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CommonWealth REIT Message Board

foxhsmart 33 posts  |  Last Activity: Apr 18, 2014 1:48 PM Member since: Oct 11, 2005
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  • foxhsmart foxhsmart Apr 18, 2014 1:48 PM Flag

    Now you've got me pegged! Who on earth is Padawan?!?

    With a low margin rate of under 2% I suspect that you have either Interactive Brokers as your broker or you have a sizeable portfolio, as do I, and have used that to negotiate a very low margin rate.

    That said, my use of margin tends to be conservative (30% max on the value of my portfolio) and then ONLY in the midst of a recession will I implement it. As we emerge from recession and the market recovers, I reduce and eliminate the margin.

    I hope you are careful with your margin borrowings/leverage this far into economic recovery and this far past the last recession. You don't want to be overleveraged if we incur a recessionary market downturn. ACAS learned a tough lesson about that, but it sure gave a great buying opportunity for those who had guts and the knowledge that ACAS would survive. It's a tough lesson to learn. Be careful. It may be wise to remember that from the 2000 market high the S&P 500 dropped 50% into the 2002-2003 recession bottom, and if you prefer the Dow, it dropped 56% in the 2008-2009 recession before hitting its bottom.

    I bought a slug of ACAS shares when it was ugly, but I really capitalized in the REIT space. I had not owned any REIT's going into the recession, as I was a lonely voice who felt strongly that real estate was overdone and was due for a serious decline (there are a lot of voices today that SAY they held that view, but I truly did!). The trouble was, of course, nobody would listen. Not even my close family members and closest friends who became entangled in the mess--having become enamored by all the glowing talk about how good real estate has been, etc. Anyway, as you can imagine, when real estate began its reversion to the mean--and beyond, most of the quality REIT's were down 90-95% from their highs, and I back up the wagon and piled them all on. They produce a nice pile of income and much of that income is return of capital, and thus, free of tax, which is very nice.

  • foxhsmart foxhsmart Apr 17, 2014 5:02 PM Flag

    I am a very old "Grasshopper"!

    You have a far better working knowledge in the BDC space generally and ACAS in particular than I. Therefore, I appreciate the "shortcuts" you are willing to share that help me conserve time. In other sectors, I am pretty darned confident that you would be the Grasshopper, as there are very few around who have read as much as I have and have the depth of history I can share about the market generally, and other higher yielding sectors where I am quite on top of things.

    I hate for it to be a one-way street, so if I can ever be of assistance to you in any way on companies in other sectors I will be glad to do so and to shed as much light as you may want shed on any company in particular that I have knowledge of, or perhaps, on how you might factor market history and the market impact as a whole on your investment decisions.

    Unless you are a true blue bottom up value guy, you likely give some thought to how the market in general will effect your ACAS "and kids" investments.

    As mentioned, that is my primary concern in any additional stake I may take in ACAS or an initial stake in ACSF.

    Any additional money I put into ACAS or ACSF would be small relative to the very large allocation I put into the market in many sectors/companies during the last recession (2009 primarily).

    With the exception of a bit more cash raising to do to get my cash levels to where I am comfortable and ready for the next recessionary market downturn and the opportunities that will provide, my taking additional stakes in ACAS (at its present price) and ACSF will be more "fun money" short term holdings than serious long term holdings money.

    Nevertheless, I always like to make money!

    Best to you, and thanks again.


  • foxhsmart foxhsmart Apr 17, 2014 3:25 PM Flag


    It appears to me that ACSF is trading at about a 9.5% discount to NAV if the numbers that I have read are current. NAV would be about $14.95 which would equate to a 9.5% discount to the stock price of $13.52 (about where it trades today). I'll give it a dividend range of $1.18 to $1.24 annualized once all the portfolio money is fully invested, which at today's price gives a dividend yield range of 8.72% to 9.17%. That leaves one question--how long do you think it will take ACSF to fully implement their portfolio cash and ramp up to being able to pay the full dividend?

    It will take a fully invested portfolio and more clarity in the presently murky waters to cause ACSF to trade at NAV.

    The risk with ACSF in my opinion, is the same as the risk with buying ACAS at this point , and that is that we are 4 3/4 years from the last recession, recessions are very hard to predict (especially since the inverted yield curve is no long available to observe as it is manipulated by the Fed), and we have a history of having recessions in our country about every 4-5 years.

