The Ignored Stories of Linamar

The Ignored Stories of Linamar

Linamar... Li... Na... Mar. Believe it or not this doesn't stand for Lithium, Sodium, March. It is however intended to be broken up the way I just did. The late founder, Frank Hasenfratz, needed a name so he named it after Linda, Nancy & Margret. His two daughters and his wife. I always liked that story and found it especially warming when compared to the drama of the other large Canadian auto company.

Today's post isn't about names or fun facts no matter how much they may make the company more likable. I wanted to discuss the company in a bit more detail to my prior post. Often when $LNR.TO comes up in conversation, people are unenthusiastic. On the recent financial metrics, meandering stock price, or general attitude of meh towards the industry... it get brushed off as nothing special. I get it, there are a number of stocks that trade a low multiples and most casually seem like the next. Most of the time, the low multiple is suggesting overearning, lack of growth or some type of declining business. That may or may not be the case for each. The difference in my view with Linamar is that longer term this perception is off sides. I believe they are underearning their normal or potential and with that comes the potential future realization of the quality of the business. I view the special side of the company as something that starts coming out when you break down the sides and history of the business.

Main Businesses

Auto Parts

Originally, I was going to list all the components Linamar provided within their mobility segment. I'm not going to because there are too many. If you're interested I'll give you A Link To Their Product Page. Sufficed to say, they're quite diversified across products, manufacturing methods, customers, and future flexibility. Their manufacturing assets are able to shift what they're producing and thus able to easily handle flexible order sizes & shifts. They do a lot and have since 1966. Their precision manufacturing and expertise has expanded and is likely applicable to a growing suite of products inside and outside of the auto sector.

This flexibility has allowed them to easily add substantial EV business & even FCEV/ commercial Hydrogen prospects. I mention this because I often hear stuff like "but EVs will be a threat/difficulty." I don't expect that to be the case with whichever way and timeline that plays out.

As far as earnings and EBITDA goes, this segment is the biggest contributor. It is capex & D&A heavy but when done right can more often than not be a surprisingly decent business. Even excluding the D&A it's still the largest business line.

Skyjack

Skyjack is a line of products. Have you ever seen an orange lift device? (scissor, boom, telehandler cherry picker... they have lots of names and variants) Next time you do, check if it says Skyjack on it. Linamar makes those. They're certainly not commonplace in the office for most but in places where there's physical work being done above ground level (changing a window, fixing something on the second story, etc) such devises are common. Outdoor work and warehouses frequently use them. It's a niche market for sure & there are competitors. Linamar does make a solid product with a brand that people who work in the space will recognize. 

Linamar bought skyjack starting with a 48% stake in 2001. They bolstered the segment with another acquisition in 2007. It continued to grow globally and even now is expanding capacity into Mexico, Hungary and China. Some of which just started up in Q4 of 2022 and significantly expands capacity into 2023. Manufacturing will go from two plants in Canada to Five across three continents. A 235% increase in unit capacity.

Agriculture

The agricultural segment consists of two main acquired brands; Salford and MacDon. Aswell as some older ones such as Oros and Harvestec. Putting things in the ground and collecting them once they've grown. Both sides use giant machinery. Guess who makes all sorts of giant machinery... Both of these were acquired more recently, MacDon in 2018 and Salford last year. They spent a combined $1.46 Billion on the two. They paid roughly 10x EBITDA for MacDon & roughly 8x for Salford on a trailing, pre-synergy basis. I should point out that the ag cycle was in a different place a few years ago amidst a sustained period of low farmer capex. 

I believe the whole suite of agricultural offerings will add a different dimension of scale to the business. I'd suspect that growth from that sector would offer solid returns if they expand.

(My 5 year old brain loves the pictures of the things the company I own a small part of builds. Seeing real ones is 10x more satisfying.)

Going forward, I believe the EBITDA for the industrial segment (Ag + Lifts) could be in the realm of $400M (see math below & add D&A of ~56M). If a world existed where sums of the parts were valued on par with the parts, (~10x back then) one could imagine that Linamar's industrial assets values might not be fully reflected in their current ~$4B market cap.

The presentation from when they acquired Macdon This One (Linamar 2017 MacDon Acquisition) Has a slide with multiple sector multiples (Ag, Lift & Autos) demonstrates how the market might have viewed the value of the segments. Since the resolution when I put it here was terrible, I'll summarize that the non autos traded at 10x forward EBITDA (vs autos at 5x) another slide showed a current and pro forma EBITDA pie chart and details of the price they were paying for the value in MacDon.

The point is, it might be possible that the value, cashflow potential, quality, or whatever you want to go by, is lost within the company. Using rough math from the presentation above I could suggest $3B-$4B in value of industrial [Assuming 1.2B takes the segment from 15% to 25% (slide 17) then add capex, synergies & Salford]. If you prefer for simplicity, ~2x Sales. Yes, this is suggesting that the industrial segment provides a minority of the earnings. I think that can be looked at via multiple lenses.

Numbers

Looking at the guidance given at the Q4 earnings, let's look at what the 'Normalized' earnings would be.

Guidance for both segments was "Double digit sales growth" So let's assume 10%

Mobility Sales in 2022: $6004M                

2023 at ~10% Growth: $6600M

Mobility Normalized Margin: 7-10%

Operating Earnings at Midpoint (8.5%): $561M

                                             Depreciation and Amortization would add: ~$400M

Industrial Sales in 2022: $1913M               

2023 at ~10% Growth: $2100M

Industrial Normalized Margin: 14-18%

Operating Earnings at Midpoint (16%): $336M

                                             Depreciation and Amortization would add: ~$60M

That's a shade under $900M ($897M) of operating earnings on a normalized basis. Great... now what the heck is an operating earnings. It looks something like EBIT (Earnings Before Interest & Tax). It's far from a perfect measure given the existence of interest and tax but gives some idea of what the earnings power of the business can be beyond the significant factors of Depreciation and Amortization that are parts of this kind of business. It also demonstrates how much growth or acquisition capacity the company has. I am admittedly a bit of a D&A apologist. Yes depreciation is a real thing but it's really just deferred cashflow.

Earnings Sensitivity

An interesting aspect about perpetual 'low margin' businesses is that small changes in margins can make surprising differences for a time.

In 2015 easing commodity prices helped boost earnings.

Recently, inflationary cost pressures in wages, commodities etc have hurt margins.

