Disqus - Latest Comments for BandOfAnalysts

Re: Mohnish Pabrai's Hedge Fund Q3 Investor Letter

BandOfAnalysts — Wed, 21 Oct 2009 15:28:59 -0000

Wow, he's up more than 100% YTD and *still* hasn't made back his investors' losses from 2008. That's a lesson on the importance of "hedge" in hedge fund (and the lack thereof at the vast majority of so-called hedge funds). I know many funds that are up *only* 25-30% this year, but they have more than made up for 2008's losses already.

Re: Eric Mindich's Hedge Fund Eton Park Files 13G on Verisk Analytics (VRSK)

BandOfAnalysts — Mon, 19 Oct 2009 13:05:55 -0000

VRSK is a great company indeed. With a difficult-to-replicate yet critical for the indsutry database that's used to analyse risk and help insurance companies with their decisions, it has a scalable platform and +40% EBITDA margins. Yet at 12x EBITDA some may find it a bit pricey. You are definitely paying up for the high quality of the company and the competitive position, but if its plans for growth across other verticals plays out, it should outfrow the multiple. Interesting company to analyze and definitely something to buy in the case of dips or a correction.

Re: David Einhorn's Greenlight Capital Loads Up On S&P500 Puts (13F Filing)

BandOfAnalysts — Wed, 19 Aug 2009 14:45:43 -0000

I'm not 100% sure, but I believe that Einhorn did not invest 25% of the portfolio in puts, but rather the amount listed under market value reflects the notional amount of the shares underlying his puts.

If you enter the CUSIP of the security referenced in the 13F filing, you get the spider, which was trading around $92 at the end of 2Q. If you multiply that price with the stated shares, you get the stated market value.

Unfortunately, there is not enough information to figure out neither the strike price nor the expiration date of the puts, so you can't tell how much he actually invested in the puts. As an example though, assuming roughly that he bought the Dec 09 $85 puts, he may have invested around $50mm.

Re: Pershing Square: New Positions In McDonalds (MCD) & Automatic Data Processing (ADP) ~ 13F Filing

BandOfAnalysts — Mon, 17 Aug 2009 12:56:34 -0000

I believe that if a security is de-listed, reporting a position in a 13F filing becomes optional. Most funds will stop reporting changes in their ownership, but some can continue doing so. In Ackman's case, a large portion of his ownership was through swap accounts with some of the large broker-dealers, but they disclosed no position in GGP as well in their 13Fs. I'm pretty sure he hasn't sold, especially since he's on the bankruptcy equity committee and probably cannot transact anyway because he has insider knowledge. You can find the official list of 13f reportable securities on sec.gov here: http://www.sec.gov/division...

Re: Sunday links: information addiction Abnormal Returns

BandOfAnalysts — Sun, 16 Aug 2009 20:27:04 -0000

Many investors are looking at corporate credit as a leading indicator of the equity markets, maybe a few weeks to a couple of months down the road. As long as credit is rallying, equity investors are very comfortable putting more and more money to work. At this point, corporate CDS are starting to widen a bit again. This past week, bank CDS widened significantly, but stock prices shrugged it off. Unless it's just a blip, this could be ominous for equities.

Re: Doug Kass Turns Bearish

BandOfAnalysts — Sat, 15 Aug 2009 16:17:44 -0000

I think he's spot on. Most -- though not all -- companies' management teams have turned to positive guidance claiming that they've seen the market level off, but I believe that the seasonality and other technical factors that make the situation only seem to have improved are being under-estimated. Seasonality in the housing sector has changed from historical averages because there are so many more distressed sales, which clear at prices 15-20% below market and push the market down. I have talked to many investors that are basking in the euphoria of recent positive reports, but some companies that are more "on the ground" haven't been seeing any real positives in the fundamentals. To a large extent, the market rally has been driven by technical factors, such as more liquidity in the system and funds putting more capital to work. However, the expected losses in certain asset classes don't justify these prices. There was a recent article on housingwire about a report by Amherst Securities recommending the sale of non-agency Alt-A RMBS paper, because the market has run too much. (Nevertheless, that market probably has still some room to go b/c of the government PPIP program that will start buying those assets in the next couple of months)

Re: Blue Ridge Discloses New Stake In PennyMac Mortgage (PMT): 13G Filing

BandOfAnalysts — Sat, 15 Aug 2009 15:28:33 -0000

Just a small correction: PMT uses a 1.5% + 20% fee/incentive structure, which seems to be the new standard among BDC/REIT structures. Bloomberg's observation is nothing new... these structures have been mimicking the hedge fund comp scheme for a long time. What's telling though is that PMT was planning to raise $750mm but ended up raising only $320mm (excl. green shoe). The market wasn't sold on the combo of Countrywide + stale FDIC deal success. Also, I'm sure they didn't like the +20% incentive fee, because recently funds and REITs have been giving up on the incentive fees in order to entice investors.

Re: Blue Ridge Discloses New Stake In PennyMac Mortgage (PMT): 13G Filing

BandOfAnalysts — Fri, 14 Aug 2009 11:23:45 -0000

I don't get that investment. Ex-Countrywide guys are going to invest in mortgages and compete head to head with all these banks that have now sort-of recapitalized and have been touting FDIC assisted deals to their investors. A big part of PMT's pitch has been an FDIC-assisted deal it did in late 2008, but I'm skeptical as to whether that can be replicated. Maybe it's a cheap option to see what happens? It's in cash right now and will buy mortgages, and should do ok. I guess it just doesn't sound very exciting...

Re: John Paulson: Long Financials Including Bank of America, Capital One, Goldman Sachs & More

BandOfAnalysts — Thu, 13 Aug 2009 12:33:08 -0000

That's one of the reasons I prefer C over BAC (cheaper and more events, but also more complex and opaque on the other hand), though they both look great on an earnings power basis, but I'm not confident that the market is going to be that optimistic when the $hit hits the fan in late 2009. The lessons of late 2008 are have scarred me. Who knows.... Totally agree that timing is the worst part of hedge fund investing (more short term than people think).

Re: John Paulson: Long Financials Including Bank of America, Capital One, Goldman Sachs & More

BandOfAnalysts — Thu, 13 Aug 2009 09:33:14 -0000

Paulson has been marketing and telling everyone he's buying a lot of banks, particularly BAC, where he thinks it will earn at least $3 2-3 years from now. It's good to hear that, because it makes him more of a long-term holder. Having a strong and steady hand in some of these banks is a positive.

Still, it's curious why he hasn't made the plunge with Citigroup yet. Also, I wonder how much of the rally in banks is due to the "Paulson effect" and whether banks are over-extended, going into the seasonally weak 2H of 2009. There are lots of headwinds with high foreclosures hitting the market and a higher proportion of distress sales in the winter months, inflationary pressures, the government backing out of keeping interest rates artificially low, etc.