The complete Baupost 2016 letter (h/t qed1984, EDIT: link is gone…..)
Are GoPro and FitBit already interesting ?
The 2016 book list from Broyhill AM
A few ground rules for shorting stocks
Interesting profile of Short selling legend Mark Cohodes
In my book review “The Frackers”, I mentioned one of the stories in the book was about Cheniere Energy:
Finally, there is a fascinating side story about the guy who is running Cheniere Energy, Charif Souki. His great idea was to import natural gas into the US and he raised several billion USD to build a huge gasification plant on the gulf coast. He clearly did not see fracking coming and his investment was worthless. Nevertheless, he was able to raise another few billion bucks and retool the facility in order to export natural gas.
This “double or nothing” gamble seems to have paid off. Seth Klarmann by the way, has just doubled its stake in Cheniere, making it their biggest public listed position at around 1,7 bn USD.
Seth Klarman
Seth Klarman is a famous value investor running Baupost Group a 25bn USD hedge fund. In contrast to Buffett, Klarman very seldom gives interviews and his fund commentaries are hard to get. Hi is considered to be the “heir” of Benjamin Graham and still sticking to the “cigar butt” approach of deep value investing. Two years ago in a Charlie Rose interview, Klarman made the following comment:
Baupost’s leading man says that he buys “cigar butts” at cheap prices. Warren Buffett used to also do this. The difference between the two legends is that Klarman stayed focused on cigar butts while Buffett’s process morphed into buying great companies at great prices and then into paying so-so prices for great companies.
Klarman does many things ordinary investors can’t do, like buying defaulted Lehman stuff etc. Not many of his investments are public and not all of his public investments are successes. Nevertheless it is clearly interesting to look more deeply into his biggest public position, Cheniere Energy.
Cheniere Energy
Cheniere’s stock chart shows the “unusual” history of the company:
Just as a side remark, somehow this chart reminds me of this funny animal:
Looking at Cheniere’s latest quarterly report, we can clearly see that Seth Klarman’s days as Graham style “net-net” investor seem to be over. Cheniere has currently around 7,5 bn net debt and 2,3 bn equity. Based on a market cap of around 17 bn USD, this is a P/B of roughly 7 times so hardly a bargain investment based on this metrics.
On top of that, the company never made a profit in its life as this table with EPS since 2004 clearly shows:
| EPS | ||||
|---|---|---|---|---|
| 02/21/2014 | FY 13 | 12/13 | -2,2 | |
| 02/22/2013 | FY 12 | 12/12 | -1,6 | |
| 02/24/2012 | FY 11 | 12/11 | -2,6 | |
| 03/03/2011 | FY 10 | 12/10 | -2,3 | |
| 02/26/2010 | FY 09 | 12/09 | -3,8 | |
| 02/27/2009 | FY 08 | 12/08 | -6,0 | |
| 02/27/2008 | FY 07 | 12/07 | -3,6 | |
| 02/27/2007 | FY 06 | 12/06 | -1,5 | |
| 03/13/2006 | FY 05 | 12/05 | -0,9 | |
| 03/10/2005 | FY 04 | 12/04 | -0,6 | |
| N.A. | FY 03 | 12/03 | -0,4 |
So the question is clearly: What does Seth Klarman see to make this his biggest publicly disclosed investment ?
The best analysis I found was the one at Value Investor’s Club (accessible with guest login) from 2013, where the stock was trading at a third of the current price (Klarman bought between 60-70 USD). There is also a good article in Forbes from 2013 about the story behind Cheniere from 2013.
I try to summarize the case in a few bullet points:
– natural gas is very cheap in the US due to fracking and multiple times more expensive especially in Asia
– despite high costs, it is a pretty good business to liquify natural gas in the US and ship it to Asia in order to earn the spread
– Cheniere is in the process of finishing its first gasification plant by the end of the year 2015 and will then start to produce reliable cash flows as it has already contracted out its full production capacity for 20 years to major energy companies
The most important point is however the following quote from Forbes:
Cheniere’s Sabine Pass facility got its approval from the Department of Energy to export to any country in the world two years ago. It is so far the only facility to be cleared to export to countries that do not have a Free Trade Agreement with the U.S. And getting a non-FTA permit is a make-it-or-break-it approval for these projects, because there’s only one big gas-importing country (South Korea) with a free trade deal with the U.S. Unless a facility can export to the likes of Japan, China and India, the economics likely won’t support a multibillion-dollar build-out.
