Amit Chokshi
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Latest Comments87 Comments
Downey Financial's Problems Run Deep
Same can be said for some of the sharpest guys around like Tom Brown and David Einhorn who ran into problems with some of their holdings in the financial sector. I'll give the benefit of the doubt to Brown and Einhorn because they are really elite investors based on their long-term records, but I've known plenty of analysts on the buyside for institutional funds that are just flat out weak, my opinion is the same for most sellside analysts as well.
Shanghai's P/E Ratio Isn't High By Historic Measures
G. Willi-Food: Da or Nyet?
I manage a fund that is long WILC but I’m pretty certain your analysis is wrong. Unless the news has changed since the past few hours you’re not identifying the buyer of the Russian poultry business accurately. Willi Food INVESTMENTS, which trades as WLFD on the TASE is buying the Russian business. AG, through WLFD owns 62% of Willi Food INTERNATIONAL, which is WILC and what US shareholders own.
The acquisition will have no material benefit to WILC shareholders other than to show AG and Willi mgmt are working on the deal front. WLFD is the holding co, the Russian business will be held alongside WILC and the real estate and other WLFD holdings but don’t look to factor any of the egg business into WILC’s financials. Check the TASE, WLFD stock is rocking because WLFD shareholders receive the benefits of that deal, WILC shareholders do not.
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I am in the author's camp obviously by having WILC in my fund (and a significant position in my fund) and believe this is a great investment but the news reports have been somewhat confusing as far as what the implications for WILC shareholders are. This deal by AG and Willi mgmt won't impact WILC shareholders like me but it portends hopefully good M&A deals down the road. Skeptical WILC longs should keep in mind Gil was hired as an M&A guy specifically for WILC so there will be deals done for the WILC operating co as well.
Seitel/ValueAct Looking to Acquire Pulse Data on the Cheap
Watching the Tape on Intertape
What Sort of Returns Can You Expect Shorting Naked Puts?
Some Core Themes for Portfolio Planning
Take-Two Software: Risky But Worth It
Coach is the Real Retail 'Tell' Stock
Ecology and Environment: Microcap With Major Potential
Also, the analysis included more data but due to timing issues was not included.
Core Molding Technologies: 2Q Earnings Review
If you make some conservative estimates for 2007, these guys could top out at about $120MM in sales which would be below their ideal capacity for strong operating margins. I put their 2007 EPS around $0.41 a share or so (17x forward P/E valuation) and their forward EV/EBITDA around 5.2x (my est is ~$7.5MM for the year). That's a fair value for a company that is mostly US based (no material European truck exposure which is holding up well), has 3 customers that account for 80+% of sales, has a unionized workforce with I believe two sets of unions due for contract renegotiations this month and Jan 2008, and no material insider ownership (for microcaps I prefer to see a large chunk held my management).
Metalico Hasn't Lost Its Luster
Metalico Hasn't Lost Its Luster
Selling Bank of America Puts Is As Safe As It Gets
Your strategy is very very risky given how far dated the options you're short are. You have no hedge, if you're going to play the option and it seems you mean to imply you want some income as opposed to "playing it", set up a vertical or horizontal spread where you partially hedge your risk. Takign a quick look at the BAC options it seems you've gone to the Jan options because those are the only ones that have some "meat" to them which to me suggests there's even a bigger problem because you're short volatility. The option premiums for BAC look fairly low, so you're taking on more risk by going further out to get some fatter income but you're doing it at low volatility (relative to most options)
Everything you say regarding the probability of BAC falling/dividend cut may be true but you're dealing with a skewed return profile. If BAC is down to even $37 or $36 per share and you're assigned, you're paying $38.70 for a stock that is worth $37. If they're down to $35 or $30, you get the picture. And if you look at some of these megabanks back in the early 90s, these stocks has dropped into the teens.
Selling Bank of America Puts Is As Safe As It Gets
So if that stock is at $30, you're down on your BAC stock holding and are now assigned a stock you have to pay $40 less that $1.30 premium for. Also, you've had to put who knows how much cash into that brokerage account as the short put value has gone the other way on you. Don't forget the opportunity cost of that collateral/margin cash you need too, that just sits there in your account when you could have been investing it elsewhere.
I think selling puts is an ok at best idea using short dated options if you want a stock at a specific price. That way you have theta decay working for you at a more rapid pace. Most longer dated options under-price volatility and theta decay is nowhere near as pronounced which is why being a buyer as opposed to a writer is preferable for longer-dated options.