Dow Inc Spin-Off: Classic Value Investment Story?
by ValueWalk - March 22nd, 2019 11:58 am
By Alex Gavrish. Originally published at ValueWalk.
Alex Gavrish discusses Dow Inc spin-off from DowDuPont
Shares of Dow Inc, a spin-off from DowDuPont, started trading on March 20th, 2019 on a when-issued basis. At $50 per shares, Dow Inc’s market cap is approximately $37.5 billion. According to the company’s roadshow presentation, Dow Inc will have a net debt of $15 billion at the spin-off while FY 2018 operating EBITDA was $9.1 billion. This means that Dow Inc is currently valued at an EV/EBITDA multiple of x5.77. This looks low, especially compared to the valuation of DowDuPont combined: it currently trades at an EV/EBITDA ratio of about x9.3 (FY 2018 results).
Q4 hedge fund letters, conference, scoops etc
Already before the spin-off, the company announced that initially, it plans to pay an annual dividend in the amount of $2.1 billion, which provides investors with an annual yield of 5.6% percent. Dow will also have share repurchase program in place, initially for $3 billion. Assuming that it will be implemented over 3 years, shareholders will be rewarded with an additional annual yield of 2.6% percent.
Assuming a more “normal” EV/EBITDA multiple and generation of $3 billion of FCF annually, in two years Dow Inc shares could be valued at $79 per share, which provides an upside of 58% percent.
The post Dow Inc Spin-Off: Classic Value Investment Story? appeared first on ValueWalk.
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Mary Barra: GM To Build Chevrolet Bolt EV In U.S. Plants [Full Transcript]
by ValueWalk - March 22nd, 2019 11:50 am
By Jacob Wolinsky. Originally published at ValueWalk.
CNBC Excerpts: General Motors Chairman and CEO Mary Barra Speaks with CNBC’s Phil LeBeau Today
The following is the unofficial transcript of excerpts from a CNBC interview with General Motors Chairman and CEO Mary Barra and CNBC’s Phil LeBeau today, Friday, March 22nd. The following is a link to video from the interview on CNBC.com:
Q4 hedge fund letters, conference, scoops etc
GM to build Chevrolet Bolt EV in U.S. plants, add 700 jobs
All references must be sourced to CNBC.
Mary Barra on Orion Vehicle:
It’s going to come out in a year or two. We haven’t released the specific date yet, and there will be a lot more to follow on the specifics of the product. But today we are really focused on the workforce at Lake Orion.
On the Trump Conversations:
I generally try to keep those conversations private, when I am talking with any member of the administration or government. But you know, this is an announcement that we have been planning a while, just getting everybody aligned, because it is so significant, you know, a brand new electric vehicle that we had planned to build at a location outside the country. So very significant that we are building it here, investing in the U.S. and creating 400 jobs.
On Briefing the Administration:
We regularly brief the administration when we are going to be making announcements-- announcements such as this. And so that is where I will leave it. And I think, you know, when we look at what General Motors is committed to, we are committed to investing, we have been making shifts because we see the growth in trucks and crossovers and now electric vehicle, and we are going to be making those investments. And I believe as we continue to go forward, not only maintaining the employment that we have here and the good paying jobs, but creating more.
On the Chevrolet Bolt EV:
When we look at the architecture that this vehicle is coming off of, and there have been significant enhancements, but it makes sense because the Chevrolet Bolt EV is built at Orion and this is a…
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Howard Marks Sees More M&A After Brookfield Deal
by ValueWalk - March 22nd, 2019 11:38 am
By Jacob Wolinsky. Originally published at ValueWalk.
Bruce Flatt, chief executive officer at Brookfield Asset Management, and Howard Marks, co-founder at Oaktree Capital, discuss the background of Brookfield’s purchase of a majority stake in Oaktree Capital and how the deal could impact the industry. They speak with Bloomberg’s Erik Schatzker on “Bloomberg Daybreak: Americas.”
Oaktree’s Marks Sees More Industry Mergers After Brookfield Deal
Q4 hedge fund letters, conference, scoops etc
Transcript
Whose idea was this anyway.