Cheniere had the luck to be the first to get this license. Later on, mostly due to the pressure of US based energy users, the US Government declined to issue further LNG “non FTA” export licenses for some time. According to Cheniere’s latest investor relation presentation, in 2014 two more “non FTA” licenses have been granted but Cheniere clearly has a head start.
Many more export facilities in the US would lead to higher prices in the US and to lower spreads compared to Asia, but for the time being, Cheniere’s primary LNG facility could be viewed as the typical “toll bridge” for US natural gas on its way to off shore destination as the other two licensed projects are still to be completed in several years time.
Cheniere itself is trying to further expand its current facility by 50% and they are projecting another site, but both projects have not yet received their license.
Valuation:
Replacement value
Despite buying at 7 times book, the question is: Could it be that Klarman is buying below replacement value ? I think it is unlikely. EV is around 25bn, stated book value of the assets is around 8 bn. Liquification facilities are not that hard to construct. all you have to do is to call someone like Bechtel and sign a turn-key project. Ok, you need the land and the permission, but overall this seems to be manageable in the US. So without going into more detail, we can assume that the current valuation of Cheniere is clearly above replacement value.
Valuation based on future cash flows
The VIC author estimates around 4-6 USD per share distributions for Cheniere’s shareholders going forward based on the first 4 trains of the initial liquification project. I have not double checked this but I will assume this number of being correct.
Reading through the roughly 15 pages of risk factors in Cheniere’s 2013 report, I would not call this a risk free business.There are still a lot of moving parts and operational risks even if the whole facility is up and running. Cheniere’s public bonds in the operational subsidiary trade at around 5,5% yield p.a. So discounting equity cash flows at the HoldCo level should be higher than that.
A) Existing facility and licence & contracted cash flows only
Cheniere has fixed contracts for 20 years. In the following table I have calculated NPS for the above mentioned EPS range and different discount rates, based on the assumption that one gets those earnings for 20 years and after that nothing (for instance any future earnings have to be applied to retire the debt):
| eps/discount rate | 4 | 5 | 6 |
|---|---|---|---|
| 6,50% | 44,07 | 55,09 | 66,11 |
| 7,50% | 40,78 | 50,69 | 60,83 |
| 8,50% | 37,85 | 46,73 | 56,08 |
| 9,50% | 35,25 | 43,17 | 51,81 |
| 10,50% | 32,92 | 39,96 | 47,95 |
| 11,50% | 30,84 | 37,05 | 44,46 |
We can clearly see, that the contracted amounts at the existing facility will not be enough to justify the current valuation of around 70 USD.
B) Existing facility, indefinite cashflows
This is the table with an indefinite stream of earnings at various discount rates:
| eps | 4 | 5 | 6 |
|---|---|---|---|
| 6,50% | 61,54 | 76,92 | 92,31 |
| 7,50% | 53,33 | 66,67 | 80,00 |
| 8,50% | 47,06 | 58,82 | 70,59 |
| 9,50% | 42,11 | 52,63 | 63,16 |
| 10,50% | 38,10 | 47,62 | 57,14 |
| 11,50% | 34,78 | 43,48 | 52,17 |
Even with an indefinite time horizon, Cheniere does not look like a “bargain stock”.
C) Existing facility + 50% capacity increase, contracted cash flows only
| eps/discount rate | 4 | 5 | 6 |
|---|---|---|---|
| 6,50% | 66,11 | 82,64 | 99,17 |
| 7,50% | 61,17 | 76,03 | 91,24 |
| 8,50% | 56,78 | 70,10 | 84,12 |
| 9,50% | 52,87 | 64,76 | 77,71 |
| 10,50% | 49,39 | 59,93 | 71,92 |
| 11,50% | 46,26 | 55,57 | 66,69 |
D) Existing facility +50% capacity increase, indefinite cash flows
| eps | 6 | 7,5 | 9 |
|---|---|---|---|
| 6,50% | 92,31 | 115,38 | 138,46 |
| 7,50% | 80,00 | 100,00 | 120,00 |
| 8,50% | 70,59 | 88,24 | 105,88 |
| 9,50% | 63,16 | 78,95 | 94,74 |
| 10,50% | 57,14 | 71,43 | 85,71 |
| 11,50% | 52,17 | 65,22 | 78,26 |
The 4 scenarios show relatively clearly that only with including future non-contracted cashflows and additional, not yet approved capacity, the stock looks interesting. In order to satisfy the return expectations of Klarman, which should be 15-20% p.a.based on his track record, he must assume further cash flows for instance from the second site Cheniere wants to contruct at some point in the future in Corpus Christi. Plus, there should be no dilution etc. from raising the rquired gigantic amounts of capital.
