they are concentrating on buying back stock instead to reach NAV so that they can reclaim BDC status and issue dividends again. They hope to do this before they lose all of their carryforward losses, however, their NAV is also increasing asymetrically to their buybacks.

Bought 200 shares of BP at 43.43 today.

dont really get how this could be a value investment. how could it possibly be undervalued/what incite could you have?

Pays a real nice dividend which is coming up. I'm kind of a dividend whore. And I'm generally bullish on energy and fossil fuels. Read an article the other day that said in 2030 China will be using 2x as much energy as the USA and 80% of the world's energy will still be fossil fuels.

Holding:
AAPL
BP
DEM
CVY

There's isn't a lot of projected growth over the next year or two, if that's what you mean. But I like BP and just added more myself. It's trading at around 6x earnings. Chevron and Exxon by comparison have over a 9.5 P/E. Granted Chevron has $1/S higher dividend, but I think BP is still a little undervalued due to the spill. I found a DCF valuation of + $104.

I own a good chunk of an oil company, and I considered it to be a reasonable value investment at the time. But it has multiple catalysts coming up and is cheap from any mathematical point of view. BP costs more than mine on the math and has no catalysts. I agree that oil is underpriced as a sector right now, but you could have done better than BP. Also a dividend is not a good reason to buy a stock. You'll have to pay taxes on the dividend and there will be an instant drop in the stock price on dividend day most of the time.

EDIT: This was my 3k Poast. At least it wasn't a troll. Just noticed that. I'd do some kind of AMA 'give back to 2p2' type thing, but I already did one of those... And 2p2 hasn't done all that much for me lately.

Also anyone pretending to know what energy consumption will look like in 17 years is pulling stuff out of their ass. We have literally zero idea what the energy market will look like in 5-10 years.

Actually I think we can predict the next 5-10 years of energy consumption with better probabilities than most industries, due to long term trends, a strong base and the lag time for new infrastructure and technology. It's nearly as reliable as predictions of food consumption.

What's going to change in 5-10 years for oil? Electric cars will still be a fraction compared to gasoline due to material and technology limitations,and simple inertia. After 100 years, the internal combustion engine isn't suddenly going to get 2x as efficient. Solar and wind will still be a dog. Fusion (if it ever comes online) won't exist commercially yet, in fact not for decades in the best case. The world is turning away from nuclear because people are morons.

So what's left? Coal, oil and gas. Gas has been rejected as an oil substitute for decades despite a cheaper price. So anywhere you want easily transportable energy, oil is it. And usage will continue to increase while new production continues to push into more and more marginal (and hence costly) areas. The owners of cheap old fields, the owners of prospecting licenses, as well the existing extractors and refiners, have a huge advantage.

It's probably one of the surest bets in the market over the next 10 years.

I wouldn`t bet my money on that.

well didnt this thread give you skul?

yeah whats going to stop electric cars? you read in the news about tech advancements in this area every day. How they will soon have instant chargeble batteries etc. They can easily have some super awesome battery + electric engine ready within the next 5 years. And what about those hyperloops elon musk will be working on soon? Shooting basicly everything from one location to the other ttwice as fast as an aircraft with much less costs. That might happen within 10 years, and that will greatly reduce gas usage. Allthough it isnt too likely i guess. Even tho the technology is there already.

chipchip,
The 1970s called and they want their electric car optimism back.

may as well just spy or a dividend etf then.

im not ****ting on BP. It might be a good investment, I dont know. What im trying to say is that it makes no sense to talk about it in a value investing thread, as you cant do any research that the street hasnt already incorporated into its analysis. same goes for these other picks. I also own apple but thats more something I expect to match the index than something I have any great incite into, so I dont bother posting it in a value thread

Oh my bad. I just picked it up as a long-ish term investment. Was gonna post it in the trading thread but this thread title looked more appropriate. I don't have any special insight beyond stuff that's readily known and a feeling that it's too cheap right now.

It did. At the same time I've given the internet an awful lot over the last few years. SKUL is literally the only useful thing I've gotten in the last 2 years. (I would be singing a different tune if I'd noticed PRSC lol)

The long term trends are (and basically always are) unsustainable at current rates. If a model shows dramatic changes in price for a commodity it almost always fails to adequately factor in substitution.

Seriously the most tilting thing that analysts (of all stripes) do is use rulers to make forecasts. The world is a complicated place. Trends may continue, or they may break, but anyone claiming to make a reliable prediction for 2030 is an idiot.

EDIT: What I'm basically saying is that if the long term forecast is projecting a massive change in price for a commodity that is itself a catalyst that will drive people to try to figure out a way to break the trend.

This thread is mostly "I think X is cheap" and not too much analysis behind it.

And there's plenty of examples where the street view is wrong or right but not reflected in the market. BP may very well be an interesting value investment, but the poster's response was pretty LOL.

I think you are simply not paying attention.
Besides PRSC and WDC, I can also name GILD, LACO, and SILC among others that I've seen in this forum. I also posted about AGO and ANAT, and briefly about REGI.

Though none of them beat the almighty NICK, which I am still agonizing over when I bought around $3 many years ago and sold around $11.