Market Participant -- High Concept Value Investing

Medley Capital BDC and the high fees and dilution.

2010-07-06T21:50:00.000-05:00

Medley Capital BDC has filed its latest N-2/A detailing plans to sell 13.3 million shares at $15.00/share. The initial portfolio will be contributed by some of the managers private funds, who will exchange loan assets for shares in the new BDC. This is similar to what THL capital did for its IPO. However unlike THL Credit (TCRD) Medley's fee structure is much more favorable to the manager, being

May brings plenty of filings for new BDC's and some oddball REITs

2010-05-05T01:49:00.000-05:00

Oodles of S-11's and N-2's have been filed recently; and so this list is not exhaustive. 1. Legacy Healthcare Properties Trust. Equity healthcare reit started by ex-CNL folks. These folks are veterans of the non-public reit market (scam). Statements in the prospectus such as "In addition, we will grant an aggregate of ????? shares of our common stock to our executive officers upon completion of

Plenty of new S-11's in mid April

2010-04-13T22:22:00.003-05:00

The lawyers are busy as several REIT's have filed new (DLC Realty Trust/Younan Properties) or updated S-11's (Welsh Property Trust/Excel Trust/Hudson Pacific Properties, and Two Harbors Investment Corp). DLC Realty Trust DLC Realty plans to be a "a vertically integrated, self-administered and self-managed real estate investment trust, or REIT, that acquires, manages, leases, repositions and

THL Credit and Horizon Technology Finance putting out new N-2's

2010-03-22T20:25:00.002-05:00

THL Credit THL Credit has uploaded its second revised form N-2/A with a bunch of changes that make it non-comparable to previous filings. Most notably the management fee structure has changed from being (1.5% Base + 15% xs of 8% with a catch up) calculated quarterly with no cap, to being 1.5% + 20% xs of 8% with a catch up, but also being subject to cumulative total return hurdle. Most

Ellington Financial files 7'th S-11/A

2010-03-17T21:48:00.000-05:00

Ellington Financial has filed a new S-11/A with the SEC. Thi filing removes the aspect that I think lead the previous IPO attempt to fail. Viz, that the company inteded to pay out only 50% of taxable income as cash dividends, while shareholders would be paying cash taxes on 100% of the companies income. This implied a very high effective tax rate on any cash distributions. As of March 17th 2010:

New prospectisii?

2010-03-09T00:52:00.000-05:00

Couple of new S-11's/N-2's out there. Plainfield Direct A Plainfield Direct is is an externally managed business development Company with a 2/20 (7% hurdle + catch up) management fee structure. CEO is Max Holmes is ex-DE Shaw/Drexel Burnham Lambert etc. Interestingly Since 1993, he has taught “Bankruptcy and Reorganization” at New York University Stern Graduate School of Business, where he

Weekend/Weekly Update on new REITs and IPOs

2010-02-16T23:36:00.000-05:00

This and last week saw several IPO's/secondary offerings. Terreno Realty Terreno Realty IPO'd with a reduced offering of 8.75 Million shares at $20/sh. I'm not sure how much of the reduction from the original plan was due to general hostility to IPO's vs the specific business that Terreno wanted to persue. On paper, iwning property at a 9% cap rate with 40% leverage won'tgenerate the mid teens

PennyMac's big 4Q09 loss.

2010-02-02T01:45:00.001-05:00

Okidata, PennyMac has reported results 4Q09, of a loss of $0.07 cents per share. This isn't that surprising given the companies high cost structure and relatively low percentage of invested assets (the company claims to have invested ~37% of IPO proceeds so far). At this pace I would expect them to be mostly invested by late 2010. The companies ultimate ability to generate FAD is hard to predict,

PennyMac's big discount

2010-01-31T00:41:00.002-05:00

Of all the 2009 MREIT IPO's PennyMac Mortgage Investment Trust (PMT) trades at a worst discount to book value. This creates plenty of head scratching as to if PMT is pregnant with opportunity or pregnant with something else. Reading the S-11's gives a number of reasons not to invest in PMT beyond those concerns with the target asset class; credit impaired residential mortgage assets requiring

Terreno IPO on ice.

2010-01-25T22:06:00.003-05:00

It appears that Terreno Realty (TRNO) has postponed its IPO, because Goldman Sachs couldn't find enough IPO investors. I have mixed feelings about this, because I was honestly impressed by the companies road show. I went in as a complete skeptic, and was more convinced afterwards. The management team (Blake Baird, Mike Coke) showed a profound understanding of how to build a quality real estate

Fresh S-11 for Verde Realty

2010-01-24T01:37:00.002-05:00

Verde Realty filed an S-11, to take this existing and operational REIT public. According the filing Verde already owns a multifamily rental portfolio of 14 properties totaling 4,790 units, an industrial distribution portfolio of 87 properties totaling 12.0 million square feet. In addition to the operating portfolio, the company has a land bank of approximately 1900 acres for multifamily/

Latest REIT S-11 filings (Halvern, Chesapeake, Callahan Capital)

2010-01-20T00:48:00.001-05:00

Three new amended S-11's filed today; all equity REITs. Halvern Realty files an updated S-11. Halvern is trying to "acquire, own and manage a portfolio of office properties which will be located in Southern California." Chesapeake Lodging Trust files an updated S-11 reducing the proposed offering by 40%. The company is now offering 7.5 Million shares of Beneficial Interest ($20/sh) down from