Maybe he is betting that the stock will trade like a bond if the company starts paing dividends ? Or is he leveraging the investment with addtional debt ?
In any case, he seems to be paying a lot for future, uncertain cash flows, which contradicts his “we still do cigar butts” statement. This is not that different from what Buffett is doing when he is paying rather expensive prices for great companies. At least for a guy with a portfolio size like Seth Klarman, the time of “cigar butt” investing seems to be over. Even he must feel th pressure that you cannot charge 2/20 for holding cash.
So to answer the question from the beginning:
Why on earth is Seth Klarman investing 1,7 bn USD in Cheniere Energy (LNG) at 7x P/B ?
I have no real idea but it might be the case that Klarman somehow need to put money at work and he expects this investment to be uncorrelated to general market as he has been quite pessimistic on equities for some time.
Summary:
For me, Cheniere at current prices is clearly one for the “too hard” pile. Klarman of course can spend a lot of money and time to fully analyze the energy markets etc. although as we know now, most energy experts have a hard time to make meaningful forcasts. But still it doesn’t look like a bargain and clearly no “cigar butt” or “net-net” kind of investment.
Funnily enough, analyzing Cheniere makes me much more confident in my Electrica investment. At least to me, the risk/return relationship there is some magnitudes better than for Cheniere. I think I will upgrade this to a full position over the next few days.
P.S.
Some other stories I found about Cheniere
http://www.alternet.org/fracking/how-powerful-friends-and-cozy-relationships-helped-cheniere-energy-cash-natural-gas-exports
http://www.octafinance.com/baupost-group-doubled-stake-cheniere-energy-still-bullish-us-lng/
http://www.mailtribune.com/article/20150125/Opinion/150129835
In many books which deal more or less explicitly with “special situation” investing, for instance Joel Greenblatt’s “You can be a stock market genius” or seth Klarman’s “Margin of safety”, many so-called “Corporate actions” are mentioned as interesting value investing opportunities.
Some of the most well know corporate actions which might yield good investment opportunities are:
– Spin offs
– tender offers /Mergers
– distressed / bankruptcy
However one type of corporate action which is rarely mentioned are rights issues and especially “deeply discounted” rights issues.
Let us quickly look at how a rights issue is defined according to Wikipedia:
A rights issue is an issue of rights to buy additional securities in a company made to the company’s existing security holders. When the rights are for equity securities, such as shares, in a public company, it is a way to raise capital under a seasoned equity offering. Rights issues are sometimes carried out as a shelf offering. With the issued rights, existing security-holders have the privilege to buy a specified number of new securities from the firm at a specified price within a specified time.[1] In a public company, a rights issue is a form of public offering (different from most other types of public offering, where shares are issued to the general public).
So we can break this down into 2 separate steps:
1. Existing shareholders get a “Right” to buy new shares at a specific price
2. However the shareholders do not have to subscribe the new shares. Instead they can simply choose to not subscribe or sell the subscription rights
Before we move on, Let’s look to the two alternative ways to raise equity without rights issues:
A) Direct Sale of new shares without rights issues
This is usually possible only up to a certain amount of the total equity. In Germany for instance a company can issue max. 10% of new equity without being forced to give rights to existing shareholders. In any case this has to be approved by the AGM.
B) (Deferred) Issuance of new shares via a Convertible bond
Many companies prefer convertible bonds to direct issues. I don’t know why but I guess it is less a stigma than new equity although new equity is only created when the share price is at or above the exercise price at maturity. So for the issuing company, it is more a cash raising exercise than an equity raising exercise. Usually, the same limits apply to convertible debt than for straight equity.
So if a company needs more new equity, the only other feasible alternative is a rights issue. But even within rights issues, one can usually distinguish between 3 different kinds of rights issues depending on the issue price:
1) “Normal” rights issue with a relatively small discount
Usually, a company will issue the new shares at a discount to the old shares in order to “Motivate” existing shareholders to take up the offer. If they do not participate, their ownership interest will be diluted. Usually “better” companies try to use smaller discounts, high discount would signal some sort of distress
2) Atypical rights issue with a premium
This is something one sees sometimes especially with distressed companies, where a strategic buyer is already lined up but wants to avoid paying a larger take over premium to existing shareholders
3) Finally the “deeply” discounted rights issue
Often, if a company does not have a majority shareholder, the amount of required capital is relatively high and there is some urgency, then companies offer the new shares at a very large discount to the previous share price.
But exactly why are “deeply discounted” rights issues an interesting special situation ?
