This 18-acre Vineyard compound has an asking price under $9M

It includes a 6,100-square-foot main residence as well as a guest cottage......»»

Category: topSource: bizjournalsMay 14th, 2022

Take a tour of Michael Jordan"s Chicago mansion that"s been on the market for 10 years and why he can"t sell it

It was first listed for $29 million and has cool, personalized touches like a Jordan-branded basketball court. But that may be working against him. Jordan's estate has been on the market since 2012.Concierge Auctions; Stephan Savoia/APMichael Jordan's enormous house in Chicago is still on the market after 10 years.Michael Jordan has tried to sweeten the pot by cutting the price nearly in half and throwing in a complete set of Air Jordans with the purchase of the house.He pays more than $100,000 in annual property taxes."Any time you have these homes that are just kind of gross over-improvements for the area they do lead to very, very lengthy marketing times," said Gail Lissner of Integra Realty Resources. The house was originally listed for $29 million and has every bell and whistle you can think of. Some of the "over-improvements" Lissner may be referring to are the pool with a grass island in the middle of it, a door from the Playboy Mansion, a table based on the streets of Baghdad, and MJ-branded golf flags.Below, we take a closer look at the house and why it's struggling to find a buyer. Most images are from footage provided by Concierge Auctions.Tony Manfred contributed to this post.Michael Jordan's 56,000-square-foot, 7-acre compound looks massive even from the air.Concierge AuctionsAnyone who approaches from the ground can tell right away that this estate belongs to the legendary No. 23, Michael Jordan — and that might be what's keeping it from selling. "It's clearly his home," said Bruce Bowers of Bowers Realty Group. "... There's a lot of work that would have to be done to make it your own."ZillowSource: Business InsiderThe price on the house has dropped several times and is now going for $14.9 million, or about $265 per square foot — that's a far cry from the original price of $517 per square foot. The exact price is $14,855,000, and the numbers in that price add up to 23 — Jordan's basketball jersey number.Concierge AuctionsThe long drive from the gate and the full-grown trees ensure that the house has complete privacy.Concierge AuctionsJordan had the house — and the surrounding property — built from scratch to his personal tastes.Concierge AuctionsThe outdoor space proves to be spectacular. There's a tennis court ...Concierge Auctions... an infinity pool with a grass island in the middle ...Concierge Auctions... which lies in the center of a large patio ...Concierge Auctions... and down on the lawn there's a putting green.Concierge AuctionsThe putting green is complete with Jordan Brand flag sticks.Concierge AuctionsThere's also a pond stocked with fish.Concierge AuctionsWhile the outdoor space is sprawling and undoubtedly impressive ...Concierge Auctions... the inside is equally spectacular. When guests first walk in the front door, they are greeted by this view, which includes a piano in the background.Concierge AuctionsThe piano room doubles as one of many sitting rooms in the house.Concierge AuctionsAnd here's a look at another sitting area dubbed the "great room" — this isn't the only great room around the house, though.Concierge AuctionsJordan's luxurious taste even shows itself in details like doorways. The set of doors seen below are from the original Playboy Mansion in Chicago.Concierge AuctionsThey lead to a game room with a pool table.Concierge AuctionsOf course, since this is the former home of Michael Jordan, there is a full-court basketball court. It's the centerpiece of the house.Concierge AuctionsThe court has the legend's name at both ends ...Concierge Auctions... and the Jumpman logo at center court, which includes the names of his children — his daughter's name is out of view.Concierge AuctionsWhile guests wait for their turn on the court, they can hang out in this sitting area.Concierge AuctionsMoving along to the dining room, guests were able to eat at this "Baghdad table."Concierge AuctionsThat grid seen on the tabletop is based on the streets of Baghdad.Concierge AuctionsDetailed eating areas are somewhat of a theme. Here we can see a beautiful skylight positioned perfectly over the kitchen table.Concierge AuctionsIn one of the dining areas just off the kitchen, there is a large aquarium built into the wall.Concierge AuctionsThe house has nine bedrooms ...Concierge Auctions... and 19 bathrooms.Concierge AuctionsThere is also a cigar room, which has been decorated intricately with a detailed ceiling.Concierge AuctionsEven the railing in the cigar room is ornate.Concierge AuctionsThe cigar room also has plenty of card tables where we're guessing Jordan played some high-stakes poker games — he is known for his love of gambling, after all.ZillowThe home also features a full gym.Concierge AuctionsJordan's Bulls teammates used to work out there every morning, according to an interview shared by Concierge Auctions.Concierge AuctionsSource: Concierge AuctionsAnother luxurious part of Jordan's estate is the expansive wine cellar.Concierge AuctionsThe library upstairs was said to be MJ's favorite room. It features a drop-down movie screen.Concierge AuctionsSource: Concierge AuctionsBetween the house and the patio, there's another TV room with a 110-inch screen.Concierge AuctionsThis area used to be an indoor pool. Jordan renovated it after he moved in and added sliding walls to both sides that can make the gathering room either indoor or outdoor depending on the mood and the weather.Concierge AuctionsThere are plenty of media rooms throughout the house. Even the seemingly random nooks like this one below have TVs.Concierge AuctionsThe property also boasts a three-bedroom guest house ...Concierge Auctions... which has its own family room and kitchen.Concierge AuctionsMJ himself lived in the main house for 19 years.Concierge AuctionsThe house comes fully furnished, although some of the pieces may be a tad dated.Concierge AuctionsDespite how awesome the house seems, it's been on the market since 2012. Jordan tried to auction the house in 2013, but the minimum bid of $13 million was never met.ZillowJordan said, "Many of the world's most desirable items are sold at auction, and Concierge Auctions is the hands-down leader when it comes to auctioning one-of-a-kind real estate."Concierge AuctionsSource: Concierge AuctionsMJ's estate remained unsold despite attempts to get creative, including marketing to wealthy people in basketball-crazed China.Concierge AuctionsSource: MaximIn 2015, the agent working to sell the house at the time promised that the buyer would also receive every edition of Air Jordans in his or her size — but that didn't work either.Nicholas Hunt/Getty Images for Tribeca Film FestivalSource: MaximAdam Rosenfeld, of the luxury-real-estate startup Mercer Vine, told Marketwatch in 2016 that Jordan was likely struggling to sell the house because of all of the personalized customizations.Concierge AuctionsSource: MarketwatchRosenfeld said the house also just isn't in an area where wealthy celebs are looking for houses. Gail Lissner of Integra Realty Resources called the area "much more modest" than what Jordan's property suggests.ZillowSource: Marketwatch, Business InsiderThere is no need to worry about the house rotting while remaining unsold, though. The house is still occupied by staff who Jordan employed to keep it looking fresh.Concierge AuctionsSource: The Real DealJordan is still paying a lot in property taxes. The annual bill is more than $100,000, and he has paid nearly $700,000 in property taxes since he put it on the market in 2012.ZillowSource: ZillowOne problem is that Jordan may feel his celebrity status adds value to the house, but, according to Stephen Shapiro of the Westside Agency, people do not pay more for a house just because somebody famous owned it.Chuck Burton/APSource: The Real Deal"But you know who tends to think a property is worth more because a celebrity lived there?" Shapiro said. "The celebrity trying to sell it."Concierge AuctionsSource: The Real DealAnother issue is the location. Most of the homes in this price range in this area are closer to Lake Michigan, a few miles east of Jordan's former house. "Buyers at that level in that area tend to want to be closer to the lake," Missy Jerfita of Berkshire Hathaway Homes Services told The Real Deal.Concierge AuctionsSource: The Real DealSince Jordan put his Chicago home on the market, he has since purchased a lakefront house in North Carolina in a golf-course community.ZillowThe house is in Cornelius, about a 30-minute drive from the Charlotte Hornets' arena — Jordan owns the NBA team. MJ purchased the house for $2.8 million after it was originally listed for $4 million.ZillowSource: Fox SportsJordan also reportedly bought a house on a golf course in Jupiter, Florida, for $4.8 million in 2013 and spent $7.6 million on renovations.ZillowSource: Jeff RealtyHe also owns a condo in downtown Charlotte, in the same building as Cam Newton. The condos reportedly go for between $1.5 and $3.5 million.YouTubeSource: Charlotte AgendaMost recently, Jordan listed his 10,000-square-foot home in Park City, Utah, for $7.5 million. Experts think it will likely sell faster than the Chicago compound.Isaac Brekken/GettySource: Forbes, Business InsiderHe continues to wait for a buyer for the Chicago-area home. Of course, MJ is estimated to be worth $1.9 billion, so he can afford to wait for the right owner to come along on his old Chicago digs.Jordan Brand via Getty ImagesRead the original article on Business Insider.....»»

Category: personnelSource: nytMar 19th, 2022

Howard Marks January 2022 Memo: Selling Out

Howard Marks memo to Oaktree clients for the month of January 2022, titled, “Selling Out.” Q4 2021 hedge fund letters, conferences and more As I’m now in my fourth decade of memo writing, I’m sometimes tempted to conclude I should quit, because I’ve covered all the relevant topics. Then a new idea for a memo […] Howard Marks memo to Oaktree clients for the month of January 2022, titled, “Selling Out.” if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Series in PDF Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q4 2021 hedge fund letters, conferences and more As I’m now in my fourth decade of memo writing, I’m sometimes tempted to conclude I should quit, because I’ve covered all the relevant topics. Then a new idea for a memo pops up, delivering a pleasant surprise. My January 2021 memo Something of Value, which chronicled the time I spent in 2020 living and discussing investing with my son Andrew, recounted a semi-real conversation in which we briefly discussed whether and when to sell appreciated assets. It occurred to me that even though selling is an inescapable part of the investment process, I’ve never devoted an entire memo to it. The Basic Idea Everyone is familiar with the old saw that’s supposed to capture investing’s basic proposition: “buy low, sell high.” It’s a hackneyed caricature of the way most people view investing. But few things that are important can be distilled into just four words; thus, “buy low, sell high” is nothing but a starting point for discussion of a very complex process. Will Rogers, an American film star and humorist of the 1920s and ’30s, provided what he may have thought was a more comprehensive roadmap for success in the pursuit of wealth: Don’t gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don’t go up, don’t buy it. The illogicality of his advice makes clear how simplistic this adage – like many others – really is. However, regardless of the details, people may unquestioningly accept that they should sell appreciated investments. But how helpful is that basic concept? Origins Much of what I’ll write here got its start in a 2015 memo called Liquidity. The hot topic in the investment world at that moment was the concern about a perceived decline in the liquidity provided by the market (when I say “the market,” I’m talking specifically about the U.S. stock market, but the statement has broad applicability). This was commonly attributed to a combination of (a) the licking investment banks had taken in the Global Financial Crisis of 2008-09 and (b) the Volcker Rule, which prohibited risky activities such as proprietary trading on the part of systemically important financial institutions. The latter constrained banks’ ability to “position” securities, or buy them, when clients wanted to sell. Maybe liquidity in 2015 was less than it had previously been, and maybe it wasn’t. However, looking beyond the events of the day, I closed that memo by stating my conviction that (a) most investors trade too much, to their own detriment, and (b) the best solution for illiquidity is to build portfolios for the long term that don’t rely on liquidity for success. Long-term investors have an advantage over those with short timeframes (and I think the latter describes the majority of market participants these days). Patient investors are able to ignore short-term performance, hold for the long run, and avoid excessive trading costs, while everyone else worries about what’s going to happen in the next month or quarter and therefore trades excessively. In addition, long-term investors can take advantage if illiquid assets become available for purchase at bargain prices. Like so many things in investing, however, just holding is easier said than done. Too many people equate activity with adding value. Here’s how I summed up this idea in Liquidity, inspired by something Andrew had said: When you find an investment with the potential to compound over a long period, one of the hardest things is to be patient and maintain your position as long as doing so is warranted based on the prospective return and risk. Investors can easily be moved to sell by news, emotion, the fact that they’ve made a lot of money to date, or the excitement of a new, seemingly more promising idea. When you look at the chart for something that’s gone up and to the right for 20 years, think about all the times a holder would have had to convince himself not to sell. Everyone wishes they’d bought Amazon at $5 on the first day of 1998, since it’s now up 660x at $3,304. But who would have continued to hold when the stock hit $85 in 1999 – up 17x in less than two years? Who among those who held on would have been able to avoid panicking in 2001, as the price fell 93%, to $6? And who wouldn’t have sold by late 2015 when it hit $600 – up 100x from the 2001 low? Yet anyone who sold at $600 captured only the first 18% of the overall rise from that low. This reminds me of the time I once visited Malibu with a friend and mentioned that the Rindge family is said to have bought the entire area – all 13,330 acres – in 1892 for $300,000, or $22.50 per acre. (It’s clearly worth many billions today.) My friend said, “I’d like to have bought all of Malibu for $300,000.” My response was simple: “you would have sold it when it got to $600,000.” The more I’ve thought about it since writing Liquidity, the more convinced I’ve become that there are two main reasons why people sell investments: because they’re up and because they’re down. You may say that sounds nutty, but what’s really nutty is many investors’ behavior. Selling Because It’s Up “Profit-taking” is the intelligent-sounding term in our business for selling things that have appreciated. To understand why people engage in it, you need insight into human behavior, because a lot of investors’ selling is motivated by psychology. In short, a good deal of selling takes place because people like the fact that their assets show gains, and they’re afraid the profits will go away. Most people invest a lot of time and effort trying to avoid unpleasant feelings like regret and embarrassment. What could cause an investor more self-recrimination than watching a big gain evaporate? And what about the professional investor who reports a big winner to clients one quarter and then has to explain why the holding is at or below cost the next? It’s only human to want to realize profits to avoid these outcomes. If you sell an appreciated asset, that puts the gain “in the books,” and it can never be reversed. Thus, some people consider selling winners extremely desirable – they love realized gains. In fact, at a meeting of a non-profit’s investment committee, a member suggested that they should be leery of increasing endowment spending in response to gains because those gains were unrealized. I was quick to point out that it’s usually a mistake to view realized gains as less transient than unrealized ones (assuming there’s no reason to doubt the veracity of the unrealized carrying values). Yes, the former have been made concrete. However, sales proceeds are generally reinvested, meaning the profits – and the principal – are put back at risk. One might argue that appreciated securities are more vulnerable to declines than new investments in assets currently deemed to be attractively priced, but that’s far from a certainty. I’m not saying investors shouldn’t sell appreciated assets and realize profits. But it certainly doesn’t make sense to sell things just because they’re up. Selling Because It’s Down As wrong as it is to sell appreciated assets solely to crystalize gains, it’s even worse to sell them just because they’re down. Nevertheless, I’m sure many people do it. While the rule is “buy low, sell high,” clearly many people become more motivated to sell assets the more they decline. In fact, just as continued buying of appreciated assets can eventually turn a bull market into a bubble, widespread selling of things that are down has the potential to turn market declines into crashes. Bubbles and crashes do occur, proving that investors contribute to excesses in both directions. In a movie that plays in my head, the typical investor buys something at $100. If it goes to $120, he says, “I think I’m onto something – I should add,” and if it reaches $150, he says, “Now I’m highly confident – I’m going to double up.” On the other hand, if it falls to $90, he says, “I’m going to think about increasing my position to reduce my average cost,” but at $75, he concludes he should reconfirm his thesis before averaging down further. At $50, he says, “I’d better wait for the dust to settle before buying more.” And at $20 he says, “It feels like it’s going to zero; get me out!” Just like those who are afraid of surrendering gains, many investors worry about letting losses compound. They might fear their clients will say (or they’ll say to themselves), “What kind of a lame-brain continues to hold a security after it’s gone from $100 to $50? Everyone knows a decline like that can foreshadow further declines. And look – it happened.” Do investors really make behavioral errors such as those I’ve described? There’s plenty of anecdotal evidence. For example, studies have shown that the average mutual fund investor performs worse than the average mutual fund. How can that be? If she merely held her positions, or if her errors were unsystematic, the average fund investor would, by definition, fare the same as the average fund. For the studies’ findings to occur, investors have to on balance reduce the amount of capital they have in funds that subsequently do better and increase their allocation to funds that go on to do worse. Let me put that another way: on average, mutual fund investors tend to sell the funds with the worst recent performance (missing out on their potential recoveries) in order to chase the funds that have done the best (and thus likely participate in their return to earth). We know that “retail investors” tend to be trend-followers, as described above, and their long-term performance often suffers as a result. What about the pros? Here the evidence is even clearer: the powerful shift in recent decades toward indexing and other forms of passive investing has taken place for the simple reason that active investment decisions are so often wrong. Of course, many forms of error contribute to this reality. Whatever the reason, however, we have to conclude that, on average, active professional investors held more of the things that did less well and less of the things that outperformed, and/or that they bought too much at elevated prices and sold too much at depressed prices. Passive investing hasn’t grown to cover the majority of U.S. equity mutual fund capital because passive results have been so good; I think it’s because active management has been so bad. Back when I worked at First National City Bank 50 years ago, prospective clients used to ask, “What kind of return do you think you can make in an equity portfolio?” The standard answer was 12%. Why? “Well,” we said (so simplistically), “the stock market returns about 10% a year. A little effort should enable us to improve on that by at least 20%.” Of course, as time has shown, there’s no truth in that. “A little effort” didn’t add anything. In fact, in most cases, active investing detracted: most equity funds failed to keep up with the indices, especially after fees. What about the ultimate proof? The essential ingredient in Oaktree’s investments in distressed debt – bargain purchases – has emanated from the great opportunities sellers gave us. Negativity reaches a crescendo during economic and market crises, causing many investors to become depressed or fearful and sell in panic. Results like those we target in distressed debt can only be achieved when holders sell to us at irrationally low prices. Superior investing consists largely of taking advantage of mistakes made by others. Clearly, selling things because they’re down is a mistake that can give the buyers great opportunities. When Should Investors Sell? If you shouldn’t sell things because they’re up, and you shouldn’t sell because they’re down, is it ever right to sell? As I previously mentioned, I described the discussions that took place while Andrew and his family lived with Nancy and me in 2020 in Something of Value. That experience truly was of great value – an unexpected silver lining to the pandemic. That memo evoked the strongest reaction from readers of any of my memos to date. This response was probably attributable to (a) the content, which mostly related to value investing; (b) the personal insights provided, and especially my confession regarding my need to grow with the times; or (c) the recreated conversation that I included as an appendix. The last of these went like this, in part: Howard: Hey, I see XYZ is up xx% this year and selling at a p/e ratio of xx. Are you tempted to take some profits? Andrew: Dad, I’ve told you I’m not a seller. Why would I sell? H: Well, you might sell some here because (a) you’re up so much; (b) you want to put some of the gain “in the books” to make sure you don’t give it all back; and (c) at that valuation, it might be overvalued and precarious. And, of course, (d) no one ever went broke taking a profit. A: Yeah, but on the other hand, (a) I’m a long-term investor, and I don’t think of shares as pieces of paper to trade, but as part ownership in a business; (b) the company still has enormous potential; and (c) I can live with a short-term downward fluctuation, the threat of which is part of what creates opportunities in stocks to begin with. Ultimately, it’s only the long term that matters. (There’s a lot of “a-b-c” in our house. I wonder where Andrew got that.) H: But if it’s potentially overvalued in the short term, shouldn’t you trim your holding and pocket some of the gain? Then if it goes down, (a) you’ve limited your regret and (b) you can buy in lower. A: If I owned a stake in a private company with enormous potential, strong momentum and great management, I would never sell part of it just because someone offered me a full price. Great compounders are extremely hard to find, so it’s usually a mistake to let them go. Also, I think it’s much more straightforward to predict the long-term outcome for a company than short-term price movements, and it doesn’t make sense to trade off a decision in an area of high conviction for one about which you’re limited to low conviction. . . . H: Isn’t there any point where you’d begin to sell? A: In theory there is, but it largely depends on (a) whether the fundamentals are playing out as I hope and (b) how this opportunity compares to the others that are available, taking into account my high level of comfort with this one. Aphorisms like “no one ever went broke taking a profit” may be relevant to people who invest part-time for themselves, but they should have no place in professional investing. There certainly are good reasons for selling, but they have nothing to do with the fear of making mistakes, experiencing regret and looking bad. Rather, these reasons should be based on the outlook for the investment – not the psyche of the investor – and they have to be identified through hardheaded financial analysis, rigor and discipline. Stanford University professor Sidney Cottle was the editor of the later versions of Benjamin Graham and David L. Dodd’s Security Analysis, “the bible of value investing,” including the edition I read at Wharton 56 years ago. For that reason, I knew the book as “Graham, Dodd and Cottle.” Sid was a consultant to the investment department at First National City Bank in the 1970s, and I’ve never forgotten his description of investing: “the discipline of relative selection.” In other words, most of the portfolio decisions investors make are relative choices. It’s patently clear that relative considerations should play an enormous part in any decision to sell existing holdings. If your investment thesis seems less valid than it did previously and/or the probability that it will prove accurate has declined, selling some or all of the holding is probably appropriate. Likewise, if another investment comes along that appears to have more promise – to offer a superior risk-adjusted prospective return – it’s reasonable to reduce or eliminate existing holdings to make room for it. Selling an asset is a decision that must not be considered in isolation. Cottle’s concept of “relative selection” highlights the fact that every sale results in proceeds. What will you do with them? Do you have something in mind that you think might produce a superior return? What might you miss by switching to the new investment? And what will you give up if you continue to hold the asset in your portfolio rather than making the change? Or perhaps you don’t plan to reinvest the proceeds. In that case, what’s the likelihood that holding the proceeds in cash will make you better off than you would have been if you had held onto the thing you sold? Questions like these relate to the concept of “opportunity cost,” one of the most important ideas in financial decision-making. Switching gears, what about the idea of selling because you think a temporary dip lies ahead that will affect one of your holdings or the whole market? There are real problems with this approach: Why sell something you think has a positive long-term future to prepare for a dip you expect to be temporary? Doing so introduces one more way to be wrong (of which there are so many), since the decline might not occur. Charlie Munger, vice chairman of Berkshire Hathaway, points out that selling for market-timing purposes actually gives an investor two ways to be wrong: the decline may or may not occur, and if it does, you’ll have to figure out when the time is right to go back in. Or maybe it’s three ways, because once you sell, you also have to decide what to do with the proceeds while you wait until the dip occurs and the time comes to get back in. People who avoid declines by selling too often may revel in their brilliance and fail to reinstate their positions at the resulting lows. Thus, even sellers who were right can fail to accomplish anything of lasting value. Lastly, what if you’re wrong and there is no dip? In that case, you’ll miss out on the ensuing gains and either never get back in or do so at higher prices. So it’s generally not a good idea to sell for purposes of market timing. There are very few occasions to do so profitably and very few people who possess the skill needed to take advantage of these opportunities. Before I close on this subject, it’s important to note that decisions to sell aren’t always within an investment manager’s control. Clients can withdraw capital from accounts and funds, necessitating sales, and the limited lifespan of closed-end funds can require managers to liquidate holdings even though they’re not ripe for selling. The choice of what to sell under these conditions can still be based on a manager’s expectations regarding future returns, but deciding not to sell isn’t among the manager’s choices. How Much Is Too Much to Hold? Certainly there are times when it’s right to sell one asset in favor of another based on the idea of relative selection. But we mustn’t do this in a mechanical manner. If we did, at the logical extreme, we would put all of our capital into the one investment we consider the best. Virtually all investors – even the best – diversify their portfolios. We may have a sense for which holding is the absolute best, but I’ve never heard of an investor with a one-asset portfolio. They may overweight favorites to take advantage of what they think they know, but they still diversify to protect against what they don’t know. That means they sub-optimize, potentially trading off some of their chance at a maximal return to increase the likelihood of a merely excellent one. Here’s a related question from my reconstructed conversation with Andrew: H: You run a concentrated portfolio. XYZ was a big position when you invested, and it’s even bigger today, given the appreciation. Intelligent investors concentrate portfolios and hold on to take advantage of what they know, but they diversify holdings and sell as things rise to limit the potential damage from what they don’t know. Hasn’t the growth in this position put our portfolio out of whack in that regard? A: Perhaps that’s true, depending on your goals. But trimming would mean selling something I feel immense comfort with based on my bottom-up assessment and moving into something I feel less good about or know less well (or cash). To me, it’s far better to own a small number of things about which I feel strongly. I’ll only have a few good insights over my lifetime, so I have to maximize the few I have. All professional investors want good investment performance for their clients, but they also want financial success for themselves. And amateurs have to invest within the limits of their risk tolerance. For these reasons, most investors – and certainly most investment managers’ clients – aren’t immune to apprehension regarding portfolio concentration and thus susceptibility to untoward developments. These considerations introduce valid reasons for limiting the size of individual asset purchases and trimming positions as they appreciate. Investors sometimes delegate the decision on how to weight assets in portfolios to a process called portfolio optimization. Inputs regarding asset classes’ return potential, risk and correlation are fed into a computer model, and out comes the portfolio with the optimal expected risk-adjusted return. If an asset appreciates relative to the others, the model can be rerun, and it will tell you what to buy and sell. The main problem with these models lies in the fact that all the data we have regarding those three parameters relates to the past, but to arrive at the ideal portfolio, the model needs data that accurately describes the future. Further, the models need a numerical input for risk, and I absolutely insist that no single number can fully describe an asset’s risk. Thus, optimization models can’t successfully dictate portfolio actions. The bottom line: we should base our investment decisions on our estimates of each asset’s potential, we shouldn’t sell just because the price has risen and the position has swelled, there can be legitimate reasons to limit the size of the positions we hold, but there’s no way to scientifically calculate what those limits should be. In other words, the decision to trim positions or to sell out entirely comes down to judgment . . . like everything else that matters in investing. The Final Word on Selling Most investors try to add value by over- and underweighting specific assets and/or through well-timed buying and selling. While few have demonstrated the ability to consistently do these things correctly (see my comments on active management on page 4), everyone’s free to have a go at it. There is, however, a big “but.” What’s clear to me is that simply being invested is by far “the most important thing.” (Someone should write a book with that title!) Most actively managed portfolios won’t outperform the market as a result of manipulation of portfolio weightings or buying and selling for purposes of market timing. You can try to add to returns by engaging in such machinations, but these actions are unlikely to work at best and can get in the way at worst. Most economies and corporations benefit from positive underlying secular trends, and thus most securities markets rise in most years and certainly over long periods. One of the longest-running U.S. equity indices, the S&P 500, has produced an estimated compound average return over the last 90 years of 10.5% per year. That’s startling performance. It means $1 invested in the S&P 500 90 years ago would have grown to roughly $8,000 today. Many people have remarked on the wonders of compounding. For example, Albert Einstein reportedly called compound interest “the eighth wonder of the world.” If $1 could be invested today at the historic compound return of 10.5% per year, it would grow to $147 in 50 years. One might argue that economic growth will be slower in the years ahead than it was in the past, or that bargain stocks were easier to find in previous periods than they are today. Nevertheless, even if it compounds at just 7%, $1 invested today will grow to over $29 in 50 years. Thus, someone entering adulthood today is practically guaranteed to be well fixed by the time they retire if they merely start investing promptly and avoid tampering with the process by trading. I like the way Bill Miller, one of the great investors of our time, put it in his 3Q 2021 Market Letter: In the post-war period the US stock market has gone up in around 70% of the years... Odds much less favorable than that have made casino owners very rich, yet most investors try to guess the 30% of the time stocks decline, or even worse spend time trying to surf, to no avail, the quarterly up and down waves in the market. Most of the returns in stocks are concentrated in sharp bursts beginning in periods of great pessimism or fear, as we saw most recently in the 2020 pandemic decline. We believe time, not timing, is the key to building wealth in the stock market. (October 18, 2021. Emphasis added) What are the “sharp bursts” Miller talks about? On April 11, 2019, The Motley Fool cited data from JP Morgan Asset Management’s 2019 Retirement Guide showing that in the 20-year period between 1999 and 2018, the annual return on the S&P 500 was 5.6%, but your return would only have been 2.0% if you had sat out the 10 best days (or roughly 0.4% of the trading days), and you wouldn’t have made any money at all if you had missed the 20 best days. In the past, returns have often been similarly concentrated in a small number of days. Nevertheless, overactive investors continue to jump in and out of the market, incurring transactions costs and capital gains taxes and running the risk of missing those “sharp bursts.” As mentioned earlier, investors often engage in selling because they believe a decline is imminent and they have the ability to avoid it. The truth, however, is that buying or holding – even at elevated prices – and experiencing a decline is in itself far from fatal. Usually, every market high is followed by a higher one and, after all, only the long-term return matters. Reducing market exposure through ill-conceived selling – and thus failing to participate fully in the markets’ positive long-term trend – is a cardinal sin in investing. That’s even more true of selling without reason things that have fallen, turning negative fluctuations into permanent losses and missing out on the miracle of long-term compounding. * * * When I meet people for the first time and they find out I’m in the investment business, they often ask (especially in Europe) “what do you trade?” That question makes me bristle. To me, “trading” means jumping in and out of individual assets and whole markets on the basis of guesswork as to what prices will do in the next hour, day, month or quarter. We don’t engage in such activity at Oaktree, and few people have demonstrated the ability to do it well. Rather than traders, we consider ourselves investors. In my view, investing means committing capital to assets based on well-reasoned estimates of their potential and benefitting from the results over the long term. Oaktree does employ people called traders, but their job consists of implementing long-term investment decisions made by portfolio managers based on assets’ fundamentals. No one at Oaktree believes they can make money or advance their career by selling now and buying back after an intervening decline, as opposed to holding for years and letting value lift prices if fundamental expectations prove out. When Oaktree was formed in 1995, the five founders – who at that point had worked together for nine years on average – established an investment philosophy based on what we’d successfully done in that time. One of the six tenets expressed our view on trying to time markets when buying and selling: Because we do not believe in the predictive ability required to correctly time markets, we keep portfolios fully invested whenever attractively priced assets can be bought. Concern about the market climate may cause us to tilt toward more defensive investments, increase selectivity or act more deliberately, but we never move to raise cash. Clients hire us to invest in specific market niches, and we must never fail to do our job. Holding investments that decline in price is unpleasant, but missing out on returns because we failed to buy what we were hired to buy is inexcusable. We’ve never changed any of the six tenets of our investment philosophy – including this one – and we have no plans to do so. January 13, 2022 Updated on Jan 14, 2022, 12:38 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkJan 14th, 2022

