Azurik
Platinum Member
- Jan 23, 2002
- 2,206
- 12
- 81
IHMJ,
Can you give me a brief overview of what this energy company is about? How is revenue rising at a good clip, but net income is running in the opposite direction?
IHMJ,
Can you give me a brief overview of what this energy company is about? How is revenue rising at a good clip, but net income is running in the opposite direction?
Large capex = high depreciation = negative effect on net income
Look at projected operating cash flow based on new wells drilled from [previous] capex spend.
ATPG is similar but to me more attractive because of lower valuation due to its presence in the Gulf and higher leverage.
USG is barely cash flow break even in an environment where raw material prices are rising why would this be a target for old farty farterson?
- Sep 29, 2004
- 18,656
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Alot of the oddities you see are due to the acquisitions they have done. They have done quite a few acquisitions over the past few years.
To remove ambiguity, you mean the bottom line by net income, correct? I never pay attention to that. I go right to FCF.
SD is not easy to value. I did a very rough estimate based on revenues. That's why at $7 and change i was buying. Sometimes value is obvious.
SD is a natural gas company that grew it's interests in oil over the past few years as a hedge. When the US goes to natural gas, SD stands to make out. Some of their buys have been of distressed companies that needed to sell. In part I am also piggybacking Prem Watsa. His buy is the reason I read up on it in the first place.
For what it is worth. I can understand why it is worth $11 but I do not understand why it could be worth more. When it was at $7, I simply bought it. Not one of those buys where it takes 5 minutes to go holy crap. Reading annual reports along with a small background knowledge of oil/nat gas is why I bought along with price/revenues.
Anyone on covestor? just created an account there, not sure how it work there, since I am not a RIA, they pay by per subscriber. I guess I might as well make some extra money from my investment.
Aharami
Lifer
- Aug 31, 2001
- 21,205
- 165
- 106
- Sep 29, 2004
- 18,656
- 68
- 91
Right now we are not in "normal" times. The housing downturn is still here and there is still an over-inventory of homes.
Drywall is mostly gypsum. One of the most abundant materials on earth. Drywall companies typically own the land the gypsum is on. This is the case with USG.
I can't get into everything here because I'd like to cite sources for things like new factories where COGS scale more linearly with demand/output.
To see what is normal with USG, look back to pre-2003 numbers. That's when the housing markets were normal. Those days will come back eventually.
Prem Watsa and Warren Buffett own about 50% of the company if you include the convertable debt they own.
- Sep 29, 2004
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gurufocus.com has a good page with 10 years of financial data:
http://www.gurufocus.com/financials.php?symbol=USG
The other half is read and ask questions. Read USGs annual report and pay especial attention to the risks. Valuing a company is easy. The hard part comes in having confidence about your future assumptions and how well you actually know the business.
One of the most fascinating companies i ever read about did the plastics for dashboards in big rigs. I wish I remember its name because it is an excellent company for a new investor to read about. The finances were easy to follow. It's business model was simple and easy to understand. The risk though was that 50% of its business came from one company. But the question then becomes, what is the health of that 50% company and so on. It was fascinating reading about it. it really allows one to see what you should be doing as an investor.
Azurik
Platinum Member
- Jan 23, 2002
- 2,206
- 12
- 81
Have a good Memorial Day weekend! I'm checking out in a bit. Flying from Boston to San Diego tomorrow and then back on the same night. Doing it for the miles, haha!
29 out of 30 slots have been filled, 9 from Anandtech. Because the question pops up so much, this is the usual format (and it's geared towards novice to intermediate investors/traders):
1. Focus Stock
2. Economy
3. Financial Deal (some has a value that recoups the subscription fee itself)
4. Q&A and suggestions for next month's topic
29 out of 30 slots have been filled, 9 from Anandtech. Because the question pops up so much, this is the usual format (and it's geared towards novice to intermediate investors/traders):
1. Focus Stock
2. Economy
3. Financial Deal (some has a value that recoups the subscription fee itself)
4. Q&A and suggestions for next month's topic
Got a source for that? A USG product rep told me a few years back that most of their raw gypsum comes from coal fired power plants - it's apparently a byproduct. My understanding was that hardly anybody mines gypsum for GWB these days, at least in the US.