You know our our view was that this is one of the great credit businesses in the world. And we followed them for years and Howard is obviously. A legend in the markets and so we approach them and talked about talked about it in from there. We ended up with a transaction that was your idea that I guess you’re right. How long did it take. It took five months the markets were a little rough in December. So they were. That didn’t help the transaction but I say in transactions you learn a lot of both the other side when you go through rougher periods of time and that is probably good for the end and end result we got. Howard you have been telling your clients for 17 years already what it would take for oak tree to be acquired 17 years why now
Well not for 17, 17 years ago. It hasn’t been a constant theme. But you know there was a rumor in 02 that we were for sale. And day in my year end report I published the five criteria for a transaction and I said they’ve never been satisfied. I assume they never will so let’s forget about it and nothing ever happened until this transaction came along.
Now the criteria you set forth are being satisfied.
Yes.
What about the timing. The now factor.
You know I’m not a market timer. And this is a. Fundamentally sound transaction. And we’re not are entering into it at this time has nothing to do with the timing. I mean Bruce described-
Nobody should impute or infer some sense of where you think we are in the credit cycle etc.
Not at all. Not at all.…
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The Future Of National Beverage Corp. (FIZZ) Stock; Cannabis Webinar
by ValueWalk - March 21st, 2019 10:50 pm
By Jacob Wolinsky. Originally published at ValueWalk.
Whitney Tilson’s email to investors discussing the LaCroix maker National Beverage Corp. (FIZZ)’s stock; Tesla; Cannabis webinar; question 3; Jamaica.
1) I’m still sniffing around National Beverage Corp, best known for its LaCroix brand of flavored sparkling water, which I wrote up as my Stock Idea of the Day in my email eight days ago.
Q4 hedge fund letters, conference, scoops etc
The key question that will determine the future of the stock is whether we’re seeing a mere hiccup for LaCroix or the beginning of a long-term decline. To help answer this question, I’ve put together a short survey, posted here: https://www.surveymonkey.com/r/JLS9QQS.
If you drink LaCroix and/or know someone who does, I’d be grateful if you’d take a moment to fill out/forward it. Thank you!
2) A friend forwarded me a 33-slide presentation on Tesla (TSLA), Detecting “Potential” Fraud in Real-Time, that Tom Bachrach of PFH Capital gave on Tuesday to UPenn Wharton students. You can download it here.
I don’t know him or his firm, but it’s an outstanding piece of analysis, especially the forensic accounting part that begins on page 17, which captures why I think there’s at least a 50% chance of significant fraud at the company. Pay particular attention to the “VIN Gap” he discusses on slides 28-29.
3) It’s a credit to Galileo Russell, the young guy who’s made a name for himself as a Tesla uber-bull, that he’s beginning to question all of the insane, inexplicable things that the company and its CEO, Elon Musk, are doing. Most people I’ve found do the opposite once they’ve committed to something, especially if they’ve done so publicly: they dig in their heels, block out any and all disconfirming information, and attack anyone who questions them.
In contrast, Russell did a live 28-minute YouTube session yesterday with his many followers in which he outlined his concerns Tesla and Musk and practically begged the company to raise money. Why it hasn’t done so remains a great mystery…but its failure to do so may be a major cause of the craziness we’re seeing, as Russell appears to be realizing (though he says he’s still bullish and buying the stock!)…
4) I’ve been…
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Selling Into The Rally: Not Everyone Is Bullish On Equities
by ValueWalk - March 21st, 2019 5:09 pm
By Michelle Jones. Originally published at ValueWalk.
The markets have generally had a bullish view of equities for much of the year so far, but not everyone is buying stocks. In fact, Bank of America Merrill Lynch reports that this year has brought the worst start to the year for equity flows since 2008.
Selling into equity strength
Last week BofAML recorded $10.1 billion in outflows from stocks, of which $5.5 billion of those outflows were in U.S. stocks alone.