Jeff Bezos turns 58 today. Here"s how he built Amazon into a $1.7 trillion company and became one of the world"s richest people.

Jeff Bezos got his start as a New York hedge-funder before driving across the country to start building Amazon. Jeff Bezos inside Amazon's Spheres in 2018.The Washington Post/Getty Images Jeff Bezos began his career as a hedge-funder in New York before leaving to start Amazon. Amazon struggled to turn a profit at first, but these days, it's worth $1.7 trillion. Its share price has hit new highs during the pandemic. Along the way, Bezos has faced antitrust scrutiny, weathered scandals, traveled to space, and become one of the world's richest people. Jeff Bezos' mom, Jackie, was a teenager when she had him on January 12, 1964. She had recently married Cuban immigrant Miguel Bezos, who adopted Jeff. Jeff didn't learn that Miguel wasn't his real father until he was 10, but says he was more fazed about learning he needed to get glasses than he was about the news.Jeff Bezos with his father, Miguel Bezos.Kevin Mazur/Getty Images for Statue Of Liberty-Ellis Island FoundationSource: WiredWhen Bezos was 4, his mother told his biological father, who previously had worked as a circus performer, to stay out of their lives. When Brad Stone interviewed Bezos' biological father for Stone's book "The Everything Store," Bezos' dad had no idea who his son had become.Not Jeff Bezos' father.Reuters/Eric GaillardSource: The Everything StoreBezos showed signs of brilliance from an early age. When he was a toddler, he took apart his crib with a screwdriver because he wanted to sleep in a real bed.Fabian Strauch/picture alliance via Getty ImagesSource: The Everything StoreFrom ages 4 to 16, Bezos spent summers on his grandparents' ranch in Texas, doing things like repairing windmills and castrating bulls.AP Photo/Richard DrewSource: The Everything StoreHis grandfather, Preston Gise, was a huge inspiration for Bezos and helped kindle his passion for intellectual pursuits. At a commencement address in 2010, Bezos said Gise taught him "it's harder to be kind than clever."Jeff Bezos.AP ImagesSource: Business InsiderBezos fell in love with reruns of the original "Star Trek" and became a fan of later versions too. Early on, he considered naming Amazon, a reference to a line from Captain Jean-Luc Picard.Paramount PicturesSource: The Everything StoreIn school, Bezos told teachers "the future of mankind is not on this planet." As a kid, he wanted to be a space entrepreneur — now, he owns a space-exploration company called Blue Origin.Getty Images / Blue OriginSource: WiredAfter spending a miserable summer working at McDonald's as a teen, Bezos, together with his girlfriend, started the Dream Institute, a 10-day summer camp for kids. They charged $600 a kid and managed to sign up six students. The "Lord of the Rings" series made the required reading list.Kim Kulish/Getty imagesSource: WiredBezos eventually went to college at Princeton University and majored in computer science. Upon graduation, he turned down job offers from Intel and Bell Labs to join a startup called Fitel.Princeton University.John Greim / Getty ImagesSource: The Everything StoreAfter he quit Fitel, Bezos considered partnering with Halsey Minor — who would later found CNET — to launch a startup that would deliver news by fax.Karl Baron/FlickrSource: WiredInstead, he got a job at the hedge fund D.E. Shaw. He became a senior vice president after only four years.The rising graph of the Bombay Stock Index is reflected in the glasses of Senior broker and Assistant Vice President of Motilal Oswal Securities Limited, Jitendra Prasad, as he looks into a computer in his firm in Bombay November 15, 2001. India's key share index finished up more than two percent on Thursday to its highest level since September 11, as investors bet on a recovery in global equity sentiment. The 30-share Bombay Sensitive Index closed up a provisional 2.65 percent at 3,195.52 points. YEAREND PICTURES 2001 Reuters/Arko DattaSource: The Everything StoreMeanwhile, Bezos was taking ballroom dancing classes as part of a scheme to increase his "women flow." Just as Wall Streeters have a process for increasing their "deal flow," Bezos thought analytically about meeting women.Lisi Niesner/ReutersSource: The Everything StoreHe married MacKenzie Tuttle, a D.E. Shaw research associate, in 1993. The couple had four kids together.APSource: The Everything StoreIn 1994, Bezos read that the web had grown 2,300% in one year. This number astounded him, and he decided he needed to find some way to take advantage of its rapid growth. He made a list of 20 possible products to sell online and decided books were the best option.Paul FalardeauSource: The Everything StoreBezos decided to leave D.E. Shaw even though he had a great job. His boss at the firm, David E. Shaw, tried to persuade Bezos to stay. But Bezos was already determined to start his own company — he felt he'd rather try and fail at a startup than never try at all.Amazon CEO Jeff Bezos is silhouetted during a presentation of his company's new Fire smartphone at a news conference in Seattle, Washington June 18, 2014.REUTERS/Jason RedmondSource: WiredAnd so Amazon was born. MacKenzie and Jeff flew to Texas to borrow a car from his father, and then they drove to Seattle. Bezos was making revenue projections in the passenger seat the whole way, though the couple did stop to watch the sunrise at the Grand Canyon.Sara Jaye/Getty Images Source: The Everything StoreBezos started in a garage with a potbelly stove. He held most of his meetings at the neighborhood Barnes & Noble.Mike Segar/ReutersSource: WiredIn the early days, a bell would ring in the office every time someone made a purchase, and everyone would gather around to see whether anyone knew the customer. It took only a few weeks before it was ringing so often they had to make it stop.AP Photo/Andy RogersSource: InsiderIn the first month of its launch, Amazon sold books to people in all 50 states and in 45 different countries. And it continued to grow: Amazon went public on May 15, 1997.Frank Micelotta/Getty ImagesSource: InsiderWhen the dot-com crash came, analysts called the company "Amazon.bomb." But it weathered the storm and ended up being one of the few startups that wasn't wiped out by the dot-com bust.Mario Tama/Getty ImagesSource: Barron'sAmazon has now gone beyond selling books to offering almost everything you can imagine, including appliances, clothing, and even cloud computing services.An Amazon warehouse.ShutterstockIn the early days, Bezos was a demanding boss and could explode at employees. Rumor has it he hired a leadership coach to help him tone it down.Amazon's Jeff BezosReutersSource: InsiderBezos is known for banning PowerPoint presentations at Amazon. Instead, he requires his staff to turn in papers of a specific length on their proposals to encourage critical thinking over simplistic bullet points.Pens and paper with an Amazon logo are seen at the logistics center in BrieselangThomson ReutersSource: The Everything StoreBezos is also known for creating a frugal company culture that doesn't offer perks like free food or massages.An Amazon office.Business InsiderIn 1998, Bezos became an early investor in Google. He invested $250,000, which was worth about 3.3 million shares when the company went public in 2004. Those would be worth billions today (Bezos hasn't said whether he kept any of his stock after the initial public offering).APSource: All Things DWhat does Bezos do with all his money? In 2012, he donated $2.5 million to defend gay marriage in Washington. More recently, he's pledged $10 billion to fight climate change, donated $200 million to the Smithsonian, and gave $100 million each to the Obama Foundation, chef Jose Andres, and activist Van Jones.Jeff Bezos.REUTERS/Abhishek N. ChinnappaSource: The Washington Post, Insider, InsiderBezos has also donated $42 million and part of his land in Texas to the construction of The Clock Of The Long Now, an underground timepiece designed to work for 10,000 years.The Long Now Foundation / Facebook Source: InsiderIn August 2013, Bezos bought The Washington Post for $250 million.Chip Somodevilla/Getty ImagesSource: The Washington PostAnd he also spend money on his space company, Blue Origin. Blue Origin made history in 2015 when it became one of the first commercial companies to successfully launch a reusable rocket.Blue OriginSource: InsiderBezos' interest in flying has gotten him into trouble in the past. In 2003, Bezos almost died in a helicopter crash in Texas while scouting a site for a test-launch facility for Blue Origin.This isn't Bezos' helicopter.NTSBSource: CNNBut in early 2016, he flew his personal jet to Germany to pick up and bring home Jason Rezaian, the Washington Post reporter who had been detained by Iran.Photo by Drew Angerer/Getty ImagesSource: InsiderBezos is said to own a 5.35-acre estate on Seattle's Lake Washington that includes 200 yards of shoreline.An Amazon-branded Boeing 767 freighter, nicknamed Amazon One, flies over Lake Washington.Stephen Brashear/GettySource: Curbed SeattleHe bought a seven-bedroom, $24.5 million mansion in Beverly Hills in 2007. There's a greenhouse, tennis court, pool, and guest house on the property, and it neighbors Tom Cruise's estate.Bezos' house in Beverly Hills.Dream Homes MagazineSource: ForbesIn January 2017, Bezos purchased the Textile Museum, a pair of mansions in Washington, DC's Kalorama neighborhood. The property sold for $23 million and is the largest in Washington. Bezos' renovation plans for the house cost $12 million.AgnosticPreachersKid/Wikimedia CommonsSource: The Washington Post, InsiderBezos also owns five apartments at 212 Fifth Avenue in New York City. His most recent purchase in the building was last August, when he paid a reported $23 million for a four-bedroom unit, bringing his total real estate holdings in the building to $119 million.Madison Square Park in New York City.ShutterstockSource: InsiderIn February 2020, Bezos became the new owner of the Warner estate, a sprawling compound in Beverly Hills, California, that he reportedly purchased for $165 million. A few months later, Bezos added to the compound with an adjacent house worth $10 million.Los Angeles County/PictometrySource: InsiderIn October 2021, Bezos reportedly added to his real estate portfolio once again with a new home in Hawaii. The home is located in an isolated area on Maui's south shore and is near lava fields, Pacific Business News reported.A home in Maui, Hawaii, although not the one Bezos purchased.ejs9/Getty ImagesSource: Insider, Pacific Business NewsNow, more than 20 years after going public, Amazon has a market cap of nearly $1.7 trillion.Amazon CEO Jeff Bezos.Alex Wong/Getty ImagesSource: Markets InsiderIn August 2017, Amazon officially acquired Whole Foods for $13.7 billion. The Amazon influence became immediately clear: Customers who are Amazon Prime subscribers can get 10% of sale prices, and you'll see some Amazon branded items offered in stores, including tech products like the popular Amazon Echo line.Kate Taylor/Business InsiderSource: InsiderIn July 2017, Bezos became the world's richest person for the first time, surpassing Microsoft founder Bill Gates. At the time, his net worth was more than $90 billion.Getty ImagesSource: Markets Insider, ForbesDespite his high net worth, Bezos never actually took home a high salary, comparatively speaking: His annual salary while he was CEO came out to $81,840, according to Bloomberg.Jeff Bezos, chief executive officer of Amazon, and John Elkann, chairman of Fiat Chrysler Automobiles, walk together during the annual Allen & Company Sun Valley Conference, July 12, 2018 in Sun Valley, Idaho.Drew Angerer/Getty ImagesSource: BloombergIn January 2019, Bezos and his wife, MacKenzie, announced they were divorcing. "As our family and close friends know, after a long period of loving exploration and trial separation, we have decided to divorce and continue our shared lives as friends," the couple wrote in the statement. "If we had known we would separate after 25 years, we would do it all again."Dia Dipasupil / StaffSource: InsiderShortly after the Bezoses announced their divorce, news broke that Bezos was dating TV host and helicopter pilot Lauren Sanchez. At the time, the National Enquirer said it had obtained texts and explicit photos the couple had sent to each other.Simon Stacpoole/Offside/Getty ImagesSource: InsiderBezos immediately launched an investigation into who had leaked his personal messages. Soon after, he dropped a bombshell of his own: an explosive blog post accusing National Enquirer publisher AMI of trying to blackmail him. "Rather than capitulate to extortion and blackmail, I've decided to publish exactly what they sent me, despite the personal cost and embarrassment they threaten," Bezos wrote.Jeff Bezos.Drew Angerer/Getty ImagesSource: MediumThe Bezoses announced on Twitter they had finalized the term of their divorce in April 2019. MacKenzie retained more than $35 billion in Amazon stock, making her one of the world's richest women.Jeff and MacKenzie Bezos.ReutersSource: InsiderSince then, Bezos and Sanchez have had a whirlwind few years, attending Wimbledon together, yachting with other moguls and celebrities, and vacationing in Saint-Tropez and St. Barths.Reuters/Andrew CouldridgeSource: InsiderDuring the coronavirus outbreak, Amazon saw a surge in demand as more people were forced to shop online. At the same time, the company faced criticism over its treatment of workers and its attention to health and safety at its fulfillment centers nationwide.Former Amazon employee, Christian Smalls, stands with fellow demonstrators during a protest outside of an Amazon warehouses in the Staten Island borough of New York on May 1, 2020.REUTERS/Lucas JacksonSource: InsiderAmazon delivery drivers, who are contractors employed by third-party companies, have also spoken out about the demands of their jobs. Drivers say Amazon's emphasis on metrics has forced them to use their delivery vans as a bathroom or sacrifice safety to deliver packages on time.An Amazon driver carrying packages.Patrick T. FALLON / AFPSource: Insider, InsiderThe company is also facing antitrust concerns, particularly over the company's treatment of third-party sellers on its platform. Bezos and other major tech CEOs were called to testify before Congress in July 2020.Jeff Bezos threw his weight behind the US military.AP/Pablo Martinez MonsivaisSource: InsiderAfter the killing of George Floyd and the protests that followed in 2020, Bezos was outspoken about his support for the Black Lives Matter movement, publicly shaming customers who sent racist emails about his and Amazon's support. In an Instagram post, he posted a screenshot of a customer email and described the man as "the kind of customer I'm happy to lose."A person holds a "Black Lives Matter" sign at a protest in Seattle, Washington on June 1, 2020.Lindsey Wasson/ReutersSource: InsiderOn February 2, 2021, Bezos announced he would step down as Amazon's CEO and transition to executive chairman after 27 years at the helm. Bezos said that he planned to spend more time on philanthropy — including the Bezos Earth Fund and his Day 1 Fund — as well as his two other major endeavors: The Washington Post and his rocket company, Blue Origin.Jeff Bezos attends the premiere of "Star Trek Beyond" in 2016.Kevin Winter/Getty ImagesSource: InsiderBezos stepped down in July and embarked on his next adventure: On July 20, he took an 11-minute voyage to the edge of space aboard a Blue Origin spacecraft. He was accompanied by his brother, Mark; a Dutch teenager named Oliver Daemen; and Wally Funk, an 82-year-old aviator who trained to go to space in the '60s but was ultimately denied the opportunity because she was a woman.Isaiah J. Downing/ReutersSource: Insider Allana Akhtar contributed to an earlier version of this story.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderJan 13th, 2022

In Pioneertown, an Old West-themed vineyard is up for grabs at $2 million

A five-acre compound complete with a 2,000-square-foot home and 700-vine vineyard has surfaced for sale in Pioneertown for $2 million.A five-acre compound complete with a 2,000-square-foot home and 700-vine vineyard has surfaced for sale in Pioneertown for $2 million......»»

