Now there appears to be some relief in the stock the Raven thought it would be worth having a look at his revised estimates on $BP.
assumptions;
86 days of spill at 60k flow rate = 5.16mm barrels of oil
cost to $BP of clean up $30mm per day, and cleanup lasting another 172days = $8bn
litigation cost = $28bn from Exon Valdez figures inflation adjusted
aditional fines of $22bn from Water agencies etc.
so $58bn all in.
valuing the stock on its historic multiples that would make it worth 425p a share, $40.8 an adr. pretty much bang on where its trading now...
(the Raven does note, that he thinks those cost estimates are too low, especially the litigation cost, given that most estimates are based on the Exxon Valdez figures, which had less human impact than the BP spill, given that its not impossible that the litigation could be more like 3x that figure (but who knows??) in which case the Raven thinks its more like ~ 215p and $20.65, on the other hand there could be m&a as JPM have indicated that could get built into the stock? the one thing the Raven does know, is that there is more action in the name going forward)
Tuesday, 10 August 2010
Thursday, 5 August 2010
An interesting point from Zecco on $WDC and $STX
The Raven read this and thought it was interesting;
http://pulse.zecco.com/2010/07/data-storage-valuation-versus-earnings-stx-wdc/
Basically it points out that data storage is cheap ie. $100 for a terabyte now. It doesn't explicitly say it, but the argument is then that 1Terabyte is enough space for you to store everything you could want and therefore that you'd just buy the cheaper version of the 1TB. Now it would be easy to dismiss this argument by regurgitating a quote about a desktop PC being everything you could need in the 90s. The Raven thinks it more interesting to wonder where the actual limit might be using a bit of imagination. As we're only really looking at personal data storage what items do people like to store? (and a point he's going to dig some more into offline)
photos, music, films, books? software? personal documents
photos, music and films all have the potential to upgrade again to higher resolution formats requiring more storage space, books less so, but software and the personal documents they produce if anything produce larger and larger files. Without even looking at the massive increase in commercial data that will be stored in the future its easy to make an argument that the size of files will expand to fill the space available to store them.
The other point that really should be thought about is what percentage of the population actually store this kind of data on their pc's, and if there is a potential generational effect, as stupid as this sounds the Raven would have a rather good punt that penetration of these sorts of products is much lower with consumers the older they are. ie. Your average 50yr old isn't going to have as many digital photos as your 30 something, or as many photos as that 30 something will have in 20yrs. Just to make the maths easier, lets say people only buy storage when they get to 20, and that penetration really only goes up to 40, thats 20yrs of the population that could be 40yrs in 20yrs time. Not a huge growth rate, but certainley not a stagnating industry at 3.5% p.a. growth for 20yrs.
It still looks like a situation to sit on one's hands. Especially given his other previous thoughts on WDC and STX...
http://blackraven999.blogspot.com/2010/08/wdc.html
http://blackraven999.blogspot.com/2010/08/stx-translation-of-wdc-comments.html
http://pulse.zecco.com/2010/07/data-storage-valuation-versus-earnings-stx-wdc/
Basically it points out that data storage is cheap ie. $100 for a terabyte now. It doesn't explicitly say it, but the argument is then that 1Terabyte is enough space for you to store everything you could want and therefore that you'd just buy the cheaper version of the 1TB. Now it would be easy to dismiss this argument by regurgitating a quote about a desktop PC being everything you could need in the 90s. The Raven thinks it more interesting to wonder where the actual limit might be using a bit of imagination. As we're only really looking at personal data storage what items do people like to store? (and a point he's going to dig some more into offline)
photos, music, films, books? software? personal documents
photos, music and films all have the potential to upgrade again to higher resolution formats requiring more storage space, books less so, but software and the personal documents they produce if anything produce larger and larger files. Without even looking at the massive increase in commercial data that will be stored in the future its easy to make an argument that the size of files will expand to fill the space available to store them.
The other point that really should be thought about is what percentage of the population actually store this kind of data on their pc's, and if there is a potential generational effect, as stupid as this sounds the Raven would have a rather good punt that penetration of these sorts of products is much lower with consumers the older they are. ie. Your average 50yr old isn't going to have as many digital photos as your 30 something, or as many photos as that 30 something will have in 20yrs. Just to make the maths easier, lets say people only buy storage when they get to 20, and that penetration really only goes up to 40, thats 20yrs of the population that could be 40yrs in 20yrs time. Not a huge growth rate, but certainley not a stagnating industry at 3.5% p.a. growth for 20yrs.
It still looks like a situation to sit on one's hands. Especially given his other previous thoughts on WDC and STX...
http://blackraven999.blogspot.com/2010/08/wdc.html
http://blackraven999.blogspot.com/2010/08/stx-translation-of-wdc-comments.html
Wednesday, 4 August 2010
share buybacks
IT REALLY IRRITATES THE RAVEN WHEN SELL SIDE COMMENTATORS SAY THAT SHARE BUYBACKS ARE A WASTE OF MONEY BECAUSE OF THE PRICE THAT IS PAID ON THE SHARES. IT IS JUST STUPID.
Imagine there are two shares in a listed company, the intrinsic value of the company is $400 lets say made up of $250 of hard assets and $150 of cash, the company has no liabilities. So the intrinsic value of one share is $200.
Lets say the company decides to buy back 1 share, ie. 50% of the shares issued. if they pay $x for that share to you as a shareholder. If they pay $100 for the share, you as a shareholder then have $100 of cash, and 1 share left in the company, which then has an intrinsic value of ... $50 of left over cash+$250 of hard assets = $300. So as a shareholder you're left with $400. If they pay $1 for the share, then you have $1 cash + 1 share worth $250+$149 = $400.
WOW its the same.
Imagine there are two shares in a listed company, the intrinsic value of the company is $400 lets say made up of $250 of hard assets and $150 of cash, the company has no liabilities. So the intrinsic value of one share is $200.
Lets say the company decides to buy back 1 share, ie. 50% of the shares issued. if they pay $x for that share to you as a shareholder. If they pay $100 for the share, you as a shareholder then have $100 of cash, and 1 share left in the company, which then has an intrinsic value of ... $50 of left over cash+$250 of hard assets = $300. So as a shareholder you're left with $400. If they pay $1 for the share, then you have $1 cash + 1 share worth $250+$149 = $400.
WOW its the same.
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