More S-11's

2010-01-17T02:24:00.003-05:00

There was a rush to file S-11's on last friday; in front of the federal National Plagiarism Awareness holiday on January 18th. S-11/A Chatham Lodging Trust. Chatham trust is run by Jeffrey H Fisher who was CEO of Innkeepers USA Trust (KPA) a New York Stock Exchange-listed hotel real estate investment trust, or REIT, from its inception in 1994 through its sale in June 2007 to Apollo Investment

Growing by your own bootstraps

2010-01-03T23:37:00.000-05:00

Let's say we own shares in MREIT with a BVPS of $10.00 per share, and in which each $1 of book equity when fully leveraged/invested is good for generating $0.10/year in FAD (funds available for distribution). Now imagine that the REIT is trading at $12/sh and does a secondary public offering which causes fully diluted BVPS to become $10.50/sh for all shareholders. The REIT's earnings power

IRS extends guidance on taxable stock dividends.

2009-12-29T00:08:00.000-05:00

Morrison & Foerster LLP has issued a note to clients on IRS's extension of Revenue Procedure 2008-68 on taxable stock dividends: On December 23, 2009, under Revenue Procedure 2010-12, the Internal Revenue Service (“IRS”) extended the period of temporary guidance regarding certain stock distributions by publicly-traded real estate investment trusts (“REITs”) and regulated investment companies (“

New S-11's for Excel Trust and Invesco Mortgage Capital

2009-12-28T21:03:00.004-05:00

Taking a look at the hot sheets (aka SEC EDGAR online) reveals that S-11's for two REITs have been filed this week. Excel Trust (EXL) Invesco Mortgage Capital (IVR) Excel Trust (EXL) Excel Trust is a new REIT, started by former New Plan Excel (NXP) folks, who are looking to buy retail assets. This S-11 gets an immediate de-merit for burying "Management History and Experience" all the way on

The courage to sit tight.

2009-12-20T20:20:00.005-05:00

Natixis economic research has a very sharp man in Patrick Artus, who has put out a research piece which describes a problem that many sensible investors face today. What happens when investors no longer want to buy anything?s (10 December 2009 - No. 542). Patrick asks "Could investors reject all asset classes?", and concludes yes. Today, one could imagine a situation where investors no longer

Why no BDCs?

2009-12-16T21:18:00.003-05:00

One thing that is odd in the rush to file S-11's for new REITs, is the lack of filings of N-2's for new business development companies. So far just three have filed during this landrush to the SEC. The public markets have lost two BDC's (ALD and PCAP) to mergers, along with relatively little capital raising from secondary offerings. This doesn't make sense since the credit conditions in the

S-11's Three fresh today.

2009-12-14T22:35:00.003-05:00

Today had four S-11's (Registration of securities issued by real estate companies) uploaded to the SEC's edgar system. If we ignore the private reit, we find...Terreno Realty Corporation. (TNRO) -- Internally managed (ex AMB folks) reit targeting industrial properties. Industrial is an odd sector because the key issue is scoring good locations. The properties themselves tend to be cheap to build,

Why new is better than old, when it comes to REIT ipo's.

2009-12-12T21:16:00.004-05:00

Way back when, (September 23 2009) Tom Petruno of the LA times wrote about the troubles of starting up a new REIT as a blind pool offering (Real estate vulture Colony Capital set to launch REIT IPO and Why investors are balking at IPOs of new vulture mortgage funds). Buying into such an offering is making a macro bet that there are good investments out there, and a micro bet the management team

The new generation of mortgage REITs

2009-12-10T21:48:00.008-05:00

So when I last posted, the mortgage crisis was just beginning. And I thinking it was a good time to get into the banks. Because they were looking pretty cheap, relative to their performance over the past 8 years or so at the time. Pretty much all the old line players in commercial mortgage REIT space were wiped out, or never fully recovered. (CT, AHR, CRZ, JRT, GKK, CBF, NCT). Which is not to

Harsh Punishment and Bank Stocks KBE

2007-08-09T16:55:00.000-05:00

Too much hard work getting this small business off the ground has kept me away from blogging, but I hope to return to a more normal schedule soon. If you really want to punish someone force them to keep a diary.All in I think this is an interesting time for investors as recent market dislocations have created some impressive buying opportunities, especially for stocks tainted with subprime

The Sub-prime of Life.

2007-03-05T19:21:00.000-05:00

The subprime meltdown has been in full swing ever since February 7th 2007, when HSBC (HBS) raised subprime loan loss reserves by 20% and New Century (NEW) announced a net loss for 4Q06 and accounting probe to determine how big that loss was.On New Century filed a form 12b-25 with the SEC explaining why it could not file form 10-K on time. The grimmest part of this filing was:In the event the

Value Line 100 Fund to be reorganized into ETF

2007-02-07T07:20:00.000-05:00

First Trust has filed with the SEC a plan to reorganize the First Trust Value Line 100 Fund (FVL) into a new ETF (FTA). This is the second direct closed end to ETF conversion done by first trust. The new ETF will track an index of the 100 stocks ranked #1 by Value Line for timeliness, reconstituted monthly.The old FVL fund tracked the VL100 stocks in real time as they were updated every week.

Blumberg on REITs.

