I just finished up looking over CLP’s end of year materials and voting my shares. They did a fabulous job – the multifamily theme continues to have powerful undercurrents carrying the REITs to success. Occupancy is so high right now; money is flowing freely and AEC and CLP are both pushing through massive expansions in the pipelines.
I continue to see good things coming from this sector. I will be maintaining my investment in both AEC and CLP.
Comments »I am becoming increasingly cautious as this rally is now sustained on the backs of defunct maritime shippers, the airline industry, and pharmaceuticals. Most of this trash would never be permitted to find its way into my holdings.
As summer sets in, the theme will settle on a single discord: disappointment.
The other day, I had a family gathering about 100 miles away. Along the trip, I counted almost 300 acres of land for sale at “NEW LOWER PRICES”. This is what I saw along my way; I didn’t go out looking.
There is a shadow inventory overhanging this market, and the chord that is holding it up is made of the ability of an aging Baby Boomer generation to tolerate pain and discomfort – two things which that group of whining malcontents has never been particularly prone to enduring.
And Europe continues to circle the drain in a slow bleed. You can stop looking for the inflection point, where suddenly everything starts to become increasingly easier and growth picks up. Thanks to binging on positive carry trades for two decades the system has been made recalcitrant and calcified. The arteries are hardened and strain for blood flow.
Thanks to my maneuvers in the Fall, I’m up 21% since November. Yet, more than half of this is contained in just two positions forcing higher by large margins – CCJ and BAS. It could all vanish in a hurry.
This is why I pushed to raise 30% cash recently, although my exposure to CCJ and BAS remains extreme. I have faith in these two positions; they will continue to benefit and outperform remarkably over the next few years. But the swings will be gut churning and disruptive.
Factoring in EUO, my net artificial cash position is closer to 40%. If we crater, EUO is going to spike (more than it has been). I’m also treating BXG like a cash position, as there is an all cash offer (even though I’m hoping/expecting the deal to fall through). That puts me at ~45% cash.
I’m almost ready for the fireworks to get started.
Comments »
I’m consolidating this on one page for you to look over this weekend.
I’d love to tell you how I’ll never hurt you again like this – breaking up the play date and all because of work – but that would by a lie…
Comments »Right around 2007 began a rough time for Bluegreen. The company was thrown into a drag from the housing crisis. Fascinatingly, if there was one industry that could possibly have been in a worse position in 2008 than constructing, selling, or financing housing, it was probably constructing & selling luxury condominiums, then slicing them up into complex financial instruments and selling those pieces to middle class citizens without bothering to check credit or salary data…THEN packaging those obligations into complex financial securitizations and selling THOSE off to wallstreet.
Say hello to the Timeshare industry, folks…
But right around 2007, a guy named John Maloney took the helm of Bluegreen as CEO and President. I’ve talked to some of Bluegreen’s employees, and they seem to have nothing but praise for the guy. Like Schlumberger’s Gould or Ford’s Mulally, there doesn’t seem to be a whole lot of doubt about who’s in charge, or that he’s done a terrific job.
Under Maloney, the company increased focus on not just selling these timeshares, but selling them to the right kinds of people – namely, people that could actually afford them. He also put emphasis on being honest about the pros and cons of the product, and simplifying the portfolio of off-balance sheet finances (which are still present but decreasing quickly).
By these moves, the company has seen an incredibly low default rate on these mortgages. And it’s a cash cow – the company earned $1.00 a share in 2012 on its own. It earned $0.75 in 2011, before restructuring the business. For the last two to three years, BXG has been using a cash generating machine to really restructure, cutting out business lines that were holding the main operation back.
Today, barely 5% of mortgages are distressed, and employees tell me that 40% of all prospective customers they invite to their presentations are making a purchase.
As of September 2012 the company has assets of just over a billion dollars, and because of a large credit line that was extended to them they’ve done a good job of rebalancing the debt terms and lowering interest rates. Actually, I think Levan (the board member trying to buy the company) was the one who extended the credit. With that money the company restructured over $250 million of liabilities (almost one third of their debt).
By all of this, the company is worth about $10 a share clean a clear. I impaired their books by 10-20% just in case something is wrong (lots of off-balance sheet fidgeting) and I’m still getting about $7-8. This company has no premium baked into the pie.
And with earnings of $0.75-1.00, the company has a price to earnings of 10-13X. Really not very expensive, especially considering that revenues last year jumped by ~15%. Or that all the heavy lifting needed to get this company into a shareholder money press seems to have already been done.
Now, the company is complicated. They like to pull the housing bust especial – their mortgages are packaged into CMBS products then securitized and sold off to investors; sound familiar?