Category: topSource: latimesNov 3rd, 2021

10 places to stay in Monterey and Carmel, two of California"s most charming towns

From family-friendly hotels next to the aquarium to quaint inns well-suited for romance, these are the best Carmel and Monterey hotels to book. When you buy through our links, Insider may earn an affiliate commission. Learn more. Carmel and Monterey are two charming towns on California's coast amid the Pacific Ocean and Big Sur. Both towns have many hotels, from a romantic B&B to a family-friendly stay next to the aquarium. These are the best hotels you can book in both Monterey and Carmel-by-the-Sea. Table of Contents: Masthead StickyThere are just four miles between Monterey and Carmel-by-the Sea, but each of these charming California towns has its own distinct allure drawing families, couples, golfers, and travelers of all stripes.Monterey is home to a famous aquarium and Cannery Row, the once rugged avenue made famous by John Steinbeck that is now populated with quirky stores and seafood restaurants serving up plates of local calamari and crab.Carmel-by-the-Sea is a former artist colony where luminaries like photographer Ansel Adams, author Beverly Cleary, and actors Doris Day and Clint Eastwood all once lived. In fact, Clint was once the mayor. Now, the village is filled with charming boutiques, wine shops, intimate restaurants, and world-famous golf in adjacent Pebble Beach.Each has its own appeal and so do the choices for local accommodations. The best hotels in Monterey and Carmel range from bed-and-breakfasts poised for romance to family-friendly hotels next to the Aquarium, and a 500-acre ranch in the valley. Browse all of the best Carmel and Monterey hotels below, or jump to a specific area:The best Monterey hotelsThe best Carmel hotelsFAQ: Carmel and Monterey hotelsHow we selected the best hotels in Monterey and Carmel-by-the-SeaMore of the best hotels in CaliforniaThese are the best Carmel and Monterey hotels, sorted by location and price. Insider Spindrift Inn In-room binoculars are provided to spot sea life from your guest room window. Tripadvisor Book Spindrift InnCategory: BoutiqueLocation: Cannery Row, MontereyTypical starting/peak prices: $173/ $374Best for: CouplesOn-site amenities: Breakfast, wine and cheese reception, Wi-FiPros: The hotel boasts ocean views from most rooms and the complimentary breakfast is a great perk.Cons: There is no restaurant on the premises or any other on-site amenities.The relaxed romantic style of the Spindrift is ideal for couples with 45 rooms and suites, most of which boast ocean views. See if you can spot local sea life like seals and otters with the help of in-room binoculars.Standard rooms are the Cannery Row Kings, which overlook the legendary street made famous by John Steinbeck. The Ocean View Kings are my pick for their cozy window seats or private balconies that offer a prime perch over the water. Whichever you choose, you'll enjoy tastefully decorated accommodations with a subtle European vibe of rich brocades, dark wood furniture, and hues of sage green and dusty rose. All rooms include a wood-burning fireplace as well.Breakfast is included in every stay and is the only real amenity offered. Start each day with fruits, cereal, bread, juice, and coffee, which are delivered to your room on a silver platter. In the afternoon, the hotel hosts a wine and cheese reception. COVID-19 procedures are available here. Hotel Abrego The restaurant, Bistro Abrego, serves California cuisine on a lovely terrace, Tripadvisor Book Hotel AbregoCategory: Mid-rangeLocation: MontereyTypical starting/peak prices: $197/$509Best for: Couples, families, friends, solo travelersOn-site amenities: Restaurant, bar, pool, fitness centerPros: The complimentary on-site parking is a welcome perk, especially since it can be hard to come by in the area.Cons: The rooms can be noisy and the hotel is far from the Monterey Bay Aquarium and the bay.Hotel Abrego is an affordable, clean, comfortable option in downtown Monterey. Since it is located away from the waterfront, it is less busy and far cheaper than its closer counterparts. Of course, you won't have those beautiful bay views, and Monterey Bay Aquarium and Cannery Row are about a 40-minute walk, so keep that in mind when booking.If you don't mind the distance, the entry-level Deluxe Rooms are spacious, though relatively basic. For about $10 more, upgrade to a Deluxe Room with a fireplace for a bit more ambiance, or go up to the next tier, the Premier Room, which has a balcony or patio.The hotel's public spaces have a Craftsman-style aesthetic and there's a large heated swimming pool and hot tub. The restaurant, Bistro Abrego, serves California cuisine for dinner and will soon be offering breakfast.There are several dining options nearby as well as a Pete's Coffee and a Trader Joe's. COVID-19 procedures are available here. Monterey Plaza Hotel & Spa The waterfront location actually extends over it with a position on the pier. Tripadvisor Book Monterey Plaza Hotel & SpaCategory: LuxuryLocation: Cannery Row, MontereyTypical starting/peak prices: $269/$529Best for: Couples, families, friendsOn-site amenities: Hot tub, restaurant, fitness center, spa, bike rentalsPros: The hotel is centrally located and has the best location for visiting the Monterey Bay Aquarium and Cannery Row. The rooftop spa is a treat after a long day of exploring.Cons: There's no parking on-site. You'll need to find your own parking space or splurge for the hotel's valet, which has a high nightly fee.Right in the heart of Cannery Row, Monterey's iconic tourist area, and along with the InterContinental, the Monterey Plaza Hotel & Spa is one of the most popular hotels in the area. The hotel is built over the water, which offers incredible views of the ocean and Monterey Bay.The hotel rooms have a simple, clean, contemporary style in soothing hues of beige, tan, and cream. Standard rooms have street views, so upgrade for a higher tier to enjoy ocean, bay, or harbor views, as well as private balconies or fireplaces. The best splurge is a suite, which ranges from 700 to 2,100 square feet and comes with a hot tub, a sun deck, and ocean views.The rooftop spa is not to be missed, with two hot tubs framed by water views. The fitness center is well equipped with Peloton bikes and staff members are on hand to create personalized itineraries for your visit. COVID-19 procedures are available here. InterContinental The Clement Monterey, an IHG Hotel Rooms facing the water are worth the upgrade for the magnificent views from the balcony. Tripadvisor Book InterContinental The Clement Monterey, an IHG HotelCategory: LuxuryLocation: Cannery Row, MontereyTypical starting/peak prices: $285/$556Best for: Families, IHG loyalists, business travelers, friendsOn-site amenities: Restaurant, bar, pool, fitness center, spaPros: The hotel is located right next door to the Monterey Bay Aquarium on Cannery Row, the main tourist hub.  Cons: Daily parking is expensive at $35 for a lot that is a couple of blocks away, or $45 for the valet.If you plan on spending the majority of your visit at the Monterey Bay Aquarium, this is the best hotel to choose as it's right next door.And when you go back at the end of the day, you'll have plenty to do with a pool, fitness center, and restaurant all on-site, which are far more amenities than most in the area. The hotel also has its own pier and boardwalk, which gives guests an unobstructed view of the Monterey Bay National Marine Sanctuary. There are 120 rooms and suites, done up in the chic, contemporary style that you'd expect from the higher-end Intercontinental brand with comfortable beds and nice bathrooms.  For ocean views, balconies, and fireplaces, you'll need to pay extra, in some cases twice as much as the entry-level rooms, though they are a good bit larger. The outdoor pool and spa are popular with families and are a big perk for those with water-loving kids. The courtyard also has fire pits and is a nice place to relax on chilly evenings.COVID-19 procedures are available here. Old Monterey Inn Romantic cottages overlook lush gardens and grounds. Tripadvisor Book Old Monterey InnCategory: BoutiqueLocation: MontereyTypical starting/peak prices: $299/$499Best for: CouplesOn-site amenities: Breakfast, spaPros: The hotel has an intimate, romantic vibe that couples will love and the varied room styles each offer a different vibe.Cons: There's no restaurant even though breakfast is included. Weekends require a two-night stay and rooms only sleep two, so this hotel is not suitable for families.The Old Monterey Inn is a traditional bed and breakfast housed within an old 1920s English Tudor mansion in the heart of Monterey. This romantic inn, which has been welcoming guests since 1978, even secured a place in Patricia Schulz's "1,000 Places to See Before You Die: A Traveler's Life List." Intimate and quiet, it isn't a place for families, but rather, is a destination for couples looking for a special getaway.Charming guest rooms are homey and elegant with oversized worn leather chairs, European-inspired linens, and an eclectic array of antiques. Rooms range from the Brighstone Suite that overlooks the garden with a stately fireplace and soaking tub in the living room to the Library Suite that includes floor-to-ceiling bookshelves, a rustic stone fireplace, and a quaint patio.Each morning, guests can enjoy homemade breakfast in the dining room or in the privacy of their own room. Follow with a stroll through the lush English garden dotted with places to sit and relax.In the evening, nightly cheese and hors d'oeuvres are served by candlelight next to a roaring fireplace, paired with house wines from local vintners. There is also a spa for facials and massages.COVID-19 procedures are available here. Insider Cypress Inn Doris Day once owned this charming, dog-friendly inn. Tripadvisor Book Cypress InnCategory: BoutiqueLocation: Carmel-by-the-seaTypical starting/peak prices: $276/$429Best for: Couples, travelers with petsOn-site amenities: Restaurant, breakfast, hot tub, complimentary cream sherry (upon request), fresh fruit and snacks, pet blankets and bowlsPros: This hotel is very pet-friendly offering amenities for your four-legged family member. It's also in a great location.Cons: Some rooms are small and outside noises can be heard. Parking may also be an issue.The Cypress Inn is famous for two things, Doris Day and dogs. The Hollywood star was once the co-owner of this charming Mediterranean-inspired hotel built in 1929 that's been a long-time friend of furry family members.Old-school charm oozes throughout the property with vaulted ceilings, wood beams, and colorful Spanish tiles. An airy garden courtyard serves as a welcome oasis from the busy sidewalks of town.Standard rooms are handsomely decorated with dark wood furniture but are admittedly small and boxy. Deluxe rooms and suites offer far more character with wood-beamed ceilings, fireplaces, Jacuzzi tubs, and ocean views.The hotel is dog-friendly so you'll see canines of all shapes and sizes walking around the grounds, halls, and even in the restaurant. A continental breakfast buffet is included in the stay, and in the evenings, a locally sourced menu is served along with live music. Finish with complimentary cream sherry, fresh fruit, and snacks. La Playa Carmel Guest rooms surround the hotel's well-kept grounds and large swimming pool. Book La Playa CarmelCategory: BoutiqueLocation: Carmel-by-the-SeaTypical starting/peak prices: $278/ $549Best for: Couples, families, friendsOn-site amenities: Pool, restaurant, bar, bike rentalPros: The hotel enjoys a plum spot right near the beach and village. The large central pool is a nice perk.Cons: The standard rooms are small. You'll have to upgrade for more room, which will add to your total costLa Playa Carmel, conveniently located two blocks from the beach and the village's main street, has 75 remodeled rooms that are attractively designed with a beach cottage vibe in mind through wood shutters and wicker furniture. Upgraded rooms include ocean views, private patios, and fireplaces for a more comfortable stay. The guest rooms surround the hotel's well-kept grounds that include gardens, patio areas, and a large swimming pool, which is a rarity in town.A daily champagne breakfast buffet is served with fruit, pastries, cheeses, and hot entrees in the library overlooking the Pacific, and for an evening cocktail and snacks, head to the bar for drinks in a cozy bohemian-inspired atmosphere.  Tradewinds Carmel The Asian-inspired design of this hotel is sourced from Bali, Japan, and China. Book Tradewinds CarmelCategory: BoutiqueLocation: Carmel-by-the-SeaTypical starting/peak prices: $316/$493Best for: CouplesOn-site amenities: Breakfast, in-room spa treatmentsPros: It is not easy to park in Carmel-by-the-Sea, but thankfully the Tradewinds has their own ample lot. It's also located in a quiet area just a short distance from the town's main street.Cons: There is not much in the way of amenities at this hotel, but there are plenty of dining and spa options nearby.The Tradewinds is an ideal spot for a tranquil, quiet stay that's still close to the restaurants and shops of Carmel-by-the-Sea but feels like you're off the beaten path.There are just 28 rooms, each with Asian-inspired decor sourced from Bali, Japan, and China, including Kimona Balinese robes made specifically for Tradewinds. The rooms are plush with goose-down feather beds, jetted bathtubs, and gas fireplaces. While big on comfort, they're small in stature and only suited for two people.A private courtyard invites guests to relax in a lushly landscaped mediation Zen garden filled with tall bamboo, tropical plants, a fountain, and a fire pit. Breakfast of coffee, juice, fruit, and baked goods are included each morning in any stay.COVID-19 procedures are available here. L'Auberge Carmel The L'Auberge Carmel, a Relais & Châteaux luxury property, is a top pick for luxury seekers. Book L'Auberge CarmelCategory: LuxuryLocation: Carmel-by-the-SeaTypical starting/peak prices: $364/ $530Best for: CouplesOn-site amenities: Spa, room service, breakfast, complimentary valet parking, local car servicePros: Breakfast is included with a fine dining Michelin starred restaurant, Aubergine, on the premises. The hotel is one of the most romantic options for couples.Cons: Rooms are small, amenities are limited, and this is not a good hotel for families. Also, there is no air conditioning, so summer stays can be hot.The L'Auberge Carmel, a Relais & Châteaux luxury property, is located in the heart of Carmel-by-the-Sea, four blocks from the beach and near all the shopping and dining that Carmel is known for.Originally built in 1929, the intimate hotel has a distinct European elegance, and feels like the kind of inn you'd find it in a small town in the South of France.Each of the hotel's 20 guest rooms are individually designed with antiques, lush fabrics, and unique touches. Standard rooms are small but well-appointed with French windows and many rooms have four-poster beds, draperies, and connect to a beautiful courtyard.Thoughtful perks include fresh baked cookies in the afternoon, free valet parking, and breakfast served in the hotel's Michelin-starred restaurant, Aubergine. For dinner, a splurge on a meal in the lauded restaurant is well worth it, for the signature tasting menu that includes eight courses of seasonally inspired dishes (at $205 per person).COVID-19 procedures are available here. Carmel Valley Ranch Suites come with outdoor soaking tubs and gorgeous views. Book Carmel Valley RanchCategory: LuxuryLocation: Carmel-by-the-SeaTypical starting/peak prices: $434/$660Best for: Couples, families, travelers with pets, Hyatt loyalistsOn-site amenities: Golf, spa, restaurants, swimming pools, tennis, pickleball, fitness center, ranch with animals, daily activitiesPros: The resort is massive with something for each member of the family from golf to spa treatments, and fireside chats with a local naturist (which includes s'mores). World of Hyatt members receive a discount on rates, often almost 10%.Cons: Since the resort is so large, it can be a trek to get around to the pools and spa. It also requires a drive to visit Carmel-by-the-Sea or Monterey.The Carmel Valley Ranch is part of the Unbound Collection By Hyatt, a roster of upscale properties offering sumptuous stays in one-of-a-kind destinations. Sprawling over 500 acres, The Carmel Valley Ranch is so much more than just a place to sleep with a wide array of activities ranging from animal meet-and-greets to archery, falconry, and beekeeping.There are also three salt-water pools with hot tubs, a generous selection of fitness classes, and a Pete Dye-designed golf course. Every room is a suite, starting with studios up to one to four-bedroom suites. Each has a fireplace, a private deck, and starts at 650 square feet. Larger options include kitchens and have dreamy outdoor bathtubs with vineyard views. The ranch welcomes dogs, pampering them with their own beds and room service menu, and there are plenty of hiking opportunities at the Ranch.COVID-19 procedures are available here. FAQ: Carmel and Monterey hotels When is the best time to visit Monterey and Carmel-by-the-Sea?Due to the moderate weather in Monterey and Carmel-by-the-Sea, it is comfortable to visit any time of the year. Some of the hotels don't have air conditioning, so the summer can be a bit hot. The summer is also the hardest time to secure a hotel room reservation since that is when families are most likely to be visiting and the area is at its busiest.Which hotels allow dogs?The area's hotels are generally dog-friendly. La Playa Carmen, the Cypress Inn, The Tradewinds, L'Auberge Carmel, Carmel Valley Ranch, and the InterContinental the Clement Monterey all allow pets. Standouts include the Cypress Inn, which was a pioneer in pet-friendly lodgings, and Carmel Valley Ranch which offers dog beds and a special room service menu just for dogs.Which Carmel or Monterey hotel is best for couples?The central California coast is the perfect destination for a romantic getaway and many of these properties cater to couples. For honeymoons, anniversaries, or just any given weekend, the L'Auberge Carmel, Spindrift Inn, and the Old Monterey Inn are particularly alluring for adults.Is it safe to stay in hotels?At this time, the CDC states that domestic travel is safe if you are fully vaccinated. While the vaccination rates vary by location, the unvaccinated should continue to take extra precautions, including those 12 and under who aren't yet able to be vaccinated. It is advisable that all travelers should continue to follow the CDC and local guidelines such as wearing masks, social distancing, and using hand sanitizing. All of the hotels that we've included in this list have cleaning protocols for the guest room and the public spaces to mitigate the spread of COVID-19. How we selected the best hotels in Monterey and Carmel-by-the-Sea As a San Francisco native, the Carmel and Monterey areas have been a destination for my family since I was a child. As an adult, I try to visit as often as I can and am very familiar with the following hotels for their location, charm, comfortable rooms, and access to unique experiences and amenities.Each hotel or resort is located in an area of interest either by the main tourist areas or, in the case of the Carmel Valley Ranch, on a 500-acre property.Many of the hotels boast comfortable, spacious rooms and can accommodate families while a few have cozy and intimate rooms that are perfect for a couple's getaway.Hotels are considered three-stars and up and hold a Trip Advisor rating of four or above with significant, honest recent reviews.The hotels have good on-site amenities such as pools, free breakfasts, and perks that guests will enjoy.The hotels promote stringent COVID-19 policies to prioritize the health and safety of all guests, which we've noted for each hotel where available below. More of the best hotels in California Tripadvisor The best beach hotels in CaliforniaThe best hotels in San FranciscoThe best hotels in Napa Valley and SonomaThe best hotels near Yosemite National ParkThe best hotels in Santa BarbaraThe best hotels near DisneylandThe best hotels in Los AngelesThe best affordable hotels in Los AngelesThe best boutique hotels in Los AngelesThe best beach hotels in Los AngelesThe best hotels in Palm SpringsThe best hotels in San Diego Read the original article on Business Insider.....»»

Category: smallbizSource: nytSep 30th, 2021

The Bethesda estate where Mike Tyson once lost his pet tiger has been relisted at a lower price

The Bethesda estate once belonging to heavyweight champ Mike Tyson has been relisted for $5.25 million — a $3.25 million reduction from when it first hit the market a year ago. Tyson purchased the 5.3-acre compound along with his former wife, .....»»

