Sunday, July 26, 2015

Articles of interest

A major Burger King franchisee thinks that 3G overpaid for the company (h/t Glenn Chan):

They received an offer for Burger King that was much more than our group [of buyers] thought the brand was worth. 3G bought it for basically $4.5 billion. The investment groups that originally bought Burger King – Texas Pacific and Goldman Sachs – had only paid like $1.4B...

3G came in and was willing to pay a big premium, $25 a share for Burger King. We were shocked at that.

Auto lending
According to Bloomberg, "the rejection rate for auto loans over the previous 12 months fell to 3.3 percent in June, down from 10.3 percent in October 2013."

Arguing against efficient-markets triumphalism, Robert Shiller writes that "Maybe Buffett’s past investing style can be captured in a trading algorithm today. But that does not necessarily detract from his genius. Indeed, the true source of his success may consist in his understanding of when to abandon one method and devise another."

According to The Globe and Mail, Canada is experiencing a housing boom even though its "working-age population... is growing at the slowest pace on record, a paltry 0.4 per cent or just one third of the long-term average."

Inflation and deflation
Michael Pettis argues that "[U]nder certain conditions lower interest rates and depreciating currencies may actually exacerbate deflationary pressure" and that these conditions exist in China today.

Investing ideas
Back of the Envelope Investing analyzes Ferronordic Machines, a Volvo construction equipment dealer in Russia. The analysis is part of a series called "cheapest stock of the week" that looks at cheap stocks from (primarily) Scandinavia and Finland.

Investing strategies
Bear of Burrard Street describes how he finds investment ideas, with an emphasis on special situations, event-driven ideas, and cloning.

Market Wizards
After turning $2000 into a reported $200 million in the 1980s, Richard Dennis went broke in 1990 and had to borrow money to pay a legal settlement. Likewise, Gary Bielfeldt incurred $172 million in losses in the late 1980s and was stuck with a large tax bill that he couldn't pay.

Describing the dynamics of the shipping industry, Credit Bubble Stocks writes that "Ships have very high skew because the supply is inelastic enough... that the rates an owner can charge will have huge swings. Huge swings attract speculators with borrowed money."

Fox Sports argues that cord-cutting and a la carte cable pricing threaten ESPN's business model. As ESPN's subscriber count declines, so will its ability to buy broadcasting rights, subjecting the network to a vicious cycle.

"Doggydogworld" argues that not only is the market above its historical average valuation, the historical average has been inflated by a long-running bubble. He writes, "The real issue is not how far we sit above the 'long term' trend, but how far our long term trend is above the equilibrium level."