    While the discount to NAV is far greater in ACAS than ACSF, providing more comfort, I suspect that a return to NAV will happen sooner at ACSF than at ACAS. But I can't get a good idea of how long it may take ACSF to fully invest its portfolio and pay out a maximum level of dividend.

    Both ACAS and ACSF will suffer in an economic downturn. So I am thinking shorter term on both ACSF and ACAS and hoping we can avert recession for 18 months or so. I think ACAS will need that much time. ACSF will take a much shorter time, and I would exit the stock, capturing a dividend and a narrowing of the discount to NAV.

    What is your take on the timing it will take ACSF to trade at NAV?


  • foxhsmart foxhsmart Apr 16, 2014 8:34 PM Flag

    Hi NMB,

    It's Fox from the ACAS board and I've read your post here. I have a few questions if you don't mind sharing your thoughts. Your estimate of .32 cents/qtr. at today's stock price amounts to about a 9.5% dividend yield. 1) When do you feel the dividend will be at .32 ish cents per quarter? 2) How much of a discount to NAV is the ACSF share price currently trading at given today's closing price of $13.43? I suppose the NAV has been established in a filing that you are referring to? I haven't looked at the balance sheet yet to divide shareholder equity by shares outstanding and thought you likely have this current NAV per share info and the current discount to today's price at hand.



  • Reply to

    april 28

    by sandy.criscione Apr 9, 2014 10:31 AM
    foxhsmart foxhsmart Apr 9, 2014 1:31 PM Flag


    What is your best guess as to when ACAS will get the full restructuring news out this year?


  • foxhsmart foxhsmart Apr 9, 2014 1:28 PM Flag

    You are mixing up your Foxy and your Fox, NMB! I have a feeling Foxy is much younger and prettier than this old Fox! At least I hope so!


  • 3,000 options contracts traded in each of those today. That activity makes up a big percentage of all of the outstanding options contracts in those two contracts/expiration dates. I think the Jan 2015 $20 activity is very interesting. Somebody thinks there will be a big move toward or above $20 by Jan 2015.

    Did you see that, NMB?


  • Reply to

    NMB and others

    by foxhsmart Apr 7, 2014 2:05 PM
    foxhsmart foxhsmart Apr 7, 2014 3:13 PM Flag

    So to clarify, there WERE significant buybacks in the 1st quarter that will positively impact NAV when ACAS reports 1st quarter earnings later this month?

    Sorry NMB, I was still unclear from your wording. And can you hazard a guess as to what the upcoming NAV will be when they release that number at this quarter's earnings release?


  • foxhsmart by foxhsmart Apr 7, 2014 2:05 PM Flag

    I assume at the upcoming earnings release that ACAS will update us on NAV. Will this reflect any additional buybacks or was the buyback period endedat the end of the 4th quarter?

  • foxhsmart foxhsmart Apr 3, 2014 4:53 PM Flag


    With all the pieces to be spun out, I can certainly understand ACAS management choosing to dribble out the good news piecemeal over time. After the first piece is out, there will likely be questions a plenty peppering management at earnings conference calls and any public presentations they give which are followed by Q & A sessions. It will be interesting to see just how efficient a discounting mechanism the market will prove to be on this as it attempts to peer cogently into the future. Of course, it would be much more fun if they unwrapped the whole ball of wax all at once! Man alive, that would result in one fine display of stock price fireworks!


  • foxhsmart foxhsmart Apr 3, 2014 4:09 PM Flag


    $25 in 2016 was my back of the envelope value estimate for a fully implemented and appropriately leveraged ACAS. THAT much upside from $15 would be enough upside to cause management to go through the headaches and cost of a reorg.

    That leaves general market risk as the primary risk to consider which could be a potential fly in the ointment to a successful Jan 2015 $15 OR Jan 2016 $15 call purchase, in my opinion.

    How soon do you think ACAS will announce the spins?

    And how soon do you think ACAS will FULLY explain their FULL reorg plan and timeframe reaching into the formation of ACAM in 2016?

    Do you think ALL the news will come at one time--perhaps to be fully discussed as part of this coming earnings conference call in about a month or do you think they will piecemeal dribble out the news, spin by spin, and ultimate ACAM news over the course of this year and extending into realeasing news in 2016 as well?


  • foxhsmart foxhsmart Apr 3, 2014 3:09 PM Flag


    So, back to my question, do you think there is meaningful additional value creation for ACAS that will occur in 2016 that will NOT be reflected in the timeframe you are thinking about holding your Jan 2015 $15 calls?