2007-01-24T07:26:00.000-05:00

GlobeSt.com: REITs will also figure in your strategy. What structures are you looking for?Blumberg: We're not going to buy a $10-billion REIT. We'll be looking for specialty office REITs that are regionally focused--anywhere where we have market interest. For many years, I've been talking about REITs and takeovers. REITs are sitting ducks. They can't store cash, they can't buy back their shares.

TD Ameritrade gets in the target date lifecycle game.

2007-01-14T19:56:00.000-05:00

Behold, TD Ameritrade's investment advisory group "Amerivest" has filed with the SEC for the introduction of a series of Target Date ETF's.Independence 2010 ETFIndependence 2020 ETFIndependence 2030 ETFIndependence 2040 ETFIndependence In-Target ETFThese funds will track custom indexes from Zack's, designed to outperform corresponding Lipper target benchmarks.Once each Underlying Index is

iShares FTSE NAREIT: REIT indexes you can use

2007-01-05T16:03:00.000-05:00

The iShares trust has filed with the SEC for the creation of ETF's that will track FTSE/NAREIT indexesiShares FTSE NAREIT Residential Index FundiShares FTSE NAREIT Industrial/Office Index FundiShares FTSE NAREIT Retail Index FundiShares FTSE NAREIT Mortgage REITs Index FundiShares FTSE NAREIT Real Estate 50 Index FundThe current set of REIT ETFs (ICF), (RWR), (VNQ) all own on Real estate

Wishing everyone a happy new year.

2007-01-01T11:43:00.000-05:00

Just wanted to post a thank you to my loyal readers and wish everyone a happy new year. We are thankful all the good things that happened to us, and all the bad things that did not.Looking forwards, Market Participant, should return to a more frequent publishing schedule sometime in late January. I'm currently in the process of starting a new business, which takes up a good bit of time, but the

Duplicate Shares

2006-12-24T09:40:00.000-05:00

Roger Nussbaum has a post up on ETF Duplication, questioning who powershares seems to have duplicated funds. A number of "basic 10" sector funds are available in both RAFI and Intellidex formats. My take is that powershares is letting people choose their alpha. You can get it from the Intellidex black box, or from the fundamental weighting hypothesis.Some investors are going to want a strictly

Thoughts on fearless predictions. It's too soon to tell.

2006-12-17T09:13:00.000-05:00

On September 26th 2006, I posted a set of predictions about the housing market, US Macroeconomy, and Investment themes. Lets run through them how see how they panned out so far. US Housing MarketIt's clear that the general direction of US housing is down, and it is taking the US economy with it. The main questions at this point relate to "how much" and not "if". First prediction: "Mild national

Ocean Tomo 300 Patent Index

2006-12-08T08:15:00.000-05:00

One interesting development in the past month is the promulgation of the Ocean Tomo 300 Patent Index and an ETF (tentatively (OTP) ) from Claymore that will track this index.Ocean Tomo's index aims to quantify the value of intellectual property owned by companies and then create an index of companies with large intellectual property assets. The index is then further stratified by investment style

Aegean Marine Petroleum (ANW) Risk Factors

2006-12-03T19:37:00.000-05:00

Proceedings concerning our founder and largest shareholder, Dimitris Melisanidis, could generate negative publicity for us, harm our reputation and adversely affect our business and our stock price.Our founder and largest shareholder, Dimitris Melisanidis, has played a key role in the development and success of our business. Mr. Melisanidis is a prominent figure in Greece and has been the subject

Will the CDO Machine Destroy Public Equity? Part I

2006-11-29T13:15:00.000-05:00

Christopher Whalen wonders Will the CDO Machine Destroy Public Equity?". The first half of his article is about Credit Default Swaps and if they are symptomatic of something.Briefly, an introduction to the Credit Default Swap CDX market. CDX are contracts for insurance on bonds. In exchange for a fixed premium you can purchase protection against default on a notional $10 million of bonds. A CDX

His plan proves successful

2006-11-25T22:00:00.000-05:00

His plan proves successful and Judy agrees to tolerate him as "her new man," securing Victor's place high atop the neighborhood's social pecking order. At the same time, Obi-Wan's investigations lead him to a water planet where he discovers the creation of an army unlike anything he has ever seen before. The result is the only thing it can be, given its market and the Dobbs character; a lame

An investment opportunity with sleepover possibilities

2006-11-25T09:48:00.000-05:00

"There’s an overriding sense of impermanence. This is a fashion choice. No one will buy one of these gloomy spaces and say, ‘I want to have kids here. I want to grow old and die here.’ This is simply an investment opportunity with sleepover possibilities."Condos of the Living Dead by A.A. Gill, October 2006I'm reminded of a quote from Warren Buffet that you should only buy something that you'd be

Theft in the Afternoon: the Reckson Associates Realty (RA) story.

2006-11-20T08:23:00.000-05:00

Shares of Reckson Associates Realty (RA) have lifted on news that a syndicate of Carl Icahn and Macklowe Properties plan to offer $49 in cash for RA shares compared to SL Green's (SLG) current offer of $31.68 in cash and 0.10387 of an SLG share. SLG's offer was worth $43.31 a share at the time, being a slight discount to Reckson's closing price of $43.95 at the time the deal was announced.SL

PID and Tiparillos

2006-11-09T16:50:00.000-05:00

A reader asks: Hi MP. I found you when I was searching for info on [PowerShares International Dividend Achievers] (PID). I am intrigued with it, but I've never bought anything outside my ROTH or 401k before. Do you think it's a bad idea for a taxable account? Investment returns stem from capital gains and dividends. Under the current tax structure long term capital gains and qualified dividends

Douglas Emmett and the 1.4 Billion Dollars.