Q4 hedge fund letters, conference, scoops etc
The firm’s clients were clearly selling into strength as global stocks were up 10.6% for the week. BofAML Chief Investment Strategist Michael Hartnett and team pointed out that the equity bull market officially turns 10 on Saturday. Over the last decade, the U.S. market capitalization has increased $21.3 trillion, which is triple the U.S. GDP’s increase of $6.5 billion.
The only other asset which saw outflows last week was gold, which incidentally has performed well toward the end of this week, finally breaking above the key $1,300 per ounce level so many experts have been watching. According to BofAML, commodities were up 12.6% the same week gold recorded outflows. Precious metals saw $1.2 billion in outflows, the highest in 28 weeks.
The only other “bearish” flow, according to the firm, was the $8.8 billion in inflows to bonds.
Hartnett and team also said their Bull & Bear Indicator dropped for the first time this year, falling from 5.1 to 4.9. The drop is especially notable because of how quickly the indicator has shifted from buy territory just a few months ago deep into neutral territory now.
In fact, their Bull & Bear Indicator was in “extreme bull” territory just last year.
Credit over stocks
Harnett and team also found that flows significantly favor credit over stocks. In fact, this past week brought the fourth-largest inflows to investment-grade bonds ever recorded at $9.5 billion.
We would also note that other sources have indicated that pension funds, which are among the biggest investors of all, have been increasingly favoring credit over the last several months. Canaccord Genuity has been tracking record-high pension flows to credit and related…
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Public Pensions Share What They’re Doing To Boost Funding Levels
by ValueWalk - March 21st, 2019 4:37 pm
By Michelle Jones. Originally published at ValueWalk.
The pension crisis has been going on for so long that it seems like every headline about it simply adds more bad news to the pile. However, there are a few good things going on at some public pension funds. There are also some very interesting trends, according to a recent study.
The National Conference on Public Employee Retirement Systems (NCPERS) conducted a study of 167 state and local government pension funds. The NCPERS Public Retirement Systems Study analyzed the funds’ “fiscal condition” and the steps they’re taking to bolster their “fiscal and operational integrity.”
Q4 hedge fund letters, conference, scoops etc
Equity returns are higher than other asset classes
Thy found—among other things—that the three asset classes which posted the highest one-year gross returns last year are all equities. However, private equity, hedge funds and other alternatives were in fourth place. It’s interesting that PE, hedge funds and alternatives were all lumped into one group, given what we’ve seen from other studies.
For example, Canaccord Genuity has shown several times that pension funds are increasingly favoring credit and related products over other asset classes, and sometimes PE can overlap with credit. As a result, the NCPERS study makes it a bit difficult to discern exactly where pension funds are getting their returns from.
We have seen in other studies that investors in general have been boosting their allocations to PE funds, often at the expense of hedge funds.
Looking at the allocations of pension funds, the NCPERS study found “a slight decrease” in targeted allocation to equities and fixed income and a “slight increase” in targeted allocation to bonds and PE/ alternatives.
Highest returns favored equity allocations
The study also found that the pension funds with the highest one-year investment returns were those that favored equities, global fixed income, PE and alternatives, and commodities. On the other hand, these funds had lower allocations to domestic and international fixed income.
Given the strong run stocks had last year, it isn’t a big surprise that equity-focused funds did better than others, although December through a major wrench into the works for some strategies. Due…
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Detecting Potential Accounting Red Flags At Tesla Inc (TSLA)
by ValueWalk - March 21st, 2019 10:08 am
By Jacob Wolinsky. Originally published at ValueWalk.
Whitney Tilson’s email to investors discussing the Tesla bull case followed by Thomas Bachrach’s presentation on “accounting red flags” at Tesla.
1) Tesla bull and blogger Galileo Russell hosted a podcast / live YouTube yesterday, which you can watch here:
Q4 hedge fund letters, conference, scoops etc
A friend writes:
He is estimating 75,000 unit sales and 80,000 production for Q1.
Seems like he’s too high on sales, but too low on production.
They might product close to 90,000 — but sell perhaps as few as 60,000 (or even just under).