After all this theory, lets move to an example I have already covered in the blog, the January 2012 rights issue of Unicredit In this case:
– Unicredit did not have a controlling shareholder. One of the major shareholders, the Lybian SWF even was not able to transact at that time
– the amount to be raised was huge (7.5 bn EUR)
– it was urgent as regulators made a lot of pressure
As discussed, in the case of Unicredit, before the actual issuance at the time of communication the stock price was around 6.50 EUR, the theoretical price of the subscription right was around 3.10 EUR. However even before the subscription right was issued, the stock fell by 50 %. At the worst day, one day before the subscription rights were actually split off, the share fell (including the right) almost down to the exercise price without any additional news on the first day of subscription right trading.
But why did this happen ? In my opinion there is an easy answer: Forced selling
Many of the initial Unicredit Investors did not want to participate or did not have the money to participate in the rights issue. As the subscription right was quite valuable, a simple “non-exercise” was not the answer. As history shows, selling the subscription right in the trading period always leads to a discount even against the underlying shares, in this case some investors thought it is more clever to sell the shares before, including the subscription rights. Sow what we saw is a big wave of unwilling or unable investors which wanted to avoid subscribing and paying for new shares which created an interesting “forced selling” special situation.
Summary: In my opinion, deeply discounted rights issues can create interesting “special situation” investment opportunities. Similar to Spin offs, not every discounted rights issue is a great investment, but some situations can indeed be interesting. On top of this, those situations often are not really correlated to market movements and play out in a relatively short time frame.
I hate to admit it, but I am somehow a Seth Klarman “groupie” after reading his “margin of Safety” a couple of years ago.
So when ever Baupost reveals a new position, I stop everything else and try to find out why they did it (see my Microsoft analysis).
So I was quite surprised that Klarman now invested in Vivendi, the French media company.
In the hedge fund’s 2011 annual letter, they disclosed buys in private companies and mentioned recent purchases in Europe, without giving any names. The letter mentioned an expansion of the London office, as the hedge fund has been finding value due to large selling in Europe.
However, we have just discovered that Baupost’s largest disclosed equity holding (at least at the time of the purchase) was Vivendi SA (EPA:VIV) (VIV FP). The purchase was recently disclosed in Vivendi’s 2011 annual report.
Baupost owned 25.5 million shares as of February 29th, 2012; then worth close to $530 million using a ratio of 1.3:1 for euros to dollars. The $550million figure comes from looking at where Vivendi’s shares traded in 2011 and early 2012.
In the back of my mind I have always booked Vivendi as just another shitty media stock who spends all the money on stuopid acquisitions, however Klarman sticks to his strategy of buying cheap and struggling companies instead of “beautiful expensive” companies.
One of the reasons why they bought Vivendi are relatively clear: Vivendi generated a ton of free cashflow over the last few years. Some of this cashflow made it as dividend to investors, but most of this (plus some) went into acquisitions.
Lets look at some historical data:
| EPS | BV | BV tang. | FCF/Share | Dvd | net Debt/share | |
|---|---|---|---|---|---|---|
| 2002 | -21.43 | 13.09 | -19.68 | 0.49 | 1.15 | 11.55 |
| 2003 | -1.07 | 11.13 | -16.47 | 2.18 | 1.15 | 10.55 |
| 2004 | 2.57 | 14.40 | -2.16 | 2.92 | 0.00 | 4.55 |
| 2005 | 2.66 | 16.27 | 0.50 | 2.14 | 0.60 | 3.25 |
| 2006 | 3.50 | 17.23 | 2.13 | 2.43 | 1.00 | 3.53 |
| 2007 | 2.26 | 17.47 | -0.84 | 2.81 | 1.20 | 4.41 |
| 2008 | 2.23 | 19.34 | -6.73 | 2.81 | 1.30 | 7.00 |
| 2009 | 0.69 | 17.92 | -8.17 | 3.53 | 1.40 | 7.69 |
| 2010 | 1.78 | 19.44 | -6.85 | 2.46 | 1.40 | 6.52 |
| 2011 | 2.16 | 15.61 | -9.95 | 2.43 | 1.40 | 9.57 |
| Sum/Delta | 24.20 | 10.60 | -1.98 |
From a free cashflow perspective, Vivendi generated an impressive 2,40 EUR free cashflow per year. Howver, less than half of it was distributed as dividend and a small amoutn was used to reduce debt.
Tangible book as one could expect for a media company is negative, but for a media company I would accept it to a certain extent. Debt is relatively high, but even including the debt load, the total valuation is quite low at 3.7 EV/EBITDA.
The share price looks really really ugly:
So based on yesterday’s post about momentum, this would be a clear “no” or better “non”.
