It’s Shocking Because It’s Normal

328 views

Today BAS was up 4.5%. I’d normally be elated by this kind of action, but I am not.

Because last Wednesday BAS was 20% lower. And the week before that BAS was where it is today. And the week before that BAS was 20% lower.

In fact I’d say generally speaking that watching a stock ratchet between $5 and $8 is a generally tempestuous experience that does things to mans sanity. Dark things. Quiet things.

Dark, quiet things.

I want those dark things to be done to oil short sellers now. He says to himself, slowly rocking in his 9th floor prison.

OMAB 4Q Results Were Strong

2,295 views

I purchased OMAB, a Mexican airline company, is December of last year. OMAB has been putting up strong performance numbers and yet remains very much off the radar of most investors. They have control of some key geographical regions; hotspot destinations for vacationers.

Passenger traffic grew greater than 14% alone in the fourth quarter of 2014, year over year. The 2014 year showed passenger growth of greater than 10% – accelerating into year end.

Income from operations grew 56% in the fourth quarter of 2014 year over year, and total 2014 income increased 23%. Revenues grew 6% in the fourth quarter versus 9% for the 2014 year. Adjusted EBITA were up 14% in the fourth quarter and up 13% year over year.

OMAB is growing fast and aggressively and yet is still priced very competitively.

Thanks to lower fuel prices, OMAB is blessed with strong wind behind their sales. You could also reasonably make the case that stronger consumers are finally making time for long put-off vacations. OMAB is growing amenities in airport locations to expand non-core revenue.

Naturally I am looking forward to see how they do in 2015.

Note: I apologize for being somewhat absent the past few weeks. My wife had some health complications which have consumed vast amounts of my time.

BAS Earnings Breakdown

3,133 views

I am watching BAS very closely, for reasons that should be plain. I dug into the most reason filing and have a few observations.

BAS lost $0.45 per share in the most recent quarter ($0.56 per share after further impairment of goodwill), driven by business disruption for lower prices and extreme cold weather. However, this loss was driven entirely by write downs and does not appear to have consumed cash.

Without asset impairment BAS had earnings of $0.11 per share. As of right now BAS operations appear to be conserving cashflow well. The most recent quarter, expenses exceeded revenues by about $10 million. BAS has $59.5 million in depreciation and amortization, leading me to believe that BAS operations are still cash flow positive.

BAS is aggressively cutting into payroll, reducing employees by 10% in the most recent quarter. They are negotiating with their customers, offering concessions to defend business, and even managed to mildly grow revenues in the most recent quarter as a result.

I do not expect BAS to hold this performance. That is asking too much. They are currently expecting revenues to decline by 21% to 26% sequentially. That is an enormous drop and more losses should be expected.

For the moment, BAS is well capitalized. They have $80 million in cash and an addition $233 million in revolving credit.

It is my belief that BAS will weather the storm. I trust their management to make the right moves here; they have done so before so this is not new territory for them. They are watching cash flows closely and will keep expenses in or around those levels to preserve the business.

I believe that BAS will succeed in keeping cash burn to some level that staves off any insolvency concerns for some years, thereby allowing them to outlast the recent downturn in oil prices. I also believe that BAS has competitors that are in much worse position than BAS.

BAS will survive, and BAS will flourish in the aftermath of this oil industry crisis.

BAS And VOC Ended The Day Higher

3,097 views

The title of this post more or less speaks for itself. We had a 7 million barrel inventory build, yet two positions most susceptible to that sort of thing recovered and wound higher anyway.

I fully understand the possible danger here, holding these oil names still even after the “joy” I experienced in the second half of last year. But in my estimation, there comes a point when men separate themselves from boys, and needless worrying is shown to be just that.

Humanity endures. And capitalism is to date the closest thing to humanity. You can pretend like the world is just going to sit tight and let calamity knowingly take hold. Or you can believe man will take the steps necessary to prevent such a thing.

In the early years after the depths of the Great Recession, I made some bets against humanity. I bet that oil would trade to $60 (it’s amusing seeing it happen now with me on the opposite side of the fence) and that there would be massive growth shocks. I lost then just as you’ll lose now.

Man endures. Job growth is coming back and early signs of life in wage growth are also creeping up. There are, as there have ever been, many many things that a man could concern himself with. Disease and pestilence, war and famine, corruption and malfeasance, natural disasters, savagery and every other possible thing in between.