Last year, Linamar bought a Georg Fischer & Linamar JV "Mills River" which is a foundry not yet operating at a profitable scale. This, and other facilities in the ramp phase can also suppress margins. Linamar has twice suggested that they have a plan to achieve profitability at Mills River in "12 to 18 Months" that sounds like a volume and margin improvement. The swing might be in the neighborhood of $60M (1%-1.5% margin hit was the numbers I've seen suggested)

On the topic of Volume... There are multiple ways for parts companies to grow business. Increased content per vehicle & obviously, more vehicles. This isn't always a 1:1 correlation with total auto sales because demand and inclusion across vehicle types varies.

Industrial segment prices reset in January. Hopefully that should result in a normalized (~500 bps) jump on the segment of roughly $2B in sales.

Linamar also suggested that China's Q1 rebound wasn't exactly expeditious so the margin rebound in autos would likely be delayed.

Supply Chain

You might have heard... there was this chip shortage thing. Basically, if a product is unfinished, it can't ship. This fact has hit Linamar on both sides. On their industrial segment the supply chain disruptions plagued them all year with a gradual bias towards easing. On the auto parts side they got hit on the unpredictable production schedule of their customers who'd stop and start production as they intermittently lacked something from somebody. That side hurts on volume and on costs (paying people with nothing to do). Supply chain disruptions and production schedule are some big unknows going forward. They seem to be improving but remain imperfect.

This is similar to inflation. Labor, energy, transport, and raw materials have been volatile and problematic recently. While it's improving, it's still not back to normal and particularly on labor costs, it remains problematic.

There are a lot of problems. That's what's reflected in the current underutilization of the assets and depressed earnings. I like buying fixable problems, especially when the market doesn't seem to be counting on them being fixed. I don't know what the new normal will be once they are but think there's a lot of reasons why it should look relevantly better. Stock price drives narrative and I believe there's significant room for narrative improvement to get to... and perhaps beyond a more reasonable level in this name too.

Balance Sheet & Deployable Capital

Linamar's last twelve months' EBITDA is roughly $1B. Now as much as growth, MR & price resets should help the company going forward I'm really only looking for rough numbers here. Net debt to EBITDA is roughly 0.5x. Their target leverage is 1.5x (historically it has spent stretches at 1.8 when a suitable acquisition was found).

For this trivial exercise I'll assume that tax is offset by growth. So they should roughly have between 0.5 & 2.5 times their EBITDA to deploy over the next year. That's $500M to $2.5B. I'd have a base case of $1B (to keep ND/EBITDA flat) but an ideal case of $2B (to achieve target leverage). 

"Yeah dude that's just business why are you making such a big deal out of it..." Well, I think it matters that the scale of this capital feels noteworthy relative to their market cap. $1B would be over $15/share. $2B would be over $30/share. Certainly some of this is offsetting depreciation. Does it seem relevant to you? By expanding the theoretical to taking it to 2x EBITDA and 2 years, you can come up with +$50/share. Again some is to offset depreciation & more is spending to accommodate growth in existing businesses... but that's real dough.

Basically, they can easily add a relevant asset/business/brand to the organization without issuing equity or taxing the balance sheet more than they wanted. That should add EBITDA, EPS and make the 'ROE' (which I often quote) look better.

The market had a violently negative reaction to learning that Linamar had some good places to invest capital. It was a bit confusing given that this has always been a capital heavy business.

Medical Devices

Linamar first contributed to the medical devices space when the economy shut down in 2020 and ventilators were in short supply. Within weeks they redirected efforts to fill that demand. It didn't make a dent in the capacity or profitability of the company but went to show how flexible they can be and how adept they are at building new products when the need arises. "Manufacturing is manufacturing" is what they said at the time. That wasn't the origin of their desire to enter the medical devices field. It was part of their Linamar 2100 strategy from a few years prior that looked at lasting fields that they wanted to enter for the long term. The agricultural expansion was also part of this. Anyways, they got ISO13485 certified. (Certification needed to produce medical devices) They also have a few medical products in the works. They hope to provide high quality, cost effective solutions for medical devices and precision medical components under their Linamar MedTech umbrella.

I'm not sure when it might be large enough to matter let alone be split in earnings. I do believe that growing in that direction will over time change the perception of the company.

"Auto parts, yuck who care, it's cyclical capital heavy, should have a low multiple" etc

"Ok, they have some industrial and agricultural capacity... at least that's a different type of cyclicality and should offset some sector specific risk"

"Well whatever happens in the economy, the company can have some resilience to make it though carried by their medical devices business."

In other words, If I told you an auto parts business was a good one, you wouldn't believe me. If I told you a brand name industrial and agricultural products business was a good one, you might believe me. If I told you a medical devices business was a good business, you would believe me. The thing is, all can be true, sometimes. Allowing them all to thrive when they can is something that, if you were looking for a long term shift in how the market may look at the company, might unlock the value from stability. Obviously we're a long way from this given that it's currently an irrelevant segment. The company will have half of their current market cap of deployable capital over the next 2-3 years however, so, you never know.

Also, check your biases.

Linamar 2100

Ok, no one here is probably going to be a shareholder of Linamar in 2100. You know who likely will? Blackrock ;) ... just kidding... A member of the Hasenfratz* family. Linda Hasenfratz, the daughter of the Founder is the current CEO. The family still owns 1/3 of the company. The company has Mr Hasenfratz's name all over it. The company thriving in 100 years is certainly a long term goal. While that may not matter for your investment horizon, if order to get there it needs to first thrive though your investment horizon.

Let's pretend we were looking for an aggressive bull case:

What if history rhymes... Well which history...

In the late 1990s Linamar was running at ~30% ROE and trading at 5-6x book in the booming economy.

In the pre-2008 more inflationary & commodity boom cycle Linamar was generating 15% ROEs and trading near 1.5x book. They peaked at ~2.1x book.

In the ensuing recovery it traded at 1.6-3x book while generating high teens to low 20s ROE.

So which past should we compare it to? I don't believe the booming economy of the late 90s is likely to repeat... the Canadian market, led by Nortel, was pretty expensive back then too. I mention it's existence only to suggest that the performance of the last cycle wasn't "Everything perfect, so good it will never be seen again." In cyclical markets, things can... get weird. Also, in each of the last three cycles the peak valuation was above 2x Book (6.6x... yikes 2.1x & 3.2x) In terms of peak cycle stretches, 2/3 cycles had three year peak ROE stretches above 20%. The other inflationary one had roughly 13%.

With that and today's book value we can have a lot of fun.