Category: topSource: bizjournalsMay 3rd, 2021

Hayden Capital 1Q22 Commentary

Hayden Capital commentary for the first quarter ended March 31, 2022. Dear Partners and Friends, The last six months have been extremely painful – by far, the worst period since we started Hayden. There’s a lot to worry about – the highest inflation rates in decades, an aggressive US central bank that’s rapidly increasing interest […] Hayden Capital commentary for the first quarter ended March 31, 2022. Dear Partners and Friends, The last six months have been extremely painful – by far, the worst period since we started Hayden. There’s a lot to worry about – the highest inflation rates in decades, an aggressive US central bank that’s rapidly increasing interest rates, and Russia’s invasion of Ukraine shaping geopolitical dynamics for the next decade. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q1 2022 hedge fund letters, conferences and more This macro uncertainty, combined with rapidly rising interest rate expectations have had a dramatic impact on the market valuations of our portfolio companies, along with the rest of the ecommerce, fintech, gaming, consumer internet and emerging markets sectors we operate in more broadly. To illustrate the carnage out there, the Hang Seng Tech index (which tracks the largest technology companies listed in Hong Kong) is down -65% since its peak last year. Ecommerce stocks (as measured by the ProShares Online Retail ETF) are down -62%, and Fintech stocks (as measured by the Global X FinTech ETF) are down -56%. Looking at the NASDAQ, over 50% of the index companies are now down more than -50% from their highs. Even Amazon, a blue-chip of the tech universe is down over -40% from its highs last year. This isn’t a normal draw-down in our sector. The markets are already trading similarly to what we saw in 2001 and 2008… the amount of fear that’s out there is chilling. As another example of the craziness out there, you can even find growing, profitable companies, trading below net cash (see HUYA at a negative -$800M valuation, although there are plenty of other examples) in the Chinese Internet sector. You don’t see these types of extreme situations in healthy markets. I thought the below graphic from my friend Freda at Altimeter illustrated the situation well. As of April 22, the median internet stock was down ~-40% YTD alone. In addition, the American Association of Individual Investors (AAII) survey indicates ~60% of investors believe the stock market will fall in the next six months – levels not seen since March 2009 in the depths of the financial crisis. Note, these statistics don’t mean that the markets will turn around quickly. But I mention it, as it does tell us where we are today, and state of the market’s mood. When the markets are full of pessimism, usually that’s a buy signal for long term investors. But there’s certainly the possibility of even more pain in the short term, so the question becomes “when” to buy and how to tell the difference between stocks that will be permanently value impaired in this downturn, versus those whose fundamental trajectories are unaffected and their share prices should rebound quickly after sentiment improves. Personally, I’ve been surprised by the speed and magnitude of the draw-down, especially considering many of the companies in our universe are even trading below their valuations prior to Covid. This is in contrast to their fundamentals, which have only gotten stronger and have grown 2 - 3x from their levels two years ago. The pandemic helped provide “free” customer acquisition as customers were stuck at home and looked for new online alternatives (see our Q1 2020 letter, where I talked about this dynamic in the early days of Covid; LINK). The recent share price round-trip would make sense if these customers were returning back to their old habits – but that isn’t happening. In fact, these customers have proven to be sticky, and the companies themselves are expecting to grow by 20 - 40% annually on top of their “Covid gains”, despite Covid restrictions ending. It’s been a difficult period, and the markets are trading more on macro-factors than company fundamentals these days. It’s impossible to call a bottom in the short-term, especially as daily moves are seemingly dictated by narratives. And as long as there’s negative headlines and Fed officials keep increasing their hawkish tones, the markets and our portfolio will continue to be extremely volatile in the short-term. In the near-term, stock prices can trade anywhere – it simply depends on at what price the last marginal seller is willing to part ways with their shares. But if we look out a few years from now, I believe we’ll look back to this time period and recognize just how cheap these companies were trading at, and how much certain companies’ valuations had over-shot to the downside. In markets like these where it seems most investors have a hard time looking out more than 3 weeks, those who have the ability to look out even 3 years will likely be rewarded. During the first quarter of 2021, our portfolio declined by -39.2%. This compares to the S&P 500’s -4.6% and the MSCI World’s -5.7% first quarter return. We have generated a +15.6% annualized return for our partners, since our portfolio’s inception. Meanwhile, our portfolio ended the year with ~49% of our assets invested in Asia and ~50% in North America, with the remainder in cash. Our Australian position was acquired in Q1 2022. Anatomy of a Bear Market Over the past few years, I’ve described the areas we hunt for our investments and how that fits in our portfolio construction process (see our Q1 2019, Q2 2020, and Q3 2020 letters for reference). Historically, we’ve focused on the early-stage of the S-curve. These companies are younger in their business model development, likely still a few years before they are able to generate profits and thus need external capital to reinvest into (by our calculations) high return on capital business opportunities, which given the high incremental margins will take them to profitability within a few years. Considering their nascent stage, the market tends to perceive these businesses as having a wide range of outcomes, and our alpha has historically come from being able to determine more accurately where the business trajectory might lie within this range. Essentially, we get paid to take business model risk. As the business model proves itself to be capable of profitability, the market tends to ascribe a higher valuation to these business models than at our initial purchase due to this higher certainty / predictability. This allows us to realize valuation expansion, on top of an exponentially growing earnings stream. Once our companies are self-sustainable, our goal is to then allow our capital to compound alongside them, so long as the future reinvestment opportunities within the business remain attractive (i.e. high IRRs). However in markets like today, this strategy is going to be extremely volatile. The reason for this, is that similar to fixed income markets where investors require higher returns in compensation for committing their capital for longer durations and higher volatility (30 year debt is more expensive than 1 year debt), I believe the equity markets exhibit a similar dynamic. Our companies tend to be long duration (most of their profits, and thus basis for their valuations, lie further out in the future). Therefore any change in the interest rate or market environment tends to affect the market’s perceived valuation of these businesses to a greater degree, than more “stable” / more predictable companies. For example, US government long-term bonds have already declined by over -30% since their peak, which is even greater than in 2008 – 10. If essentially risk-free US government bonds are trading at these extremes, it’s only logical that the stock prices of our businesses, which are not only long-duration, but also have business risk as well, will decline even more. In addition, real yields (as measured by TIPS) have increased by the quickest pace since the financial crisis of 2008. While the absolute level is still relatively low by historical standards, it’s the pace of change that matters most for financial markets. Markets tend to be able to digest yield increases if it’s done in a methodical and steady manner. However sudden changes in the yield cause turmoil and volatility, and panic to reposition investor portfolios, which is what we’re seeing today. Long-Duration Bonds Drawdown As of April 18, 2022 (LINK) Most Rapid Increase in Real Yields Since 2008 As of May 7, 2022 (LINK) Businesses are the Most Pessimistic in Decades During pessimistic and fearful markets like today, the market tends to discount the expected future trajectory of these businesses to highly conservative (and often overly pessimistic) levels. This means that not only do our businesses get negatively impacted by entire market valuations shifting downwards due to rising interest rates, but also that the “equity yield curve” steepens too. On top of these two already negative factors, investors then value these businesses at the bottom end of the potential range of outcomes, in an effort to be conservative in an uncertain environment. These three factors combined, result in a large negative impact on the valuations the market places on our businesses today. However as the macro environment stabilizes and investors are able to analyze the future clear-eyed again, these factors tend to revert just as violently upwards as they did to the downside. As long as the companies do not need access to the capital markets, are self-sustainable (generating profits) or have plenty of cash to get them to profitability soon, these companies’ stock prices tend to rebound quickly after the macro environment calms down. Multiple Negative Factors = Long-Duration Asset Prices are Most Impacted A couple historical case studies of these, are, Inc. (NASDAQ:AMZN) and Mercadolibre Inc (NASDAQ:MELI) during the past two major market drawdowns (in 2001 and 2008, respectively)3. Both of these companies were in similar stages of their business lifecycles during these periods, as our companies today. They were young companies at less than 10 years old, growing in the high double digits annually, and were just starting to make a mark on their industry with single digit market shares of their addressable markets. Amazon (AMZN) Stock Chart July 1999 – December 2003 For example, Amazon reached a peak by the end of 1999, at a valuation of over $30BN. Considering that the company only generated $1.64BN in revenues that year (growth of 169% y/y), this equated to a valuation of 18x Price / Sales at the peak. More notably though, was that Amazon was a pure 1P retailer at the time, meaning that they owned the inventory that they sold. Long-term margin assumptions under this business model were low, at just ~5% expected operating margins (365x implied structural operating profits). By the time the stock bottomed in September 2001, shares were trading for ~0.7x P/S or 14x structural operating profits. During those years, Amazon worked to reduce its operating losses and dialed back its growth investments as a result. In 2000, Amazon grew revenues by 68% y/y and reduced its cash burn from -26% operating margins to -6% by the end of the year. In its year-end 2000 earnings release, Amazon indicated that it targeted profitability by the end of 2001. While the stock continued to decline throughout the first 9 months of 2001, the company reiterated on its 3Q 2001 earnings that it would achieve its profitability target within the next quarter. They had to dial back growth from its previous ~68% y/y in 2000 to just ~13% y/y growth in 2001, in order to cut costs and achieve this. However, with investors focused on profitability, this period marked the turning point for the stock price, with a bottom ~$6 per share (equating to the aforementioned ~0.7x P/S or ~14x structural operating profits). Notably, based on this, the stock was able to bottom a full year before the NASDAQ index found a bottom in September 2002. Over the next few of years, Amazon’s fundamentals remained strong, with sales growing ~26% y/y in 2002 and proving to investors that the company could be profitable in such an environment. By 2003, the company was generating $5.2BN in sales and reported its first full year of profits. Within a little over a year of bottoming, by the end of 2002, the share price had recovered 240% to ~$21 per share (equating to 1.8x P/S). By the end of 2003, the stock had recovered to a 4x P/S multiple or $21BN valuation. This equated to a ~8.5x return on the stock price in just a little over two years. ** Mercado Libre, the leading ecommerce company in Latin America, is another example of this dynamic. Mercado had just IPO’d in August 2007, and the stock immediately shot up in the following months. At its peak in December 2007, the company was valued at ~$3.5BN despite only generating revenues of $85M that year (~41x Price / Sales) and growing top-line at 64% y/y. But contrary to the Amazon situation, Mercado was highly profitable from the time of its IPO. Operating margins were ~25%, and gross margins were ~85%. Despite its highly profitable business model though, its shares declined from these high valuations throughout the 2008 financial crisis. Mercado Libre (MELI) Stock Chart August 2007 – December 2011 The share price reached ~$8 in November 2008, equating to a ~$360M valuation. Revenues increased to $137M in 2008 (61% y/y growth), and operating profit grew by a similar amount (73% y/y growth, 27% operating margins) to $37.5M. This equated to ~2.6x Price / Sales and ~10x operating profit at the bottom. The company kept executing and its fundamental trajectories remained intact, despite the dour market sentiment. Notably, the share price didn’t stay at those levels long and doubled soon afterwards. By the end of 2008, it had reached $17 per share as the market sentiment for many growth companies turned towards the end of the year (and ~4 months before the broader indexes turned). The company grew more slowly coming out of the recession, growing revenues 26% y/y & 25% y/y in 2009 and 2010, while operating profits grew 49% y/y and 33% y/y, respectively. The share price quickly rebounded over the next year, and reached $50 by the end of 2009 (a 525% return from the bottom, and 194% return from the end of 2008). This equated to a valuation of 9x Price / Sales, and 27x operating profits. By 2011, revenues had grown to $299M (38% y/y growth) with operating margins of 33%. The stock traded at 12x P/S or ~37x operating profits, and the price had rebounded ~10x from the bottom within a span of 3 years. By contrast, we can look at Cisco Systems Inc (NASDAQ:CSCO) during the 1999 – 2002 years, as an example of a company that failed to recover after the bear market ended. Cisco (CSCO) Stock Chart July 1999 – December 2004 During the height of the tech bubble, Cisco’s stock peaked at ~$80 in March 2000, reaching up to a $500BN+ valuation (~26x Price / Sales, with ~17% operating margins or 156x operating profits). However, by the time it bottomed in September 2002, shares were trading at just ~$8.60 per share (~3.2x Price / Sales, ~21x operating profits). A little over a year later, the share price had doubled to ~$20, but then continued to trade around those levels in a range for the next 10 years. So why were Amazon and Mercado Libre able to recover so quickly from their large draw-downs, while Cisco’s stock price remained anemic? It seems the answer is in their differing growth profiles in the years afterwards. For example, Cisco revenues were $18.9BN in 2000, $22.3BN in 2001, $18.9BN in 2002, $18.9BN in 2003, and $22.0BN in 2004. By contrast, Amazon was able to grow its business by ~120% in the 3 years after the stock bottomed, and Mercado Libre grew by ~118% in the following 3 years. For Cisco, it wasn’t until 2012 (11 years later) that revenues managed to double (to $46BN) from its original peak. Compare this to Amazon, who during those same 11 years, managed to grow its business 22x. These are just a few select examples, but investors can go back to the last few market crises to find similar dynamics among other stocks. This is all to illustrate, that what really matters to whether a stock recovers after a bear market, is 1) whether its fundamentals continue to grow throughout the period, and 2) if the business is able to prove that it can be profitable. If business performance is permanently impaired, you can expect its stock price to as well. But if the business is able to grow through the bear market / recession or optimally come out of it even stronger, you tend to see the stock price rebound quickly (usually by multiple-fold from the lows) in the 1-2 years after overall market sentiment improves and panic selling subsides. If we’re confident in the fundamentals of our businesses and the valuations are reasonable, then the stock prices will reflect that in due time. Given the market dynamics & volatility we’re seeing today, it leads me to think we’re closer to the bottom than otherwise. However, during the bottoming process, these prices during these months can be heart-wrenching and extremely “choppy”. If you examine the volatility in the weeks or months surrounding “the low”, you’ll notice that these stocks regularly exhibit 10 – 40% moves on a weekly (!) basis. In addition, there’s going to be several “false starts” and bear-market rallies, which take an even greater emotional toil than the low prices themselves. Note, I’m also not necessarily saying that we’re going to see 8 - 10x increases from the bottom over the next few years like Amazon or Mercado. But rather, I’m just illustrating that these stocks can trade extremely wildly once there’s panic in the markets, since they’re early-stage and the market has a hard time pricing them during uncertainty. Prices during these periods are not dictated by fundamentals (the intrinsic values of Amazon and Mercado didn’t change by 8 - 10x over just a few years) – they’re controlled by whatever price the marginal seller is willing to sell at. There will certainly be companies that don’t make it during this period and will eventually be sold for scraps or go out of business. On the other hand, those companies that can maintain their growth trajectories and prove their ability to be self-sustainable / profitable tend to bounce back quickly. The issue today, is that the market can’t distinguish between the two, so all companies within this category are being sold off indiscriminately. However, if we look at the valuations of our portfolio companies and other quality companies within our investment universe, we’re already at or below the valuations reached at the depths of the 2001 and 2008 crises4. And crucially, this is nothing like the 2001 tech bubble. During that time, average valuations multiples were more than double that of where valuations peaked this time around, adjusting for growth and margin profiles held equal. Additionally, the reason that it took many years for tech stock prices to recover afterwards, was that revenues back then were primarily comprised of non-recurring hardware spend. As the entire technology industry slowed, capex spend slowed as well, which meant that many companies went into negative earnings growth for several years (many companies fell into the Cisco situation, as above). Meanwhile, the technology sector today is largely comprised of digital based or software revenues (i.e. high-margin and / or recurring revenue streams), and their earnings continue to exhibit strong growth. Because of this, I believe it’s a good time to go hunting as an active investor. History has shown that once these types of markets turn, there’s a high chance of generational returns on the other side. It’s our job to determine which businesses will continue thriving during this period versus those that will ultimately fade away – using the market’s indiscriminate selling to our advantage. Afterwards, it just requires bravery to go capture these returns. Portfolio Review Undisclosed Positions: We’ve had quite a few changes on the early-stage side of our portfolio in the past few months. As discussed above, this portion of the portfolio tends to have a wider-range of outcomes, with both higher potential returns (targeting multiple-times our initial capital) if our thesis plays out, while also higher downside if our thesis fails. These tend to be highly-asymmetric situations, because of this. But given the nascent stage of some of the businesses and thus inherent business model risk, they need to be sized smaller. Also because of the early-stage nature, the rapidly changing dynamics of their businesses, and just the fact that the odds of us being wrong on these investments is higher (but compensated by the higher returns, if we’re correct), we’ve tended to refrain from talking about them publicly (partners are always free to reach out, to discuss offline though). Additionally, this portion of the portfolio provides strategic benefits to the “core” portfolio, as it allows us to be closer to these companies. Given their rapidly evolving businesses, it forces us to keep closer tabs on their evolution and quickly recognize their inflection points. By doing so, we can also “flex up” these positions in a more expedient manner at that time, given the research groundwork that we had prepared beforehand. Lastly, it provides healthy competition for the capital within the portfolio, since a high velocity of new ideas is the best way for us to keep the portfolio “fit”. Partners will notice that we trimmed or sold some holdings within this segment of the portfolio in the past few months. ** In addition, we added two new software companies to the portfolio. Historically, I have avoided software investments given a combination of high valuations, along with requiring a different research process than our core competency of consumer internet businesses. We’ve conducted quite a few deep-dives on the space over the years, but never felt like we had a durable edge versus other investors, especially given the high valuations. However, with software valuations coming down rapidly in the past few months, I believe we’ve identified two companies that fit squarely within our circles of competence, and at very attractive valuations. Software is too large a component of the technology universe to ignore, so it’s time to build out our research muscles in this space and wade in. For example, one of them has overlap with a core sector competency of ours – mobile gaming. Mobile gaming (and especially casual games) is extremely hit driven, which has made it tough to invest in the space over a longer holding period. But our new position has a commanding position within the most critical piece of the mobile game value chain. Despite this dominant position, the company is actively consolidating the industry to create an even stronger competitive advantage and growing their SAAS business at 100%+ y/y rates at ~30% EBITDA margins. The shares have nevertheless traded down to a ~11x EV / EBITDA in this market sell-off (share are down -75% from their highs, and over -60% from their IPO price). I believe this is an extremely attractive valuation, and may discuss it publicly in due time. ** Lastly, we also made an investment into a Chinese ADR this quarter. This is a company that we owned 2 years ago, but had exited early, since during the course of our research, I realized that the economics on the new projects the company was investing in weren’t as attractive as its core business, and thus expected its unlevered ROICs to decline over time. These issues still remain. However with the stock now trading over -50% below where we originally sold the shares (despite doubling its earnings over that time frame), these issues (and more) are now priced in. The company generates attractive margins (~50% EBITDA margins), is growing 20-30% y/y, and is one of the most stable assets and cash flows in China tech. I expect that the company will be largely insulated even if the China tech regulation pressures continue and / or the Chinese economic issues persist, given the critical service that it provides its customers. Given this backdrop, I thought the shares were too cheap to pass up, and worthy of reinstating a position. It seems that most of the share price impact has been from negative flows – i.e. US-based funds exiting their Chinese investments due to today’s macro uncertainties (whether it’s sanctions, US ADR de-listings, China’s slowing economy / Covid lock-downs, etc.). We’re comfortable with all of these issues and believe the company is even insulated from them. In fact, the shares are already dual-listed in Hong Kong as well, so a potential ADR de-listing should have minor long term impact. Due to the aforementioned issues though, this likely won’t be a long-term hold for us. But when others are essentially forced selling for non-company related worries, we’re happy to be on the other side scooping up shares. The share price could continue to be volatile in the short-term, due to market flows. But if the company continues to execute along its current growth path, we should see earnings double over the next 3 years (and the stock price along with it). If the macro worries around China subside by then, I’d expect a multiple re-rating as well back to its historical levels, and a 3-4x return from current prices in that scenario. ** At a portfolio level, the current funding environment means that it will be tough for businesses that still require external capital to get them to scale and achieve profitability. The cost of funding and the bar to do so, is going up. As such, we have thoroughly reviewed the portfolio, and reduced / exited investments that are still reliant upon the capital markets. Among our portfolio today, all of our companies (except for one tracking position) are self-sustainable going forward. Some of the businesses are highly profitable with 30 - 60% margins, growing 20 - 50% y/y, and are actively buying back their shares. Others are near break-even, but are expected to generate substantial profits in the next 1 - 2 years. In these circumstances, the businesses have more than enough cash on their balance sheet to get them there (often >5 years of runway) without any risk of needing to tap the capital markets. Additionally, we’re getting paid to wait for this inflection in profitability, since during these periods the market tends to be extremely skeptical of any companies where the profits aren’t obvious today. In markets like these where everything in our fishing pool of investments has declined by substantial amounts, it actually gives us a rare opportunity to upgrade the portfolio. We’re able to exit positions where the thesis is weaker, and reinvest the proceeds into companies with more attractive outlooks but at similar valuations. During these periods, partners should expect to see more portfolio activity than normal, as we use this to our favor. Conclusion The recent period has been unpleasant, as we are currently in the middle of a once every ~10 years type of market decline. Judging by the historically large price draw-downs as illustrated above, I understand that I’m essentially asking all our partners to come to the Gates of Hell with us, with the confidence that we’ll come back unscathed over the next few years. It’s going to be scary, and the mark-to-market prices painful to look at. However as history as shown, as long as these companies 1) don’t go bankrupt, 2) have a profitable business model, and 3) their financials continue to grow throughout this period, the stock prices do eventually return. Mr. Market just needs to get through his depressive panicky phase first. Logically, our partners might ask if we’re prepared for another leg down in prices, why not just sell the entire portfolio now and have cash at the bottom? Well first, is that in the depths of a bear-market, the swings in price can be massive and you never know which way it will go. When prices are driven by emotions rather than fundamentals, gauging the market’s near-term direction is a toss of a coin. But the key is to catch the turn in the markets when that finally happens, because stock prices can move 50-100% in just a few weeks. And it’s impossible to know when that’s going to happen, or if the upswing is just another bear market rally. In addition, it’s key to stay in the game during this period, and keep a hawks-eye watch over our company developments on a real-time basis. This is psychologically much easier when you have positions / capital at risk – especially when there’s little chance of long-term value impairment at these low levels – and can therefore add to them when the time is right. ** On a completely different note, I was fortunate enough to be interviewed by Columbia University’s Graham and Doddsville newsletter in December of last year (what a difference the last few months has been!). The interview was just published, and I think it does a good job of illustrating how I think about Hayden’s place in our investment industry, and how we think about the investing craft in general. Those interested can read the full interview here: Link: Graham & Doddsville – Spring 2022 It’s crazy to think that I’ve been reading Graham & Doddsville for the past 15 years, all the way to when I was still in high school. It’s really an honor to be included in this semester’s edition, and thank you for the G&D team for including Hayden. ** There are few things more important to me, than our partners, our portfolio, and Hayden as a firm. Starting Hayden has been a dream of mine since even those original days of reading Graham & Doddsville during lunch breaks in high school, fifteen years ago. But we must be prepared for this period of market volatility, which is going to test both our portfolio and the resilience of our partners. My friend Yen of Aravt Global mentioned to me the other day – “The only way out [of this bear market] is through it”. I think those are wise words, and we should be both mentally and financially ready for the times ahead, and what’s sure to be some wild swings in our portfolio prices. But while the markets are noisiest, it’s actually the most crucial period to maintain focus and get to work finding the winning companies of the next decade. These low prices won’t last forever. Our existing portfolio companies will also continue to grow and execute upon their business plans during this period, with some taking advantage of this time to emerge even stronger than before. I’m confident that we’ll get “through it” and eventually things will get better. And once we’re on the other side, there will be a plenty of washed-up “multi-baggers” for us to hunt. I don’t know when that will be – it could be a few months, or a few years. But that day will come, and we need to be ready. Sincerely, Fred Liu, CFA Managing Partner Updated on May 20, 2022, 1:41 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkMay 20th, 2022