2) Anton Wahlman’s latest: https://seekingalpha.com/instablog/200447-anton-wahlman/5283935-dan-ives-wedbush-doesn-t-know-automobile-industry
Summary
- Dan Ives of Wedbush publishes Tesla report based on having visited Tesla’s two main facilities in California and Nevada.
- It appears that Ives does not cover any other automaker. Has he visited any other car factories lately? How many? Where? When?
- As for the car itself, has Ives driven the latest competitive models from Audi, Jaguar, Hyundai and Kia? If not, how does he have any sense of the competition?
- It seems to me that Ives doesn’t know what he is talking about, because he has little or no experience with the competitive climate.
- It’s like someone seeing an Android phone and being amazed, without ever having heard of Apple and the iPhone.
3) A big part of the Tesla bull case is how the company marries software and hardware, like Apple does. My analyst Kevin DeCamp writes:
The bottom line is I think OTA (over the air) updates are one of Tesla’s main advantages and one of the reasons that Tesla owners LOVE (as Whitney points out) their cars. I don’t agree that it is just the EV powertrain that they love, although that is an important part of it. Although comparisons to Apple are laughable when you consider the financials and the quality of the business, there are some parallels when it comes to the seamless integration of hardware and software.
More on this later, but for now here is a well-balanced blogpost that explains well why the auto incumbents are, and I think will continue to be for the foreseeable…
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Gator Financial Up 23% YTD As GSE Preferred Shares Yield Returns
by ValueWalk - March 21st, 2019 8:45 am
By Michelle Jones. Originally published at ValueWalk.
Gator Financial is now two for two for 2019 after ending both January and February in the green. It’s a much-needed recovery after last year’s double-digit negative return. According to the firm’s February fact sheet, the month wasn’t as outstanding as January, but it was still a solid return, nonetheless.
Gator Financial was up 4.44% in February
The financials-focused hedge fund reported a return of 4.44% for February to follow up January’s 17.76% return. That brings Gator Financial’s year-to-date returns for 2019 to 22.98%. In all of 2018, the fund posted a return of -16.02%, with the vast majority of those losses coming in December when the fund was down 14.01%.
Q4 hedge fund letters, conference, scoops etc
Gator Financial Partners is a long/ short equity fund with a preference for small- and mid-cap financial companies with less sell-side research coverage. The firm, which is managed by analyst Derek Pilecki now manages slightly under $100 million in assets.
The fund’s top five long positions in February included Zions Bancorporation stock and warrants, which accounted for 13.04% of its net asset value. Syncora Holdings made up 9.32% of the portfolio, while 9.31% of the portfolio was in government-sponsored enterprise (GSE) preferred shares. The fund’s fourth and fifth biggest long positions were Ambac Financial Group and SunTrust Bank at 8.75% and 7.83%, respectively.
Update on GSE preferreds
Gator is one of many hedge funds banking on GSEs Fannie Mae and Freddie Mac exiting conservatorship this year. So far the bet has paid off for funds like Gator which are holding the shares. Other well-known funds which have been known to hold GSE preferred shares include Blackstone’s GSO Capital Partners, Paulson & Co., Pershing Square Capital Management and Perry Capital, The Wall Street Journal reports.
Gator has highlighted its position on the GSEs’ preferred shares several times over the years. In a recent letter, the fund’s management explained why they expect Fannie and Freddie to exit conservatorship this year. For example, they pointed out that the Trump administration was pushing to get Mark Calabria appointed as the next director of the Federal Housing Finance Agency, which oversees the GSEs. As soon as…
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Jamie Dimon On How JPMorgan Is Making The Planet A Great Place [Full CNBC Interview]
by ValueWalk - March 20th, 2019 3:59 pm
By Jacob Wolinsky. Originally published at ValueWalk.