1 Estimate future book: Current book * (1 + (Peak ROE %))^3

2 Apply target multiple: Peak Multiple * Future Book

In my prior post I looked at a mean reversion towards 15% ROE but used book multiples between 1.5x and 1.7x. The goal was to be realistic and not overly aggressive. The problem is that there's also reflexivity in the situation. If they can get ROE to 20% instead of 15% I'd expect to see more of a multiple expansion. In either case, I was also looking for a true fair value (as again I view this as a stealthily good company that should do just fine as a long term hold from a decent entry point) rather than what I'm going to look at now for a 'if you were trying to measure a hopeful sell target.' 

So if we got a good environment for a while... eventually... we could see, (~80*1.2^3)*2.1= $290 (3x book would be $414 after three good years)... yeah I know it sounds ridiculous now. I can't even fathom it but if operations were running at 1997 levels & valuations, the price would have been +$500 today. Maybe I'm saying all this so I feel less crazy for suggesting that it is probably worth closer to $120 than $60 today. Things change over time. That's my point. It also may have permanently changed for the worse. Maybe they never recover operations and things keep declining instead. Maybe ROE goes to 3% and we move towards 0.3x book. Maybe poor capital allocation decisions are made or there are problems and the company loses money consistently. It's all possible, that's why I say that even though I can point to what I think will eventually happen but for me to be right, THINGS NEED TO CHANGE. WE NEED TO SEE IT. It's not because I view the stock as undervalued that the market should bid it to where I think it should be. As I suggested last time, I think the mid 100s is probably a reasonable fair value when things normalize... with growth from there.

Buyback

With my opinion on their intrinsic value part of me would prefer them using this discount to buyback more shares. Academically, if they normalized their leverage ratio to 1.5x by spending $1B buying back 1/4 of the company I believe it would add a ton of value per share. I'd love to increase my holdings by 33%. In practice it won't go that way. CEO own's too much, prices would move in the attempt, it's not exactly in their nature. That said, I will admit to some disappointment that the NCIB (buyback) wasn't renewed yet. Having the option on the table, even if only for exotic events or temporary dislocations, is something I think most companies should have on hand. I understand that they have a lot of capital to spend to fulfil their growth and they don't particularly want to expand the balance sheet only to buyback. Still, that would be my main input. Close enough to or above book, this desire fades unless they can't find anything worth buying/spending money on.

Last Decade & Next Decade

Over the last decade Linamar has; 

Taken their book value per share from ~$17 to ~$78

They've acquired: Mubea (2013) Seissenschmidt (2014) Montupet (2016) MacDon (2018) Salford (2022) Amid other JVs and deals.

I can't say whether the next decade will include more or less good years than the last. I realize, only after writing this how much there is going on that might be missed by calling this an auto parts company. I've been part of this problem. They can certainly make most of their money from that business. There's also tremendous value & resilience elsewhere. You also have a proven and aligned management team that has grown a tremendous amount of value by utilizing cashflows from business operations. I believe that will continue. In time, I suspect they'll show the market that it's both undervalued and underrated them at this juncture.

That's enough for today, hope you enjoyed.

Disclosure: At the time of this article I own $LNR.TO as well as have sold some puts so may be buying more later this year.

Not investment advice, please see (Can Do Investing: Ground Rules) page for more information.

Lumber: The Joys of Instability

The Joys of Instability

DR Horton's most recent conference call included the words stability, stabilizing, stabilization etc. 34 times. They did so particularly in relation to pricing, costs and demand. One problem... The price of lumber is too low for lumber producers to make money.

There are companies where you can model out earnings for years and pretend you know what the future will look like... Then there are commodity stocks. I can't tell you how many successful commodity stories started with, "Well, they're not making any money right now...but...." There's a reason for this. Central banks say they target price stability. I think that's funny because price stability is impossible. Especially in certain areas, you either have too much or not enough. The prices that make companies 'make more' or 'make less' are so far away from each other that price instability is necessary. Or, if you prefer, to use a Druckenmiller concept, invest 18 months out into the unknowable future because everyone knows today.

This thinking has me caught on lumber. I can point to EXACTLY why I believe the price has perpetually been in the doldrums for months. Even still, I can't say when that will end. I don't even know what the sector will be worth when it ends. Best I can do is shrug and say "probably a fair bit more... IF..."

What's Wrong?

To me the two part answer is:

1: The decline in single family housing starts. Direction is important, at any given level production can adapt and price can balance out. If the demand keeps shrinking the market needs to keep sending the "We need less" signal.

2: The reason for declining single family housing starts has likely been the higher prices and higher mortgage costs. This weighed on the marginal buyer and probably has some waiting for lower prices, lower rates, a magic recession that will provide them with an almost free house at a perfect time... the usual.

For me, the primary question is: when do things stop getting worse in SFHS? I believe that once that happens a number of aspects will fall into place in the sector. We need to get through the re-adjustment period.

While I can point to what's wrong with lumber, the valuation on some of the equities seems beyond recent lumber woes. On that subject I can only speculate:

Recession or housing bust story?

Lack of clarity around duties?

Lack of recognition of how big the recent boom was & what that means?

Thinking that big boom = big bust?

No dividend= who cares?

Simply

I believe the lumber price is unsustainably low. Lumber producers are burning value. Negative earnings!!! Are you excited yet? Didn't think so. It's a bad situation to be in... Today. My interest is similar to the chicken's interest in going to the séance... To get to the other side... (Blame the Bing chatbot for that joke... I had to hear it and because of that, you had to hear it). Anyway, like many interesting investments, what's special about them is the ability to visualize what they may be able to look like on the other side of today's issues.

If there's no extreme outcome along the way (bankruptcy or forced asset sales of some sort) the asset value and earnings power will likely shine though eventually. That should in one way or another, convert into value.

How Much Value?

I already told you... I have no idea... But for arguments sake, let's say I had to pretend to know. 

Some angles I might approach the problem from would be.

1: Historical price to book multiple at point X

Over the last decade 1.2-2.5x book has been the common trading range. It depends if they're profitable at that time.

In the post 2005 bear market valuations traded from 1.5x book down to 0.5x. Of note West Fraser's AGM had a slide titled something like "This is not 2005" pointing to the vastly different supply dynamics vs then. Lumber supply never recovered anywhere near 2005 levels. (see further down)

While perhaps the most stable measure book value literally changes every quarter & doesn't really account for balance sheet torque. What I'd imagine for a reasonable price in a difficult environment might be ~1x book. Then as things turn, if ROE can bounce back to 20% you might see something closer to 1.5x Book... with book being 20% higher.