Can Nvidia Bounce Back

Shares of Nvidia Corp (NASDAQ:NVDA) slipped more than 6.8% on Wednesday, to a value of $169.38, during what turned out to be a rather inexorable day on the trading floor. Indeed, every index suffered overall losses with the NASDAQ closing down more than 5%; the Dow Jones Industrial Average and the Standard & Poor’s 500 […] Shares of Nvidia Corp (NASDAQ:NVDA) slipped more than 6.8% on Wednesday, to a value of $169.38, during what turned out to be a rather inexorable day on the trading floor. Indeed, every index suffered overall losses with the NASDAQ closing down more than 5%; the Dow Jones Industrial Average and the Standard & Poor’s 500 each fell 4.04% and 3.57%, respectively. The Dow finished the day at 3,923.68 while the S&P finished at 31,490.07. Trading volume on the day held at 54.1M, which is still 2.4 million below the 56.5 million 50-day average volume. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q1 2022 hedge fund letters, conferences and more NVIDIA Underperforms Even Against Competitors The decline of NVDA stock was among the worst performer in the NASDAQ index. Competitors like Microsoft (MSFT), Intel Corp (INTC), and Texas Instruments (TXN) were all down at the end of the day. Texas Instruments had the smallest drop, of nearly 2.7% to $170.30 while Microsoft saw a 4.55% drop to $254.08. Finally, Intel Corp fell more than 4.6% to $42.35. For Nvidia Corp, though, the day was not a satisfying one. As such, on Wednesday NVDA closed $177.09 below its 52-week high of $346.47 (reached on November 22, 2021). Accordingly, Nvidia shares have slipped as much as 50% from its record high share price of $346, from last year. Currently, the Nvidia share price has a value of $177. Why Nvidia is Struggling Nvidia is probably most commonly known as a manufacturer of graphics processing units (GPUs) that make PC video gaming possible. Unfortunately, a decline in prices for these products could present a near-term risk to one of Nvidia's biggest revenue sources. As a matter of fact, gaming remains the largest segment for the company. Last year, alone, Nvidia's gaming revenue grew by 61% year-over-year, to $12.4 billion. But while the overall growth in this segment is excellent, declining sale prices could put a damper on things. During the pandemic, a microchip shortage shot selling prices for items like upgraded GPUs through the roof. Indeed, prices for both Nvidia's GeForce RTX 30 series and also the Radeon RX 6000 series from Advanced Micro Devices had been on an upward trend throughout all of last year. Since the start of 2022, however, GPU prices started to drop. In addition to this, two major global events have created major obstacles for various industries and including chip makers like Nvidia. For example, China's largest chipmaker, Semiconductor Manufacturing International Co (SMIC) has warned of a massive drop in both smartphones and personal computers. Primarily, SMIC CEO Zhao Haijun notes that COVID lockdowns across China and also the Russian invasion of Ukraine have destroyed demand for approximately 200 million smartphone units. While SMIC and Nvidia are two separate companies (operating in two different countries), SMIC's struggles could easily spell out an equally difficult fate for Nvidia. Indeed, there is a chance that SMIC could be just a microcosm in China for what could become a much larger complication in the global market. This Cloud Has a Silver Lining Finally, some analysts have noted that Nvidia stock is trading at a somewhat attractive price-to-earnings ratio of 31.5. More importantly, perhaps, some analysts also expect Nvidia to grow its earnings at a 30% compound annual rate across the next half a decade. On top of this, the market anticipates that Nvidia will deliver a YOY increase in earnings on notably higher revenues when it releases its Q1 2022 earnings report. With the first quarter ending in April, Nvidia is expected to release its new earnings report on May 25, 2022. If the key numbers in the report are better than analysts expected, the stock could see a bump in value. Of course, that also means the stock could slip even further if the numbers fail to meet expectations. That said, analysts do expect the gaming and artificial intelligence graphics chip maker will post quarterly earnings upwards of $1.30 per share in that coming report. This incline represents a positive YOY change of 41.3%. Similarly, revenue is expected to reach $8.12 billion, which would be a YOY increase of 43.4% on the quarter. All this in mind, analysts are a bit cautious about Nvidia stock for the time being. For those who may be interested in acquiring a few shares, it may be best to wait til the end of the month, after the release of their earnings report, to be certain it will move favorably towards the end of the year. NVIDIA is a part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs. Should you invest $1,000 in NVIDIA right now? Before you consider NVIDIA, you'll want to hear this. MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and NVIDIA wasn't on the list. While NVIDIA currently has a "Buy" rating among analysts, top-rated analysts believe these five stocks are better buys. Article by Keala Miles, MarketBeat Updated on May 19, 2022, 5:18 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkMay 19th, 2022

Dividend Passive Income: How To Make $1,000 Per Month

Would you like to have an extra $1,000 per month? Even if you’re a minimalist, I think most of us would jump at this opportunity. And, for good reason. An extra grand a month could totally transform your life. In addition to paying off financial debt, you could also invest in your retirement or buy […] Would you like to have an extra $1,000 per month? Even if you’re a minimalist, I think most of us would jump at this opportunity. And, for good reason. An extra grand a month could totally transform your life. In addition to paying off financial debt, you could also invest in your retirement or buy life insurance with this extra cash. Or, with your newfound financial freedom, you could finally make much-needed home repairs, take a class to enhance your skills, or take that vacation you’ve been talking about for years. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Walter Schloss Series in PDF Get the entire 10-part series on Walter Schloss in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q1 2022 hedge fund letters, conferences and more And, considering that 56% of Americans can’t pay for a $1,000 emergency expense, this money could be used to build a considerable emergency fund. However, you’re not going to suddenly end up with $1,000 per month — unless you inherit money or win the lottery. It has to be earned. Now, your first thought could be that you should find a second job. If you’re facing a financial crisis or are working toward a short-term financial goal, this is the right move. On the other hand, you may find this takes you away from your family, friends, or hobbies. Plus, juggling both a full-time job and an internship can be exhausting. Consequently, if your performance or productivity plummets, you could in essence risk your primary source of income. With that said, what are your realistic options for earning an extra grand each month? One of my favorites is through a passive income. What is a Passive Income? Making passive income requires little effort on your part. Often, passive income is referred to as ‘earning money while you sleep’ because it requires almost no involvement. This isn’t the case in every situation, however. However, hopefully, you’ve got the jest on what a passive income is. However, there is a myth about passive income that needs to be busted. Passive income is assumed to be so easy that anyone can earn it within the weekend. Once that’s done, you just sit back and wait for the money to come following in. Truth be told, a lot of work needs to be done upfront. Your passive income sources still need to be updated and maintained even after the initial legwork is completed. One example is blogging. Once it’s up and running and producing a steady revenue stream, it can make a lot of money. But, building a blog to that level takes a lot of effort. And, even if you reach that level, it still needs to be managed. If anything, it’s semi-passive. Although this is an excellent income source, it is not really passive. But, that’s not true with dividends. What is a Dividend (And Why They Rock)? If you want a truly passive income, then let me introduce you to my good friend dividends. For those who aren’t acquainted with my friend here, dividends are payments companies make to shareholders as a way of sharing profits. Investors earn a return on stock investments through dividends, which are paid on a regular basis. Let me also add that not all stocks pay dividends. You should choose dividend stocks if you want to invest for dividends, however. All right, that’s great. What makes dividends a passive income though? Again, most passive income sources will still need a little TLC every now and then. I already talked about blogging. But, property rentals are another example of a semi-passive income. If you don’t maintain your rental, it’s going to depreciate and become loss appealing to renters. In the current era of exceptionally low interest rates, dividend income is in a league of its own. It is possible without any effort to create a portfolio of stocks that generates a steady return of 3%-4% per year. There is no better example of a truly passive investment today than that. Now, let me be real. To reach the desired level of income takes a lot of capital. If you invest wisely, however, you can earn a generous income — even $1000 per month in dividends. And, as soon as it’s up and running, you won’t have to lift a finger to get it going. Besides being a legitimate passive income, I’m a big fan of dividends for the following reasons. Capital appreciation. Even though I’m talking about dividends, dividend stocks can also generate capital appreciation. After all, they’re stocks, and the value of stocks tends to go up over time. If you’re lost, let’s take Pepsi as an example. Right now, the stock pays a dividend of almost 3% per year. The current share price is about $172. But if you purchased the stock 10 years ago? You could have done so at less than $65 per share. The stock value has more than doubled in 10 years, and you have earned 3% in passive income over that time. In other words, dividend stocks have the advantage of not only providing a steady income. But also the benefit of capital appreciation. By doing so, you can protect your investment from inflation and also make sure it grows over the long run. As such, dividend stocks are among one of the very best investments you can make, and are one of the strongest recommendations for the foundation of your portfolio. Dividend stocks should be a core investment, even if you own other investments. Dividend stocks vs. growth stocks. Now, I gotta quickly fill you in on dividend stocks. Unlike growth stocks, dividend stocks tend to rise less in price than growth stocks. Why? As their name implies, growth stocks are all about growth. Most pay little dividends if any at all. All profits are instead reinvested into the business to expand revenue and profit. In fact, over the past decade, growth stocks that don’t pay dividends have produced some of the best results. The most notable example is Amazon (AMZN). In the past 10 years, its stock price increased from $170 per share to more than $3,000 now, but it doesn’t pay a dividend. You won’t get income from these stocks until the day you sell them, so you may want to hold a number of them in your portfolio. The appreciated value will come at that point. But, for now, it’s just paper gain. In short, investing in dividend stocks is a better choice if you’re looking for passive income. Favorable tax treatment. Dividend-paying stocks offer tax benefits in addition to yields above those of interest-bearing securities. Dividends are treated as ordinary income by the Internal Revenue Service. If qualified for the long-term capital gains tax rate, however, they aren’t taxed. Dividends on the stock must be issued by a US corporation or by a foreign corporation with stock trading on a US exchange in order to qualify as a qualified dividend. To qualify for dividends on a stock, you must also own it for at least 60 days. For qualified dividends the tax rates are as follows: If you have a taxable income of less than $78,750, you pay 0%. If you’re single and earn more than $78,750, but less than $434,550, or if you’re married filing jointly, or if you’re a qualified widow, you’re eligible for a 15% tax exemption. Taxes are charged at a rate of 20% of your taxable income that exceeds these thresholds. In any case, if you hold dividend stocks in qualified tax-deferred retirement plans, the lowered (or nonexistent) taxes won’t matter. Holding them in a taxable investment account will give you a big tax advantage though. Where to Find Dividend Stocks Dividend-paying stocks tend to be issued by large corporations with established financial records. Or at least those that pay higher yields consistently over time. They are also commonly known in most cases. Either they have popular products or services, or they’ve been around for a long time and have built a strong reputation. They tend to be popular with investors, too, due to all those qualities and their dividends. Now, when it comes to dividend stocks, companies can choose between different dividend types. The most common types include: Cash dividends. These are the most common dividends. Companies typically deposit cash dividends directly into shareholders’ brokerage accounts. Stock dividends. In addition to paying cash, companies can also share additional stock with investors. Dividend reinvestment programs (DRIPs). With DRIPs, dividends are reinvested into the company’s stock, often at a discount, so investors receive their dividends back sooner. Special dividends. Shareholders receive these dividends when their common stock goes up in value, but they do not recur. When a company has accumulated profits over years but does not need them at the moment, it will issue a special dividend. Preferred dividends. The dividends paid to the owners of preferred stock. Stocks that are preferred function less like stocks and more like bonds. Most preferred stock dividends are paid quarterly, but unlike dividends on common stock, they are typically fixed. With that out of the way, let me go over the three basic ways to invest in dividend stocks. Start with dividend aristocrats. At present, all stocks in the S&P 500 index offer a yield of 1.37%. To begin, you might want to focus on stocks that are paying even higher dividends. Stock screener software can certainly assist with finding those companies. But, there’s a much easier method. You can find many of the best and most stable dividend stocks on a list called Dividend Aristocrats, which includes some of the highest-dividend paying stocks. At the moment, the list includes 65 companies. In order to be considered a Dividend Aristocrat, a company must meet specific criteria. Among these criteria are: At least 25 straight years of increasing dividends to shareholders. An established, large company is generally listed on the S&P 500, rather than one that is fast-growing. The company must have a market capitalization of at least $3 billion. The value of daily share trades for the three months prior to the rebalancing date must have averaged $5 million. However, just because a stock is a Dividend Aristocrat doesn’t automatically make it a good investment. There is no guarantee that a company is permanently on the list just because it is on the list. The list is usually altered every year, as some companies are added and others drop. Dividend aristocrats: What to watch out for. In the case of Dividend Aristocrats, two factors need to be considered: The ratio of dividends paid out. This is the percentage of net profits a company pays out to shareholders in dividends. It is unlikely that the current dividend is sustainable if this number approaches or exceeds 100%. The optimal dividend payout ratio is between 50% and 60%. A dividend yield that is excessive. A dividend yield of 3% to 4% is the average for Dividend Aristocrats. In some cases, higher pay may be due to a company’s share price falling, such as 6%, 8%, or more. This could indicate a company is in distress. Either situation can indicate a dividend reduction is a real possibility. If that happens, not only will your dividend yield be reduced, but the price of the stock will almost certainly fall. High dividend exchange-traded funds (ETFs). Investing in ETFs can be a good alternative to holding individual stocks. For example, you can invest in dividend-paying ETFs. Examples include: Vanguard High-Dividend Yield ETF (VYM) – currently yields 2.99%, with an average return of 10.45% over the past decade. SPDR S&P Dividend ETF (SDY) – has an overall return of 10.23% over the past ten years and a dividend yield of 2.91%. Schwab US Dividend Equity ETF (SCHD) – pays dividends of 3.69%, and has returned 14.61 percent over the past 9 years (founded in October 2011). These three funds not only show double-digit returns for the past decade but also have current yields much higher than interest-bearing investments. Although you might not become wealthy in the way that high-flying growth stocks do, these funds provide steady, reliable returns. Long-term investors should consider this kind of investment as the centerpiece of their portfolios. Real Estate Investment Trusts (REITs) Essentially, REITs are mutual funds that invest in real estate instead of stocks. However, not any kind of real estate will do. Real estate investment trusts invest mostly in commercial properties, including office buildings, retail space, warehouses, and big apartment buildings. A minimum of 90% of their income must be distributed to shareholders as dividends as well. The net rental income and the capital appreciation distributions of sold properties make up this portion. For simplicity, dividends are usually paid on a monthly basis by REITs. Here are some dividend-paying REITs to consider: Brookfield Property REIT (BPY) – current dividend yield of 7.54%. Kimco Realty Corp (KIM) – current dividend yield of 3.26%. Brandywine Realty Trust (BDN) – current dividend yield of 6.59%. Bear in mind, however, that REITs have not had good long-term performance in the past few years. In spite of paying consistently high dividends, both Brookfield Property REIT and Kimco Realty Corp have experienced major share price declines over the past decade. On the flip side, Brandywine Realty Trust showed the best capital appreciation, holding constant over the past decade. Where to Invest in Dividend Stocks Want to earn a passive income with dividends? The following investment platforms allow you to invest in dividend stocks or high dividend ETFs. As an added perk, each gives you the option of commission-free investment in stocks or ETFs. Robinhood On either your computer or your mobile device, you can trade stocks and ETFs using the Robinhood app. This is also one of the only investment apps that offer trading options as well as cryptocurrency. In spite of the fact that Robinhood is primarily designed for self-directed investors, it provides sufficient company information to identify dividend stocks and track them. Dividend yield, price-earnings ratio, and 52-week high and low prices all fall into this category. The company is currently giving you the chance to earn up to $500 in free stocks by referring friends who open accounts on the app. A stock can be worth anywhere from $2.50 to $200. But, come on. That’s free money just for signing up. Webull Webull works a lot like Robinhood. This company offers commission-free trading of stocks, ETFs, and options, and it has mobile trading capabilities. If you’re on the move constantly, then this is the platform for you. Webull does not require a minimum initial investment. But funds are required for investing. Moreover, it does offer both traditional and Roth IRA accounts, which makes it a better alternative to Robinhood. The reason dividend stocks are ideal for retirement accounts is that they provide long-term growth in addition to income. You will also receive interest on any invested cash held in your account at Webull. M1 Finance Unlike Robinhood and WeBull, M1 Finance allows you to purchase stocks through portfolios called “pies,” which are comprised of many stocks and/or ETFs. There are pre-built pies available, but you can customize your own with the stocks and ETFs you want. If you prefer, you can make a pie out of each of your favorite Dividend Aristocrats, or even pick all 65 stocks. It’s entirely up to you how many pies you want. Dividend Aristocrats can be held in one account, growth stocks in another, or sector ETFs in another. When you have created one or more pies, M1 Finance provides you with another advantage. Your pie will be managed robo-advisor-style, with periodic rebalancing to make sure your allocations remain on target, and even dividends reinvested. You can then sit back and watch your investment grow once you’ve selected your stocks or funds. Ah. The best kind of passive income you could ever ask for. How to Build a Portfolio That Will Make $1,000 Per Month in Dividends Sample Dividend Portfolio For new and small investors, this is a significant barrier. I mean you’d need about $400,000 with a yield of 3% to make $1,000 per month in dividends. But how do you get to $400,000? To begin, let’s take a look at things from a different perspective. Investing in dividends is, by definition, a long-term endeavor. The goal isn’t growth, and most certainly not explosive growth. Rather it’s all about a steady income that hopefully will appreciate over time. So, you’ll need patience and constant investing if you want to make it a long-term investment. The first step, then, is to consider the amount you plan to invest and set up a regular schedule. Suppose, for example, you buy 10 shares of a particular stock each month, or invest $500 per month. Over time, you can gradually add many thousands of dollars to your investments every year. This results in a positive outcome. With your monthly purchases, you will be able to utilize dollar-cost averaging. A method like that greatly eliminates the impact of stock price fluctuations or the timing of the end of the market. Every month, you will just invest the same amount. And, best of you all, you just let compound interest work its magic. If you are investing $500 per month in a growing portfolio of dividend stocks with a 10% return, including dividends and capital appreciation, you would be investing $6,000 per year. Investing at the same level for 21 years will mean you’ll have over $400,000 — even if you never increase it. Dividend Reinvestment Plans commonly called DRIPs, make this possible. These are often offered by the brokerage firm where you hold the stocks. With DRIPs, dividends are used to buy more shares of the same company automatically. The Bottom Line Dividend stocks don’t get the same buzz as growth stocks do. The thing is, they’re the kind of investments that build both permanent wealth and passive income. What’s not to like about that? For retirement portfolios, dividend stocks are especially enticing. Investing in these funds will not only allow you to build wealth over decades but will also provide a steady flow of income when you retire. As the stock prices rise in value over time, you can use the dividend income to cover living expenses. You can choose to receive $2,000, $3,000, or even $5,000 in dividends per month, even though I have been talking about $1,000. You’ll need a much broader portfolio for that. However, if you are planning to become wealthy or retire with a seven-figure account, you might as well earn a decent income while you’re at it. To build a portfolio large enough to generate $1,000, or more, per month in dividends, you must combine regular contributions, dividend reinvestment, and capital appreciation. Article by Jeff Rose, Due About the Author Jeff Rose is an Iraqi Combat Veteran and founder of Good Financial Cents. He teaches people wealth hacking. He is a frequent on CNBC, Forbes, Nasdaq and many other publications. He is author of the book "Soldier of Finance: Take Charge of Your Money and Invest in your Future" where he teaches how he escaped from $20,000 in credit card debt to a life of wealth. Updated on May 19, 2022, 3:58 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkMay 19th, 2022

Gas prices reach new record high as GOP senators blame Biden for holding production back

The average price of gas in the U.S. reached a new record high in the days after the Biden administration canceled a 1-million-acre oil lease and as Senate Republicans blame the administration for blocking companies' ability to drill in the Gulf of Mexico......»»