2006-11-04T09:56:00.000-05:00

Douglas Emmett (DEI) is attracting the attention that biggest REIT IPO of 2006 does deserve. DEI's portfolio of trophy office property in Los Angeles and Honolulu is unmatched. The company is profitable from the get-go with prospects for internal growth. DEI is going to become a core holding for investors in BIGREITs: the large actively traded real estate investment trusts that make up the Cohen

Plan for next week

2006-10-30T09:40:00.000-05:00

It has been a terribly busy week, so I apologize for the lack of posts. Depending on my schedule over the next few days expect to see some new posts on new topics. As always readers are invited to comment, and I'll do my best to respond. Continuing my series on fixed income investments, by talking about TIPS and then moving on to more exotic fixed income securities. I see TIPS as one of the best

Like an old pair of jeans that you won't give up

2006-10-28T14:51:00.000-05:00

Richard DeKaser, senior vice president and chief economist for National City Corp (NCC), predicts 40 percent of the nation's housing is at risk of losing value, but the areas are definitely in low employment, over-built regions. He said consumers who are in the market for a home should forget about stretching as far as they can for a bigger and better home and be more realistic about what they

On SLX the Market Vectors Steel ETF

2006-10-21T10:54:00.000-05:00

On October 16th 2006, Van Eck Global launched the Market Vectors Steel ETF (SLX) based on the AMEX Steel Index. This follows the IPO of the Market Vectors Gold Miners ETF (GDX) on June 22 2006. Since then the gold miners ETF has gathered $282.4 million in assets. As I predicated, Van Eck would catch the ETF bug and start more hard asset ETFs.The core motivation for investing in steel is capturing

The Case for Bonds: Part II In the Aggregate

2006-10-18T08:35:00.000-05:00

The current bond ETFs can be split into two groups. The treasury yield curve group and the asset class groups. iShares Lehman 1-3 Year (SHY), iShares Lehman 7-10 Year (IEF), and iShares Lehman 20+ Year (TLT) cover the short, intermediate and long portions of the treasury yield curve. Unlike bonds themselves, ETFs are perpetual instruments, and so you can't ignore market price risk. Because of the

The Case for Bonds: Part I - Only the boring survive

2006-10-11T08:52:00.000-05:00

2006 has seen the introduction of many toys for the "Global Macro Hedge Fund in my E*Trade Account" crowd. ETF sponsors have wrapped all sorts of exotic assets such as foreign currency, precious metals, emerging markets, commodities, and short positions into ETFs. The previous obscurity of these asset classes kept them safely out of the hands of retail investors.The main asset class that the fast

Look at XME !!

2006-10-05T19:58:00.000-05:00

A mere one day after I mention that XME at 39.96 could be cheap on October 4th. Today, October 5th, the entire metals sector goes wild and rockets up 5.23% in a single day.Big drivers for the sudden jump metal stocks include bullish comments about US Steel (X) and talk of a takeover of British Steel (CGA) by Tata Steel. Excitement about steel spread to Nucor (NUE), AK Steel (AKS) which may

The Second wind of SPDR Metals and Mining XME

2006-10-04T21:22:00.000-05:00

Recently I have been looking at the SPDR Metals and Mining (XME). This ETF represents an equal weighted index of stocks involved in metals and mining. The fund is mostly base metals miners, together with a few steel makers, coal miners and gold miners.This nifty chart, shows the performance of XME over the past three months. XME has followed the path of iShares Goldman Sachs Natural Resources ETF

Douglas Emmett DEI and the 1.1 Billion Dollars

2006-10-03T16:07:00.000-05:00

All systems go at Douglas Emmett (DEI), as the REIT plans an IPO of 55 million shares at between $19.00 and $21.00 per share. This pricing implies an IPO takedown of $1.1 Billion dollars for a portfolio of trophy office/residential properties located in Los Angeles and Honolulu. See more background about DEI here.DEI plans to pay a dividend of $0.70/share, equivalent to 3.5% yield on a $20

Equity Risk Premium

2006-09-29T07:04:00.000-05:00

[This week] Stock prices are being driven by one simple factor: a drop in risk adverseness. Over the past several weeks, investors have become more concerned with beating benchmarks than with wealth preservation.Charles Rotblut, posting on the Zacks blog, September 28, 2006

Fearless predictions

2006-09-26T22:28:00.000-05:00

My fearless predictions about the housing markets and other things.Soft to bumpy landing for housing marketMild national housing recession with regional hard landings in overbuilt areas.Reserve army of unsold housing depresses housing prices for longer than generally expected.Waves of opportunistic refinancing as people switch out of ARMs and lock in fixed rates.Widening of spreads between credit

Claymore Zacks Yield Hog CVY

2006-09-25T13:03:00.000-05:00

The Claymore/Zacks Yield Hog ETF (CVY) has accumulated $5 million in assets in its first week of trading, since September 21, 2006. This the underlying Zacks Yield Hog Index replicates the strategy of an aggressive equity income investor. 50% or more of the the portfolio is made up of classical dividend stocks. While the remaining 50% is allocated between various other high yielding equities such

What makes Chindia run?