CNBC Transcript: JPMorgan Chase CEO Jamie Dimon and American University President Sylvia Mathews Burwell Speak with CNBC’s Kayla Tausche Today
WHEN: Today, Wednesday, March 20, 2019
WHERE: CNBC’s “The Exchange”
Following is the unofficial transcript of a CNBC interview with JPMorgan Chase CEO Jamie Dimon American University President & Former Obama Health and Budget Official Sylvia Mathews Burwell and CNBC’s Kayla Tausche on CNBC’s “The Exchange” (M-F 1PM – 2PM) today, Wednesday, March 20th. Following is a link to video of the interview on CNBC.com
Q4 hedge fund letters, conference, scoops etc
Jamie Dimon: CEOs optimistic about business outlook
All references must be sourced to CNBC.
KELLY EVANS: Welcome back to “The Exchange.” The Business Roundtable has published its Quarterly CEO Economic Outlook Survey and executives are less bullish than a year ago. Kayla Tausche is in Washington and is joined by JPMorgan Chairman and CEO Jamie Dimon, along with American University President Sylvia Mathews Burwell for more. Hi, Kayla.
KAYLA TAUSCHE: Hi, Kelly. Thanks so much for having us and thanks to our esteemed guests today. In addition to that survey, they are also announcing a partnership, efforts under way between 15 companies, 13 universities to try to develop the 21st century curriculum for students and eventual workers for companies. So, our thanks to both of you for being here to discuss that and many other issues. Jamie, first the backdrop economically. We’ve heard from lots of CEOs, whether it’s FedEx, UBS, about jitters. Potentially a global slowdown. And then the Business Roundtable Survey today showed a little bit of declining optimism. Is there a slowdown afoot?
JAMIE DIMON: What I would call a ‘slowdown’ – there are always jitters. I’ve never been in business where there weren’t jitters. And it’s a little bit of a slowdown. But, you know, the Business Roundtable is very optimistic about the future. America, in particular, had less of a slowdown than the rest of the world. But one of the things we try to focus on is: how do you make things better? So, this initiative today is a great example how business, government and this town can get together, create jobs for kids, you know, earning $50,000,…
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David Mark Rubenstein’s Full Interview With CNBC [Transcript]
by ValueWalk - March 20th, 2019 12:56 pm
By Jacob Wolinsky. Originally published at ValueWalk.
CNBC Exclusive: CNBC Transcript: The Carlyle Group Co-Founder and Co-Executive Chairman David Mark Rubenstein on CNBC’s “Squawk on the Street” Today
WHEN: Today, Wednesday, March 20, 2019
WHERE: CNBC’s “Squawk on the Street” – Live from the Yale CEO Caucus in Washington D.C.
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with The Carlyle Group Co-Founder and Co-Executive Chairman David Mark Rubenstein on CNBC’s “Squawk on the Street” (M-F 9AM – 11AM) today, Wednesday, March 20th. Following is a link to video of the interview on CNBC.com:
Q4 hedge fund letters, conference, scoops etc
Watch CNBC’s exclusive interview with Carlyle Group’s David Mark Rubenstein
All references must be sourced to CNBC.
SARA EISEN: Stocks are a bit lower this morning, ahead of today’s Federal Reserve decision on interest rates and the policy statement. The major indices though are up double digits since Chairman Powell said, back in January, that the Fed will take a patient approach to monetary policy. Joining us now for a CNBC exclusive is Carlyle Group Co-Founder and Co-Executive Chairman David Mark Rubenstein, live today from the Yale CEO Caucus down in D.C. David, welcome. Nice to see you again.
DAVID MARK RUBENSTEIN: My pleasure to be here.
SARA EISEN: So, since you know Jay Powell, the Chairman, better than most: you hired him at Carlyle, you spoke to him recently at The Economic Club — what do you expect to hear from him today?
DAVID MARK RUBENSTEIN: Well, he’s obviously a person that’s got a lot of people focusing on him. He worked at Carlyle for about eight years – he was an outstanding buyout professional. I thought that was the highest calling of mankind, he would stay there forever, but he decided that public service was more important, so he’s now doing a great job, I think, as Chairman of the Fed. Now that’s a difficult position because nobody ever likes anybody who is increasing interest rates, so when he’s had to increase interest rates, that’s been a problem for some people. But I think it’s been the right decision.
SARA EISEN: Do you expect that he’s…
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