Some more interesting points:
1. Vivendi does not have a majority owner
2. A couple of their subsidiaries are listed. That makes an interesting “sum of parts”:
– 61% in Activision are worth around 6.5 bn
– 53% of Maroc Telecom are worth around 5 bn EUR
A very simplistic comparison with Vivendi’s total marekt cap of 14 bn shows a maybe interesting situation.
3. Acquisitions:
– Vivdendi paid almost 8 bn EUR in 2011 for the 40% they did not own in its French Telecom subsidiary. However, after Iliad SA launched its aggressive enntrance into the French mobile market this amount was most likely much to high.
– in parallel, Vivendi is bidding for EMI and has bought several other companies, like a tv station for 350 mn EUR last year.
One has also to keep in mind that Klarman is managing around 25 bn USD, so the Vivendi position is for him a 2% postion, similar to News Corp, HP and BP. And not all of his invetsments are winners, despite the “Margin of Safety”.
I am howver not sure if the Iliad scenario was included in his “Margin of Safety” considerations.
Nevertheless it is very interesting situation as this is basically his first major contintental European Investment (despite a 5 mn EUR stake in a samll fFrench company named Chargeurs SA).
For the time being I nevertheless prefer to watch this from the outside as for me Vivendi is still a company which generates a lot of free cashflow but spends most of it for stupid acquisitions.
David Einhorn hat ja im Mai für Aufsehen gesorgt, als er seinen Micdrosoft Case vorgestellt hat. Im Prinzip war das ja eher eine Art “Acitivist Position”, seiner Meinung nach ist Microsoft v.a. Aufgrund der Person Steve Balmer unterbewertet.
Persönlich sind solche “Activist” Sachen nicht so mein Ding, aber spätestens als Seth Klarman eine relativ signifikante Microsoft Position veröffentlichte war mir klar, dass man Microsoft mal unter (Deep)Value Gesichtpunkten anschauen muss.
Fairerweise muss man sagen, dass Klarman gleichzeitig auch ähnlich große Positionen bei News Corp und BP veröffentlicht hat. Bei den Werten scheint mir aber der Case eher klar zu sein. Sowohl BP wie auch News Corp leiden unter individuellen Problemen, die wenn sie gelöst werden, die Kurse wieder deutlich steigen lassen sollten. Beide Werte notieren relativ nah am Buchwert, d.h. für einen Asset orientierten Investor ist das vertrautes Terrain.
Bei Microsoft scheint der Case weniger klar zu sein (KBV ~3,9), warum Klarman hier als “Deep Value Investor” einsteigt.
Schauen wir uns aber zunächst Microsoft selber an:
Zum “Geschäftsmodell” von Microsoft und den weiteren Aussichten kann ich vermutlich nicht wirklich viel Neues beitragen, ich versuche aber mal die wesentlichen Punkte zusammen zu tragen:
Auf der “Plus” Seite stehen
+ wenn es jemals einen klaren “Moat” durch Netzwerkeffekte gegebn hat, dann durch Windows und Office. Die meisten Versuche den Moat anzuknabbern (Linux, Google Docs) sind bislang gescheitert
+ die Firma ist nach wie vor irre profitabel und generiert Unmengen von Cash mit relativ überschaubarem Kapitaleinsatz
+ blitzsaubere Bilanz, Nettocash sowie quasi kein Goodwill. F&E wird alles “expensed”
Die allseits bekannten Probleme /Risiken dürften wohl sein
– Microsoft hat quasi jede neue Entwicklung in den letzten 10-15 jahren verpennt (Mobilfunk, Suchmaschienen etc.)
– man muss jederzeit damit rechnen, dass sie einen großen Teil des Cashs für eine Akquisition verballern
– aktuelle Entwicklungen (Tablets, Smart Phones etc.) könnten am Moat knabbern bzw. den Moat z.B. bei Windows in bestimmten Bereichen einfach überflüssig machen
Warum ist die Aktie so billig ? Ein paar strukurelle Gründe könnten zusätzlich noch sein:
– Für Software/ Technologie Investoren ist das Wachstum zu gering
– der Aktienkurs stagniert seit 13 Jahren, für Momentum Investoren uninteressant
– für Dividendeninvestoren ist die Dividendenrendite (2,4%) nicht attraktiv genug
– für “Mechaniker” sind KBV (3,9) und KUV (3,2) wohl zu hoch
– für einen Management Buyout oder Private Equity ist die Firma zu groß (Market Cap 220 Mrd USD)
Ich finde in diesem Forbes Artikel wird die “allgemeine Stimmung” ganz gut zusammengefasst:
Microsoft trades at a moderately high PEG of 1.35. Its P/E is 9.6 on earnings forecast to grow 7.1% to $1.76 in 2012. This stock is not over-valued but at that PEG ratio, it does not offer anything to get excited about — unless a 2.65% dividend yield makes your day.
