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Category: Portfolio Management

Valuation insights

Valuation insights

A couple of recent posts by same author are worth a walk-thru imho.

There’s a bit of an echo chamber as I am fairly aligned here in the valuation tiering – my variance is however i am not so willing to take capital risks in the middle tier and will accept lower return rates for lower capital risk, aka, bills and short-term high quality bonds.

https://seekingalpha.com/article/4315341-expectations-for-next-decade

The subsequent post walks thru some critical questions investors need to bat around for actionable direction https://seekingalpha.com/article/4317012-lyn-aldens-positioning-for-2020-diversified-global-focus

Mainstream financial press on 5G

Mainstream financial press on 5G

This post is pretty good advice (not that it mirrors mine :))

Prudent approach over several years and there will be waves of investment appropriate to different areas on value chain … FOMO will be a negative impact on portfolio and patience will be rewarded.

https://www.marketwatch.com/story/how-and-when-prudent-investors-ought-to-buy-these-5g-stocks-2020-01-13

Of their list, I am watching or own APPL, NOK, NXPI, T and QCOM. I also add ERIC, CSCO and a host of carriers around the world (mostly because they pay dividends to be patient)

Mixing Indicators

Mixing Indicators

In a quick post this morning from Heisenberg on the data out this morning, a statement struck me square in the face

Quote: “Retail sales came in better than expected for December (even as some cohorts were revised lower for prior data), perhaps relieving some worries about the stability of the key pillar holding up the US economy at a time when business investment is subdued and C-suite confidence remains depressed.”

Heisenberg is one of the smartest financial bloggers I read, so I am not pointing a finger at his misuse of indicators – his was a summary statement, not a conclusion or inference of the data.

Here’s the problem – mixing indicators and trying to reconcile their inferences – Retail numbers are backward historical indicators; CFO confidence is a forward looking indicator. It’s no surprise they are not consistent. From an investment perspective, which direction do you want to review and analyze (i remember all the prospectus i read … historical performance is no guarantee of future performance). But all the C-suite people i worked with looked ahead and planned accordingly – …

So should we, i think.

Healthcare REITs

Healthcare REITs

Today was a good day for good reads – doesn’t happen all that much

Hoya Capital does a great job (imho) with their analysis and data-rich updates. They tend to share their data analysis and let the reader make their own decisions – i like that!

This was one of the best Healthcare REIT reviews I have seen in long time.

Healthcare REITs: ‘Retirement Crisis’ Fears Overblown

That graphic is a great overview of the segment … the rest of the article fills in the gaps around this table.

My portfolio contains: WELL, DOC and LTC. These positions were trimmed in 2019 given the run up and earlier I sold all my VTR as I am not a fan of SHOP-heavy senior housing businesses. Up-coming earnings reports and conference calls will be important to see if additional capital should be applied … i am skeptical until later in 2020, but facts will tell.

Mr Duy and an easy explanation

Mr Duy and an easy explanation

The title of Mr Duy’s post is a bit misleading or a teaser, but the content is worth the read. While the easiest explanation is often close to accurate, continued FED theories of economic and market manipulation stretches the imagination. Duy makes it simple rather than conspiratorial.

Sad, but true?

Sad, but true?

Where climate justice sometimes comes up short, economics closes the deal.

https://www.spglobal.com/marketintelligence/en/news-insights/trending/n2V18rq_af4OBgqaW6CmkQ2

Quote: “Morgan Stanley & Co. LLC forecast that about 70,000 MW to as much as 190,000 MW of coal-fired generation is “economically at risk” from the deployment of a “second wave of renewables” in the U.S. under three of the more likely scenarios in a recent analysis. The research firm said these projections exclude about 24,000 MW of coal generation already set to shut down.

Driven by the surprisingly low cost of renewables, we believe that carbon-heavy utilities that have not historically led the pack in clean energy deployment will accelerate their earnings growth by pursuing a ‘virtuous cycle’: shutting down expensive coal plants and investing in cheap renewables,” Morgan Stanley analysts wrote in the Dec. 10 research report.”

I grant that climate work has done tremendous work to help drive alternative energy sources, but sometimes simple economics takes hold and it’s a freight train running wild down the mountain … better late than never!

Disclaimer: of the companies mentioned in MS report, I am long either common or preferred in: D, DUK and PPL. No short positions.

My portfolio manager hat is here!

My portfolio manager hat is here!