So I checked the state of affairs of their SPE’s. It looks like they’re baking in allowances on their loans of 10-20%, depending on where you’re digging. And what’s the actual rate of defaults their packaged securities have been experiencing?
For loans that were originated after Maloney took charge, the loans have been defaulting at 6.5%…
The guy did solid work. Delinquency rates are even lower. And the company has a good focus on keeping this financial garbage under tight control. It’s paying off.
So here’s a company that is really fairly priced, is growing quickly, and just doesn’t have much in the way of a premium baked into the share prices (even after the run up from the buyout announcement). Also, the more shady sides of the business seem pretty clean, after I pry them open, if not also improving.
It’s a company I would own for a good while, provided they keep up the performance. The American public is shifting away from the McMansion frame of mind and starting to ask themselves “what am I doing?” Everywhere, an emphasis on living simply but to the fullest and happiest is taking over. That means less square footage, more vacations and marble and fine dining, provided within one’s salary and with financial security. That’s what people want now. So it’s a solid buy.
Just one problem – the chairman Levan is taking the company private, right?
Well, maybe. You see, Levan is also being investigated by the SEC for shady securities dealings around the time of the housing crisis. His entire reputation – including his ability to chair a company – is at stake. And the deal has already failed once.
I want to see this deal fail. I want the company to stay public. I would warn you that if it does, the stock may initially fall back to the $5 range it was trading at before the buyout offer. But, I think this whole affair has put attention to the company, and that it was mispriced at that level.
If it falls like that, I would take my lumps and double down.
If Levan perseveres and manages to take BXG private, I’ll collect 2% and go on my way.
Comments »Alright, I’ve reached the conclusion that I won’t have time to sit down and just carve out the entire culmination of my thoughts on BXG and what drove me to buy the name. I don’t have the uninterrupted gap of time to make that happen – and it needs to get done.
So instead we’re taking the modular construction approach here; I’m carving this thing up into pieces and I’ll let you assemble it all when I’m done.
The introduction to the name is as follows: Bluegreen is a timeshare corporation. They weren’t always timeshare, they used to be just a regular real estate company of some kind, if I’m remembering, but then in the 90’s they got into timeshare in a big way. They sort of pioneered the modern timeshare concept, taking the real estate deed/title holder model but building an exchange based travel agency on top of it, so you could go to other owner’s properties at different times of the year – before, you were restricted to the destination you purchased at the time you purchased for.
Alright, so Bluegreen got absolutely rocked in 2008/2009. But they had some management changes and the operation was cleaned up spectacularly. I’ll get into that in more intricate detail later.
Now, the company presently has limited upside of $10 a share…exactly. That’s because the chairman of BXG, an, er…interesting figure by the name of Alan Levan with possible Jeffrey Fastow-type tendencies has accepted an all cash offer to take the company private from a financial group by the name of BankAtlantic Bankcorp (BFCF), which is also chaired by, um…Alan Levan. BFCF presently owns 51% of Bluegreen stock.
The offer was originally for 8 shares of BFCF for every 1 share of BXG, but that was headed for a complete shutdown so Levan changed the offer for what is now a pure cash play.
Now, in my next piece I’ll get more detailed on the possible developments I see with the offer and the company in a minute, but I’ll leave you with this to start: at the current $10 offer, with the stock trading for ~$9.80, there’s a simple arbitrage here that nets about 2%.
In my next post, I’ll argue that that’s probably the minimal outcome and explain what I’d rather see happen.
Comments »You’ve got to be kidding me!? RGR didn’t just demolish earnings estimates. They vaporized them. They crushed all the analysts so badly, I don’t think the analysts have managed to figure out by how much yet. Was it 50%, or a whopping 77%?
So the stock is down a percent??
Look, do not lull yourself into thinking the earnings game is over for RGR. I flip on my television and see a multi-million dollar marketing campaign equivalent for RGR on C-SPAN this morning, as Feinstein and a half dozen brain dead Senators let a man so inundated by grief he can hardly stand steer their response to weapons in the USA.
These gun control measures are dead on arrival. They will not impact RGR or SWHC in the slightest. They are, however, FREE ADVERTISEMENT and the single greatest argument for a gun purchase the gun manufacturers could ever hope to make.
“Wait, assault weapons will be banished, but if you have one already it doesn’t count? So buy one now.”
Why does RGR even have a marketing division? I’d zero budget them immediately, on the grounds that their job is being done for them, at no cost to the company – the US Senate is that kind
The market is resting from yesterdays’ mighty run. We are not reversing lower, as far as I can tell. EU yields with respect to the problem children continue to subside.
South American countries are feeling the heat this morning, as their debt gets the Argentina treatment. But their economies are too small to matter. And, really, that’s what you deserve for investing in South America.
Comments »