    This is primarily a question about ACAM being established in 2016 and earning the maximum near term amount of income they can in 2016 due to the fact that by 2016 the new funds will be spun out (in 2015) and by 2016 any additional leverage in those funds and additional leverage in any preexisting funds will be implemented?

    Behind my thinking is that in my experience, I don't think companies engage in the difficulty and short term expense of a reorg to move their stock from, let's say, $15 to $18 (a 20% move). No, that percentage upside in value creation would likely not be sufficient to enact a reorg. In that regard, I am looking at ACAM as being the master stroke which causes an eventual much larger than 20% upside move for ACAS shares. THAT is why I am asking you about your thoughts on 2016 (and, in turn, about your Jan 2015 $15 calls not being Jan 2016 $15 calls).

    Can you share your thoughts on this? Particularly, how much ADDITIONAL value ACAS can create relative to the current share price of a bit over $15 today given fully implemented and levered funds (old and new) that will be in place and earning AUM management fees for ACAM?



  • Reply to

    Price v Value

    by donedealer Apr 3, 2014 12:01 PM
    foxhsmart foxhsmart Apr 3, 2014 2:10 PM Flag

    Well said, Foxyxi! You are a true, pizza/special situations analogy genius!

    This is a case where the parts are worth more than the whole--as long as ACAS management follows through and executes the pizza slicing in such a manner as to create maximum value for shareholders.

    How much for a slice of your best veggie pizza?


  • foxhsmart foxhsmart Apr 3, 2014 1:13 PM Flag


    Why did you go with the Jan 2015 $15 calls instead of the January 2016 $15 calls?

    It seems from your posts you feel that the funds will be spun in 2015, but the final separation into ACAM will not occur until 2016? If ACAM is the most important part of the whole spin process, why have you decided to buy the Jan 2015 calls instead of the Jan 2016 calls?

    On another note, I think the growth in income at ACAM will be extraordinary. Once all the spinouts are completed, the corresponding management fee earning AUM goes up meaningfully, and the annual income from management fees will surge upward. Besides the spinouts of the funds and the resulting dividend payments from those funds post-spin causing a narrowing or elimination of the CURRENT discount to NAV in the current ACAS share price, I think that ACAM will be experiencing rapid income growth as the funds lever up assets within the newly created spin funds.

    So perhaps the real gem here in creating the most value will likely be ACAM, once established as its own entity and earning the full management fees they will earn on all the funds they manage once all the funds are levered. Do you agree?

    This brings me full circle back to the first question-

    If ACAM is a big part of the future value creating story for ACAS, and if ACAM is a 2016 story
    , then why would you not buy the Jan 2016 $15 calls? And further, what will you do with your Jan 2015 $15 calls if you find that much of the value creating moves ACAS will make will occur in 2016?


  • NMB,
    You have certainly looked at this closer and for longer than I. Can you share your thoughts on how ACAS management may be thinking about--pros and cons--and what you think they will ultimately decide to do--in regard to making a final decision as to whether to spin out the upcoming different funds directly to current shareholders or to spin them but not to current shareholders?

    Which method would create the greatest overall value for shareholders from ACAS management's position?
    And why?
    It seems you are hoping for spins directly to current shareowners, but you are uncertain if ACAS management wants to go that route. Why might management be hesitating to spin directly to shareholders?
    It would seem that ACAM would get the management fees either way.
    What are your thoughts on this?


  • Reply to

    No More buybacks

    by bellard Mar 31, 2014 9:35 AM
    foxhsmart foxhsmart Apr 1, 2014 6:15 PM Flag

    Yes NMB, this is similar in a very basic sense to another special situation I was involved in where the stock price pre-spin was very depressed (and actually yielded a 10% dividend when I initially bought shares). The company was United Online (Symbol UNTD), which held within its depressed valuation a very large, fine division--FTD Companies (the florist who makes women smile on Valentines Day as they reach into the man's pocket for those flowers/candies/etc.!).

    FTD, as compared to its peers which were trading as stand alones, was severely undervalued while being held inside of United Online. The rest of United Online was a mish mash of second tier social networking companies as well as internet access divisions-- net Zero and Juno. This mish mash of other businesses were uninspiring to Wall Street, and the shares languished at about $4 when I stepped in to buy a bunch.