So if we say the group is at 0.66x Book today,

Scenario 1: 10% loss over NTM = 0.9x current book target or 0.9/0.66 = 1.3636 (36% upside) then 20% ROE in following 12 months. 1.3636*1.2=1.6363 (at 1xBook) at 1.5X new book we'd get 1.6363*1.5 = 2.45 (145% upside)

Scenario 2: Loss losses, less gains... Breakeven this year, 15% ROE next. 1.3 X Book (1.15*1.3/0.66)= 126% upside

Scenario 3: Bankruptcy = 0 (100% loss)

Scenario 4: Breakeven 2023, 30% ROE 2024, 1.7x book. (1.3*1.7/0.66) = 3.35 (235% upside target)

Basically, if you get a re-rating without too much damage, I think more than a double is in store. Getting no rerating, would be historically rare for profitable times but would result in potential for high yielding capital returns. The problem with me making a case at this point in the cycle is that I can always postulate that 'It might be different next time' & 'you might not get the rerating and have to hold for multiple cycles to fully reflect the value.' It's possible, it's always something to consider.

2: M&A or Capex replacement cost

This one is more of a judgement call, not all assets are equal. Prices shift with different price environments too. 

Looking at the recent Interfor acquisition of EACOM acquisition they paid roughly CAD$500/Mbfm (before other factors) across eastern Canada.

Green First recently sold 245k of capacity at CAD$385/Mbfm.

Canfor has two capex projects underway at US$640 DeRidder (250MMBFM) and US$840/Mbfm Alabama (250MMBFM) For their greenfield growth.

In the most bizarre example so confusing that I checked twice, West Fraser is spending ~$1850/Mbfm on a brownfield expansion.

Here it is if you want to do the math yourself. P.S. Their cursor not mine.

So capacity can be anywhere from $350 to $1000+ any questions? ... Oh now you care about pulp and OSB capacity...

3: EV/EBITDA at different potential margins.

Ignoring that normal doesn't exist let's have a look.

Over three companies and a dozen years I could easily come up with too many number to keep straight so I'll simply.

Interfor's 10 year average EBITDA margin is: ~$135

Last 3 years average EBITDA margin is: ~270

A number that ignores windfall years and looks reasonable to me is: $90

(Top left, but I just want to take a second to admire how good this slide is overall... it's all there)

Given that multiples depend where we are in the cycle, it might look something like:

(Using Interfor's 4.5BBF because it's the only pure play)

(10 year average) 4500*$134  = $603M EBITDA *4?

(3 year average) 4500* $270 = $1.215B EBITDA *2?

(Old profitable years) 4500* $80 = $360M EBITDA *7?

This is possibly even more arbitrary than the M&A. As the good years come in, shares can quickly be bought back to make prices pretty stale by the month. for instance holders of shares of some of these companies over the last 2 years may own a ~50% greater stake as nearly 1/3 of the shares have been repurchased. I've sold this kind of thing in the past at a multiple that felt frustratingly stupid to sell at. It was... but a few months later at virtually the same multiple it wouldn't have been.

All of these require various levels of creativity in assumptions. They all also have significant problems.

1: Losses & lack of consideration of future upside potential

2: these values change and really only matter if the company is going to be acquired.

3: lol it's a commodity business... I've seen 1x multiples or infinite multiples... Plus a 'normal' margin is often an imagined concept.

Supply Comments

There's another factor in the back of my mind. I could be way off base here but BC capacity has been a bit of a pain & I'd be a bit more cautious towards it. The mountain pine beetle has been... A plague might be harsh... But a blight on the local industry.

Production is down in the region, costs are up etc. it's not ideal. We may be passed the worst of it or not. If not it's bullish other areas. Most majors are diversified enough that it's not a huge concern but it's what comes to my mind on the subject.

Lumber supply has actually been flat longer than that and never regained 2007 levels despite the strong recent housing numbers.

The Recent Boom

The recent volatility that had lumber at $1000 isn't something that is in a base case to happen anytime soon. I do want to address what it meant for the companies. Those companies were able to add a tremendous amount of fundamental value per share very quickly. The acquisitions, buybacks, capex, special dividends... you name it, are something that I'm not sure is adequately represented in a long term stock chart or examination of many individual aspects. I think some of the recent valuation decline may be the 30000 foot view stock-chart looking at just another lumber cycle.

The stocks are trading at something like 2018 or even 2015 levels whereas the book value added since isn't even close. Good time pricing vs bad time pricing I guess...

Duties

The elephant in this industry is the trade dispute. Companies have hundreds of millions of dollars tied up trade duties. This uncertainty is unfortunate especially considering our countries existing trade partnership background. It's a potential persistent headache or potential windfall. I don't know how to quantify it because while I can reference how much money is on deposit and what that could amount to, I'm not sure I can handicap if, when, or to what degree a resolution is possible.

But Fundamentals...

Some events shape a generation. Some booms develop into bubbles and people use their 100% experience to tell you all booms develop into bubbles. Some busts are one in 100 year events. If that constitutes all your experience with downturns then every potential downturn will look apocalyptic. Ok, but why am I going on this random tangent in a post about lumber whose demand is linked to hoooooook.

Nothing I say about fundamentals matters to someone who believes or wants to believe that 2008 is coming. Or even, someone who believes that this ends like 2008. There are a lot of such people.

Remember how I started this post? DR Horton's most recent conference call included the words stability, stabilizing, stabilization etc. 34 times. They did so particularly in relation to pricing, costs and demand. People can't and won't believe that this isn't 2008. They're incredulous about the recent performance of homebuilders. Listening to the builders however it sounds like they think they've seen the worst of it last year and things have... Stabilized.

If (big IF I guess) they have, and the next direction is an improvement in volume, it could be quite positive for lumber. No, I'm not saying +$1000 lumber is around the corner. I'm simply suggesting that in any kind of stable market, the biggest and best lumber producers should be able to turn a profit. In my opinion, they currently aren't priced for that.

In relative terms I suppose it has stabilized. Also, and this can change quickly, the recent relative performance of the sector has been somewhat ok. Perhaps that's just within my crappy portfolio. But we have seen some insider buying in a few names over the past quarter. Not as much as the last time I followed insiders into the lumber trade but enough to get me thinking more seriously about the idea.

As for a minor commentary on some of the names I looked at:

West Fraser has long been the leader through multiple cycles. They do have a premium price to go with the paid for quality. They have OSB and pulp exposure so it isn't pure lumber price as a factor.

Canfor would be the defensive way to play it. They're sitting on a lot of cash. Enough to account for a significant portion of their market cap. This means less leverage to near term price upside but if things go poorly or take longer it might mean more opportunity for them. They also have pulp exposure.

Interfor is the pure play. It's debt is laddered out many years and should have plenty of near term liquidity. Of the three I'd say it has the best leverage to an improving market or downside in a deteriorating one. Their performance has arguably been slightly better this recent cycle.