Category: topSource: foxnewsMay 19th, 2022

For $4.99 million, you can become the owner of a North Carolina estate in a fly-in community replete with airstrip and golf course — take a look

"The ideal buyer is someone who has a true appreciation for high-quality finishes and the Blue Ridge Mountains," the listing agents told Insider. The house is in Mountain Air, a gated community in North Carolina.Courtesy of Ryan Theede An estate in North Carolina's Blue Ridge Mountains is listed for $4.99 million. The three-bedroom home is in the gated, fly-in community of Mountain Air. The mountaintop community comes with amenities such as an 18-hole golf course and an airstrip. If you're in the market for an uber-private mountaintop home in the woods, look no further: A North Carolina estate that sits on .84 acres of land has hit the market for $4.99 million.The house was built in 2011.Courtesy of Ryan TheedeThe home is located in Mountain Air — a gated, fly-in community in North Carolina's Blue Ridge Mountains. The 500-acre community has 435 homes and condos, per a Mountain Air community site.As a fly-in community, Mountain Air has a runway that allows residents to fly their own planes into the neighborhood. The 2,875-foot-long airstrip has no landing fees and is open for residents and guests alike to use with advance permission.The community is a 30-minute drive from Asheville and is surrounded by other small mountain towns.The house is nestled in the mountains, at an elevation of over 4,400 feet.Courtesy of Ryan TheedeLocated at an elevation of over 4,400 feet, the home at 388 Slickrock Road was built in 2011, per the listing. Listed in November 2021, this is the first time the home has been put up for sale, per property listing records. Single-family home prices in Mountain Air tend to fall between $799,000 and $1.89 million, making 388 Slickrock Road's $4.99 million price tag an outlier. It's the most expensive listing in the area at the moment, per Zillow.The interiors of the house are made primarily from Douglas fir. Floor-to-ceiling windows are found throughout the home, offering residents a full view of the landscape outside.The main living area comes with a fireplace.Courtesy of Ryan Theede"The openness of the main level puts the focus on the views of the back of the house while flooding each room with natural light," listing agents Alec Cantley and Lacey Power with Sotheby's International Realty said in a joint statement to Insider.The design of the houses in Mountain Air is heavily influenced by the surrounding landscape, and features natural materials such as stone and timber, per the Mountain Air site.The home has a cantilevered design, with parts of the residence protruding out from the main building and hanging over the side of the mountain. The house's steel frame in covered in a protective zinc coating to prevent rusting, per a property factsheet sent to Insider.The house has with three bedrooms and three full bathrooms. The master suite of the home, which is on the upper floor, has a private outdoor deck, a minibar, and a fireplace.The master bedroom.Courtesy of Ryan TheedeSource: Sotheby's International RealtyThe master bathroom comes with a sauna, a shower, and a free-standing tub.The bathroom in the master suite.Courtesy of Ryan TheedeSource: Sotheby's International RealtyThe kitchen is decked out in custom-designed cabinets and has a full range of appliances, including a Wolf stove and a built-in Miele refrigerator.The kitchen.Courtesy of Ryan TheedeSource: Sotheby's International RealtyLocated on the lower floor of the mansion are a home office, a guest suite, a bar, and a patio.The office has full-length windows.Courtesy of Ryan TheedeSource: Sotheby's International RealtyWith multiple outdoor porches where residents can admire the landscape, the property is "ideal for someone looking to truly experience mountain living," the listing agents said.The estate comes with numerous outdoor spaces where residents can enjoy the views of the landscape.Courtesy of Ryan TheedeThe house also boasts eco-friendly features, including a green roof covered in plants and a geothermal heating system. The floors of the mansion are made from recycled heart pine wood.The green roof.Courtesy of Ryan TheedeSource: Sotheby's International RealtyOther shared amenities in the Mountain Air gated community include an 18-hole golf course, tennis courts, and a fitness center.Amenities in the gated community include an 18-hole golf course.Courtesy of Ryan TheedeThe sale of 388 Slickrock includes a complimentary golf membership, per the listing."Whether it is a seasonal or primary residence, there are a variety of activities within the community to participate in," the listing agents said. "In the summertime, it is an ideal oasis to beat the heat and enjoy the mountain breeze."Read the original article on Business Insider.....»»

Category: topSource: businessinsiderMay 18th, 2022

Loan Growth Supports Hancock Whitney (HWC) Amid Cost Woes

Growth in loan balances is expected to keep aiding Hancock Whitney's (HWC) top line. Yet, elevated costs are likely to hurt profits to some extent in the near term. Hancock Whitney Corporation’s HWC strategic expansion initiatives, and solid loans and deposit balances position it well for the future. Its efficient capital deployment activities indicate a solid liquidity position, through which it will keep enhancing shareholder value.Analysts also seem optimistic regarding the company’s earnings growth potential. The Zacks Consensus Estimate for HWC’s current-year earnings has been revised 3.5% higher over the past 30 days.However, despite the expected rate hikes, relatively lower interest rates might hamper margin growth to some extent. Elevated expenses will likely hurt profits. Thus, the company currently carries a Zacks Rank #3 (Hold).So far this year, shares of Hancock Whitney have lost 3.6% compared with the 12.7% decline recorded by the industry. Image Source: Zacks Investment Research Looking at its fundamentals, while revenues (on a tax-equivalent basis) declined in first-quarter 2022, it witnessed a compound annual growth rate (CAGR) of 6.9% over the last six years (2016-2021). Total loans saw a CAGR of 4.8% over the same time frame. Robust economic growth and a gradual rise in loan demand will likely continue to support the top line.For 2022, management expects total core loans (excluding Paycheck Protection Program loans) to rise 6-8% year over year, with quarterly performance affected by seasonality. Total deposits are expected to be flat or slightly down from the 2021 reported level.Apart from organic expansion efforts, HWC has undertaken acquisitions in the past, which continue to support its financials. Given the strong balance sheet position, the company is well-poised to further grow through inorganic means to diversify revenues and improve market share.The company’s strategic investments in growth and new markets are expected to further bolster its top line and help achieve an efficiency ratio of 55% by the end of fourth-quarter 2022.As of Mar 31, 2022, Hancock Whitney had total debt of $1.86 billion (87.1% of which consisted of short-term borrowings). The company maintains investment grade ratings of BBB/Baa3 and a stable outlook from Standard and Poor, and Moody’s Investors Service, respectively. Thus, despite having a huge debt balance, the company will likely be able to meet its debt obligations in the near term, even if the economic situation worsens.However, while HWC’s expenses declined in first-quarter 2022, the same witnessed a five-year (2017-2021) CAGR of 3.9%. Although the acquisition of MidSouth Bancorp has resulted in significant cost savings, the company’s continued efforts to expand inorganically and upgrade technology are expected to keep costs elevated in the near term.Pressure on margins is another major concern. While net interest margin (NIM) (tax-equivalent) improved to 3.44% in 2019, the same declined to 3.38% in 2018 from 3.43% in 2017. The downward trend continued in 2020, 2021 and the first quarter of 2022, as NIM declined to 3.27%, 2.95% and 2.81%, respectively. Despite the March and May rate hikes, along with expectations of further rate increases in 2022, relatively lower rates might keep NIM under pressure for some time in the near term.Hancock Whitney has significant exposure to residential mortgage, construction and land development, as well as commercial real estate loans. Despite some improvement in the housing sector, the company’s exposure to these risky loans remains concerning. If there is any deterioration in real estate prices, the company’s financials will be hurt.Stocks to ConsiderA couple of better-ranked stocks from the finance space are Gladstone Capital Corporation GLAD and Main Street Capital Corporation MAIN. Both GLAD and MAIN currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.The consensus estimate for Gladstone Capital’s current fiscal year’s earnings has been revised 8.1% upward over the past 60 days. Over the past year, GLAD’s share price has rallied 9.6%.Main Street Capital’s current-year earnings estimates have been revised 1.4% upward over the past 60 days. MAIN’s shares have lost 3.9% over the past year. 5 Stocks Set to Double Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%. Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Main Street Capital Corporation (MAIN): Free Stock Analysis Report Gladstone Capital Corporation (GLAD): Free Stock Analysis Report Hancock Whitney Corporation (HWC): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksMay 18th, 2022

Will Buffett"s Bet on Citi (C) Drive the Stock"s Market Confidence?

Let's delve into what has attracted Berkshire's investment in Citigroup (C) and how is the banking giant poised. Shares of Citigroup Inc. C gained 7.5% in yesterday’s trading session after Berkshire Hathaway (BRK.B), Warren Buffett’s investment giant, announced on Monday through its 13F SEC filing that it staked up 55.2 million shares of the big bank in first-quarter 2022.The equity portfolio holding aggregates $2.95 billion and indicates a stake of 2.5% of Citigroup’s outstanding shares. This provided the much-needed boost to the company’s shares, which have been dominated by the bears in the year so far. Until the market closed on Monday, shares of this S&P 500 member had slid 21.4%.In the year-to-date period, Citigroup’s shares dipped 15.5%, narrower than the industry’s and the S&P 500 index’s declines of 20.1% and 16.2%, respectively. Image Source: Zacks Investment Research Let’s take a look at what has attracted Berkshire’s investment in the stock and how is the banking giant poised for the future.A Deep Value PickValue investment style — picking stocks with low multiples or assets trading below their intrinsic value — is a widely known investment proposition and is broadly followed by Buffett.As for Citigroup, its low multiples suggest that the stock is trading at a significant discount.A forward price-to-tangible book (P/TB) multiple of 0.65 and forward price-to-earnings (P/E) multiple of 7.10 make it one of the biggest steals in the banking industry presently. Hence, the heavily-discounted big bank could become a deep value investment in the long term.Generous Capital Deployment PlansDividend-paying stocks always attract investors as these act as a steady source of income and Citigroup’s dividends and repurchase activities might have also encouraged Buffett’s position in the company. The bank has a dividend yield (annual dividend per share/stock’s price) of 4%, higher than its industry’s average of 3.17%.From 2017 through 2021, the company returned capital of around $77 billion to shareholders in the forms of dividends and share buybacks.Also, Citigroup aims to use excess capital for share buybacks, similar to 2021 and the first quarter of 2022. Given that the bank is trading at a discount, repurchases grow tangible book value.Looming Regulatory ScrutinyCitigroup continues to encounter many investigations and lawsuits from investors and regulators. The company paid a significant amount in fines previously to federal regulators, and was issued a cease-and-desist order for lacking compliance, data and risk management controls.In third-quarter 2021, the company submitted its remedial plans, comprising six major programs over a multi-year period, to regulators. C is expecting to increase "investment in transformation" spend to $3-$3.5 billion in 2022 from $1.7 billion reported in 2021. The investments relate to consent orders and technology upgrades, among others.Hence, as Citigroup continues to work through its legacy legal issues, we believe that the company will witness elevated regulatory expenses and litigation provisions, which will likely hurt its financials in the near term.Strategic Revamp to the RescueCitigroup is making efforts to simplify operations and reduce costs. In January 2022, the company revealed plans to exit the consumer, small business and middle-market banking operations in Mexico. This was in addition to its major strategic action announced in April 2021 to exit the consumer banking business in 13 markets across Asia and EMEA, including Australia, Bahrain, China, India, Indonesia and Korea.Since then, the company has signed deals to sell nine consumer businesses in Australia, Indonesia, Malaysia, Philippines, Thailand, Taiwan, Vietnam, India and Bahrain. It also plans to gradually wind down its consumer banking business in South Korea. Such exits will free up capital and help the company pursue investments in wealth management operations in Singapore, Hong Kong, the UAE and London to fuel growth.Citigroup anticipates the release of $12 billion (in aggregate) of allocated tangible common equity over time from such market exits. These efforts will likely help augment its profitability and efficiency over the long term.Multi-Year Strategy to Drive Shareholder ValueAt its investor day meeting earlier this March, Citigroup unveiled a mid-term strategy that underlined streamlining of operations to improve the banking mix, investment in technology to modernize the operations and boosting the company’s global presence.The bank aims to boost its return on average tangible common shareholder equity, driven by medium-term revenue growth and improved business mix. It is targeting a return on average tangible common shareholder equity of 11-12% over the next three to five years.In the medium term, revenues are expected to grow, seeing a compound annual growth rate (CAGR) of 4-5%.The company expects to achieve a Common Equity Tier 1 ratio of 12% by 2022 end.Parting ThoughtsWhile in the near term, its slow pace of transformation efforts and higher expenses might dampen investor interest in the stock, Buffett’s investment in the stock is likely to shift investors’ focus to the company’s long-term growth prospects.This should be rewarding for patient investors.Buffett also unloaded a 3-decade-old investment in Wells Fargo & Co WFC. Nonetheless, Berkshire Hathaway’s ownership in banks like Bank of America Corporation BAC, The Bank of New York Mellon Corporation BK and U.S. Bancorp USB should be looked upon favorably by investors interested in the banking industry.All stocks mentioned in the article carry a Zacks Rank of 3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 5 Stocks Set to Double Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%. Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Bank of America Corporation (BAC): Free Stock Analysis Report Wells Fargo & Company (WFC): Free Stock Analysis Report Citigroup Inc. (C): Free Stock Analysis Report The Bank of New York Mellon Corporation (BK): Free Stock Analysis Report U.S. Bancorp (USB): Free Stock Analysis Report Berkshire Hathaway Inc. (BRK.B): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksMay 18th, 2022

Public Storage billionaire wants $127.5 million for her Malibu compound

Tamara Gustavson, daughter of Public Storage founder B. Wayne Hughes, is asking $127.5 million for her 3.5-acre spread in Malibu.Tamara Gustavson, daughter of Public Storage founder B. Wayne Hughes, is asking $127.5 million for her 3.5-acre spread in Malibu......»»

Category: topSource: latimesMay 17th, 2022

Business Restructuring Aids Ameriprise (AMP) Amid Cost Woes

Ameriprise (AMP) continues to benefit from business-restructuring initiatives. However, higher costs will likely continue to hurt profits to an extent. Ameriprise Financial AMP remains poised for top-line growth on the back of its robust assets under management (AUM) balance and business-restructuring initiatives. Given a solid balance sheet, its capital deployment plans seem sustainable, through which it will enhance shareholder value.However, significant outflows in the company’s Asset Management segment and steadily rising expenses are expected to hurt the bottom line to some extent, which makes us apprehensive.Notably, the Zacks Consensus Estimate for AMP’s current-year earnings has been revised marginally lower over the past 30 days, reflecting that analysts are not optimistic regarding its earnings growth potential. Thus, the company currently carries a Zacks Rank #3 (Hold).Over the past year, shares of Ameriprise have gained 3.1% against the industry’s decline of 29.1%. Image Source: Zacks Investment Research Looking at its fundamentals, the company’s net revenues (GAAP basis) witnessed a compound annual growth rate (CAGR) of 2.6% over the last six years (2016-2021). The momentum continued in the first quarter of 2022. AMP’s efforts to launch products are likely to keep supporting top-line growth in the quarters ahead.Moreover, Ameriprise has grown inorganically and restructured its business from time to time to remain profitable by focusing on its core operations.In November 2021, the company closed the deal to take over BMO Financial Group’s EMEA asset management operations, which will bolster its wealth and asset management businesses.In July 2021, it closed a deal for RiverSource Life Insurance Company (its insurance subsidiary) with Global Atlantic’s subsidiary, Commonwealth Annuity and Life Insurance Company, to reinsure $7 billion of fixed deferred and immediate annuity policies.In 2019, Ameriprise divested the Ameriprise Auto & Home business.The above-mentioned initiatives are expected to further support revenue growth.The company’s capital deployment activities look sustainable. In April 2022, Ameriprise announced a dividend hike for the 15th time since 2010. In January, its board of directors authorized an additional repurchase plan worth $3 billion (expiring on Mar 31, 2024). As of Mar 31, 2022, the company had $3 billion worth of shares left to be repurchased.However, the company’s Asset Management segment, which remains one of the major sources of revenues (accounting for 27.5% of total adjusted operating net revenues in the first quarter of 2022), has been continuously witnessing significant outflows. While the segment witnessed overall net inflows in 2020 and 2021, outflows are expected to continue in the quarters ahead amid a tough operating backdrop. This will likely adversely impact the segment’s performance.Moreover, while GAAP expenses declined in 2020, the same increased, witnessing a CAGR of 0.4% over the four-year period ended 2021. The uptrend persisted in the first quarter of 2022. Although the company’s initiatives to focus on cost management have resulted in controlled general and administrative expenses; overall costs are expected to remain elevated in the near term due to advertising campaigns, hiring, inflation and technology upgrades.Stocks to ConsiderA couple of better-ranked stocks from the finance space are Gladstone Capital Corporation GLAD and Main Street Capital Corporation MAIN. GLAD currently sports a Zacks Rank #1 (Strong Buy), whereas MAIN carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.The consensus estimate for Gladstone Capital’s current fiscal year’s earnings has been revised 8.1% upward over the past 60 days. Over the past year, GLAD’s share price has rallied 9.9%.Main Street Capital’s current-year earnings estimates have been revised 1.4% upward over the past 60 days. MAIN’s shares have lost 5.5% over the past year. Just Released: Zacks Top 10 Stocks for 2022 In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2022? From inception in 2012 through 2021, the Zacks Top 10 Stocks portfolios gained an impressive +1,001.2% versus the S&P 500’s +348.7%. Now our Director of Research has combed through 4,000 companies covered by the Zacks Rank and has handpicked the best 10 tickers to buy and hold. Don’t miss your chance to get in…because the sooner you do, the more upside you stand to grab.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Ameriprise Financial, Inc. (AMP): Free Stock Analysis Report Main Street Capital Corporation (MAIN): Free Stock Analysis Report Gladstone Capital Corporation (GLAD): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksMay 17th, 2022

5 Reasons You Should Invest in Bank OZK (OZK) Stock Right Now

Supported by strong fundamentals and good growth prospects, Bank OZK (OZK) stock looks like an attractive investment option now. Bank OZK OZK is well-positioned for top-line growth, supported by its business restructuring and branch consolidation initiatives. The company’s solid loan balances will keep aiding revenues. Thus, it seems to be a wise idea to add the stock to your portfolio now.Analysts also seem bullish on the stock. The Zacks Consensus Estimate for OZK’s current-year earnings has been revised 5.1% upward over the past 30 days. Thus, the stock currently carries a Zacks Rank #2 (Buy).Looking at its price performance, Bank OZK’s shares have lost 19% so far this year compared with a decline of 15.7% for the industry. However, given a favorable Zacks Rank and positive earnings estimate revisions, the company’s price performance will likely improve in the near term. Image Source: Zacks Investment Research Factors That Make Bank OZK a Solid Bet Right NowEarnings Strength: Bank OZK’s earnings have grown at the rate of 4.6% over the last three to five years, driven by solid top-line performance and strategic buyouts. While the company’s earnings are expected to decline 7.6% in 2022, the same is projected to grow at the rate of 6.4% in 2023.The company also has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters.Revenue Growth: Bank OZK has grown substantially through de novo branching strategy and inorganically. Its revenues witnessed a compound annual growth rate of 9.4% over the last six years (2016-2021), mainly driven by steady loan growth and a rise in fee income. The uptrend in revenues continued in the first quarter of 2022. Given its strong balance sheet position, the bank is expected to continue expanding through acquisitions.For 2022, the company’s revenues are expected to rise 4.3%, whereas, for 2023, it is projected to grow 8.4%.Impressive Capital Deployments: Bank OZK has been regularly increasing its quarterly dividend. In April 2022, it hiked its dividend for the 47th consecutive quarter. In July 2021, the company announced a share repurchase program to buy back shares worth up to $300 million through Jul 1, 2022. In October, it increased the authorization, which now totals $650 million and will expire on Nov 4, 2022.Given a robust capital position, the company is expected to sustain efficient capital-deployment activities, thereby, continuing to enhance shareholder value.Favorable Valuation: Bank OZK stock looks undervalued when compared with the broader industry. Its price/earnings and price/cash flow ratios are below the respective industry averages. OZK has a P/E (F1) ratio of 9.26 compared with the industry average of 9.71. Its P/CF ratio stands at 7.09, below the industry’s 8.35.Superior Return on Equity (ROE): Bank OZK’s trailing 12-month ROE reflects its superiority in terms of utilizing shareholder funds compared with its peers. The company has an ROE of 12.57%, higher than the industry average of 11.55%.Other Stocks Worth a LookA couple of other top-ranked stocks from the finance space are Gladstone Capital Corporation GLAD and Main Street Capital Corporation MAIN. GLAD currently sports a Zacks Rank #1 (Strong Buy), whereas MAIN carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.The consensus estimate for Gladstone Capital’s current fiscal year’s earnings has been revised 8.1% upward over the past 60 days. Over the past year, GLAD’s share price has rallied 9.9%.Main Street Capital’s current-year earnings estimates have been revised 1.4% upward over the past 60 days. MAIN’s shares have lost 5.5% over the past year. Just Released: Zacks Top 10 Stocks for 2022 In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2022? From inception in 2012 through 2021, the Zacks Top 10 Stocks portfolios gained an impressive +1,001.2% versus the S&P 500’s +348.7%. Now our Director of Research has combed through 4,000 companies covered by the Zacks Rank and has handpicked the best 10 tickers to buy and hold. Don’t miss your chance to get in…because the sooner you do, the more upside you stand to grab.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Main Street Capital Corporation (MAIN): Free Stock Analysis Report Gladstone Capital Corporation (GLAD): Free Stock Analysis Report Bank OZK (OZK): Free Stock Analysis Report To read this article on click here. Zacks Investment Research.....»»

Category: topSource: zacksMay 17th, 2022

I"ve made $26,000 renting out my extra yard space. It"s been a great low-lift side hustle and only takes 5 to 10 hours a month.

