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Strategies & Market Trends : Value Investing

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To: bruwin who wrote (58568)	11/27/2016 11:55:14 AM
From: E_K_S	Read Replies (1) of 78816

EQUITY BOND = SHARE PRICE = COUPON RATE/LONG TERM CORPORATE BOND RATE (L.T.C.B.R.) LTCBR = Long Term Corporate Bond Rate Had to Google that ("LTCBR) and it came up w/ this post goo.gl Otherwise you get this definition: What does LTCBR mean or stand for ? ------------------------------------------------------------- Please spell out the acronym as it may not be obvious. Just need once in the beginning of the post. The other thing I look at and may/could be a big deal especially if there is a debt issue is the composition of their debt, specifically (1) if their debt is $US denominated and if foreign units have $US denominated debt, (2) variable (based on LIBOR) rates and maturity terms (will show interest rate exposure) and (3) is their business and FCF debt intensive. Does the company need debt/leverage to grow their revenues (ie REIT). That's why it is hard w/ large Caps to find specific value as they are so big w/ lots of moving parts all over the world. I prefer regional players mid to small caps. Especially if I am considering a short (I have never shorted a stock except one in early 1990's and it went bad). With the large cap companies, there is typically no one thing that will drive earnings and profitability. If there is and it is obvious, every body else has figured that out. I do like the Long Term Corporate Bond Rate analysis and s/d use it as a secondary value metric if/when I have narrowed my value candidate stocks. I own one small cap that is going through a restructure and recently refinanced their debt to the detriment of their common shares (discontinued their dividend). The loan was at a high rate and w/ pre-payment penalties but did provide necessary liquidity and increased their credit revolver. The term was five years and they are through year 2 w/ ok results. They are a specialty refiner (CLMT) and need commodity prices to recover to get margins and EPS back on track. The first 24 months of their restructure were the discontinue of money losing subsidiaries, writing down losses and doing this debt re-package. Their long term corporate bond has recovered to $0.82/1200 YTM of 12.5% far better than 18 months ago. I was thinking of buying this bond at a discount and/or making a bet on their common shares. Will have to look at the cost of debt to EBITDA when they report their next financials to see if there is more improvement. FWIW, many of these small energy explorers and drillers that were over exposed to too much debt but survivors, may could be possible Buys but IMO still are too risky since they are commodity price dependent. There was even talk of those that did a BK (ie Chapter 11) may have to go into Chapter 22 (that's a second round of BK). Swift Energy Company (SWTF) was recently mention as a candidate for CH 22. . . . What is Chapter 22 bankruptcy? Do any prominent examples come to mind? Conclusion; Always important to evaluate a company's debt profile and all options on paying it back and/or servicing that debt (including growing interest expense as a % to EBITDA). EKS

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