Conclusion

For this to work out... At least as a bull... Change is needed. They lost money last quarter and likely Q1 as well. Either costs come down or price goes up. Until that happens value is lost. If it doesn't happen for months or years they might not be a bargain... If they survive at all.  Obviously I believe they will without too much damage. I also believe that buying at the perfect timing won't be obvious. Structuring when and how one might be willing to leg in is likely worth some consideration.

Hope you enjoyed!

Disclosure: I am long lumber equities in various forms including multiple names mentioned in this article.  This isn't investment advice. Please see Can Do Investing: Ground Rules for more details.

A Few Points About Local Inflation

 

Inflation Update

On so many levels I hate that I still have to write about this. Yet, I do feel like there's more to be said... And a number of repeated points that some perhaps haven't adequately considered.

The inflation target in Canada is a range of between 1% and 3%. People call it 2% and I won't fight much with that definition as it is the center of the range.

If I said to you that we've had an unexpected bounce back in inflation, you might look at me like I lost it... after all inflation looks like this:

Canada CPI YoY

But I believe we have.

The leading inflationary force in Canada is (drumroll please) Mortgage Interest Cost... That's right, cost of living is being most increased by the brilliant measures we use to stop the cost of living from increasing. This measure has increased so much (more than 26.4% YoY) that it now accounts for 0.7% YoY (according to statcan, my estimate was slightly lower) according to the CPI. Or more than 15% of all 'inflation'. (To the Americans laughing at our stupidity, may I refer you to OER) Luckily we seem to have started to recognize this as a society. Six months ago my frustration with the situation had me feeling like I was living in a different universe.

Yes that means interest rate hikes is the most significant inflationary force in the country by a wide margin.

Producer prices aren't part of the CPI or what's considered inflation by many but it is an interesting signpost. If producer prices are going up they're going to need to increase prices to stay in business. They were going up a lot... Last year. Since then however, PPI inflation got transitory in a big way. Prices are down over many timeframes. This doesn't immediately translate into CPI falling but it at least means that businesses don't have to keep raising prices and can flatten/reduce them. Margins can neither be too high nor too low indefinitely.

You decide for yourself, this is PPI, now +1.4% YoY

I'd call that transitory.

Wages 

Wages which aren't measured in CPI, have been more rounded. They actually ticked lower in march and not simply in YoY terms. 33.12 in March (5.3%) vs 33.16 in February (5.4%). This didn't keep up with CPI last year so in some ways it's not surprising that it remained above trend. Despite this, this measure of wages is hot. Wages would need to remain flat until the fall for it to normalize.

Base Effects

Now we're approaching a strong period of inflation from last year meaning a time when base effects should be a significant help.

Last year May, June, July had, 0.6%, 1.4%, & 0.7% inflation respectively. Which means if each month comes in slightly hot this year (0.3) inflation would fall by 1.8%. at 0.2 average it would fall by 2.1%. Both of those scenarios would put it back in the target range. That's without accounting for adjustments related to Mortgage Interest Cost or Core vs Non Core inflation. We could realistically have inflation (ex-MIC) below 2% this summer without a recession.

However, if we put in another quarter like last of 1.4% inflation it's more complicated. Although the number would be 3% including a significant amount from MIC, I'd still be disappointed vs expectations from 3 months ago. We'd lap the biggest reason for optimism and as far as I'm concerned then be looking at more of a risk of inflation stickiness. 

I just keep looking at inflation post May or June. After May's results, the leading measure of inflation will most likely still be Mortgage Interest Cost. Flat from here would be ~25% YoY or still ~0.6%. Yes, it's technically part of 'core'. Bank of Canada stated they expect CPI to be ~3.3% in the summer... So roughly 1/6 of which is MIC... Or roughly 2.5% inflation with rates firmly in restrictive territory. That's not 'so bad'. Is it high? Technically slightly yes. Is it sticky? Maybe. Is it a recession? No.

The problem is, that's all I've got... I was very much saying and thinking that inflation would be highly transitory. My belief was that would be largely the case whether we raised rates at 2.5% or 4.5%. The shock was going to roll off. The supply chains were going to improve. Those elements were completely predictable and the disinflation was probable. When we hit June data, if we're not THERE... The incremental small step lower will be difficult. July onwards the base effects reverse and you could see a step up in inflation.

There's enough noise in the data lag and enough slightly pent up inflation and deflation beyond that point that I honestly don't have any idea which way it goes. I don't know if it matters, but if we're going to make it matter, I don't know the solution.

I think the debate will become, "How restrictive do we need to be around 2.5-3.5% inflation?" 3.5% probably means higher for longer but what would 2.5-2.75% mean. It's within 'the range' and rates would be fairly restrictive (positive real rates). That could go either way. Lowering to 4% or even 3.5% would still be technically restrictive but might spur some acceleration which might reverse the intent. On the other hand there's the risk of sustained higher rates doing further unnecessary damage to growth.

If there's an answer, I think it will come with wages. if wages are flat or falling over the next 3-6 months I believe we'd be much closer to an easing bias. If wage growth is in the 4s it's probably more 'on plan' and if wage growth is still in the 5s there might be more concern.

Annualized Different Periods

If we annualize different stretches and examine inflation over them, I believe it's easier to see my lack of immense enthusiasm.

3 Months: 5.6%

6 Months: 3.2%

9 Months: 2.0%

1 Year:      4.3%

Now I could argue that seasonal adjustments would make the last 3 months 0.3, 0.1, 0.1 instead of 0.5, 0.4, 0.5, but I generally don't love seasonal adjustments so I won't say too much about it aside from, "there might be hope."

Food

To date, Food Inflation has been mocking me...

It may have rolled over but the lag between it and the roll over months ago has been high on my radar given my holdings in the agriculture complex taking hit after hit on pricing while "food inflation" has been a non stop talking point. Crop prices are WELL off last summer's levels yet increases in grocery stores and the CPI measure have continued further pressuring rate hike enthusiasm.

I think this part of inflation should come down but if it tracked in real-ish time, it would have already so I can't say if, when, why it hasn't. I can suggest that the margin reparation/expansion of someone in the supply chain means the situation is getting better below the surface. Things are normalizing even if it can't be seen yet.

Shelter

Shelter is a big topic & a messy one. It accounts for roughly 30% of CPI. I could (and probably will at some point) write an entire post about shelter in Canada. The problem it 

1: It's not really discretionary

2: High rates slow supply (at least funding construction via pre-sales)

3: Care to guess which category the +26% YoY mortgage interest cost is part of? Even ignoring that component by itself, what does that do to rent demand... which is also a big talking point on inflation.

