Japanese bargains continued..

Following on from a previous post, here’s my take on a further few bargains I found when trawling through the TOPIX. Note: I’m not advocating any investment in these companies. As always: read the disclaimer. Also, I’ve indicated the date on which I purchased these stocks. Some time has elapsed since then. Numbers quoted are all effective as of the date of purchase. My initial screen focused only on those companies selling at a discount to net assets. There were various instances however of companies which were seemingly terrific businesses selling for net assets along with a p/e of 5x or 6x.

Bitcoin- What’s the deal?

The crypto currency bitcoin has exploded into the news over the past few years. Most famously upon the default of Cyprus and Greece, the value of this would be game changer shot through the roof. I’ve already highlighted how, thanks to the digital revolution, a premium is being tacked onto anything with the potential to disrupt. What’s more disruptive than an entirely new currency then? This could be the very basis of a revolution!

Signs

Interesting that I read this the same day the market made new highs. Asset swaps and equity fueled takeovers suggest equity is getting up there in terms of valuation. The thinking on part of these managements is: Why pay out cash and increase the company’s leverage? Far easier to dilute shareholders and exchange my expensive stock for yours.

Article via Bloomberg

See also this chart from the excellent rank and filed website

M.L.Pee on your returns- Part 2

continues from part 1 here…

Previously, we looked at the balance sheet effects of sponsoring an MLP or REIT. Here we’ll look at how debt can be manipulated by the parent company.

To ensure creditworthiness of the MLP, which it needs in order to issue meaningful debt (which can be funnelled back to the parent), the parent has to guarantee its fiscal performance. This guarantee usually amounts to issuing letters of credit or guaranteeing debt repayment. Most companies of a certain size have revolving credit lines from which they can access debt. Usually the subsidiaries have access to this revolver as well. Now, the bank sponsoring the revolver will need additional criteria to be fulfilled for the newcomer to qualify. These criteria are where debt guarantees come from.

Balance sheet shenanigans or: How I learned to stop worrying and love crooks

Apologies to Kubrick for ruining what was a great title of an even greater movie.

I once ran day to day operations of a small/medium retail business for a man I know and respect. He had been in the retail business for 20 plus years and knew all the tricks of the trade: legal and not so legal ones which, given the business environment we operated in, was necessary. My biggest worry was my staff or customers stealing merchandise. The customers were easy enough to monitor but the staff presented a huge problem since I found it difficult to trust and suspect people at the same time. When I presented him with this problem he sat me down and basically said,”You need to be the bigger crook”.

M.L.Pee on your returns- Part 1

This article caught my eye recently. Its admirable that Fidelity seems to be educating its customers about the various investment vehicles out there. However, the article also seems to be marketing something which is against the very basis of successful investing: follow the crowd. I’m not a huge fan of REITs and their less liquid cross industrial cousins, MLPs. Let me try and breakdown what actually goes on with the formation of such entities. Here’s a quick definition of what a REIT and MLP is.

S&P: When will the last fool stop buying?

Its no secret I’m currently bearish/neutral on the market. An obscene number of valuations stopped making sense as far back as December ’13 and the irrationality has only increased. I’m not a fan of shorting on the basis of fundamental principles since, as Keynes said, “Markets can stay irrational longer than you can stay solvent”. Fundamental reasons always need a catalyst, an indication of peak insanity if you will, for the tide to turn. Its difficult to tell when the last fool has ceased operations.

The Value of Uber

News broke this past Friday that Uber, the car service matching app, has raised $1.4 billion for an implied valuation of $17 billion. The first and understandable reaction was one of disbelief but most of this was a cousin of “the price is too high” sentiment. Just because something is expensive doesn’t make it ridiculous.