- Sep 29, 2004
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From what I recall reading, USG has about 15 years worth of gypsum already owned via land they own/mine.
I can not find a source easily. It's not as though I read one or two things about USG and bought it. Read about 4 or 5 annual reports, a bunch of presentations and countless articles.
Anyway, yes they still mine. I found this via Google granted it is about a slow down causing a mine to stop operation:
http://elkodaily.com/mining/article_7a067346-015b-11e0-a065-001cc4c03286.html
The article does say it though:
"Empire is one of 16 gypsum mines USG operates in North America."
Maybe not all from mines but ??% of it.
I guess if you are bullish new housing then USG is the appropriate investment. I'm personally very bearish in new and existing housing for the next decade.
something is up with KV-A, up 76cents, I got lucky and bought some at $2.77..maybe the FDA will change their mind and disallow compounder to sell compound to compete with Makena.
- Sep 29, 2004
- 18,656
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I never spent time dedicated to the topic.
So, I basically took a look at the US population and total housing numbers. Data goes up to 2009 so it is slightly stale. I could probably track down better data but this is a good start.
Housing inventory:
http://www.census.gov/compendia/statab/2011/tables/11s0977.pdf
US population:
http://www.google.com/publicdata?ds...ulation&tdim=true&dl=en&hl=en&q=us+population
And I came to the conclusion that, there is not a housing inventory glut. The number of housing units relative to US population is actually normal. I was not expecting that. Far from a complete study though.
So the big problem now is really the fact that banks F'ed up and put alot of people in the red. That needs fixing. That takes time. Because with time we get inflation and people paying down their mortgage which decreases the principal owed.
Perhaps this is why I hear people smarter than me giving ranges of 6 months to 10 years for a recovery to occur. I'll stand with Buffett in saying that things will eventually get fixed. Some economist (or economists) will get it right and be applauded after the fact for their prediction. Much like those that predicted the housing crash within a few months.
But so long as the population goes up, more homes will be needed. And that is what drives construction. Not a people being under water.
Further ...
Housing vacancy's of 11% or 12% are normal. Right now we are at about 14.4% (stale data by a year or two). If the population were to grow at 0.5% a year this discrepancy would take 5 years to resolve.
Who knows when things will get better. It depends. Obviously some areas of the country will improve before others. And some will be the last to recover.
When investing though, it is easy to be late to the party. Being early is where the money is made.
Azurik
Platinum Member
- Jan 23, 2002
- 2,206
- 12
- 81
I wish I rec the above 100x times. Early is on time in the stock market. Bigger risk in being early most the time, but the rewards are much more - and so are reputations. It's easy to hop on the bandwagon when the message is right in front of you... much more difficult to look at the underlying factors and make a call based on your DD.
dullard
Elite Member
- May 21, 2001
- 26,196
- 4,869
- 126
The typical housing supply is 5 or 6 months. Meaning if no more houses went up for sale, that all homes currently for sale would be sold in 5 to 6 months if the same numbers of buyers kept buying. Right now, the inventory is at 9 months (record is 10 to 11 months depending on how you calculate it). That is a 1.5 million glut of homes for sale over the typical levels.
Typically it is 10 years. Although if you include inflation, housing typically takes 15 to 20 years to recover. I think you have a lot of time to still get in while it is early.
Population increases are becoming slower and slower. The recent recession actually drived a lot of immigrants out (and kept new ones from wanting to come in). You are correct with your unstated conclusion though. We typically need nearly 1 million homes per year to keep up with growth and with houses that are destroyed. Our current rate of about 600k houses being built per year is below that level. So, the problem will work itself out eventually. With a 1.5 million home glut, and a 400k per year deficit of homes being built, it will fix itself in about 4 years if nothing changes.
But, that leaves 4 years of bad construction. Four years of low profits. And then it just returns to normal - not to any fantastic growth position. I personally think you can wait 3 years earning money in better places and still not miss out when this glut finally does go away.