2006-09-22T13:39:00.000-05:00

According to Morgan Stanley's Andy Xie, participant in the "The Nature of Growth in China and India: Challenges Ahead and Implications for the Rest of the World," panel at the 2006 IMF/World Bank Annual Meeting in Singapore: The secret is fearless liquidity.This [positive] sentiment bubble will likely burst along with the end of the growth cycle, in my view. The current global cycle is all about

David W. Tice: Quote of the day

2006-09-20T19:11:00.000-05:00

We just papered over the problem, creating more debt to keep the party going. It's like a group of partygoers who are drunk at 11 p.m. You can give them more tequila, and they'll be really drunk at 4 a.m., but that doesn't mean they weren't still drunk at 11. From 10 Questions: Prudent Bear Fund Manager David Tice 05/06/2002.

TIP: never pay retail for Real Return Funds

2006-09-20T17:35:00.000-05:00

With a free premium day pass from morningstar.com, I had chance to take a peek into Morningstar's mutual fund ratings. One fund that Morningstar brought to my attention was the Harbor Real Return Fund (HARRX). Harbor Fund farms out the management of its mutual funds to proven subadvisors while keeping costs down at the company and fund level.This strategy really shows in Harbor Real Return Fund

Emerging prudence about EEM Emerging Markets

2006-09-18T14:25:00.000-05:00

Martin Hutchinson, who writes the "The Bear's Lair" column for PrudentBear.com his most recent (September 16 2006) column is The James Jesus Angleton economy. It is about Russia and dangers of an economy that runs for any purpose but enrichment.Russia is said to be keen on inviting foreign capital into its electric power generators; an ambition that at first sight conflicts with its

Seth Klarman Quote of the Day

2006-09-14T20:00:00.000-05:00

No crystal ball is required for investment success. Smart investors stick to investments within their circle of competence, with which they are comfortable whose businesses they have the capability to understand. This does not require accurately divining the meaning of the markets pattern. You dont need an opinion on every security. And you dont need to know which way to lean, following every

SPG, Simon Property Group: Very nice but you paid too much.

2006-09-13T09:32:00.000-05:00

A breathless article from Reuters talks about renewed interest in Retail Mall REITs, especially Simon Property Group (SPG). Two different analysts: David AuBuchon of A.G. Edwards and Murat Sensoy of SSgA/Tuckerman contend that Simon Property (nifty chart) is not overvalued but secretly and unfairly undervalued. Well maybe, but probably not. Compared to bubbly specimens such as SL Green (SLG) or

SHLD Geometrically unsound Sears

2006-09-08T11:58:00.000-05:00

Recently Jim Cramer has been promoting Sears, claiming that Sears is wonderful. But Sears has a very deep problem, and no amount of share buy-backs can mask that. The problem is that Sears sucks. There isn't a compelling reason to shop at Sears instead of somewhere else. Target (TGT) and Wal*mart (WMT) have roughly 90% of the merchandise that a typical Sears would carry, and they sell it for less

The first three sentences of the first five pages

2006-09-05T09:20:00.000-05:00

National City Bank's (NCC) Private Client Group serves a clientele of people who do not have to balance their checkbooks. The PCG publishes a weekly investment newsletter with the masthead "The A.R.T. of Investing". NCC defines ART as:After Tax ReturnsRisk ControlTime Horizon These three concepts are the first three sentences of the first five pages of investment success.After Tax

ICF Realty Majors a bargain at half the price

2006-08-30T16:06:00.000-05:00

Barron's recently published an interview with Marty Cohen of Cohen & Steers (CNS), an asset manager that specializes in REITs and Utilities. The subject of the interview was REITs. Marty Cohen carefully danced around the subject of the massive bubble in large cap equity REITs. The bubble is nicely captured by the iShares Cohen & Steers Realty Majors (ICF). This nifty chart shows the staggering

With wisdom comes silence.

2006-08-22T14:52:00.000-05:00

To be successful at investing, you have to constantly reexamine your starting assumptions with time. This is because you are constantly confronted with choices. Over time you begin to realize that not all choices are of equal importance and that for many important choices there is really no conclusive information to inform your decision. So you stay silent and watch. There is always backchatter

A brief refresher

2006-08-20T12:56:00.000-05:00

Willis Stein & Partners has retained Evercore Partners (EVP) and Lehman Brothers (LEH) to help evaluate a possible sale of Ziff Davis Holdings, a New York-based publisher of titles like PC Magazine, eWeek and CIO Insight. Ziff Davis reported $5.7 million in EBITDA for Q2 2006, on revenue of $45.2 million. Willis Stein acquired the company in 1999 for $780 million from Softbank.Just a reminder

Shareholder Friendly

2006-08-17T10:51:00.000-05:00

Bloomberg has a fascinating article today (by Caroline Salas and Aparajita Saha-Bubna) on investment grade bonds that are getting hurt as companies increase leverage to finance special dividends and stock buybacks. The conversion of equity into cash for shareholders reduces the amount of junior capital supporting the senior bonded debt. From an academic finance perspective, this is an example of