4: 4 new residents per housing start is problematic and demand quantity is independent of interest rates

You can obliterate the economy and destroy a lot of lives before having much impact on this problem. You can also make it worse by attempting to 'fix it' the wrong way. If you raise rates to the point where developers are bankrupt or can't develop new residences you're doing just that.

Non Core

People love to mock the exclusion of food and energy from inflation and say "CPI excluding things you actually buy" or something. I get it. I also very much believe that CPI is a bad and lagging measure. In this case however my feeling is mixed. Yes of course those are big components. However, with all commodities, sometimes prices are high enough to incentivize increased production and sometimes they're not. Food and energy prices weren't high enough to be sustainable a few years ago, now they are and that's trickling through in it's own delayed time to CPI. Gasoline crack spreads are through the roof on temporary factors, do you want central banks breaking the economy because of a strike in France? Imagine how much trouble we'd be in if that were the case.

Economic growth

One last point is that economic growth isn't inflation. Arguably it can be the solution for inflation too. the whole bad news is good news, good news is bad news is a pain. Some things matter, I'd say focus on wages, food & rent. If they moderate good news can be good news again. "Slowing down the economy," sounds gentle and all but may have effective limits given supply is also part of the economy.

Conclusion

The headline number is coming down & will likely continue to come down even if we're not in the clear. Food can come down a lot and energy, after April, may well put in negative numbers. There are some outliers and crazy factors (MIC) but most things are moving in the right direction. We likely remain stuck in the 2.5-3.5% range for at least a number of months despite how quickly we've been falling recently. Most of this decline in inflation likely didn't require rate hikes... look at every component where the solution was eventually a supply response. Despite the record and dangerous rate of increases, the damage to date hasn't been as extreme as it could have been. All of the first increase, the recent decline, and the recent resurgent impulse have been largely driven by cyclical pricing factors in global markets. It's still messy, but there's a good deal of hope.

P.S. Now real rates are above inflation, so anyone who believed that was necessary to take down inflation can also claim victory despite the fact that we moved from 8% to 4% without positive real rates taking down inflation.

P.P.S. Hearing Poloz speak about inflation is orders of magnitude more confidence inspiring about competence of central banks than... Some other former governors. Poloz 'Has a feeling' that rates may go lower next and sooner than some think. Hopefully he's right.

Auto Parts: Still Surprisingly Undervalued

History

I still remember, it must be a decade ago by this point, watching the auto parts sector rip to new highs. I was much newer to the market back then & was very a simple value minded person. I remember Magna in particular back then because I couldn't figure it out (why now, why this price). Mostly reasonable priced (on a P/E basis) stocks were those which had fallen or perpetual underperformers. It was rare to find a cheap company aggressively pushing new highs. It was part of my learning experience, why did this one work so well? It turns out that despite the low P/E the company was growing earnings pretty well. (Back then P/E seemed far more arbitrary than today)

Zoom out on your stock chart app for full effect, it was dramatic...

I've watched the sector since then & witnessed, in slow motion, why P/E ratio doesn't tell you what you need to know. Since looking inexpensive at the end of their run in 2015, the sector has been a few different degrees of flat. Yes, 8 years, no returns. So aside from being stupid, why have I been talking about a sector that does nothing for three years now?

Back heading into their 2015 peaks, the auto sector was having a strong recovery after the GFC. Parts producers generally have added torque to growth, 

more cars = more parts

+ Ability to grow content per vehicle

+ Economies of scale

+ Higher ROC/ROE/ROA

+ Places to deploy profits

Throw in decent business conditions after the 2011 inflation spike and supply chain issues... And these businesses were able to show what they can do. They essentially had things going well for long enough for the market to look a little past the prospects of future troubling times.

One of my favorites nowadays, Linamar, for example traded up to 3x book value. Their narrow margin business has a slight margin expansion which made a big difference. Overall they were showing that they can be a good business in a difficult industry.

A good company at the wrong price will often mean less good returns... And that's what came. They continued making lots of money, investing capital to grow their business, buying business and paying small dividends... Just as they did when they ran up to their peak valuation.

It wasn't enough. Things got marginally less good in a lot of ways; auto volume peaked, margins reverted etc. Every dollar deployed towards growth was catching up.

A String of Bad Luck

Three years on, they had grown the long term value of the business but the stock still hasn't made new highs. Was it ready? It might have been... Except in 2019 there was a big strike in the US auto space & an industrial recession. That delayed things & knocked the stock to a large discount.

2020... Something happened to the economy... Can't quite remember... I feel like it was big. Probably nothing just me coming up with a weak excuse for difficult performance in industrial production.

2021 Shortages of almost everything, most notably, semiconductors, labor and transportation knocked the auto production industry into a recession. I know, you probably missed it amidst everything else going on but used car prices going meme mode was partially because we couldn't buy new ones. If you were waiting for a new car, the line kept getting longer as more and more production issues kept arising.

Big equity like cars have lots of parts, way more than the barbeque that took you 4 hours to assemble. If any are missing, you can't ship. This led to all sorts of stops and starts, volume cuts, inefficiencies. You know all the reasons why you want to own auto parts companies in good auto environments... Except the opposite. This lasted into mid 2022.

To quote the chairman of another holding Martinrea, "people thought it was going to be a blip, we said it was going to be a blimp."

---leave blank for whatever problem appears for 2023---

Through this difficult stretch companies largely still added value but still had little to show for it. The market changed its mind. It no longer thinks these are good companies. In fact, I'd say it now thinks they're bad companies. "Cyclical" "Capital Intensive" "At the mercy of..." Valuations have slumped below the trough of the .com bust.

Was 3x book the right value? Probably not... (I can still point to companies in other industries with comparable ROEs & growth that trade at that price) But we had a reason for thinking it was back in the day. Remember when these were decent companies spitting off big earnings and solidly double digit market beating growth?

Are they useless capital sinks that deserve to trade at discounts to book? Perhaps they have been recently for reasons beyond their control but will that last forever? Probably not.

This isn't a stagnant scale either. The book value has continually increased, (more capacity and assets to provide future income).

Martinrea only recently filled their factories (efficiency), and have made many investments and acquisitions which haven't yet seen a decent market.

Linamar has bought and paid off a $1.5B agricultural business $25/share since 2018. They've also spent hundreds of millions on capital investments and some share buybacks.

Going Forward 

As much as I'd love to paint the picture of "We're past all that, now 🚀"  I still can't.

Production schedules are still restrained and disruptive. Volumes are still off highs. This is leading to a sustained period of low inventories both new and used.