With that in mind, we'd be already late. We should have bought back at the $4.3/share price. At $14/share, the biggest profits were already made.
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- Sep 29, 2004
- 18,656
- 68
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Already bought USG once. made a good chunk of change. Sold it in the $20s. And whenever it dips again, I buy again.
Just realized that I have not done a DCF in about 2 years. So I redid the math. Assuming a ramped recovery to 2017 (where FCF eventually hits $244m), I see IV at $13-$18 depending on discount rate. That sucks. I should have revisited my worksheet a while ago.
I wish I could keep notes somewhere online that remind me that I have not revisited IV in a year.
EDIT: Limit order to dump in for $18/share.
Just realized that I have not done a DCF in about 2 years. So I redid the math. Assuming a ramped recovery to 2017 (where FCF eventually hits $244m), I see IV at $13-$18 depending on discount rate. That sucks. I should have revisited my worksheet a while ago.
I wish I could keep notes somewhere online that remind me that I have not revisited IV in a year.
EDIT: Limit order to dump in for $18/share.
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Sold most of my kv.a between 3.29-3.35, not bad for a ~20% gain for holding them over with the long weekend. I still hold some in my wife’s account, will let those ride. SGMO is up another 50cents, I’ve stumbled upon KBLB while doing my DD on SGMO. It looks like KBLB is ready to commercialize something. They’ve just released their monster hybrid silkworms news this morning, so maybe they are ready to move forward for commercialization. Other than the CEO is a nut job and it doesn’t look like he has a science background, the company seem legit, and the fact that they have an agreement with Sigma-Aldrich, it’s good enough for me. I bought some at 0.136 this morning. They will have a conf call on 6/10, it’d be interesting to hear what they have to say. oh and CIGX is over $5 now, yeah!
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- Sep 29, 2004
- 18,656
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LinkedIn closed at $81 today. Remember IPO day. Almost worth doing some sort of options magic. Yes, they already have options.
- Sep 29, 2004
- 18,656
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FelixDeCat
Lifer
- Aug 4, 2000
- 31,283
- 2,789
- 126
I dont see what makes that site so valuable. It reminds me of when I was trading internet stocks back in the late 90s. All the trash came to market and all it had to have was a .com in the name and it was almost a guaranteed double.
The worst stock I could remember was some little money losing pip squeek piece of garbage internet site similar to geocities. It debuted at $30 and hit $90 intraday during its IPO in 1999. By early 2001 it was delisted and going for .25 cents a share. Total trash.
Likewise, I dont see what makes LNKD so valuable. I suspect once the hoopla of this business networking site dies down it will come to its offering price or below, maybe just before the lockup expires and insiders can legally dump en masse. There is usually a pop afterwords about a month following passage of said lockup date if no percipitous decline happens then a gradual return to the mean depending on earnings.
LNKD is not Google, its not FaceBook (another potential short after its expected 'stunning' market debut, which I plan to short the ever living crap out of as indicated in post 319 and the intense debate that followed), its not Zynga and its not even Groupon. I have checked it out and I dont see the appeal nor do I see the growth potential, so I think its just hype. But of course I will need to see earnings reports to confirm my suspicions.
Even Google fell once it reached the moon (before going back up again). I even remember comming to have a laugh at Apple once when the shorts came to kick it in the teeth and chuckle at longs in late 2000. It experienced a near 50% correction to $19 after iMacs were no longer hot. After languising for nearly three years afterwords, who knew that Steve Jobs would move away from PCs to portable consumer devices like mp3 players then PDA/smart phones, and that the stock would go up 20 fold over time. He found his niche - appeal to the masses and their love of high margin "Monster Cable" type solutions to everyday technology. :sneaky:
LNKD falling like a rock. Gee, what a surprise.
Should I buy puts now or later? Hmmmm.....
Imp
Lifer
- Feb 8, 2000
- 18,828
- 184
- 106
LNKD falling like a rock. Gee, what a surprise.
Should I buy puts now or later? Hmmmm.....
lol.. It fell 8% last Friday and 7% today.
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