Weekly Musings – 13 Aug

Periodically, I post my thoughts on current news or recent postings adding my slightly irreverent take on the events and a sometimes offer a slightly contrarian view.  So follows the current installment.

Observation #1 – MET

This week, my allocation from MET’s spin of BHF arrived.  In layman’s terms, Brighthouse is a domestic play while MET has both domestic and international operations.  Personally, I viewed the logic as being a way to strengthen their hand (MET) in the ongoing court battle with the US regarding the SIFI designation -a view not presented in any interviews I saw.  Once trading began, it was widely panned as a lackluster performance.  Now this was a spin not an IPO, my take was it was aggressively valued – meaning (in theory) greater value was retained by the mother ship.  What garnered my wrath was the incompetence MET exhibited with the spin.

First the costs associated with the spin were underestimated.  This requires consent from bondholders to modify debt covenants (for a fee) with the alternative being selling common stock to attain appropriate debt ratios (dilution).  Secondly, a special meeting has been called (more costs) to vote on dividend payment tests included in the corporate charter.  The press release states:

These changes would avoid potential dividend and common stock repurchase restrictions which could occur as a result of the August 4, 2017 spin-off of Brighthouse Financial, Inc.

Why was this issue only identified post spin?  This gross mismanagement has placed MET into my Penalty Box and one has to wonder whether a meeting should be called to replace the CEO and Board?

Observation #2 – NUE

Sure Dividend analyzed Nucor recently, but his usual precision was (in my opinion) lacking.  Invoking “Trump” in the headline was bound to get visits and his ‘Take a pass’ recommendation hit the mark but the review missed in a few areas:

  1.  The claim of dumping is certainly an allegation yet no part of his analysis was to drill down on the validity of this claim.  Such as a strong US dollar.  Or the findings of the WTO.
  2. He does address electricity as being a significant cost component to the manufacturing process but fails to note that they entered into a 20+ year contract with Encana (ECA) for natural gas in 2012.  Any failure to perform (deliver) could be detrimental to NUE’s margins.
  3. Lastly in a dent to NUE’s dumping claims, their 2016 JV with JFE (JFEEF) to build a Mexican factory to supply the auto industry has a hollow ring to it.  As in, Who’s really doing the dumping?

Observation #3 – DIS

While roaming the channels this morning I came across a segment on Fox (FOX) about how to invest despite the troubles in North Korea.  One talking head said Disney citing their theme park exposure was insulated from it.  Really?  Perhaps he ignores the fact that 18-20% of US Disney visitors are foreign.  How would this be impacted?  What would the traffic count (or currency repatriation) be like in China?  What about travel to Paris or Tokyo?  Just one more reason why Fox is not my choice for news.

Hope you enjoyed this segment … until next time.

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Methods To My Madness Pt 3

My final post to this series is probably the least defined and most speculative post I’ve composed.  Many have attempted before and I’m sure many will follow, but the topic Cord Cutting and how to profit from it is filled with politics, regulation, evolutionary technology, disruptive practices and good old fashioned corporate greed coming together to create a minefield to negotiate for those seeking answers.

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