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  • softdude2000 2017-06-16 05:51
    batbeer2: Hi Softdude,

    Yes and no. This is a pretty simple business with a lot of revenue. They are not generating enough cash now but that IMHO is a choice. T
    SHOS management is investing(in IT infra and rebranding) as if there is no doubt as a going concern for this business. Market is treating as if they are going to close doors.
  • softdude2000 2017-06-15 18:34
    Other than balance sheet, do you see any safety in cash flow statement/income of SHOS.
  • softdude2000 2017-06-03 17:18
    batbeer2: Hi Softdude,

    Bricks and mortar are expensive but so is IT infrastructure.

    I don't think the IT expenses are on the downstream side (webshop). I thi
    Thanks for the reply.

    Is this IT system worth anything if they close down their business?
    I am trying to understand if there is any resale value from IT system in addition to NCAV discount we see.
  • softdude2000 2017-06-03 05:13
    I was reading latest 10-Q for SHOS. what caught my attention is that they spent 10M, 15M in 2015 and 2016 for IT related stuff. They are planning another $20M in 2017 and ~0 in 2018. 1. I dont get this. A company with 70M marketcap spending $45M on IT expenses. Did I understand this right? Did they forget we are in cloud computing era? Is there any referral fee for AWS :) I can charge them. 2. Does this mean huge upside waiting in 2018 that frees up $15M average annual expense? 3 ...
  • batbeer2 2016-06-23 10:24
    Hi brinsley, thanks for the heads-up on Kone. Hadn't really looked at that one for a while and the P/E is not as high as it used to be last time I checked. I don't mnd the currency they report in. If Schindler moves its head office to Luxemburg then they start reporting in euros but the company remains otherwise unchanged. What matters is their costs. I would have to check out the Swiss headcount as compared to the total to determine if I'm worried about currency fluctuations. best, ...

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  • batbeer2 commented on batbeer2's article 11-10 01:56
    Value Idea Contest: Dundee Corp
    This article has taken me four years to write. Back in 2014 I promised a fellow GuruFocus contributor I would share my views on Dundee Corp....
    View all 12 comments
    batbeer2 11-10 01:55
    • >> But I would add that there are many outcomes between those two extremes where the prefs do better than the common, in some cases, much better.

      Fair point. 
  • batbeer2 commented on batbeer2's article 11-09 13:05
    Value Idea Contest: Dundee Corp
    This article has taken me four years to write. Back in 2014 I promised a fellow GuruFocus contributor I would share my views on Dundee Corp....
    View all 10 comments
    batbeer2 11-09 13:05
    • Hi Raj123456789,

      Thanks for your questions.

      >> Management that want to play games with preferred stock can also play games with common stock.

      Yes, except that they own the common and not the prefs so the incentive is different.

      >> How is the The series 2 and 3(DC.PR.B.PFD and DC.PR.D.PFD) dont have atleast as much advantage as common stock?

      Well, the prefs are worth at most C$25, that's par value, roughly twice the current price. Meanwhile the common is worth at least twice the current price (by my estimates that is).

      Of course my estimates could turn out to be way too optimistic. If turns out to be the case then neither the prefs nor the common are worth anything so that's par for the course :-)
  • batbeer2 commented on batbeer2's article 11-09 02:37
    Value Idea Contest: Dundee Corp
    This article has taken me four years to write. Back in 2014 I promised a fellow GuruFocus contributor I would share my views on Dundee Corp....
    View all 7 comments
    batbeer2 11-09 02:37
    • >> this stock goes against my two most most important initial investment criteria: (1) very low or preferably no debt; and (2) profitable companies.)

      Pehaps Kone Oyj is more to your liking then. Elevators, escators etc. Once they are installed you get 30+ years of maintenance income. You are unlikely to rip out and replace the elevator from your building and you are certainly not going to use generic parts for maintenance. If something goes wrong you're screwed. So you use certified OEM parts.

      Also the escalators at your airport/subway/train station must be well-maintained and must be fixed within minutes if they fail. 

      Kone is growing its installed base at a fair clip, is highly profitable and has a bullet-proof balance sheet. Schindler and Otis are pretty good too but IMHO Kone is the best. Maybe I find some time to write about that one sometime.

      But it is not as cheap :-( 
  • batbeer2 commented on batbeer2's article 11-08 15:25
    Value Idea Contest: Dundee Corp
    This article has taken me four years to write. Back in 2014 I promised a fellow GuruFocus contributor I would share my views on Dundee Corp....
    View all 5 comments
    batbeer2 11-08 15:25
    • >> but to what extent to you believe that the family has any intention of essentially liquidating what can truly be deemed a "famly business"?

      Good point. My belief in their willingness to liquidate is based on the evidence that they are in fact liquidating. At least partially. It is important to note that they have treated the holders of the A shares fairly in the past. Most likely, Jon sees some core value somewhere in there and would want to build on that after cutting all the rot. If so, he'll have to show us (and his siblings) the money.  By now the family too must be a bit fatigued and a some of them may simply want out. The way it is currently structured they sink or swim together. Some of them might want to get rid of that structure their dad saddled them with.

      Let's imagine for a moment that the four sons don't agree 100% on the way forward (this problem becomes bigger with each generation). Then the rational approach would be to salvage as much value as possible, liquidate and call it a day. I'm not saying this is the case but it would be consistent with what Jon has been doing. He simply sells everything (will take another couple of years), retires all the debt and spins out the excess cash plus DPM shares. He then returns to DPM owning a larger part of that company and leaves his siblings to make their choices. That way business does not get in the way of family affairs and vice-versa. 