Labor costs and other inflationary pressures are still having companies battle over margins & cost recoveries. Capex isn't what the market wants to hear. Higher debt service costs reduce flexibility & require higher IRRs to be worth pursuing. Oh... Also, haven't you heard about the imminent recession? As I mentioned above, my belief (and by definition of you care) is that autos are actually exiting a recession as opposed to entering one. Which, while positive volume, synergies etc, doesn't preclude the possibility of another one... *Sigh*

If 2015 taught us anything it's that you don't want to buy these things on earnings when everything has been going right for a while. It also shows us that the market can change perspectives. Business isn't always good or always bad... But it can be.

Earnings 

When I look at earnings I look at normalized or trend of earnings. While it's been a long time since earnings have been stable enough to call normalized, I think we can notice a trend of growth starting from a level that would have today's equity prices look fairly inexpensive. Assuming they can ever recover (I believe they can).

I continue to be the simpleton when it comes to fair value. I'm not going to assume things will be great and the market will completely forget about the issues experienced by the companies. It may be the time we get there but setting an aggressive target is a great way to be disappointed.

Step one is mean reversion. It looks to me like there's a good chance for these stocks to once again be believed to be worth 1.5x book. I also believe that there are very good odds that book value will continue to trend in the right direction more often than not. At the very least, the companies will be profitable more often than not.

I could do some ROE, EV/EBITDA, or P/E math too which would all use similar historical precedent to point to something in that range as reasonable or slightly conservative.

This means that if those assessments are correct,  I'm buying or holdings something at roughly half of their fair value. Further, it's probable that by the time they achieve that mark... If they do, it might be 10-20-30% higher still. When times are good so are the companies. Perhaps even good enough to look cheap at prices higher than my target.

When? No idea. I hoped we'd be there already. I've pushed out the timeline enough to give up at guessing. I do think things are directionally getting better. I think the companies are currently doing well enough to add relevant value proportionally to their current share price. Where I certainly differ from consensus at this pricing at least... Is that I think these companies are sneaky good. No they're not fantastic world class compounders deserving to trade at 50x earnings. But they don't lose money or perpetually struggle to stay flat. They grow by the quarter. This means I have them filed away mentally as something that I'm not eagerly looking to sell. They can also be their own compounder. If you're trading very cheaply buybacks can add a lot of value. Linamar just finished a buyback and decided to spend some catch up capex and slow the capital returns for the time being but can re-institute it if desired. Martinrea discussed a buyback in their last conference call, suggesting that we likely see one when they report in May. Right after the stock dipped on banking crisis news, they instituted one earlier than I thought. Make of that what you will.

My Simple Math

When calculating the value or targets of that I'm buying, using Linamar for example

Price low $60s

Book $78

Mean reverting ROE towards 12-15%

One year out fair value= 78*1.12*1.5 = ~$130 (~12x Earnings)

Two years out fair value = 78*1.15^2*1.75 = ~$180 (~12x Earnings)

So that would be a double to triple in one to two years. Is the ROE aggressive if there's a recession or sustained sector difficulties? Absolutely

Do I think it's aggressive vs what I think they can do upon stability? No. This obviously counts on a positive change in operations and is in no way guaranteed. It can EASILY be delayed by 12-18 months if it happens at all. (An overly competitive person might care). 

Even with my knowledge of history, sometimes I feel foolish for thinking this. It would be a significant move in a company that has spent a decade in a range. Further still, a liquid multi-billion dollar company that should have some actual eyeballs on it. Eyeballs that probably know this+ why this won't happen or won't matter if it does. Or, perhaps it's destined to trade off earnings and the earnings haven't been there & haven't been consistent in recent years.

The most likely ways that I'm wrong are 

1: Another Recession would almost certainly mean at least a delay.

2: Sustained inability to recover cost increases & idiosyncratic difficulties persist. Another spike in inflation hurts margins so on.

3: Price-wise the ROE/execution can happen and multiple can contract. If I'm right about the sustainability of that level of earnings it eventually won't matter but it will probably be some kind of delay after all we've seen.

What I appreciate about the price that the market is offering today is that we don't need much positive to materialize in order to make money. The current level of headaches can persist and we can still be buying a stock at roughly a single digit P/E and perhaps expect something like a 10% return.

My Plays

There's nuance between the two... And I structured this in a moronic way to delve too deep into specifics now. Briefly;

Martinrea is smaller and concentrated on autos. It probably has more torque (both directions) for that reason and their higher debt levels. They have, arguably navigated recent quarters slightly better after being more impacted earlier. I enjoy the color in their conference calls. They are also closer to the end of an investment cycle, they've spent their capital and filled their factories. Now they will be pickier with investments and return some capital. They guided for 150-200M in free cash flow this year. I don't know exactly what earnings will look like as it's been a while since they've been uninterrupted but I'd guess towards all time high territory.

Linamar is two stories. Their industrial business (Skyjack and MacDon/Salford) has annual price resets to should fix what was a 2022 of depressed margins. Rough math would suggest that's good for $330M of operating earnings (10% sales growth and mean reverting margins). My personal belief is that this business line is worth well more than autos. They own the brand names, they have higher margins and probably will generate higher returns on incremental capital. I mention this first in an auto parts post because you mostly need to back it out to figure out the Mobility business. The parts business is currently experiencing depressed margins not only due to the industry challenges but also because they have a foundry "Mills River" that's losing money because it's not ramped up to scale yet. This probably keeps margins artificially lower than their artificial low for 12-18 months. Linamar is also in the middle of a capex cycle so there are a few assets globally that are works in progress.

The technicals (chart) of both are in nowheresville mostly nothing special. The main note is that both have what I'd call overhead resistance between here and what I'd refer to as fair value. (Aka people that will want to sell at old highs). This isn't a problem per se but something to recognize. If you think fair value is 100 and there's tons of resistance at 90-95, you probably won't see 100 until fair value is more like 125. The other side of it is if you do break a big resistance level, you're more likely to see prices overshoot a fair value. In the examples above, share price may move up to 150 after breaking the 95 barrier before waiting for fundamentals to catch up. I don't know how relevant this is here, but my value analysis isn't the only one and certainly isn't a snap of the fingers, so I figured I'd mention it.

In 8 years of no total returns we've gone from 3x book to below 1x book. The rubber band has stretched. Maybe we go to 0.3x book... It certainly feels that way some days. Mostly these companies have traded off of earnings. They should come with increasing ease in a future with more business lines, assets & capacities. I believe patience eventually gets rewarded here. Even if we don't get the rerating I expect, I think we've gotten to values where earnings growth will drag value higher, kicking and screaming if need be. 