From Heisenberg today, quote: “If we had to guess, we’d be inclined to think Druckenmiller’s assessment of 2019 will apply in the new year as well. That is, traders will be left “wondering about where the hell the next bomb is coming from”, constraining their ability to take the positions they’ve taken historically.”

The other structural point made that was interesting was about equity buyer demand in 2020 – hadn’t seen that one described so well / clear.

5G & Cell Tower REITs

5G & Cell Tower REITs

Hoya Capital posted a view on the big Cell Tower REITs. While their update is one of the best they’ve produced recently, I provided the following feedback.

@Hoya Capital Real Estate one of your better pieces imho. this is a complicated space and I would like to see a ‘usage’ view on the tower business contrasting 2 major usage models – a) consumer mobility (aka phones) and b) machine to machine communications. I believe that the latter in the 5G game will generate the majority of the data eventually (at least 5 years out). Have you all looked at that business driver vis-à-vis the tower REITs to determine if the usage models will change REIT pricing power?

I will update on their response if received. This is a very complicated space and investors are putting down big $ with little understanding. To follow up on my post yesterday … due diligence is required and can be hard work. Carry on!

Financial due diligence – reminder

Financial due diligence – reminder

A recent post at SA got me going … i own a small slice of this company and had missed this in my financial analysis due diligence. I made a mistake (was stupid), and now need to correct it. I will exit the postion quickly. Here is my comment to the author

Thank you for this analysis … I have a small portion of LAND and will discard quickly based on this as I had missed it. Seems way out of whack and with the games FPI management played back a bit, one would think the farm REITs would come to a ‘squeaky clean’ view. Not there.Also, I tried to reconcile this w/ www.investing.com/… … – no go even at the ‘roll up’ number unless the two sources are using different time periods (would be bizarre)Sad, as I too thought this was a plausible play on a real asset in limited supply … Good work on your part and reminder to all that financial due diligence takes effort.`

Hats off to the author for doing the needed grunt work, and ‘not to self’ do you due diligence better!

Heisenberg post today – corp. buybacks

Heisenberg post today – corp. buybacks

Heisenberg report put out a great piece today on corporate buybacks using bank reports as is their practice. While there are political and economic arguments to be made about buybacks, that’s not their intent nor mine. Regardless of your opinion, buybacks are an element of stock selection and portfolio management. We need to understand their potential implications and risks.

Here are a couple of graphical apertifs

Source= Goldman

Caution on market values

Caution on market values

Lane Roberts posted a great piece on current equity valuations and trends … for risk management purposes, this is a good / valuable read. These visuals from Lance suffice to get ones attention, i think …

The sky is probably not falling, but risk management needs to be fully implemented at this point, imho.

On yesterday’s Fed

On yesterday’s Fed

The ever balanced Mr Duy posted a perspective that I found rational.

Heisenberg posted on the conflicting investment bank perspectives.

Today’s stock and bond markets responded after digesting the nuance and parsing … My personal perspective is that Powell may have dug himself out of an ugly hole into something more like normal; two key risks remain: a) liquidity in the technical plumbing as folks like to say, and b) non-predictable outbursts from maniacs with too much public air time.

‘Diligence and caution’ is the mantra going forward for risk-averse portfolio managers like me …

Ericsson’s earnings conf call – usage model spiral!

Ericsson’s earnings conf call – usage model spiral!

This week ERIC released quarterly earnings and held the requisite conference call. Mostly it was good news and the stock popped somewhat. I actually trimmed my position 50% with this move, as I believe lower entries will surface over next ~6 months.

With that said, however, there was a great line in the call that I am not sure people fully understand and it completely reminds me of Andy Grove’s insightful “Software Sprial” – basically the concept is that new technology surfaces new usages and those new usages continue to drive new technology – riding that sprial as INTC did with software and compute capabilities can make folks serious money. Usage models and use cases that were not before possible really drive the breakthroughs, not the technology itself (but that which it enables).

Quote (my bold emphasis):

“So the demand here is strong and when we look at early launch markets for 5G, we see a very sharp increase of data consumption among the 5G users, which indicate that 5G yet again shows that you will use your device in a different way, when you get a better service.

So if we look at — compare that for example to Europe, where we typically have weaker coverage or weaker networks as it’s more of an average compared to Northeast Asia and the U.S. And we see much lower data consumption as well. So I think the reality here is a better network drives new type of behaviors that actually also drives investment needs and drives our business. And that’s why it’s important I think that the operators also are able to charge a premium for 5G, because it will create new type of use cases.”