If Microsoft’s board could spin off its gaming division and put Ballmer in charge — then let Steve Jobs run the rest of Microsoft, this stock would look exciting. But that will never happen so for all the media attention that Einhorn’s Ira Sohn plug received, Microsoft is likely to remain dead money
Zurück zu Klarman: In Margin of Safety beschreibt er, dass er durchaus bereit ist auch für zukünftige Cashflows zu zahlen, allerdings nicht oder nur sehr ungern für zukünftiges Wachstum. Diesen Ansatz fasst er wie folgt zusammen:
Once future cash flows are forecast conservatively and an
appropriate discount rate is chosen, present value can be calculated.
In theory, investors might assign different probabilities to
numerous cash flow scenarios, then calculate the expected
value of an investment, multiplying the probability of each scenario
by its respective present value and then summing these
numbers. In practice, given the extreme difficulty of assigning
probabilities to numerous forecasts, investors make do with
only a few likely scenarios. They must then perform sensitivity
analysis in which they evaluate the effect of different cash flow
forecasts and different discount rates on present value. If modest
changes in assumptions cause a substantial change in net
present value, investors would be prudent to exercise caution in
employing this method of valuation.
Übersetzt auf Microsoft bedeutet das wohl Folgendes: Irgendwie kommt Klarman wohl ohne Berücksichtigung von Wachstum mit einer gewissen Discount rate auf einen Wert deutlich über dem aktuellen Börsenkurs.
Jetzt könnte man mal wieder den Spiess umdrehen bzw. “reverse Engineeren” und fragen: Mit welchen Annahmen komme ich basierend auf den aktuellen Cashflows auf einen deutlich höheren Wert als der aktuelle Börsenkurs ?
Folgende Ausgangsdaten:
Free Cashflow per Share 2010: 3,18 USD, Avg 3 Jahre 2,68 USD, Avg 5 Jahre 2,43 USD pro Aktie
Nimmt man jetzt einfach mal konstante Cashflows an, kann man sich eine einfache Matrix mit “Intrinsic” Value im Verhältnis zum Abzinsungssatz ausrechnen.
| EPS/% | 5% | 6% | 7% | 8% | 9% | 10% |
|---|---|---|---|---|---|---|
| 2.43 | 48.6 | 40.5 | 34.7 | 30.4 | 27.0 | 24.3 |
| 2.68 | 53.6 | 44.7 | 38.3 | 33.5 | 29.8 | 26.8 |
| 3.18 | 63.6 | 53.0 | 45.4 | 39.8 | 35.3 | 31.8 |
Da Klarman ja immer die “konservativen” Annahmen in den Vordergrund stellt, dürfte er wohl nicht unbedingt mit dem aktuellen hohe Free Cashflow starten, vielleicht eher mit dem 3 Jahresschnitt. Man sieht recht gut, dass man maximal mit 5-6% diskontieren darf, um einen Wert mit “ordentlich” Margin of Safety zu bekommen.
Eine andere Betrachtungsweise wäre, mit dem aktuellen freien Cashflow zu starten und dafür mit verschiedenen “Schrumpfungsraten” zu rechnen um ein Gefühl für die Bewertung zu bekommen.
| 5% | 6% | 7% | 8% | 9% | 10% | |
|---|---|---|---|---|---|---|
| 0% | 63.6 | 53.0 | 45.4 | 39.8 | 35.3 | 31.8 |
| -1% | 53.0 | 45.4 | 39.8 | 35.3 | 31.8 | 28.9 |
| -2% | 45.4 | 39.8 | 35.3 | 31.8 | 28.9 | 26.5 |
| -3% | 39.8 | 35.3 | 31.8 | 28.9 | 26.5 | 24.5 |
Hier sieht man, dass man bei entsprechend niedrigen Diskontierungssätzen sogar bei dauerhaftem Schrumpfen um 1-2% p.a. noch eine ganz ordentliche “Margin of Safety” hat.
Anmerkung: Falls sich jetzt jemand wundert, warum ich grundsätzlich den Net Cash nicht abziehe: Damit trage ich der Tatsache Rechnung, das Steve Balmer die Kohle jederzeit für einen sinnlosen Kauf rausballern kann.
Kommen wir nun zur entscheidenden Frage: Was würde die Verwendung eines Diskontierungszinssatzes von 5-6% rechtfertigen ?