Disclosure: 

At the time of this article I own both $LNR.TO and $MRE.TO as well as have sold some puts so many be buying more later this year.

Not investment advice, please see (Can Do Investing: Ground Rules) page for more information.

Officially a Rambling Man... (Google it)

Catching Up

Years ago, I loved markets, back when it was fun. It occurred to me recently that it hasn't been fun in a while. That's not necessarily bear market blues talking either.

You see, the fun bit was learning about companies, sectors, strategies etc. That and thinking about a better future and where the investment and investment's potential returns would contribute to that better future.

Then... I got steered off course, somewhere in between there and here I got distracted by trying to achieve escape velocity from real life. Things went alarmingly well for a while and the situation changed. Good became not good enough. Anything less than unsustainable felt like a step down. "Quitting." It became a matter of competition. I enjoy the occasional competition but this became life. I felt I needed to be sharp, aggressive and singularly focused... All the time. I'd get too involved in the daily price movements and overly frustrated with the simplest of things. Holdings doing little silly things became painful and mentally consuming because I was relying too much on them. Companies not returning enough capital quick enough became a failing or frustration. Then after a lengthy period of misery it wasn't interesting or fun it was everything all the time. It was too much. I went from being disappointed about the weekend to needing it to have any peace of mind. The noise became all I could hear. I was trying too hard & it wasn't working. Plenty of good results came years after I found them in the past and I put myself in a place where I mentally didn't have the time.

I set unrealistic expectations for myself and assumed that others had too.

It wasn't about finding good investments, it was about compounding as quickly as possible. Seeing if I could handle different situations & risks. Testing limits. It also, obviously, hasn't been going well.

Remedy:

So, how do I fix this? Well, I need to move towards fun again. I'm sure I'll need to be less focused on markets going forward than I have been but I believe they'll probably always be a part of my life. At their core, they're fun, interesting and productive. I also realized that I enjoyed sharing some of my thoughts. Something I had been missing and contributed to my mental isolation. I need to do it differently but I think it can be done in a way that's positive. Being right isn't more important than being happy. I lost sight of that.

The response to my recent tweets blew up well beyond what I could have imagined. I forgot how many of you there were and met more of you than I considered. I'd been gone for so long and there were even more names, sharing, supporting and encouraging. The phrase "You are not alone" although cliché... Has been absolutely true. Thanks everyone I really appreciate it & hope you find something interesting here. A number of people mentioned something specific about what I did or the way I did things that they appreciated which was quite impactful. I'll try to stay true to that going forward. The thing about hitting a bottom, whether in markets or in life is that you're surrounded in negativity, and just when it feels like nothing can go right. That's when you wake up one day and realize that you're through the worst of it. Not to say everything will be fine but there's much more upside than downside in the future.

That said, I'm thinking about doing it differently. When I made videos the process often went,

1: Go on a long walk, have an idea of something to talk about, perhaps take notes

2: Get home and while alert and have energy make presentation

3: Find quiet time to record... And again because I suck at talking or don't say it right... Go on tangent etc (Only to have people complain that I speak too slowly)

4: Upload, tags, title, cover. 

5: Release at a time where hopefully I don't get rejected by the algo or ruin the algo's opinion of me for the next video.

6: Read and reply in long form to lots of comments.

None of which is the actual source material. As a side note, I can't tell you how many things got to step 2 that you never saw for a myriad of reasons. I want something more raw, less processed... But a bit more than a tweet. 

In any case it was quite a lengthy process and in the end if we're being honest, most of the potentially interesting stuff was in step one. The format wasn't anything special either... It was the boringest* (not a word except for what I was doing) of boring formats. My stance on public speaking is akin to early years Buffett & I felt some of that even buffered. I'm surprised any of you tuned in more than once. So why am I doing the rest that I enjoy significantly less? I go for walks anyways and I like them. My mind is... semi-functional anyways so maybe I can do everything on the move. So my proposal is this; I'll write, some long and some short posts while walking (at least predominantly). I won't be as competitive. No recommendations (never was). Less short term oriented investments. No schedule or deadline. Just thoughts, ideas, opinions and perhaps the occasional joke or meme. Sometimes there's a history or aspect of an investment that's on my mind with a point or two I believe is interesting. Exclusively the part I enjoy & only while I still enjoy it. Something more akin to a twitter thread. In a productive and time efficient manner.

I thought more about ideas that were shared with me by friends and acquaintances along the way. Some good ones, some less appealing to me. Even a number of the good ones had unforeseen or unforeseeable issues along the way. I never blamed the person who shared the idea. It wasn't even always management's fault. Many people also reminded me of this side recently. People can use whatever information (good and bad) but make their own choices. You can use whatever data, opinion, or lens you want to analyze something but in the end your choice, world view, outlook, timeframe, etc. will create your own unique decisions. Even still good ideas can go wrong.

I'm going to assume that half of you use this as you would use Cramer, so my net impact will be 0. That way when I inevitably get hit by a car and the blog stops there's no net disruption. (Just kidding, I always check before crossing.) 

I don't know how often or if there'll be any interest in this format but I think I'll give it another try.

Same rules as before, I'm not trying to push any ideas. I'll tell you if I own something I discuss. I'll probably answer less comment responses (time related, more in a minute) but you can't rely on me. I screw up a lot and even when I don't it often still looks like I did for a while. I'm also going to be taking a step towards the casual direction. Simply less 'hard mode' situations so no threading the needle situations or at least a step back on specifics. Things can still go horrendously wrong or amazingly right with reasonable investments. I'll still look at sectors and situations but avoid other things that I've decided to be more cautious about discussing. Even with that filter, mistakes are inevitable.

I came to another realization. I was focusing on my goal of wanting my investing to be good enough that it could be full time "retiree" style. I didn't solve some other things thinking when I did I'd have time for them. Essentially, I need to better manage time. I think this more casual format will allow me to post both half ideas & boringly long thoughts as I have them. Hence multitasking & cutting down on the tasks 2-5 that felt more like jobs than passions. On the comments; I did enjoy hearing and responding to most of them and will keep trying where it can be simply done but I was often spending way more time giving a full response (that I believed was deserved) than I had ever imagined going in. I doubt this blog will ever generate a relevant income so I need to have it compact enough that I can expand efforts in that direction & other fulfilling ventures.

I enjoyed building something, I enjoyed sharing ideas. I even enjoyed rambling... If you can believe it. So let's get back to building something here but something healthier this time. Thanks everyone for your support to date and hopefully in this venture going forward.