YLO.PR.B is quoted @ $16.5 dollar this is beginning of bargain price for preferred B
Common Market Cap: 2.15B
Total Debt: 2.46B (as of March/11)
$16.5 = 66% of Par (1/3 Margin-of-Safety assuming YLO goes to zero)
YLO goes to to zero:
1. Equity (input) is $5.14 B
Assuming you can only liquidate at 1/3rd price of input that would be (5.14B * 0.33 = 1.7B)
1.7B / 2.15B = 0.79
And you buy @ 0.66 (66%)..How much can you lose?
P.S. I bought some 60 shares
There are growth stocks in Japan, mostly digital companies and small exporters. I just have a very very tough time finding research on that market, and even Yahoo doesn't offer delayed quotes for the Tokyo Exchange. If you have some specific recommendations I would be interested in following up with you on those after I look at them.
Good growth prospect = overvalued valuation (Like internet/tech companies in 2000..eg Microsoft, Cisco)
Buffett: "Never pay for consensus"
I don't super over-pay for "growth prospect" and none of that exist in Japanese Market..you probably want to look those in South American market (like Brazil..etc) if you want growth prospect
Too many lol...too many fit into value investing I have too many ideas too few money for me =(
I made a short-cut..a bit lazy to analyze 1000+ companies
I just buy industry ETF (same industry companies usually have very close similar valuation)
Take a look at some industry as a whole
1. Banks (I bought this..their valuation is like Great-Depression valuation)
2. Financial excludes banks (bought this one too..valuation is south of PB 0.4)
3. REITs (Bought)
4. Electricity&Power (Not yet ..but approaching bargain)
5. The whole market (I bought this)
The whole Japanese market is like Great-Depression..not hard to NOT like them =)
YLO preferreds are definitely a better buy than the common stock... but a "bargain"?? get real. They're yielding about 7.5% which is exactly what they should be considering the risk involved in YLO's high debt & uncertain future.
The big downside to all preferreds is that *when* inflation/interest rates rise, the share price will get hammered. And unlike bonds, there's not a fixed term for you to hold out for.
The upside to YLO preferreds is if they get their act together, the risk premium will fall, raising the market value.
There is "certainty" to the future? Which companies are you certain to make billions? You should be billionaire by now :P
This is NOT a high debt company...use some number sense
Benjamin Graham: "A conservative company is owing twice of it owes"
DEBT = 2.5 billion
EQUITY= ~5 billion (even you use market cap 2.0 B..this is just a fair use of leverage)
There are loads of companies that doesn't even meet this criteria
A fixed term = has no relationship with price whatsoever..
A perpetual pref/convertible can reach par (Look at all U.S. prefs..which ones didn't??Citigroup/Ford all did) when common is safe
You can wait till interest rate rises to over 10%+ (last time was 40 years ago xp)..while I collect interest xP
The pref is good but last week I got some NBG prefs at 16.5. They give 2.25$ per year and anything less than a NBG explosion should keep these prefs safe. Maybe even NBG will make a 20$ tender offer to reduce this liability which is carried at 25$ on balance sheet and costs a lot.
Prefs, hybrid capital, CoCo and debt other than deposit are all defunct ways for banks to get funded. In trouble, all of what counts is tangible equity / risk weighted assets and I expect that a trend toward any non-equity funding will be to redeem it as fast as possible and use the freed cash flows and possible capital accretive gains due to lower price to refund vs face value will be directed toward equity building.
Right now, NBG prefs are valued by markets at 425 millions, they cost 56 millions $ in dividend per year. They are carried on balance sheet at face value of 25$ for 624 millions $. If NBG could cancel them at 17$ right now, as if everybody would be insane enough to sell them the share for 17$, they would net in immediate boost on equity of 199 millions $ and save 56 millions $ in dividends per year.
NBG also has 4.4 billions Euros senior debt. This acts like deposits but it more expensive. They should take care of this in due time. Maybe a market fear could allow them to do debt for equity swap at some time.
The general consensus of many economists is that Greece will eventually default and give a haircut on its bonds of 50% to 70%. By my calculations, NBG is just barely solvent in the case of a 50% haircut, if they sell their Turkish bank stake at a very good price. If the bonds are cut 70%, I don't see any way for NBG to save its equity or preferred shares. I'm sure the Greek government will rescue the bank, but what makes you think they will rescue shareholders and preferreds?
NBG Pref $16.5 is an excellent price, I have $17.7..Hold for 2+ years you will reap 30%+ annualized
NBG Preferred has optional call date after 2013/June at $25 they can't cancel it at any other price and anytime before. They can only suspend dividend.
YLO Preferred is "dividend cumulative" but NBG Preferred is not..so YLO Preferred is definitely much safer & larger reward
**Conclusion: I would say NBG Preferred is undervalued (though not that cheap) compared to YLO Preferred (too cheap) because the higher coupon % should deserve much lower price (9% NBG vs. 5% YLO) more cost to the company.
And if I were board of director, I would cancel dividend paid on higher coupon % first
I admire both Ben&Buffett..so I will just mention how Buffett invest in financials.
1962 (American Express subsidiary scandle..almost went bankrupt) - He bought AXP
1970 (Penn Central Railroad bankrupt - another crisis 35% drop in Dow Jones) - He bought Pennslvania Bank
1990-1991 (U.S. Real Estate burst - small financial crisis) - He bought Wells Fargo&Bancorp
2008/2009 (World financial crisis) - He bought much more WFC & Goldman Sachs
2010 (European financial Crisis) - He bought Bank of New York Mellon
I don't think anyone can tell what exactly the quality of loan in on the book (definitely not Buffett otherwise he wouldn't wait till crisis to happen)
I only see boom time in South American nations..many multi-ten-bagger (dangerous to invest..because bank profit goes along with economy)
We can see NBG stands up very well in the crisis of Greece
If you have USD dollar in your account..then currency shouldn't be problem.
I invest in Europe/Japanese/US/Canadian companies with 4 different currency..Currency shouldn't affect investor's analysis..(unless you invest in "currency" -> it's a commodity though..hard to value)
The only thing I can tell you about banks/financial companies..NEVER value on book equity value..WHY?
Financial companies is all about solvency..a low P/B bank doesn't mean it's good..a higher P/B bank doesn't mean it's bad (take Citigroup a much much lower P/B -> should go bankrupt if it were not SUPER heavy dilution & bailout)
Financial should be treated differently with other non-financial ones.
THE ONLY TIME to invest in banks/financial is during the depth of "financial crisis" and NOT ANYTIME ELSE
I wouldn't even bother to touch the South American Banks/Financials (BSBR,BMA)..a Real Estate Bubble/Anything Burst there..banks can end up insolvent within months (look at how much real estate/stocks (this is 500X+) has gone up in Brazil..you don't want to know xp)
Just learn about how Buffett invest:
"When the tide goes out, I will see who is swimming naked"
Want to know the best banks/financial? look at the depth of 2008..who survived? GS, MS, WFC, JPM..who went down? Lehman, BearStern, Merril Lynch, AIG (Now you can see the quality only at these time)
P.S. I would hold WFC forever if I were you bought @ $23..not even going to sell in decades
WFC is nice indeed, but for Canadian like me, every time the stock gets up in price, we have that worthless US currency sinking against CAD negating most of the gains. I like WFC, but its market cap is in excess of equity on balance sheet and I find BSBR, STD and BMA to be at least as solid with higher profitability for the price paid. Maybe WFC will prove less risky in the long run. I have been a buyer of WFC last year at 23.5 and sold at about 28 or 29. If it slumps around 24-25 I will begin a hoard-pack of WFC with averaging down intent.