Der “Markt” sagt uns ja bei einem PE von 10, dass er ungefähr 10% als faire Diskontierungsrate ohne Wachstum ansieht. Das CAPM gibt uns auch einen Wert von um die 10% (“risk free” 2%, Beta 0,9 und Equity Premium 9%).
Das Problem am CAPM ist ja die Tatsache, dass die Prämien die Schwankungen der Marktpreise reflektieren, nicht die Schwankungen der zu Grunde liegenden Cashflows. Klarman scheint dies also zu ingorieren und die Cashflows eher als Bond Cashflows zu interpretieren.
Microsoft selber hat ja einige Bonds ausgegeben, darunter eine Anleihe, die noch 30 Jahre läuft (ISIN US594918AM64). Diese Anleihe notiert momentan in der Gegend von 4,3% Rendite.
Man könnte jetzt argumentieren, dass die Cashflows für den Aktionär, Moat hin oder her, deutlich volatiler sind als für einen Bondholder. Dann würde ein 5% bzw 6% Abzinsungsfaktor auf die Equity Cashflows sehr aggresiv aussehen.
Jetzt kommt aber das Thema Inflation ins Spiel. In der 4,3% Redite des Bonds ist das volle Inflationsrisiko enthalten. Als Bondholder bekomme ich den Cashflow und sonst nichts. Als Aktionär habe ich aber die Chance, dass Microsoft durch den Moat zumindest die Preissteigerung für lange Zeit anpassen kann. D.h. die Cashflows für den Aktionär sind eher wie ein “inflation linked bond” denn ein “fixed rate bond”.
Wie relevant das ist, erkennt man wenn man die Rendite z.B. eines 30 jährigen “Tips” , also US Inflation Linked Bond mit eienr normalen 30 jährigen Staatsanleihe vergleicht.
Ein 30 jähriger TIPS notiert momentan bei ca. 0,95% “vergleichbaerer Nominalrendite” vs. 3,35% für eine Fixed Coupon 30Y Staatsanleihe.
Auf dieser Basis müsste man dann eine Discountrate auf den Microsoft Free Cash Flow Strom eigentlich mit dem Nominalzins einer TIPS von 1% vergleichen und hätte dann ganz ordentliche Spreads.
Nur zur Veranschaulichung mal die erste Tabelle diskontiert mit dem jeweiligen “TIPS equivalent”:
| Fixed | 5.0% | 6.0% | 7.0% | 8.0% | 9.0% | 10.0% |
|---|---|---|---|---|---|---|
| TIPS equ. | 2.6% | 3.6% | 4.6% | 5.6% | 6.6% | 7.6% |
| 2.43 | 95.3 | 68.5 | 53.4 | 43.8 | 37.1 | 32.2 |
| 2.68 | 105.1 | 75.5 | 58.9 | 48.3 | 40.9 | 35.5 |
| 3.18 | 124.7 | 89.6 | 69.9 | 57.3 | 48.5 | 42.1 |
Da ist eigenlich nichts spektakuläres, es zeigt nur, dass wenn man den Cashflowstrom von Microsoft wie einen Inflationsindexierten Bond behandelt, man selbst bei relativ hohen nominalen Abzinsungsfaktoren auf eine schöne Magin of Safety kommt.
Jetzt kann man natürlich argumentieren, dass man so nicht die Risiken einer “disruptive new Technology” angemessen berücksichtigt hat, andererseits hebt sich das evtl. auf mit dem Verzicht auf jegliche Wachstumsfantasie über die reine Inflationsanpassung hinaus. Ebenso “gratis” gibt es evtl. Activist Shareholder “Attacken” bzw. Erfolge.
Lange Rede kurzer Sinn: Lässt man Wachstum aussen vor und betrachtet den Cashflowstream von Microsoft aufgrund des großen Moats wie einen inflationsindexierten Bond Cash Flow, hat man selbst bei relativ hohen Abzinsungsfaktoren (8% p.a.) einen sehr hohen intrinsischen Wert. Im Idealfall könnte Microsoft tatsächlich eine Art Inflationsschutz zu einem relativ günstigen Preis darstellen.
Im 2ten Teil versuche ich dann noch ein paar konkrete Cases zu rechnen und auf die Verwendung ds freien Cashflows bei Microssoft einzugehen.
Was bitte hat Seth Klarmann mit den IPOs von zwei Spanischen Sparkassen zu tun könnte man sich fragen ?
Die Antwort ist ganz einfach: In seinem 1991 erschienen Buch “The Margin of safety” (Pdf z.B. hier), gab es ein Kapitel dass ich nur oberflächlich gelesen hatte, aber irgendwo in meinem Hinterkopf hängen geblieben ist.