Springtime for GNC

2006-08-14T14:48:00.000-05:00

Today, GNC has cancelled its proposed IPO. According to Renaissance Capital analyst Melanie Hase, GNC's sponsors wanted to price the shares between $16 and $18, but IPO investors were only willing to pay $13 to $14.The post IPO GNC would have large and notable defects in its capital structure. Since the beginning of 2006, the IPO market has cooled to post-LIPOsuction IPO's. The Post-LIPOsuction

Everyday I wake up to be new

2006-08-14T13:32:00.000-05:00

The current Friday linkfest on Abnormal Returns, is partly about two problems that are linked. The first problem is that active investing is very hard. The second problem is that quantitative analyses aren't as helpful as commonly thought. Why is it not helpful? Mostly because the economic past is not very useful in predicting the near future. And so data about the economic past is not very

Aircastle AYR in the sky with dividends

2006-08-08T21:43:00.000-05:00

Of all the IPO's this week the most interesting is Aircastle Ltd (AYR), Air Castle was started by Fortress Investment Group, to participate in the lucrative world of aircraft leasing. In October 2004, Fund III and certain coinvestors formed an aircraft investment and leasing company to take advantage of attractive buying opportunities within the aviation sector. Particularly among the major US

DEI Douglas Emmett and the billion dollars. A REIT story.

2006-08-07T08:17:00.000-05:00

The IPO of Douglas Emmett (DEI) will be the largest equity REIT IPO of 2006. DEI specializes in owning Class A office properties in downtown Los Angles, California and Honolulu, Hawaii. In DEI's own words:We are one of the largest owners and operators of high-quality office and multifamily properties in Los Angeles County, California and have a growing presence in Honolulu, Hawaii. Our presence

Water Industry pumping on all cylinders

2006-08-03T22:05:00.000-05:00

2006 is going to be a banner year for the water industries. Major players are reporting earnings this week, and the future looks bright indeed. Previous posts have outlined the case for investing in the Palisades Water Index ETF (PHO), as well as some global water stocks with US listed ADRs. Several key players announced earnings on August 2 2006, to good reception. Taken as whole, the earnings

Growth Investing :: Recapitulation Part III

2006-08-01T16:42:00.000-05:00

In the first and second parts of this series on growth investing we looked at two elements that are hallmarks of a successful growth company. The ability to grow turnover (sales generated by each unit of operating assets)The ability to earn excess economic profits.Using just these two ideas we can see that the ethanol industry is not populated by growth companies. Many companies in the industry

The evolution of the credit cycle.

2006-07-31T12:34:00.000-05:00

The most recent FDIC Outlook (Summer 2006) is now available and highly recommended. This quarter's issue is devoted to topic of credit cycles. One of the most fascinating things about finance is how the markets constantly forget and relearn the lessons of the past. The biggest macro-economic issue facing the US economy is the current state of the credit cycle. The notion of the credit cycle or a

None of such proceeds will be used to further invest in our business.

2006-07-29T17:04:00.000-05:00

Because most of the proceeds from this offering will be used to pay a dividend to our current stockholders, only a portion of the proceeds will be used to repay our existing debt and none of such proceeds will be used to further invest in our business.The net proceeds from the sale by us of the shares of common stock being offered hereby, after deducting underwriting discounts, will be

Growth Investing :: Monopoly Matters Part II

2006-07-27T11:44:00.000-05:00

If sales growth is driven by commensurate growth in operating assets then nothing is accomplished. The company is bigger but not better. Increased sales from the same asset base, are a sign that assets (including human assets) are used effectively. Sales driven growth companies are steadily increasing their total asset turnover, year over year. Declines in total asset turnover are a hallmark of

Growth Investing :: Future Market Leaders Part I

2006-07-26T16:21:00.000-05:00

ThinkEquity Partner's Michael T. Moe has a new post up on the ThinkBLOG about some of what is important in growth companies. ThinkEquity Partners is an investment bank specializing in "companies in the growth sectors of the economy". In some respects growth investing is value investing in the future rather than value investing in the present.While it is not my style, learning from different

A currency share of blue sky

2006-07-21T15:54:00.000-05:00

I don't see the attraction of the currency ETFs. Each of the currency ETF's consists of 100 units of the base currency deposited in a savings account with the London branch of JPMorgan Chase Bank. Each deposit account will pay slightly less than the currency overnight interest rate (0.27% less for Euro shares (FXE), 0.40% less for the Swedish Krona trust (FXS) ). On top of being paid less than

What to look for in IPOs. Part II

2006-07-20T11:18:00.000-05:00

Continuing this series on IPO investing. (Part 1), this chapter will talk about different types of initial public offerings.Understanding the motivation behind the IPO provides context to the S-1 (IPO prospectus). Because motivation is qualitative, understanding it gives you the nimble investor, comparative advantage over quantitative market participants.The big question behind every IPO is why

On Vacation :: WooHoo!!

2006-07-08T14:47:00.000-05:00

Loyal Readers,I'll be off on vacation, traveling around the Mediterranean till early August. Thankfully I'll be away from computers during that time, so this site will be updated rarely if at all. To be alerted to any updates, I suggest subscribing to my RSS feed, by clicking this icon. Market Participant.

Reply to Dan McCarthy in re Covered Calls.

