In the recent VALUEx Vail Conference, short seller Jim Chanos discussed possible value traps:
CONSOL energy (CNX, Financial): faces headwinds
1. Thermal coal, 61% of 1Q12 gross profit – pressure from coal-to-gas substitution
2. Metallurgical coal, 25% of 1Q12 gross profit – uncertain Chinese steel demand
3. Shale gas, 14% of 1Q12 gross profit – ongoing domestic overinvestment
Petrobras (PBR, Financial)
Government intervention reduces inherent value
1. Push for local services. PBR must incorporate 65% of content from local services industry; Brazil must construct a high-end shipbuilding industry from scratch
2. Doenstream: Domestic fuel prices capped
3. Government domination of PBR
Hewlett-Packward (HPQ, Financial) is a value trap: the death of PC
1. –PCs: LTM operating income down 5% YoY; cannibalization from mobile computing
2. –Printers: LTM operating income down 28% YoY; fall in inkjet printing
3. –IT services: LTM operating income down 23% YoY; lack of Itanium support from Oracle, falling government spending, competitive pressures
4. –Servers/networking: LTM operating income down 19% YoY; fall in UNIX market
Coinstar (CSTR)
Reaching saturation point
1. –Over 68% of Americans now live within a five-minute drive from a Redbox kiosk
2. –Including the acquisition of NCR”Ÿs DVD kiosks, Redbox will have 45-50K DVD kiosks in operation by YE12, or 39-44K single kiosk locations, which is near the low end of management”Ÿs full saturation estimate of 45K
Banco Santander (STD, Financial)
Significant real estate exposure in Spain
–Equates to 166% of TBV as of 1Q12
–33% of commercial real estate loans are classified as NPLs
–Residential mortgage NPLs at 2.6% of portfolio
•Brazil exposure a headwind, not a panacea
VALUExVail 2012 - James Chanos
CONSOL energy (CNX, Financial): faces headwinds
1. Thermal coal, 61% of 1Q12 gross profit – pressure from coal-to-gas substitution
2. Metallurgical coal, 25% of 1Q12 gross profit – uncertain Chinese steel demand
3. Shale gas, 14% of 1Q12 gross profit – ongoing domestic overinvestment
Petrobras (PBR, Financial)
Government intervention reduces inherent value
1. Push for local services. PBR must incorporate 65% of content from local services industry; Brazil must construct a high-end shipbuilding industry from scratch
2. Doenstream: Domestic fuel prices capped
3. Government domination of PBR
Hewlett-Packward (HPQ, Financial) is a value trap: the death of PC
1. –PCs: LTM operating income down 5% YoY; cannibalization from mobile computing
2. –Printers: LTM operating income down 28% YoY; fall in inkjet printing
3. –IT services: LTM operating income down 23% YoY; lack of Itanium support from Oracle, falling government spending, competitive pressures
4. –Servers/networking: LTM operating income down 19% YoY; fall in UNIX market
Coinstar (CSTR)
Reaching saturation point
1. –Over 68% of Americans now live within a five-minute drive from a Redbox kiosk
2. –Including the acquisition of NCR”Ÿs DVD kiosks, Redbox will have 45-50K DVD kiosks in operation by YE12, or 39-44K single kiosk locations, which is near the low end of management”Ÿs full saturation estimate of 45K
Banco Santander (STD, Financial)
Significant real estate exposure in Spain
–Equates to 166% of TBV as of 1Q12
–33% of commercial real estate loans are classified as NPLs
–Residential mortgage NPLs at 2.6% of portfolio
•Brazil exposure a headwind, not a panacea
VALUExVail 2012 - James Chanos
