Folks,
Sorry for the pauses, it has been incredibly busy lately
(odd given the warmer weather, I know). The market had been on a tear with
little volume, and it is a stream of work without much alpha being generated.
That said, enjoy this edition.
Timken is a name that I spent some time on given its
pending spin, and I have to say that I like the RemainCo business quite a bit.
For those unfamiliar with the business, it makes bearings that goes into
anything that spins, rotates, and torques; think of it as the rotary piece that
helps the wheels spin and the wind turbine rotate. While it might sound
commoditized (and yes, a big part of the market is), where Timken chooses to
compete certainly isn’t – for instance, it holds 80%+ market share in the
landing-wheel for airplanes, whereby the bearing goes through multiple tons of
pressure, rotates from 0 to 100+ miles / hour (or 10k+ rounds / minute), with
its temperature going from 80 to 200+ Fahrenheit, such a torturous condition is
probably more pressure than what mortals like me will go through in a lifetime,
and that’s the market that Timken competes in – where condition is harsh, down-time
incredible costly, and specifications peculiar. Not only will such usage build
and reinforce brand loyalty given the high cost-of-error, but given that Timken
has a 100+ year of installed base and the machinery lasting 20-30+ years
(allowing for 3-4+ times of part replacement), the aftermarket + servicing
business (50%+ of Timken’s sales) makes it a hell of a resilient endeavor. The
management + employee fund owns 15%+ of the business, and mgmt. itself uses
ROIC as part of the compensation structure. Monopolistic industry w/ 4 top
players in the premium market and TKR is the least levered, highest margin of
the bunch. A bit expensive now @ 7.75x EV/EBITDA on an absolute basis, but
probably a good name to pick up amidst the next crisis.
Is
Coke Undermanaged?! - Big Dream: Anheuser-Busch InBev (BUD) / Coca-Cola (KO)
Merger: I always respect Brooklyn Investor’s view, and if BUD
makes a run @ KO (which by no means is undermanaged), It’s gonna be pretty
fascinating to see what they can accomplish w/ zero-based budgeting: http://brooklyninvestor.blogspot.com/2014/06/big-dream-anheuser-busch-inbev-bud-coca.html
Where
gun stores outnumber museums and libraries: namely, lower
Midwest and the upper South. With the most gun-heavy county in Oregon by nearly
7 to 1. Gun dealers outnumber museums and libraries in 37 states. http://www.washingtonpost.com/blogs/wonkblog/wp/2014/06/17/where-gun-stores-outnumber-museums-and-libraries/
Hedge
funds warned over leveraged CLO deals: Somewhat old news, but here’s
a quote within: “Joel Holsinger, senior partner at Fortress Investment Group,
said: “There’s been way too much supply on the issuance side because the markets
allow way too many schmucks to come in and issue CLOs.”…Source: http://www.ft.com/intl/cms/s/0/2c7e2b06-f7b0-11e3-90fa-00144feabdc0.html?siteedition=intl#axzz35Qceu6ip
Amid
Stratospheric Valuations, Google Unearths a Deal With Skybox:
This is fascinating stuff. For 1/38th of the price of WhatsApp, the
article claims, GOOG purchased Skybox Imaging that, by 2016 or so, will be able
to take images of anyplace on earth twice a day, all with just a half-dozen
satellites. By 2018 w/ 24 satellites, it can stream real-time videos. Let your
imagination run wild – because if it’s accessible via pay, it’s gonna
revolutionize how buyside research is done. http://online.wsj.com/articles/amid-stratospheric-valuations-google-unearths-a-deal-with-skybox-1402864823
Harley-Davidson’s
First Electric Motorcycle Surprisingly Doesn’t Suck:
0-60 under 4 seconds and sound like a fighter jet. Video within. Good stuff: http://www.wired.com/2014/06/harley-davidson-livewire/
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