      Yes, there may be some incentive to keep the family business for the sake of it; there often is. But in this case I believe there is evidence to the contrary. Had they wanted to build a Loews-type family empire they would have gone about it very differently. As it stands, the family takes out cash or spins out shares of succesful subsidiaries everytime they get a decent offer. This time might be different but I see no evidence of it (yet). I'll be tracking that risk like a hawk though.
  • batbeer2 commented on Robert Abbott's article 11-08 13:54
    Small Caps: The Why and How of Portfolio Diversification
    Although Ian Wyatt called himself a devoted small-cap investor, his portfolio contains more than simply small caps. “Small caps are my...
    View all 1 comment
    batbeer2 11-08 13:54
    • Thanks for the article.

      Here's my view. All the points detract from one of the most important competitive advantages a value investor can have and that is to think and act like a business owner (as opposed to thinking like a stock trader)

      Case in point: I have a rule that I strive to own only the best company within a given industry and none of its competitors. That is a rule a business owner would understand but goes against a lot of the advice given in this article. So then you have to make a choice. Are you going to "manage your portfolio" or are you going to think and act like an owner. You can't have both. 

       
  • batbeer2 commented on batbeer2's article 11-08 13:12
    Value Idea Contest: Dundee Corp
    This article has taken me four years to write. Back in 2014 I promised a fellow GuruFocus contributor I would share my views on Dundee Corp....
    View all 3 comments
    batbeer2 11-08 13:12
    • Hi Stephenbaker, thanks for your question.

      It is less than perfectly accurate to state that Dundee company has been consistently losing money. This company has returned billions of value to the owners of the A shares since they became publicly listed. Not a lot of Canadian companies can say that. But yes, for the last 16 quarters or so they have been reporting severe losses.

      The cause of these losses are:

      1) A bloated corporate structure with lots of investment analysts/advisors.

      2) Even worse, as a group they made large, leveraged and dumb investments.

      Almost all the advisors have been let go now and there have been no major investments in years. Instead, current management has been getting rid of the advisors and liquidating a portfolio of investments that was rife with big mistakes. It is the mistakes embeded in the portfolio that have caused the reported losses. Given that the current portfolio is simpler to value and much less leveraged, I expect the losses to be less severe going forward. Whether or not Dundee ever starts making good investments decisions once again is beyond the scope of this analysis. The point here is that the company could wither and die and the A shares would still be worth more than the current price.

       
  • batbeer2 commented on batbeer2's article 11-08 03:04
    Value Idea Contest: Dundee Corp
    This article has taken me four years to write. Back in 2014 I promised a fellow GuruFocus contributor I would share my views on Dundee Corp....
    View all 1 comment
    batbeer2 11-08 03:04
    • A couple of readers have contacted me asking if the preferreds might be a superior investment. Here are my thoughts on the prefs.

      1) First the series 5 (TSX:DC.PR.E.PFD). These preferreds are carried on the balance sheet as debt and come due in June 2019. They trade at C$19 or so. This price implies they will be swapped for A shares at maturity. If that happens, the owners of these preferreds get some interest/dividends plus the value of 12.5 A shares, currently trading at C$1.5.

      In this scenario, the series 5 preferreds and the A shares are more or less equal in value. IMHO there is a very good chance the series 5 get redeemed for cash at par. Interestingky, that is exactly what happened in january when management in fact made a tender offer for the series 5.

      https://globenewswire.com/news-release/2017/12/18/1263364/0/en/Dundee-Corporation-Announces-Notice-of-Redemption-in-Respect-of-its-Series-5-Preferred-Shares.html

      Investors in the series 5 preferred get that option for free. Meanwhile though, management is currently doing everything in their power to scare the owners of the prefs, perhaps preparing them for a low-ball bid of $C20. If owners of the preferred agree to that, then management has saved the company $C20 million or so.   

      Finally, there is a scenario where management swaps the series 5 for common and then makes a bid for the then-depressed common. That would be wicked. In essence, management would be enriching some shareholders at the expense of others. While that is savvy and probably legal it is IMHO not moral. More importantly, I wouldn't want to be a long-term owner of a company with management that thinks along those lines. At some point I might find myself at the wrong end of their actions. 

      The series 2 en 3 (TSX:DC.PR.B.PFD and TSX:DC.PR.D.PFD) are IMHO an inferior investment. Some argue that they trade at 0.5x par and come ahaead of the common shares.

      Firstly, par value is meaningless in this case. Common shares also have a par value and no one ever looks at that. In the case of these preferreds, they have no maturity date so the company never has to come up with par value to redeem them. The company can and does redeem preferreds when they trade at a discount to par.

      Secondly, the preferreds come ahead of common shares in the sense that the common don't get a dividend if the preferreds aren't paid first. But the company is not in default if they simply decide not to pay the dividend on the prefs. It is not interest, it is a dividend at the discretion of the board. So what is this right worth if the common are wiped out?

      Not very much.

      In theory, management could cancel the dividend on the prefs and subsequently make a tender offer at steep discounts. There would be some legal battles and the reputation of the company would be shot but there is nothing to stop them from doing that and in an extreme situation I believe they would. 

      IMHO the chances of that happening are remote. Fro an investor looking for income the cash/dividend seems as safe as any I've seen (in any case, safer than GE's dividend ;-) and that is how they should be valued. As a relatively safe stream of cash. But again, par value is IMHO irrelevant for the series 2 and 3 prefs.

       
  • batbeer2 and Dchash became friends 11-07 09:27
  • batbeer2 posts: 11-04 08:52
    Value Idea Contest: Dundee Corp
    . The stock traded at 0.5x...
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