2006-07-06T15:15:00.000-05:00

Dan McCarthy writes up an interesting reply to my fisking of a spam from Bernie Schaeffer promoting buy-write.I'll begin by pointing out that core of my critique is of the buy-write strategy. That is the strategy of buying stocks for the purpose of writing calls on them. This is bad idea for two reasons. The first reason is that you end up chasing volatile stocks while limiting (censoring) the

What to look for in IPOs. Part I

2006-07-04T08:37:00.000-05:00

This series will explore some thoughts about IPO investing. IPO investing is about taking advantage of your ability to outrun the institutional investors and so take advantage of pricing inefficiencies. This isn't hard to do, because most institutional investors rely on sell-side research, which is squelched during the pre and post IPO quiet period. Unless an IPO company is famous, (like J-Crew)

Moving on up in the capital structure

2006-06-29T18:23:00.000-05:00

The recent increase in the awareness of market volatility has left people asking the same question that Vladimir Lenin asked in 1902. What is to be done?The simplest answer is to move up in the capital structure by owning bonds. Because of uncertainty about the movement of interest rates, the best choice is something that is fairly insensitive to interest rate fluctuations. Sensitivity to

Maintaining speed in a falling market with covered calls

2006-06-25T16:44:00.000-05:00

I received a funny email today from Bernie Schaeffer of Schaeffer's Investment Research. The subject was "Maintain speed in a falling market - for only $195". Personally, I would not pay $195 to maintain speed in a falling market. To slow down or even reverse in a falling market would be worth paying for, but you can maintain speed for free.Bernie Schaeffer is yet another investment newsletter

New ETF's from Claymore/Robeco

2006-06-22T12:03:00.000-05:00

Claymore continues its drive to introduce new ETF's with the introduction of two ETF based on quantitative indexes from Robeco Group. The two funds are the:Claymore/Robeco Developed International Equity PortfolioClaymore/Robeco Developed World Equity PortfolioThe "Developed International Equity" is Global ex-US fund, while the "Developed World" includes the US. Country weightings are based on

Hexion (HXN) -- Despite our substantial indebtedness

2006-06-21T20:18:00.000-05:00

The more we become leveraged, the more we, and in turn our securityholders, become exposed to the risks described above under “Our substantial indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry and prevent us from fulfilling our obligations under our existing or future

Savings account interest rates jump higher.

2006-06-20T15:39:00.000-05:00

Continuing the recent trend towards even higher savings account yields. Sveral banks have raised rates this months, in some cases even exceeding the yeild on the 90-Day TBill. Because bank deposits are FDIC insured, they are backed by the full faith and credit of the United States, same as treasury bonds. Savings accounts are 100%risk free, and the returns are getting very competative with other

EEM and EFA, SPY and VIX

2006-06-19T19:01:00.000-05:00

A while back there controversy at seekingalpha after Michael Panzer posted an innocuous chart of iShares Emerging Markets (EEM) vs iShares MSCE EAFE (EFA) suggesting that the performance gap between EEM and EFA was narrowing. I’ve found that the solution to most problems in life is muddy up the water, and statistics are great way to do that. Thanks to data from Yahoo Finance and Software from

CNBC's amazing google clickfraud video

2006-06-14T17:06:00.000-05:00

A specter is haunting Google. Google derives the majority of its revenues from selling tiny text ads. Lots of internet publishers publish tiny text ads. Since advertising is sold on cost-per-click basis, the more clicks the more revenues for (GOOG) and publishers. Some unscrupulous publishers have tried to accelerate the ad clicking process with

New ETFs from Claymore, Zacks, and Sabrient

2006-06-13T11:11:00.000-05:00

Claymore has filed a preliminary prospectus with the SEC covering five new proposed ETFs:Claymore—BNY Brazil, Russia, India And China (Bric Select) PortfolioClaymore—Sabrient Insider Sentiment PortfolioClaymore—Sabrient Stealth PortfolioClaymore—Zacks Sector Rotation PortfolioClaymore—Zacks Yield Hog PortfolioThe Claymore—BNY BRIC select fund covers US listed ADRs of companies based Brazil,

What's the matter with GNC

2006-06-09T21:42:00.000-05:00

Continuing on a previous theme of LIPOsuction. We present the latest debutante, GNC Corporation.According the S-1 filed with the SEC GNC is the world's largest global specialty retailer of health and wellness products, including vitamins, minerals, herbal, and specialty supplements. As of March 31, 2006, there were 5,817 GNC locations globally, with 16% of revenues comming from franchised stores.

Yay! More Powershares RAFI funds on the way!

2006-06-09T10:56:00.000-05:00

Powershares Capital Management has filed a prospectus with the SEC for new series of ETFs based on the RAFI's Fundamental Indexation methodology. Fundamental Indexation uses quantitative measures of firm size, rather than market capitalization to build the index. This avoids the unintentional overweighting of companies with market caps in excess of their economic value. RAFI offers a reprint of

We got hurt by not speculating

2006-06-07T18:58:00.000-05:00

We underperformed in 1999 not because we abandoned our strict investment criteria but because we adhered to them, not because we ignored fundamental analysis but because we practiced it, not because we shunned value but because we sought it, and not because we speculated but because we refused to do so. In sum, and very ironically, we got hurt not speculating in the U.S. stock market.Seth Klarman

Liposuction is fashionable for debutantes

2006-06-05T21:28:00.000-05:00

I guess I should stop pointing at flaws in l’affaire Vonage. But there are so many good lessons in it. Of course the main lesson is not to participate in other people’s exit strategies.If current owners are exiting, why should you enter?In the case of Vonage, most of the company (80% of it)was owned by several private equity funds. A small IPO of 20% of the company is just a tool for “price

Vownage: first vonage VG lawsuit filed.