Julz Maleno, a student, says she didn't do anything to her yard in Chino, California before listing it on the Neighbor app and got a renter in a few days. Julz Maleno and the empty acre lot on her property in Chino, California.Julz Maleno Julz Maleno is a 30-something acupuncture student living in Chino, California. In 2020, she listed a vacant lot on her property as storage space on Neighbor, a storage rental app. Since then, she's made over $26,700 renting out spaces for RVs, trailer, and more. Here's what she thinks of the app and how it works, as told to writer Perri Ormont Blumberg. This as-told-to essay is based on a conversation with Julz Maleno, an acupuncture student in California, about her storage rental side hustle. It has been edited for length and clarity.I'm in my last year of classes for my doctorate in acupuncture and traditional Chinese medicine. Throughout school, I've worked a variety of odd jobs to help pay the bills while juggling coursework. I worked as an Uber driver at night and on the weekends, but after being sideswiped by another car, I decided being a driver was no longer an option for me as a single mom. I also worked as an acupuncture assistant at my school clinic and other clinics, but as my class schedule changed every quarter, I needed more flexibility. I started looking into different ways to earn money that didn't require much time and heard about Neighbor on the radio. It's a website and app that connects people who have extra room in their home, garage, shed, or yard with locals seeking space to store their belongings. After doing more research, I learned I could make money by listing the gated, vacant acre lot on my property as a storage and parking space. Since listing my space was free, I figured I had nothing to lose. [Editor's note: While listing is free, Neighbor charges the property owner a payment processing fee of 4.9% of the total reservation cost plus $0.30 per payout.] So I signed up, took pictures of the yard, and then listed each spot with the general length and width dimensions. I divided my yard into three general sections to store cars, RVs, and trailers. I then divided those sections into a total of 20 "parking spot" spaces, each of which rents for between $40 and $200 a month. I listed my first space right before the pandemic began in early 2020 and within days got a renter who wanted to store their RV. Since then, my extra acre of yard space has brought in more than $26,700.The passive aspect of renting has been great for my busy scheduleI was initially skeptical about listing my space because I didn't know much about storage or what was considered a fair price, but the passive aspect of renting really sold me in the end.Since I'm not renting out a garage or spare bedroom, I don't spend time cleaning or reorganizing the rental spaces. In fact, I didn't have to do anything to my yard before listing it.I'm busy with school and don't have time to keep up with a gig job or maintain my yard, so it's great to be able to make extra cash without a big lift. I do remember that my first listing was well underpriced, but with more experience I've priced more competitively with other Neighbor listings in the area. I was modest with my pricing at first and priced the spaces less than other local hosts because I wasn't sure if they would actually rent. After seeing how easy it was and how steady the inquiries were, I decided to message Neighbor's customer service to discuss increasing my rates. The support team helped me determine the best price for my area and space size.There's not much on a day-to-day basis that I have to do for NeighborMaleno rents her lot mainly to people looking to store vehicles, trailers, or RVs.Julz MalenoI spend five to 10 hours a month on the Neighbor app messaging renters, mostly just coordinating if they need to drop off or pick up something from their outdoor space. All of our communication happens on the platform, which is convenient so that messages don't get lost. I require renters to reach out to me in advance when they'd like to visit their vehicle or trailers. I'm usually pretty flexible, but I need to keep the space secure and monitor who's visiting and when. Luckily, my renters are all pretty low-maintenance and very accommodating, so it's been easy to plan drop-off and pick-up times around my school schedule. Many of the renters are very friendly and we'll chat from time to time. One renter had 20 Volkswagens stored with me for about a year with plans to restore them, and another renter had a school bus that was converted into a recording studio.Using the app has been a perfect low-lift side hustleIt's been a rewarding experience to have nice renters who care about me and in turn, I keep a close eye on their property and monitor all other renters visiting the lot. Since the listings are month to month, I like that I can adjust my prices and rotate renters in and out as needed, although I do have some long-term renters, including one who's been storing a Chevy Workhorse since 2020.Renting out my empty yard has been great as a fairly passive income source. I don't have to do anything or spend anything to earn money, like I did with Uber, and the month-to-month commitment means I could stop renting at any time if I needed to. If you have extra space that you're not using right now, I'd definitely recommend trying out renting it as storage.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderMay 17th, 2022

A $9.89 million mansion was destroyed by the fire in Orange County, and the homeowner watched it all happen on security cameras

"It's a very special property. You cannot duplicate that home," listing agent Leo Goldschwartz Goldschwartz told The Orange County Register. The house at 5 Vista Court after the Coastal Fire in the Coronado Pointe neighborhood of Laguna Niguel, CA, on Thursday, May 12, 2022. At least 20 homes were destroyed when the brush fire ripped through the coastal Orange County community.Jeff Gritchen/MediaNews Group/Orange County Register via Getty Images A wildfire in Orange County, California, has destroyed more than 20 homes in the past week. Among the destroyed homes was a $9.89 million mansion that was "one signature away" from being sold. Real-estate platform said it will start adding wildfire risk ratings to its listings. A massive Orange County wildfire has burned down more than 20 homes in less than a week, including a $9.89 million Laguna Beach mansion that was "one signature away" from being sold, listing agent Leo Goldschwartz told The Orange County Register.The unnamed homeowner, who was out of the country during the wildfire, watched through security cameras as the fire destroyed the 10,000-square-foot mansion, per The OC Register. The potential buyers had planned to renovate the property after their purchase, Goldschwartz told The OC Register. It is unclear what will happen next; Goldschwartz declined Insider's request for comment.The mansion at 5 Vista Court, which had seven bedrooms and six full bathrooms, was listed for sale in January for $10.39 million before its price was dropped to $9.89 million in March, listing records show. It was located in Coronado Pointe, a gated hilltop community overlooking Laguna Beach in Laguna Niguel. The house had a two-level library and a pilates studio with a sauna and steam room, per the listing description. "It's a very special property. You cannot duplicate that home," Goldschwartz told The OC Register. Homes in Vista Court have a median listing price of $1.92 million, per real-estate platform, making the mansion at 5 Vista Court one of the pricier listings in the area.While the mansion was insured, it has been getting more difficult and more expensive for California homeowners to insure their homes against wildfires due to increased risks from global warming, Goldschwartz told The OC Register.The fire, which started on May 11, is 90% contained as of May 17, per The Orange County Fire Authority. In addition to the 20 homes that were completely burned down, 11 other houses in the area have sustained damage from the fire, per authorities.At least 20 homes were destroyed after the fire moved through the coastal Orange County community in Laguna Niguel, CA, on Thursday, May 12, 2022.Jeff Gritchen/MediaNews Group/Orange County Register via Getty ImagesWildfires in California have become a more frequent occurrence in recent years due to extended periods of hot weather resulting from climate change. This fire is not the first to affect Orange County this year: In February, a 145-acre fire swept through Laguna Beach and Emerald Bay.In response to growing wildfire threats, announced in a press statement plans to include a wildfire risk rating for all listings on its platform using data provided by First Street Foundation, a nonprofit organization that assesses climate risk, and the United States Department of Agriculture (USDA) Forest Service.The risk rating is on a scale of one to ten and considers the property's exposure to fire risks, including the materials used to build the home and its proximity to vegetation."By integrating wildfire risk data directly into maps and property listings, we can help homebuyers feel confident when making one of the biggest purchases of their lives," Sara Brinton,'s lead product manager, said in the press and First Street Foundation did not immediately respond to Insider's requests for comment.Read the original article on Business Insider.....»»