But man endures still.

The most pressing problem for the US at the moment is the strength of the US dollar. This is why there is a $10 spread between WTI and Brent, and why US manufacturing is having some problems…because a strong dollar opens them to strong competition. Our manufacturing base has had an easy time of it lately.

But these are problems to be overcome and nothing more. Our trifles are the great boon of another. The oil will find its home. I am tired of these drab years and would very much welcome a return to the soaring spirits of the 90’s. Others are looking for a chance for optimism too. At the end of the day, many of our problems are just numbers on a page. And numbers on a page are hardly immutable.

No we shall overcome our problems.

And man will continue to endure.

A Special Message From Uncle Warren

2,903 views

“Good morning lads, and my what a splendid day it is.

It reminds me of when I was just a boy, taking pennies for good honest work painting fence posts. I was a regular Tom Sawyer.

Would you like to hear a humorous anecdote about personal responsibility?”

(Waves his hand to clean up crew who start making off with burning wreckage of the latest oil rail car fiasco)

“Why I sure love quality management. No good management can ever be held down by any problem. I love buying companies with good management and…

…Woah! Don’t look behind you. Eyes on me, kid.

…now I remember when my textile factory failed. I was quite upset. But did I just lie down? No, no I got back up and turned Omaha into a capital for insurance. Not that I would ever own derivatives, no that would be reckless.

Oh…I uh…I see you looked behind you and saw the smoldering ruin of my monopoly. Well, the thing about that is…

…would you care for a peppermint? I keep them in my breast pocket, and hand them out to children. I remember my grandfather. He was such a kind man. Used to have the most whimsical silver hair and kindest smile.

I was just at the White House the other day, not making special deals for preferential treatment or anything. Have you ever met the President of the United States before? You should write him a letter and tell him all about what you like about jam.”

(Clean up crew flashes an “OK” sign, then leaves)

“Well my good friends, I do believe I must be going now. I have lots of Cherry Coke to drink. Har har har. Before I’m off, let me tell you how important it is to buy good companies at a cheap price. Make sure you pay your taxes and play by all the rules”

THE END

It’s Shocking Because It’s Normal

328 views

Today BAS was up 4.5%. I’d normally be elated by this kind of action, but I am not.

Because last Wednesday BAS was 20% lower. And the week before that BAS was where it is today. And the week before that BAS was 20% lower.

In fact I’d say generally speaking that watching a stock ratchet between $5 and $8 is a generally tempestuous experience that does things to mans sanity. Dark things. Quiet things.

Dark, quiet things.

I want those dark things to be done to oil short sellers now. He says to himself, slowly rocking in his 9th floor prison.

OMAB 4Q Results Were Strong

2,295 views

I purchased OMAB, a Mexican airline company, is December of last year. OMAB has been putting up strong performance numbers and yet remains very much off the radar of most investors. They have control of some key geographical regions; hotspot destinations for vacationers.

Passenger traffic grew greater than 14% alone in the fourth quarter of 2014, year over year. The 2014 year showed passenger growth of greater than 10% – accelerating into year end.

Income from operations grew 56% in the fourth quarter of 2014 year over year, and total 2014 income increased 23%. Revenues grew 6% in the fourth quarter versus 9% for the 2014 year. Adjusted EBITA were up 14% in the fourth quarter and up 13% year over year.

OMAB is growing fast and aggressively and yet is still priced very competitively.

Thanks to lower fuel prices, OMAB is blessed with strong wind behind their sales. You could also reasonably make the case that stronger consumers are finally making time for long put-off vacations. OMAB is growing amenities in airport locations to expand non-core revenue.

Naturally I am looking forward to see how they do in 2015.

Note: I apologize for being somewhat absent the past few weeks. My wife had some health complications which have consumed vast amounts of my time.

BAS Earnings Breakdown

3,133 views

I am watching BAS very closely, for reasons that should be plain. I dug into the most reason filing and have a few observations.

BAS lost $0.45 per share in the most recent quarter ($0.56 per share after further impairment of goodwill), driven by business disruption for lower prices and extreme cold weather. However, this loss was driven entirely by write downs and does not appear to have consumed cash.