Konkret war es das Kapitel 11: “Investing in Thrift Conversions”. In diesem Artikel beschreibt er die Situation in den 80ern in den USA, wo während und nach der “S&L Krise” in USA, viele S&L oder Thrifts (im Deutschen klassische Sparkassen) in börsennotierte Gesellschaften gewandelt wurden.
Aus seiner Sicht wwar das eine besondere Situation und zwar aus diesem Grund:
So long as the thrift has positive business value before the conversion, the arithmetic of a thrift conversion is highly favorable to investors. Unlike any other type of initial public offering, in a thrift conversion there are no prior shareholders; all of the shares in the institution that will be outstanding after the offering are issued and sold on the conversion. The conversion proceeds are added to the preexisting capital of the institution, which is indirectly handed to the new shareholders without cost to them. In a real sense, investors in a thrift conversion are
buying their own money and getting the preexisting capital in the thrift for free.
Ein wichtiger Punkt den es zu prüfen gibt ist folgender:
Unlike many IPOs, in which insiders who bought at very low prices sell some of their shares at the time of the offering, in a thrift conversion insiders virtually always buy shares alongside the public and at the same price.
D.h. man sollte darauf achten, dass “Insider” an den entsprechenden Aktien beteiligt sind. Klar ist, dass man auch auf die Asset Qualität achten muss:
Many thrifts, of course, are worth less than their stated book value, and some are insolvent. Funds raised on the conversion of such institutions would pay to resolve preexisting problems rather than add to preexisting value.
Ein Grund für die damalige Unterbewertung war auch die fehlende Coverage durch Analysten:
Why were thrift stocks so depressed in the 1980s? The sell side of Wall Street has historically employed few thrift analysts, and the buy side even fewer. The handful of sell-side analysts on duty typically followed only the ten or twenty largest public thrifts, primarily those based in California and New York. No major Wall Street house was able to get a handle on all of the many hundreds of converted thrifts, and few institutional investors even made the effort. As a result, shares in new thrift conversions were frequently issued at an appreciable discount to the valuation multiples of other publicly traded thrifts in order to get investors to notice and buy them.
Als Beispiel bringt er noch die “Jamaica Savings Bank”, die anscheinend mit einem KBV von 0,47 emittiert wurde obwohl dem ein qualitativ hochwertiges Portfolio genenüber steht.
Sein Fazit dürfte generell auch auf Spanische Sparkassen zutreffen:
Thrift conversions, such as that of Jamaica Savings Bank, are an interesting part of the financial landscape. More significantly, they illustrate the way the herd mentality of investors can cause all companies in an out-of-favor industry, however disparate, to be tarred with the same brush.
Interessanterweise hat Klarman’s Firma Baupost gerade im Mai bekannt gegeben, das man ein Office in London eröffnen will um von den erwarteten “notverkäufen” zu profitieren:
Baupost Group LLC, a $24 billion Boston-based hedge fund run by Seth Klarman, will open its first overseas office in London this year as the sovereign deficit crisis prompts a wave of distressed debt sales, two people with knowledge of the plans said.
Jim Mooney, a managing director at Baupost, will oversee the operation to tap investments mainly in commercial real estate, structured products, corporate and debt that trades at distressed levels, said one of the people, who declined to be identified because the move hasn’t been made public.
Ich vermute mal nicht, dass Klarman in börsengelistete Aktien investieren wird, aber es zeigt doch, dass es hier eine größere Anzahl von möglichen Valueinvestments geben könnte.
Fazit: Die Privatitisierung der Spanischen Sparkassen könnte evtl. ähnlich den US Amerikanischen Vorbildern in den 80ern interessant sein. Allerdings muss man die einzelnen Unternehmen noch eingehend analysieren.
Fortsetzung folgt….
P.S.: Wer sich für (Deep) Value Investing interessiert und das Buch noch nicht gelesen hat, sollte das schleunigst nachholen. Viel Besseres gibt es zu dem Thema nicht….
Aleph Blog on Buffett Shareholder Letter
Baupost Fund Letters 1995-2001 – Seth Klarman – ein “must read”
Seth Klarman Auszüge aus dem 2010er Letter
Barrons Interview First Eagle Funds aus Dez 2010
Das Buch ist bestellt und wir hier vorgestellt (There’s Always Something to Do – The Peter Cundill Investment Approach)
Sehr gutes Interview mit Ray Dalio von Bridgewater:
Damodaran contra Buffet zu Black Scholes – Siehe auch den Buffett Shareholder Letter 2007.
value and opportunity 