Category: smallbizSource: nytMay 17th, 2022

Saga Partners 1Q22 Commentary: Carvana And Redfin

Saga Partners commentary for the first quarter ended March 31, 2022. During the first quarter of 2022, the Saga Portfolio (“the Portfolio”) declined 42.4% net of fees. This compares to the overall decrease for the S&P 500 Index, including dividends, of 4.6%. The cumulative return since inception on January 1, 2017, for the Saga Portfolio […] Saga Partners commentary for the first quarter ended March 31, 2022. During the first quarter of 2022, the Saga Portfolio (“the Portfolio”) declined 42.4% net of fees. This compares to the overall decrease for the S&P 500 Index, including dividends, of 4.6%. The cumulative return since inception on January 1, 2017, for the Saga Portfolio is 112.0% net of fees compared to the S&P 500 Index of 122.7%. The annualized return since inception for the Saga Portfolio is 15.4% net of fees compared to the S&P 500’s 16.5%. Please check your individual statement as specific account returns may vary depending on timing of any contributions throughout the period. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q1 2022 hedge fund letters, conferences and more Interpretation of Results I was not originally planning to write a quarterly update since switching to semi-annual updates a few years ago but given the current drawdown in the Saga Portfolio I thought our investors would appreciate an update on my thoughts surrounding the Portfolio and the current market environment in general. The Portfolio’s drawdown over the last several months has been hard not to notice even for those who follow best practices of only infrequently checking their account balance. Outperformance vs. the S&P 500 since inception has flipped to underperformance on a mark-to-market basis and the stock prices of our companies have continued to decline into the second quarter. In past letters I have spent a lot of time discussing the Saga Portfolio’s psychological approach to investing to help prepare for the inevitable chaos that will occur while investing in the public markets from time-to-time. It’s impossible to know why the market does what it does at any point in time. I would argue that the last two years could be considered pretty chaotic, both on the upside speculation and now what appears to be on the downside fear and panic. I will attempt to give my perspective on how events played out within the Saga Portfolio with an analogy. Let’s say that in 2019 we owned a fantastic home that was valued at $500,000. We loved it. It was in a great neighborhood with good schools for our kids. We liked and trusted our neighbors; in fact, we gave them a spare key in case of emergencies. It was the perfect home for us to live in for many years to come. Based on the neighborhood becoming increasingly attractive over time, it was likely that our home may be valued around $2 million in ~10 years from now. This is strong appreciation (15% IRR) compared to the average home, but this specific home and neighborhood had particularly strong long-term fundamental tailwinds that made this a reasonable expectation. Then in 2020 a global pandemic hit causing a huge disorientation in the housing market. For whatever reasons, the appraised value of our home almost immediately doubled to $1 million. Nothing materially changed about what we thought our home would be worth in 10 years, but now from the higher market value, the home would only appreciate at a lower 7% IRR assuming it would still be worth $2 million in 10 years. What were our options under these new circumstances? We could move and try to buy a new home that provided a higher expected return. However, the homes in the other neighborhoods that we really knew and liked also doubled in price, so they did not really provide any greater value. Also, the risk and hassle of moving for what may potentially only be modestly better home appreciation did not make sense. We could buy a home in a less desirable neighborhood where prices looked relatively cheaper, but we would not want to live long-term. Even if we decided to live there for many years, the long-term fundamental dynamics of the crummy neighborhood were weak to declining and it was uncertain if the property would appreciate at all despite its lower valuation. We could sell our home for $1 million and rent a place to live for the interim period while holding cash and waiting for the market to potentially correct. However, we did not know if, when, or to what extent the market would correct and the thought of renting a place temporarily for our family was unappealing. For the Saga family, we decided to stay invested in the home that we knew, loved, and still believed had similar, if not stronger prospects following the COVID-induced surge in demand in our neighborhood. Now, for whatever reason, the market views our neighborhood very poorly and the appraised value of our home declined to $250,000, below any previous appraisals. It seems odd because it is the exact same home and the fundamentals of the neighborhood are much stronger than several years ago, suggesting that the expected $2 million value in the future is even more probable than before. It is a very peculiar situation, but the market can do anything at any moment. Fortunately, the lower appraisal value does not impact how much we still love our home, neighborhood, schools, or what the expected future value will be. In fact, we prefer a lower value because our property taxes will be lower! One thing is for certain, we would never sell our home for $250,000 simply because the appraised value has declined from prior appraisals. We would also never dream of selling in fear that the downward price momentum continues and then hopefully attempt to buy it back one day for $200,000. We can simply sit tight for as long as we want while the neighborhood around us continues to improve fundamentally over time, fully expecting the value of our home to eventually go up with it. It just so happens humans are highly complex beings and do not always react in what an economist may consider a rational way. Our emotions are highly contagious. When someone smiles at you, the natural reaction is to smile back. When someone else is sad, you feel empathy. These are generally great innate characteristics for helping to build the strong relationships with friends and family that are so important throughout life. But it also means that when other people are scared, it also makes you feel scared. And when more and more people get scared, that fear can cascade exponentially and turn into panic, which can cause people to do some crazy things, especially when it comes to making long-term decisions. As fear spreads, all attention shifts from thinking about what can happen over the next 5-10+ years to the immediate future of what will happen over the next day or even hour. Of course, during times of panic, “this time is always different.” It may very well be the case, but the world can only end once. Historically speaking, things have tended to work out pretty well over time on average. I am by no means immune to these contagious feelings. My way of coping with how I am innately wired is by accepting this fact and then trying to know what I can and cannot control. A core part of my investing philosophy is that I do not know what the market will do next, and I never will. Inevitably the market or a specific stock will crash, as it does from time-to-time. This “not timing the market” philosophy or treating our public investments from the perspective of a private owner may feel like a liability during a drawdown, but it is this same philosophy of staying invested in companies we believe to have very promising futures which positions us perfectly for the inevitable recovery. Eventually, emotions and the business environment will normalize, and the storm will pass. It could be next quarter, year, or even in several years, but we will be perfectly positioned for the recovery, at which point the stock price lows will likely be long gone. The whole investing process improves if one can really take the long-term view. However, it is not natural for people to think long-term particularly when it comes to owning pieces of publicly traded companies. It is far more natural to want to act by jumping in and out of stocks in an attempt to outsmart others who are trying to outsmart you. When the market price of your ownership in a business is available and fluctuating wildly every single day, it is hard to ignore and not be influenced by it. While one can get lucky through speculation, the big money is made by investing, by owning great businesses and letting them compound owner’s capital over many years. As the market has evolved over the last few decades, there appears to be an ever-increasing percent of “investors” who are effectively short-term renters, turning over the companies in their portfolios so quickly that they never really know the business that lies below the surface of the stock. While more of Wall Street is increasingly focused on the next quarter, a potentially looming recession, the Fed’s next interest rate move, or trying to time the market’s rotation from one industry into another, we are trying to think about what our companies’ results will be in the year 2027, or better yet 2032 and beyond. The most significant advantage of investing in the public market is the ability to take advantage of it when an opportunity presents itself or to ignore the market when there is nothing to do. The key to success is never giving up this advantage. You must be able to play out your hand and not be forced to sell your assets at fire sale prices. Significant portfolio declines are a good reminder of the importance of only investing money that you will not need for many years. This prevents one from being in a position where it is necessary to liquidate when adverse psychology has created unusually low valuations. However, we do not want to simply turn a blind eye to stock price declines of 50% or more and dig our heals into the ground believing the market is just being irrational. When the world is screaming at you that it believes your part ownership in these companies is worth significantly less than the market believed not too long ago, we attempt to understand if we are missing something by continually evaluating the long-term outlooks of our companies using all the relevant information that we have today from a first principles basis. Portfolio Update Instead of frequently checking a stock’s price to determine whether the company is making progress, I prefer looking to the longer-term trends of the business results. There will be stronger and weaker quarters and years since business success rarely moves up and to the right in a perfectly straight line. As a company faces headwinds or tailwinds from time-to-time, the stock price may fluctuate wildly in any given year, however the underlying competitive dynamics and business models that drive value will typically change little. Regarding our companies as a whole, first quarter results reflected a general softness in certain end markets, including the used car, real estate, and advertising markets. However, the Saga Portfolio’s companies, on average, provide a superior customer value proposition difficult for competitors to match. Most of them have a cost advantage compared to competitors; therefore, the worse it gets for the economy, the better it gets for our companies’ respective competitive positions over the long-term. For example, first quarter industry-wide used car volumes declined 15% year-over-year while Carvana’s retail units increased 14%. Existing home sales decreased 5% during the quarter while Redfin’s real estate transactions increased 1%. Digital advertising is expected to grow 8-14% in 2022 while the Trade Desk grew Q1’22 revenues 43% and is expected to grow them more than 30% for the full year 2022. While industry-wide TV volumes remain below 2019 pre-COVID levels, Roku gained smart TV market share sequentially during the quarter, continuing to be the number one TV operating system in the U.S. and number one TV platform by hours streamed in North America. Weaker industry conditions will inevitably impact our companies’ results; however, our companies should continue to take market share and come out on the other side of any potential economic downturn stronger than when they went in. For the portfolio update, I wanted to provide a more in-depth update on Carvana and Redfin which have both experienced particularly large share price declines and have recent developments that are worth reviewing. Carvana I first wrote about Carvana Co (NYSE:CVNA) in this 2019 write-up. I initially explained Carvana’s business, superior value proposition compared to the traditional dealership model, attractive unit economics, and how they were uniquely positioned to win the large market opportunity. Since then, Carvana has by far exceeded even my most optimistic initial expectations. While the company did benefit following COVID in the sense that customers’ willingness to buy and sell cars through an online car dealer accelerated, the operating environment over the last two years has been very challenging. Carvana executed exceedingly well considering the shifting customer demand in what is a logistically intensive operation and what has been a tight inventory environment due to supply chain issues restricting new vehicle production. Sales, gross profits, and retail units sold have grown at a remarkable 104%, 151%, and 87% CAGR over the last five years, respectively. Source: Company filings Shares have come under pressure following their first quarter results, which reflected larger than expected losses. The quarter was negatively impacted by a combination of COVID-related logistical issues in their network that started towards the end of the fourth quarter as Omicron cases spread. Employee call off rates related to Omicron reached an unprecedented 30% that led to higher costs and supply chain bottlenecks. As less inventory was available due to these problems, it led to less selection and longer delivery times, lowering customer conversion rates. Additionally, interest rates increased at a historically fast rate during the first quarter which negatively impacted financing gross profits. Carvana originates loans for customers and then sells them to investors at a later date. If interest rates move materially between loan origination and ultimately selling those loans, it can impact the margin Carvana earns on underwriting those loans. Industry-wide used car volumes were also down 15% year-over-year during the first quarter. While Carvana continues to grow and take market share, its retail unit volume growth was slower than initially anticipated, up only 14% year-over-year. Carvana has been in hyper growth mode since inception and based on the operational and logistical requirements of the business, typically plans, builds, and hires for expected capacity 6-12 months into the future. This has historically served Carvana well given its exceptionally strong growth, but when the company plans and hires for higher capacity than what occurs, it can lead to lower retail gross profits and operating costs per unit sold. When combined with lower financing gross profits in the quarter from rising interest rates, losses were greater than expected. In February, Carvana announced a $2.2 billion acquisition of ADESA (including an additional $1 billion plan to build out the reconditioning sites) which had been in the works for some time. ADESA is a strategic acquisition to help accelerate Carvana’s footprint expansion across the country, growing its capacity from 1.0 million units at the end of Q1’22 to 3.2 million units once complete over the next several years. It is unfortunate the acquisition timing followed a difficult quarter that had greater than expected losses, combined with a generally tighter capital market environment. Carvana ended up raising $3.25 billion in debt ($2.2 billion for the acquisition and $1 billion for the buildout) at a higher than initially expected 10.25% interest rate. Given these higher financing costs and first quarter losses, they issued an additional $1.25 billion in new equity at $80 per share, increasing diluted shares outstanding by ~9%. Despite the short-term speedbumps surrounding logistical issues, softer industry-wide demand, and a higher cost of capital to acquire ADESA, Carvana’s long-term outlook not only remains intact but looks even more promising than before. To better understand why this is the case and where Carvana is in its lifecycle, it helps to provide a little background on the history of retail. While e-commerce is a more recent phenomena that developed from the rise of the internet in the 1990s, the retail industry has undergone several transformations throughout history. In retailing, profitability is determined by two factors: the margins earned on inventory and the frequency with which they can turn inventory. Each successive retail transformation had a similar economic pattern. The newer model had greater operating leverage (higher fixed costs, lower variable costs). This resulted in greater economies of scale (lower cost per unit) and therefore greater efficiency (higher asset turnover) with size that enabled them to charge lower prices (lower gross margins) than the preceding model and still provide an attractive return on capital. The average successful department store earned gross margins of ~40% and turned inventory about 3x per year, providing ~120% annual return on the capital invested in inventory. The average successful big box retailer earned ~20% gross margins and turned its inventory 5x per year. Amazon retail earns ~10% gross margins (including fulfillment costs in COGS) and turns inventory at a present rate of 12x times annually. The debate that surrounds any subscale retailer, particularly in e-commerce, is whether they have enough capital/runway to build out the required infrastructure and then scale business volume to spread fixed costs over enough units. Before reaching scale, analysts may point to an online business’ lower price points (“how can they charge such low prices?!”), higher operating costs per unit (“they lose so much money per item!”), and ongoing losses and capital investments (“they spend billions of dollars and still have not made any money!”) as evidence that the model does not make economic sense. Who can blame them since the history books are filled with companies that never reached scale? However, if the retailer does build the infrastructure and there is sufficient demand to spread fixed costs over enough volume, the significant capital investment and high operating leverage creates high barriers to entry. If we look to Amazon as the dominant e-commerce company today, once the infrastructure is built and reaches scale, there is little marginal cost to serve any prospective customer with an internet connection located within its delivery footprint. For this reason, I have always been hesitant to invest in any e-commerce company that Amazon may be able to compete with directly, which is any mid-sized product that fits in an easily shippable box. As it relates to used car retailing, the infrastructure required to ship and recondition cars is unique, and once built, the economies of scale make it nearly impossible for potential competitors to replicate. Carvana is in the very early stages of building out its infrastructure. There is clearly demand for its attractive customer value proposition. It has demonstrated an ability to scale fixed costs in earlier cohorts as utilization of capacity increases, providing attractive unit economics at scale. Newer market cohorts are tracking at a similar, if not faster market penetration rate as earlier cohorts. Carvana is still investing heavily in building out a nationwide hub-and-spoke transportation network and reconditioning facilities. In 2021 alone, Carvana grew its balance sheet by $4 billion as it invested in its infrastructure while also reaching EBITDA breakeven for the first time. The Amazon story is a prime example (pun intended) of a new and better business model (more attractive unit economics) that delivered a superior value proposition and propelled the company ahead of its competition, similar to the underlying dynamics occurring in the used car industry today. Amazon invested heavily in both tangible and intangible growth assets that depressed earnings and cash flow in its earlier years (and still today) while growing its earning power and the long-term value of the business. The question is, does Carvana have enough capital/liquidity to build out its infrastructure and scale business volume to then generate attractive profits and cash flow? Following Carvana’s track record of scaling operating costs and reaching EBITDA breakeven in 2021, the market was no longer concerned about its liquidity position or the sustainability of its business model. However, the recent quarterly loss combined with taking on $3 billion in debt to buildout the 56 ADESA locations across the country raises the question of whether Carvana has enough liquidity to reach scale. Carvana’s current stock price clearly reflects the market discounting the probability that Carvana will face liquidity issues and therefore have to raise further capital at unfavorable terms. However, I think if you look a little deeper, Carvana has clearly demonstrated highly attractive unit economics. It has several levers to pull to protect it from any liquidity concerns if needed. The $2.6 billion in cash (as well as $2 billion in additional available liquidity in unpledged real estate and other assets) it has following the ADESA acquisition, is more than enough to sustain a potentially prolonged decline in used car demand. The most probable scenario over the next several quarters is that Carvana will address its supply chain and logistical issues that were largely due to Omicron. As the logistical network normalizes, more of Carvana’s inventory will be available to purchase on their website with shorter delivery times, which will increase customer conversion rates. This will lead to selling more retail units, providing higher inventory turnover and lower shipping costs, and therefore gross profit per unit will recover from the first quarter lows. Other gross profit per unit (which primarily includes financing) will also normalize in a less volatile interest rate environment. Combined total gross profit per unit should then approach normalized levels by the end of the year/beginning of 2023 (~$4,000+ per unit). Like all forms of leverage, operating leverage works both ways. For companies with higher operating leverage, when sales increase, profits will increase at a faster rate. However, if sales decrease, profits will decrease at a faster rate. While Carvana has high operating leverage in the short-term, they do have the ability adjust costs in the intermediate term to better match demand. When demand suddenly shifts from plan, it will have a substantial impact on current profits. First quarter losses were abnormally high because demand was lower than expected. Although, one should not extrapolate those losses far into the future because Carvana has the ability to better adjust and match its costs structure to a lower demand environment if needed. As management better matches costs with expected demand, operating costs as a whole will remain relatively flat if not decline throughout the year as management has already taken steps to lower expenses. As volumes continue to grow at the more moderate pace reflected in the first quarter and SG&A remains flat to slightly declining, costs per unit will decline with Carvana reaching positive EBITDA per unit by the second half of 2023 in this scenario. Source: Company filing, Saga Partners Source: Company filing, Saga Partners With the additional $3.2 billion in debt, Carvana will have a total interest expense of ~$600 million per year, assuming no paydown of existing revolving facilities or net interest income on cash balances. Management plans on spending $1 billion in capex to build out the ADESA locations. They are budgeting for ~$40 million in priority and elective capex per quarter going forward suggesting the build out will take ~6 years. Total capex including maintenance is expected to be $50 million a quarter. Carvana would reach positive free cash flow (measured as EBITDA less interest expense less total Capex) by 2025. Note this assumes the used car market remains depressed throughout 2022 and then Carvana’s retail unit growth increases to 25% a year for the remainder of the forecast and no benefit in lower SG&A or increased gross profit per unit from the additional ADESA locations was assumed. Stock based compensation was included in the SG&A below so actual free cash flow would be higher than the chart indicates. Source: Company filings, Saga Partners Note: Free cash flow is calculated as EBITDA less interest expense less capex After the close of the ADESA acquisition, Carvana has $2.6 billion in cash (plus $2 billion in additional liquidity from unpledged assets if needed). Assuming the above scenario, Carvana has plenty of cash to endure EBITDA losses over the next year and a half, interest payments, and capex needs. Source: Company filings, Saga Partners The above scenario does not consider the increasing capacity that Carvana will have as it continues to build out the ADESA locations. After building out all the locations, Carvana will be within one hundred miles of 80% of the U.S. population. This unlocks same-day and next-day delivery to more customers, leading to higher customer conversion rates, higher inventory turn, lower risk of delivery delays, and lower shipping costs, which all contribute to stronger unit economics. Customer proximity is key. Due to lower transport costs, faster turnaround times on acquired vehicles, and higher conversion from faster delivery speeds, a car picked up or delivered within two hundred miles of a recondition center generates $750 more profit than an average sale. It is possible that industry-wide used car demand remains depressed or even worsens for an extended period. If this were the case, management has the ability to further optimize for efficiency by lowering operating costs to better match demand. This is what management did following the COVID demand shock in March 2020. The company effectively halted corporate hiring and tied operational employee hours to current demand as opposed to future demand. During the months of May and June 2020, SG&A (ex. advertising expense and D&A) per unit was $2,600, far lower than the $3,440 reported in 2020 or $3,654 in 2021. Carvana has also historically operated between 50-60% capacity utilization, indicating further room to scale volumes across its existing infrastructure without the need for materially greater SG&A expenses. Advertising expense in older cohorts reached ~$500 per unit, compared to the $1,126 reported for all of 2021, while older cohorts still grew at 30%+ rates. If needed, Carvana could improve upon the $2,600 SG&A plus $500 advertising expense ($3,100 in total) per unit at its current scale and be far below gross profit per unit even if used car demand remains depressed for an extended period of time. When management optimizes for efficiency as opposed to growth, it has the ability to significantly lower costs per unit. Carvana has highly attractive unit economics and I fully expect management will take the needed measures to right size operating costs with demand. They recently made the difficult decision to layoff ~2,500 employees, primarily in operations, to better balance capacity with the demand environment. If we assume it takes six years to fully build out the additional ADESA reconditioning locations, Carvana will have a total capacity of 3.2 million units in 2028. If Carvana is running at 90% utilization it could sell 2.9 million retail units (or ~7% of the total used car market). If average used car prices decline from current levels and then follow its more normal longer-term price appreciation trends, the average 2028 Carvana used car price would be ~$23,000 and would have a contribution profit of ~$2,000 per unit at scale. This would provide nearly $5.6 billion in EBITDA. After considering expected interest expense, maintenance capex, and taxes, it would provide over $4 billion in net income. If Carvana realizes this outcome in six years, the company looks highly attractive (perhaps unreasonably attractive) compared to its current $7 billion market cap or $10 billion enterprise value (excluding asset-based debt). Redfin I recently wrote about Redfin Corp (NASDAQ:RDFN) in this December 2021 write-up. I explained how Redfin has increased the productivity of real estate agents by integrating its website with its full-time salaried agents and then funneling the demand aggregated on its website to agents. Redfin agents do not have to spend time prospecting for business but can rather spend all their time servicing clients throughout the process of buying and selling a home. Since Redfin agents are three times more productive than a traditional agent, Redfin is a low-cost provider, i.e., it costs Redfin less to close a transaction than a traditional brokerage at scale. It is a similar concept as the higher operating leverage of e-commerce relative to brick & mortar retailers. Redfin has higher operating leverage compared to the traditional real estate brokerage. Real estate agents are typically contractors for a brokerage. They are largely left alone to run their own business. Agents have to prospect for clients, market/advertise listings, do showings, and service clients throughout each step of the real estate transaction. Everything an agent does is largely a variable cost because few of their tasks are automated. Redfin, on the other hand, turned prospecting for demand, marketing/advertising listings, and investments in technology to help agents and customers throughout the transaction into more of a fixed cost. These costs are scalable and become a smaller cost per transaction as total transaction volumes grow across the company. Because Redfin is a low-cost provider, it has a relative advantage over traditional brokerages. No other real estate brokerage has lowered or attempted to lower the costs of transacting real estate in a similar way. This cost advantage provides Redfin with options about how to share these savings on each transaction. Redfin has primarily shared the cost savings with customers by charging lower commission rates than traditional brokerages. By offering a similar, if not superior, service to customers compared to other brokerages yet charging lower fees, it naturally attracts further demand which then provides Redfin with the ability to scale fixed costs per transaction even more, further widening their cost advantage to other brokerages. So far, the majority of those cost savings are shared with home sellers as opposed to homebuyers. Sellers are more price sensitive than homebuyers because the buyer’s commission is already baked into the seller’s contract and therefore buyers have not directly paid commissions to agents historically. Also, growing share of home listings is an important component of controlling the real estate transaction. The seller’s listing agent is the one who controls the property, decides who sees the house, and manages the offers and negotiations. Therefore, managing more listings enables Redfin to have more control over the transaction and further streamline/reduce inefficiencies for the benefit of both potential buyers and sellers. Redfin also spends some of their cost savings by reinvesting them back into the company by hiring software engineers to build better technology to continue to lower the cost of the transaction. This may include building tools for agents to service clients better, improving the web portal and user interfaces, on-demand tours for buyers to see homes first, automation to give homeowners an immediate RedfinNow offer, etc. Redfin also invests in building other business segments like mortgage, title forward, and iBuying which provide a more comprehensive real estate offering for customers which attracts further demand. So far, the lower costs per transaction have not been shared with shareholders in the form of dividends or share repurchases, and for good reason. In theory, Redfin could charge industry standard prices and increase revenue immediately by 30-40% which would drop straight to the bottom-line assuming demand would remain stable. However, giving customers most of the savings through lower commissions has obviously been one of the drivers for attracting demand and growing transaction volume, particularly for home sellers. The greater the number of transactions, the lower the fixed costs per transaction, which further increases Redfin’s cost advantage compared to traditional brokerages, which provides Redfin with even more money per transaction to share with either customers, employees, and eventually shareholders. With just over 1% market share, Redfin should be reinvesting in growing share which will increase the value of the business and inevitably benefit long-term owners of the company. Redfin’s stock price has experienced an especially large decline this year. I typically prefer to not attempt to place an explanation or narrative on short-term stock price movements, but I will do it anyways given the substantial drop. There are primarily two factors contributing to the market’s negative view of the company: first, the market currently dislikes anything connected to the real estate industry and second, the market currently has little patience for any company that reports net losses regardless of the underlying economics of the business. Real estate is currently a hated part of the market, and potentially for good reason. It is a cyclical industry, and the economy is potentially either entering or already in a recession. Interest rates are expected to continue to rise, negatively impacting home affordability, while an imbalance in the housing supply persists with historically low inventory available helping fuel an unsustainable rise in housing prices. From a macro industry-wide perspective, the real estate market will ebb and flow with the economy over time, but demand to buy, sell, and finance homes will always exist. I do not have the ability to determine how aggregate demand for buying or selling a home will change from year-to-year, but I do know that people have to live somewhere and if Redfin is able to help them find, buy or rent, and finance where they live better than alternative service providers, then the company will gain share and grow in value overtime. Redfin has also reported abnormally high losses of $91 million in the first quarter for which the current market has little appetite. It feeds the argument that Redfin does not have a sustainable business model. While losses can be a sign of unsustainable economics, that is not the case for Redfin. There are several factors that are all negatively hitting the income statement at the same time, and all should improve materially over the next year or two. Higher first quarter losses largely reflect: Agent Productivity: First quarter brokerage sales increased 7% year-over-year, but lead agent count increased 20%, which meant agents were less productive, leading to real estate gross profits declining $17 million from the prior year. Lower productivity was a result of a steeper ramp in agent hiring towards the end of the year against lower seasonal transaction volumes. It typically takes about six months for new agents to get trained and start closing transactions and then contributing to gross profits. Any accelerated hiring, particularly during a softer macro environment, will be a headwind while Redfin is paying upfront costs before any revenue is being generated. Further, closing transactions has been difficult particularly for buyers, which is where most new agents start. The housing market has been unbalanced where there is not enough inventory. A home for sale will typically receive many competing offers which makes it difficult for a buyer to win the deal. Since Redfin agents are mostly paid on commission (~20% salary plus the remainder being commission), it has been more difficult for new agents to earn a sufficient income in the current real estate environment. In response, Redfin started paying $1,500 retention bonuses for new agents who could guide customers to the point of bidding on a home, regardless of whether those bids win. While the bonus may impact gross profits in the near-term before a customer closes a transaction, it will not impact gross margins in the long-term when a transaction eventually takes place. Going forward, agent hiring will return to more normal rates and the larger number of new hires from recent quarters will ramp up which will improve productivity and gross profits. RentPath: Redfin bought RentPath out of bankruptcy for $608 million in April 2021, primarily to incorporate its rentals on its website which helps show up higher on Internet real estate searches. Prior to the acquisition, RentPath had no leadership direction for several years and declining sales and operating losses. RentPath had new management start in August 2021 and was integrated into in March. It finally started to see operational improvement with sales increasing in February and March year-over-year for the first time since 2019 despite a significant decrease in marketing expenses. While RentPath had $17 million in losses during the first quarter and is expected to have $22 million in losses in the second quarter, operations will improve going forward. Management made it clear that RentPath will be a contributor to net profits in its own right and not just a driver of site traffic and demand to Redfin’s brokerage business. Mortgage: A recent major development was the acquisition of Bay Equity for $135 million in April. Redfin was historically building out its mortgage business from scratch but after struggling to scale the operation decided to buy Bay Equity. Redfin was spending $13 million per a year on investing in its legacy mortgage business but going forward, mortgage will now be a net contributor to profits with Bay expected to provide $4 million in profit in the second quarter. The greater implication of having a scaled mortgage underwriter that is integrated with the real estate broker is that they can work together to streamline and expedite the transaction closing which has become an increasingly important value proposition for customers. Looking just a little further into the future, having a scaled and integrated mortgage underwriter can provide Redfin with the capability of providing buyers with the equivalent of an all-cash offer to sellers. Prospective homebuyers who offer all-cash offers to sellers are four times as likely to win the bid and sellers will often accept a lower price from an all-cash buyer vs. one requiring a mortgage. A common problem that many homeowners face is that when they are looking to move, it is difficult to get approved for a second mortgage while holding the current one. Much of their equity is locked in their current home. Frequently, a homebuyer wins an offer on a new home and then is in mad dash to sell their existing home in order to get the financing to work. It is not ideal to attempt to sell your home as fast as possible because it decreases the chance of getting the best price possible. A solution that Redfin could offer as a customer’s agent and underwriter is provide bridge financing between when a customer buys their new home and is then trying to sell their existing home and is therefore paying on two mortgages. Redfin would be able to make a reasonable appraisal for what a customer’s existing home will sell for (essentially what Redfin already does with iBuying) and underwriting the incremental credit exposure they are willing to provide the buyer. The buyer would then have “Redfin Cash” which would work like a cash offer. If this service helps buyers win a bid four times more often, it would even further differentiate Redfin’s value proposition and attract further demand. At least in the near-term, the mortgage segment will go from being a loss center to a contributor to net profits as well as further improving Redfin’s customer value proposition. Restructuring and transaction costs: Redfin had $6 million in restructuring expenses related to severance with RentPath and the mortgage business as well as closing the Bay Equity acquisition. $4 million in restructuring expenses are expected in the second quarter but these expenses will go away in future quarters. The combination of the above factors provided the headline $91 million net loss for the first quarter. Larger than normal losses between $60-$72 million are still expected in the second quarter. However, going forward losses are expected to continue to improve materially. While Redfin is not done investing in improving its service offerings, it should benefit from the significant investments it has already made over the last 16 years. Redfin has been building and supporting a nationwide business that only operated in parts of the country and had to incur large upfront costs. Going forward, it will benefit from the operating leverage baked into its cost structure with gross profits expected to grow twice as fast as overhead operating expenses. Redfin is expected to be cash flow breakeven in 2022 and provide net profits starting in 2024. Redfin has built a great direct to consumer acquisition tool that is unmatched by any real estate broker. It has spent the costs to acquire the customer and has now built out the different services to provide customers any of the real estate services that they may need, whether that is one or a combination of brokerage services, mortgage underwriting, title forward, iBuying, or rental search. Being able to monetize each customer that it has already acquired by offering them any of these services provides Redfin with a better return on customer acquisition costs that no other competitor is able to do to the same extent. Additionally, these real estate services work better when they are integrated under the same company. One does not have to dig very deep to see how attractive Redfin’s shares are currently priced. Shares are now selling around all-time historic lows since its IPO in August 2017. The prior all-time lows were reached during the COVID crash which was a time the world was facing an unknown pandemic that would shut down the economy and potentially put us through a great depression. At its current $1.2 billion market cap, Redfin is selling for 3x expected 2022 real estate gross profits, or 4x its current $1.7 billion enterprise value (excluding asset-based debt). Both are far below the historic average of 15x (which excludes peak multiples reached towards the end of 2020 and early 2021), or the previous all-time low of 6x reached in the depths of March 2020. If we assume Redfin can raise brokerage commissions by 30%, in line with traditional brokerage commission rates, and it does not lose business, Redfin would be able to provide ~20% operating margins. If we take a more conservative view and say Redfin can earn 10% net margins on its 2022 expected real estate revenues of $990 million, it would provide $99 million in net profits, providing a current 12x price-to-earnings ratio. This is for a company that has a long track record of being able to grow 20%+ a year on average, consistently gains market share each quarter, and has barely monetized its significant upfront investments and fixed costs with a long runway to continue to scale. This also does not place any value on its mortgage or iBuying segments which are now contributors to gross profits. There may be macro risks as well as other concerns today, however Redfin’s business and relative competitive advantage have never been stronger. The net losses reported are not representative of Redfin’s true underlying earning power. Redfin has untapped pricing power, an increasingly attractive customer value proposition, and a growing competitive advantage compared to alternative brokerages, which will help Redfin to continue to grow and take market share in what is a very large market. Conclusion Of course, the future can look scary, as it often does when headlines jump from one risk to the other. Despite what may be happening in the macro environment, our companies on average are stronger than they have ever been and are now selling for what we believe are the most attractive prices we have seen relative to their intrinsic value. I have no idea what shares will do in the near-term and I never will. Stock prices can swing wildly for many reasons, and sometimes seemingly for no reason at all. They can diverge, sometimes significantly from their true underlying value. I have no idea when sentiment will shift from optimism to pessimism and then back to optimism. This is what keeps us invested in both good times and in bad. The current selloff can continue further, but assuming our companies continue to execute over the coming years by winning market share and earning attractive returns on their investment spending, the market’s sentiment surrounding our portfolio companies will eventually reflect their underlying fundamentals. I will continue to look towards the longer-term operating results of our companies and not to the movements in their stock price as feedback to whether our initial investment thesis is playing out as expected. While the market can ignore or misjudge business success for a certain period, it eventually has to realize it. During times of greater volatility and periods of large drawdowns, I am reminded of how truly important the quality of our investor base is. It is completely natural to react in certain ways to rising or declining stock prices. It takes a very special investor base to look past near-term volatility and to trust us to make very important decision on their behalf as we continually try to increase the value of the Saga Portfolio over the long-term. As always, I am available to catch up or discuss any questions you may have. Sincerely, Joe Frankenfield Saga Partners Updated on May 16, 2022, 4:44 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkMay 17th, 2022

Analysis Shows Multifamily Price Appreciation Outpaced Rent Growth

Real estate investors are sweet on multifamily—so much so that they have increasingly been willing to pay more for it than ever before, especially in certain circumstances. Whether that demand can continue or a bubble burst is on the horizon is the focus of a new Multifamily Trading Bulletin from Yardi® Matrix. The Yardi Matrix… The post Analysis Shows Multifamily Price Appreciation Outpaced Rent Growth appeared first on RISMedia. Real estate investors are sweet on multifamily—so much so that they have increasingly been willing to pay more for it than ever before, especially in certain circumstances. Whether that demand can continue or a bubble burst is on the horizon is the focus of a new Multifamily Trading Bulletin from Yardi® Matrix. The Yardi Matrix report tracked $215 billion of multifamily property sales in the U.S. in 2021 that traded for an average of $192,105 per unit. The new bulletin takes a close look at repeat sales over the last decade in Matrix’s database of 83,000 properties. Among those, 4,500 multifamily properties in the US (about 5.3%) sold at least three times over the last decade. The average compound annual growth rate for the repeat-sale properties averaged 17.7% nationally, according to their report. Analysts found that rents rose rapidly during the 10-year cycle, but not as much as price appreciation. Multifamily rent growth in 2021 was up 14% for the year, a record, but rent growth has been above the long-term average for over five years (except for during COVID-19 lockdowns). Meanwhile, the average price per unit climbed 21.6% in 2021, the biggest one-year jump in decades, Yardi reports. Investors know what they like, and that includes smaller assets geared toward working-class renters. “They have the potential for high rent growth because those properties have relatively low rents and are in markets with above-trend rent growth,” wrote Paul Fiorilla, director of research for Yardi Matrix. They will also pay a premium for strategically located value-add properties. The most popular regions include secondary markets and areas with strong in-migration, particularly Texas, the Southeast and Southwest, where demand and rent growth is growing faster than the rest of the nation. Relatively few properties in gateway markets made the list of repeat sales. Yardi Matrix tracks properties in 162 markets with 50 or more units. Deal flow roared back in 2021 to a record $215.3 billion, a 67.3% increase from the prior high point in 2019. View the full report here: Multifamily Trading Bulletin from Yardi® Matrix. The post Analysis Shows Multifamily Price Appreciation Outpaced Rent Growth appeared first on RISMedia......»»

Category: realestateSource: rismediaMay 17th, 2022