    My thought was that I would call UNTD management and lay out the case for spinning out FTD to surface value for shareholders. I was to do that immediately after I returned from the vacation I headed out on the weekend after I finished all of my share purchase accumulation.

    In a case of the most fortuitous timing in my decades of investing, a few days into my vacation, United Online announced that they had decided to spin out FTD in an attempt to create more value for shareholders! I was so pleased, as there is never any certainty that a management will listen even to a very rational explanation of how to increase shareholder value.

    Of course, the share price of UNTD bolted forward as the market immediately figured out that FTD was worth a whole lot more if it was trading on its own on the market rather than to be held back in a mish mash of mediocre companies inside of United Online. Ultimately it took about a year and a half for FTD to be spun out of United Online. During that period the share price of UNTD increased about 150% and I collected a 10% annual dividend on my invested capital!

  • Reply to

    No More buybacks

    by bellard Mar 31, 2014 9:35 AM
    foxhsmart foxhsmart Apr 1, 2014 3:58 PM Flag


    As we do not have concrete information on each spin off piece, I cannot yet say what I would continue to hold and what I may sell. There is the potential for me to sell some of the post-reorg ACAS should there be parts which would not pay a substantial dividend. Those entities that will pay a dividend I would evaluate holding based on that dividend.


  • Reply to

    No More buybacks

    by bellard Mar 31, 2014 9:35 AM
    foxhsmart foxhsmart Apr 1, 2014 3:13 PM Flag

    As a recession could bring ACAS down considerably as the market declines and overwhelm the spinoff moves ACAS seems ready to make in order to surface value for shareholders. So it is a timing thing for me. I have not yet decided what I will do. I think I will hope that Wall Street will lull to sleep on ACAS a bit as we wait to hear more detail on the spinoffs. If a deeper discount to NAV than today's presents itself to me, I will likely buy some more.

    If not, and if we hear soon more about the potential spinoffs and ACAS stock moves up from here and I do not get a chance to add a bit more, then so be it. I will be quite happy to see what value in the shares ACAS management brings about, and I will be happy to continue to hold ACAS if it appears management will find a way to return a nice portion of earnings to shareholders in the form of a dividend. If not, and if upon effecting the spin offs I find that there will be little to no dividend, then I will be a seller of my ACAS shares and add that cash to my patient money which will await the chance to purchase deeply discounted shares of companies in the market when we encounter the next recessionary market downturn. I only hope that ACAS management makes its decisions quickly and I get the information I need to make my decision prior to the next recession!

    I hope that helps explain my view on the market and ACAS as well.


  • Reply to

    No More buybacks

    by bellard Mar 31, 2014 9:35 AM
    foxhsmart foxhsmart Apr 1, 2014 2:44 PM Flag


    I think very clearly this is a long cycle bear market. But as I said, there are always shorter term cyclical bull markets within those long cycle bear markets. As mentioned, these typically come off the bottom of recessions when the market begins to discount an economic recovery (such as we have been seeing since the bottom of the market and end of the last recession in 2009). With history clearly demonstrating dating back to 1802, this current long cycle bear market will not end until we reach a market PE ratio down in the high single digits. maximum pessimism will have been reached, and we will begin the next long cycle bull market wherein astute and not astute investors will make gobs of money (the market will carry most all boats higher!). It is worth noting that, adding in dividends and adjusting for the wealth robbing effects of inflation, the average market gain in long cycle bull markets has been about an 8 fold gain. Long cycle bear markets are much more difficult for investors to be successful in. We typically gyrate back and forth over many, many years, making not much progress at all from the start to finish of the long cycle bear. Whereas you can have great success in a long cycle bull by just buying and holding. you will be required to trade more in a long cycle bear market if you are to keep the gains you have accrued. This gain off of the 2009 market bottom is a good example of this. The market has risen substantially, and yet, the next recession will see a large percentage of that gain disappear (think of a long choppy sideways trading range where we are now at the high end of the range). In contrast, long cycle bull markets see higher highs and higher lows over the course of what has averaged to be 14,7 years. You still have short cycle bear markets within those long cycle bull markets (usually brought on by that old familiar nemesis--recessions), but the market goes on to SIGNIFICANTLY higher highs in a long cycle bull.

    (continued below)

  • Reply to

    No More buybacks

    by bellard Mar 31, 2014 9:35 AM
    foxhsmart foxhsmart Apr 1, 2014 1:54 PM Flag

    ps--Glad I found the energy to repost my initial attempt and more!


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