Latticework Investor

Value Investing

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$GNE: energy business with call option on shale play

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$GNE: energy business with call option on shale play

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Written by latticework01

September 30, 2012 at 7:52 am

Posted in Uncategorized

Cowen Group

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Cowen Group is a mid market investment bank and alternative asset manager.

Hedge fund Ramius reverse merged into Cowen. The asset management side of business will not make any money from incentive fees until investors get back their losses from the fund. The value is in the company’s cash assets invested in their hedge fund and future earnings from incentive fees.

This idea came from an article on Seeking Alpha.  A few quotes are below:

Cowen Group is transforming itself from a small boutique investment bank into a complete financial services company with >$7 billion in assets under management. Ramius, a privately-held alternative investment manager, recently acquired Cowen Group in a reverse merger that closed at the end of 2009. The Company has more net cash and investments than market cap despite a) stabilized asset flows on the Ramius side of the business, and b) a dramatic increase in leads and wins and on the investment banking side.

Cowen trades at 0x EV/AUM, below book value and at about 5x normalized earnings. Peers trade at 7% EV/AUM, 1.3x-2.0x BV and anywhere from 6x-30x 2011 earnings. It is probably best to value this as a sum-of-the-parts as the business drivers are somewhat different and so are the peers. We think the shares are worth a minimum of $9 (shares were near $9 last summer and near $8 in November) valuing Ramius at 2.5% AUM and the investment bank at 1.0x book.

Written by latticework01

February 15, 2011 at 4:32 pm

Posted in Uncategorized

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Vodafone

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The first company in my list of 2o investments is Vodafone.

The thinking being Vodafone has a hidden asset in the form of a 45% stake in Verizon Wireless. This is likely to be realised when the Verizon Wireless starts paying a dividend to shareholders.

Below is some of the places where I found this idea.

Vitaliy Katsenelson – Contrarian Edge

  • Verizon Wireless has not paid dividends to Vodafone since 2005 and thus the street puts almost zero value on Vodafone’s stake in Verizon Wireless.
  • Verizon does need the dividend from Verizon Wireless, as Verizon’s wireline business doesn’t generate enough free cashflow to cover Verizon’s (the public company) dividend payments.
  • Verizon Wireless is the cash cow, generating about $10 billion of free cashflow a year, and is responsible for a large portion of Verizon’s free cashflow.

Manual of Ideas – 28 January 2010

  • In summary we add the estimated value of Vodafone’s 45% stake in Verizon Wireless and the estimated equity value of the rest of Vodafone, i.e. the current stock price, to arrive at a fair value for all of Vodafone operations of £1.85 to £2.11.

Manual of Ideas – 27 August 2010 (pdf)

  • Estimated value of Vodafone’s 45% stake in Verizon Wireless is between £0.51 – £0.78 per Vodafone share.
  • Using a current share price (as at August 2010) of £1.50 that gives a total value of £2.01 – £2.28 per share.

David Einhorn – 4 May 2010

Vodafone remains at a large position in the portfolio.

The basic thinking there is that the share price does not reflect a full valuation or even maybe even any valuation for Vodafone’s 45% interest in Verizon Wireless. Because right now, Vodafone doesn’t get any cash from Verizon Wireless, so it doesn’t show up in any of their cash flow metrics or in their dividend yield which tend to be some of the kinds of things that some of the sell side and buy side analysts look at. What’s interesting about it is as most of the cash from Verizon Wireless has been going to repay inter-company debt to Verizon. And that debt has been a substantial amount over the last couple of years which is now almost complete. Within the next month or two, all of that inter-company debt be repaid and then it will be interesting to see how Verizon and Vodafone work out what to do about the Verizon Wireless cash flows at that time. So, we’re hopeful that that – however that is resolved, it will be in a way that will more fully reflect Vodafone’s substantial ownership in Verizon Wireless and we hope that that will reflect in Vodafone’s share price.

Written by latticework01

February 15, 2011 at 3:03 pm

Tracking Employee Relationships

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Inc has an article about Amazon buying Zappos. Interesting comment from Zappos CEO, about how they try to track employee relationships.

In the first quarter of 2010, net sales at Zappos were up almost 50 percent, and we’ve added several hundred new employees. The growth has made Amazon very happy, but it’s also creating new challenges. I’ve noticed that at company happy hours, you don’t see as many employees from different departments hanging out with one another.

To address that, we’ve begun tracking employee relationships. When employees log in to their computers, we ask them to look at a picture of a random employee and then ask them how well they know that person — the options include “say hi in the halls,” “hang out outside of work,” and “we’re going to be longtime friends.” We’re starting to keep track of the number and strength of cross-departmental relationships — and we’re planning a class on the topic. My hope is that we can have more employees who plan to be close friends.

Written by latticework01

June 8, 2010 at 1:39 pm

Posted in Uncategorized

Whitney Tilson and Glenn Tongue

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Notes from the Value Investing Congress Twitter feed.

Whitney Tilson and Glenn Tongue

  • We are in the midst of a range-bound market and S&P is currently at 20.4x inflation-adjusted trailing earnings. Market avg is 16.3x
  • Mortgage market has been nationalized; all house price indices above 2000 but way below the peak.
  • Of the homeowners in this country who haven’t made a payment in 1 year, 24% have not been foreclosed on
  • The great idea today: Anheuser-Busch InBev (BUD) trading for 8.5x 2012 free cash flow.
  • Amazing how unfamiliar the market is with the management story behind AB-InBev; like Rose Blumkin at Nebraska Furniture Mart
  • Way to look at BUD is take FCF attributable to it net of AmBev minority interests + synergies + deleveraging + 50% of Modelo’s FCF.

Written by latticework01

May 6, 2010 at 9:57 am

Lei Zhang, from Hillhouse Capital Management, runs largest hedge fund in China

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Notes from the Value Investing Congress Twitter feed.

Lei Zhang, from Hillhouse Capital Management, runs largest hedge fund in China

  • $4 billion AUM, started with $30 million
  • 52% annualized returns since inception (8/2005) through 3/2010
  • Zhang runs concentrated portfolio, fundamental bottom up research
  • Uses team based research process
  • 3 to 5 year avg holding period on long positions
  • Zhang focuses on people and organization behind the business
  • Currently 50% cash, adds 3 to 5 names/year
  • Zhang currently negative on shipping
  • Zhang-common investment mistakes in China: short term orientation, over excitement about short term growth, concentrated bets
  • Zhang generally does not like small caps
  • Zhang discussing Changyu Corp, Chinese wine company, with massive distribution
  • 2008 ROE 35%
  • Zhang owns B shares
  • No license needed in China to sell liquor, little regulation
  • Zhang now taking questions
  • Zhang’s favorite shorts are the “frauds”
  • Consumer debt just 16% of Chinese GDP, savings rate high, net savings of $35 trillion Yuan

Written by latticework01

May 6, 2010 at 9:57 am

Tom Russo of Semper: global value equity investing.

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Notes from the Value Investing Congress Twitter feed.

Tom Russo of Semper: global value equity investing.

  • International markets very attractive because of emerging market growth
  • No way out: American companies are exposed to foreign currencies and you’ll have the same fluctuations as foreign businesses.
  • Allocated a lot of capital to emerging markets when they collapsed in late 2008.
  • Nestle has the ability to invest large sums of money at very high rates of return in emerging markets.
  • Pernod Ricard: tremendous leadership in China and leading positions in brands around the world. Became #1 shorted stock in Euronext in 2008.
  • SABMiller has burdened EBITDA margins in Africa because of investments. Commendable: not many companies can think long term.

Written by latticework01

May 6, 2010 at 9:56 am