2006-06-05T03:28:00.000-05:00

The law firm of Motley Rice LLC has filed a class action lawsuit in the United States District Court for the District of New Jersey on behalf of purchasers of the common stock of Vonage Holdings Corp (VG). The complaint alleges the Vonage and certain named officers and underwriters violated the federal securities laws by publishing a defective registration statement and misleading prospectus. A

iShares GSCI Commodity Trust GSG files prospectus

2006-05-31T13:05:00.000-05:00

Barclay’s iShares filed a prospectus for the iShares GSCI Commodity Indexed Trust. (GSG) The fund will invest in CERF futures which are linked to the total return of the GSCI Excess Return Index.The GCSI-ER index is calculated as the return from actually investing in the GCSI commodities index. The excess return index accounts for the effects of rolling futures contracts, and of earning interest

The Vonage VG to the bottom of the Sea.

2006-05-28T22:18:00.000-05:00

The recent Vonage (VG) IPO (May 24, 2006) is sign that the IPO market has wised up since 1999. I'm sure that Citibank (C), the lead underwriter for the offering was thinking of H. L. Mencken's famous quote:No one in this world has ever lost money by underestimating the intelligence of the great masses of the plain people. Sadly for Citibank, the great masses were not interested in owning shares

Pacific Ethanol PEIX PIPE deal,

2006-05-26T08:21:00.000-05:00

Today Pacific Ethanol (PEIX) has just completed a PIPE (Private Investment in Public Equity) deal, that sold 5,496,583 shares to private investors for $26.38 along with warrants to buy a further 2,748,295 shares at $31.55 in six months.This deal immediately increases shares outstanding by 17%, and would increase shares out 26% if the warrants are exercised. The stock market took a very dim view

Van Eck GDX releases Briefing Book on Gold Miners index ETF.

2006-05-23T09:57:00.000-05:00

Van Eck Global, sponsor of the new GDX AMEX Gold Miners ETF, has rung the AMEX opening bell, as shares of GDX started trading yesterday.Van Eck now has a homepage for GDX, which includes a briefing book on the ETF. Page ten of the document begins describing the investment case for GDX.The GDM index has 44 components, which makes it more complete and diverse than other Gold focused indexes (^HUI

Useful site of the day.

2006-05-23T09:32:00.000-05:00

Form 4 Oracle wins the coveted useful site of the day award. This handy website presents data from SEC form 4's, which disclose insider transactions. The site is both elegant and fast. For example you can compare insider sales for Google (GOOG) and Pacific Ethanol (PEIX)

PIMCO's Bill Gross and the rise of savings accounts

2006-05-22T19:10:00.000-05:00

Global inflation has remained low, but the combination of U.S. consumption propelled by a multi-year housing boom, Chinese reciprocation in the form of massive investment spending, and the positive knock on effects in Japan and numerous "emerging" economies produced surging global growth that has caused central banks and indeed private investors to enforce higher real yields as recompense. Bill

The lush life of an ethanol bubble

2006-05-20T23:52:00.000-05:00

Scott Burns, an analyst at Morningstar has written a nice article about the current excitement over ethanol. These days the stock market thinks that any company that can link itself to ethanol has future filled with wine and roses. Scott makes a sobering point, that there is a decent amount of capital infrastructure yet to be built before ethanol can be widely used. Beyond the obvious short-term

Bill Cara on GDM Van Eck Gold Miners ETF

2006-05-19T12:58:00.000-05:00

Bill Cara is not amused by the new Gold Mining ETF (GDM) sponsored by Van Eck Associates.Bill Cara points out an a very important issue with the recent development of Metal/asset backed ETFs. The question is if the ETF is creates demand for itself. For several months before the iShares Silver Trust (SLV) came online, silver prices rallied on the expectation that the creation of the silver ETF

MWA Mueller Water Products IPO, a possible stub?

2006-05-18T15:06:00.000-05:00

Water has become the hottest investment since Texas tea, that is, Oil, black gold! Tiny water treatment company Basin Water (BWTR) initially planned for 5.0 million share IPO at $8-$10 a share. Demand for shares was so great, that the company upped the IPO by 20% to 6.0 million shares and raised the price $12 a share. Shares are currently trading on the NASDAQ for $16.Next up on the water IPO

PEIX Pacific Ethanol insider sales, awfully familiar

2006-05-17T20:20:00.000-05:00

Insiders at Pacific Ethanol (PEIX) are selling lots and lots of shares. However the insiders at Pacific Ethanol, are insignificant gnats compared to the real masters of inside sales.Insider sales are excellent sign that a company is overvalued. With Pacific Ethanol trading with a forward P/E ratio of 182.56 and 37.10 times book value. PEIX is overvalued, and the smarter money knows that. Google

Deconstructing PKB Building & Construction Portfolio

2006-05-17T14:22:00.000-05:00

Recently Roger Nusbaum wrote an article for TheStreet.com about new ETF's that cover the homebuilder sector: Homebuilders SPDR (XHB) and Dow Jones U.S. Home Construction Index Fund (ITB). Before these funds existed there was the Powershares Dynamic Building & Construction Portfolio (PKB). Many people complained that (PKB) didn't have enough concentration in homebuilders to be an effective proxy