Without asset impairment BAS had earnings of $0.11 per share. As of right now BAS operations appear to be conserving cashflow well. The most recent quarter, expenses exceeded revenues by about $10 million. BAS has $59.5 million in depreciation and amortization, leading me to believe that BAS operations are still cash flow positive.

BAS is aggressively cutting into payroll, reducing employees by 10% in the most recent quarter. They are negotiating with their customers, offering concessions to defend business, and even managed to mildly grow revenues in the most recent quarter as a result.

I do not expect BAS to hold this performance. That is asking too much. They are currently expecting revenues to decline by 21% to 26% sequentially. That is an enormous drop and more losses should be expected.

For the moment, BAS is well capitalized. They have $80 million in cash and an addition $233 million in revolving credit.

It is my belief that BAS will weather the storm. I trust their management to make the right moves here; they have done so before so this is not new territory for them. They are watching cash flows closely and will keep expenses in or around those levels to preserve the business.

I believe that BAS will succeed in keeping cash burn to some level that staves off any insolvency concerns for some years, thereby allowing them to outlast the recent downturn in oil prices. I also believe that BAS has competitors that are in much worse position than BAS.

BAS will survive, and BAS will flourish in the aftermath of this oil industry crisis.

BAS And VOC Ended The Day Higher

3,097 views

The title of this post more or less speaks for itself. We had a 7 million barrel inventory build, yet two positions most susceptible to that sort of thing recovered and wound higher anyway.

I fully understand the possible danger here, holding these oil names still even after the “joy” I experienced in the second half of last year. But in my estimation, there comes a point when men separate themselves from boys, and needless worrying is shown to be just that.

Humanity endures. And capitalism is to date the closest thing to humanity. You can pretend like the world is just going to sit tight and let calamity knowingly take hold. Or you can believe man will take the steps necessary to prevent such a thing.

In the early years after the depths of the Great Recession, I made some bets against humanity. I bet that oil would trade to $60 (it’s amusing seeing it happen now with me on the opposite side of the fence) and that there would be massive growth shocks. I lost then just as you’ll lose now.

Man endures. Job growth is coming back and early signs of life in wage growth are also creeping up. There are, as there have ever been, many many things that a man could concern himself with. Disease and pestilence, war and famine, corruption and malfeasance, natural disasters, savagery and every other possible thing in between.

But man endures still.

The most pressing problem for the US at the moment is the strength of the US dollar. This is why there is a $10 spread between WTI and Brent, and why US manufacturing is having some problems…because a strong dollar opens them to strong competition. Our manufacturing base has had an easy time of it lately.

But these are problems to be overcome and nothing more. Our trifles are the great boon of another. The oil will find its home. I am tired of these drab years and would very much welcome a return to the soaring spirits of the 90’s. Others are looking for a chance for optimism too. At the end of the day, many of our problems are just numbers on a page. And numbers on a page are hardly immutable.

No we shall overcome our problems.

And man will continue to endure.

A Special Message From Uncle Warren

2,903 views

“Good morning lads, and my what a splendid day it is.

It reminds me of when I was just a boy, taking pennies for good honest work painting fence posts. I was a regular Tom Sawyer.

Would you like to hear a humorous anecdote about personal responsibility?”

(Waves his hand to clean up crew who start making off with burning wreckage of the latest oil rail car fiasco)

“Why I sure love quality management. No good management can ever be held down by any problem. I love buying companies with good management and…

…Woah! Don’t look behind you. Eyes on me, kid.

…now I remember when my textile factory failed. I was quite upset. But did I just lie down? No, no I got back up and turned Omaha into a capital for insurance. Not that I would ever own derivatives, no that would be reckless.

Oh…I uh…I see you looked behind you and saw the smoldering ruin of my monopoly. Well, the thing about that is…

…would you care for a peppermint? I keep them in my breast pocket, and hand them out to children. I remember my grandfather. He was such a kind man. Used to have the most whimsical silver hair and kindest smile.

I was just at the White House the other day, not making special deals for preferential treatment or anything. Have you ever met the President of the United States before? You should write him a letter and tell him all about what you like about jam.”

(Clean up crew flashes an “OK” sign, then leaves)

“Well my good friends, I do believe I must be going now. I have lots of Cherry Coke to drink. Har har har. Before I’m off, let me tell you how important it is to buy good companies at a cheap price. Make sure you pay your taxes and play by all the rules”

THE END

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