Moat Market Intel: Lumen, StoneX and Atento Deep Dives ($Lumn, $Snex, $Atto)

I have no idea why this video was pushed to me.

Yesterday, YouTube decide that I should be in the mood of learning more about FIRE or financial independence retire early.

So they pushed these two guys discussing about FIRE. One of them just reached FIRE and quit his job and that motivated the other one to see how he can speed it up.

I picked out this video they produced:

Both of them were discussing about their FI number or the number they need to be financially independent.

This video is great because these two guys are totally opposite. One doesn’t budget but wish to be FI while the other guy did extensive work before he quit work.

There were a few insecurities discussed, such as whether they push for a higher sum due to the uncertainty, how confident or less confident they are with the figures.

I feel a lot of anguish when I hear someone who refused to budget and yet has so many questions and insecurity about whether their FI number will work.

Jason has some really detailed planning. I think he has built in some contingency into his plan. But just to be sure, he decide to sought out a certified financial planner to double-check his numbers.

The financial planner calculated and let him know his plan has a 45% success rate.

And I guess that is the problem sometimes. The traditional financial planners… to me… has a weird way of computing how much is enough.

It’s either super elaborate, crumble some, and doesn’t focus on the critical aspect needed to completely stop work.

Well anyway. Enough of the rant.

On to the other Moat Market Intel stuff.

Lumen Deep Dive ($LUMN)

This stock currently trades at $14 but according to Ben Claremon believes Lumen may be valued as high as $28.

Lumen does not look nice on paper and is considered more as a special situation. The dividend yield is high and likely to be cut.

In this podcast, you will be able to hear all the bull angles and all the challenges with Lumen, including the CEO’s incentives, global bandwidth growing at 30% a year, how much they sold some of the recent assets and how much more attractive their current assets are.

Creating 100-Bagger with StoneX Group’s CEO ($SNEX)

Compounders is a new podcast that I have come across. Ben Claremon (the same Ben Claremon in the previous section) interview business leaders of the companies his firm is interested in or have invested.

In this interview, Ben interviewed Sean O’Connor, CEP of StoneX Group.

Sean shared how they did the merger deal deep in the depths of the Great Financial Crisis with a company much bigger than themselves.

Sean O’Conner also talked about their risk management process. He also talks openly about the problems they faced from time to time, and how we should frame these financial risks they face.

He also talked about how they incubate their international payments business internally. They also market-make for the crypto markets and Sean shares how they view crypto and where the potential business risk crypto will pose to them.

Finally, Sean shared the economic moat for a financial business like StoneX.

Atento S.A Deep Dive ($ATTO)

Yet Another Value Podcast(YAVP) interviewed Leo Kang from Plum Capital on US-listed CRM business outsourcing provider Atento S.A.

Leo Kang from Plum Capital on $ATTO

On paper, this looks like a troubled company on 90% debt to asset and no earnings.

Leo explains that ATTO is a recovering cash flow play with a possible designated exit special situation.

ATTO is a Latin America call centre operations company sold to a group of private equity by Telefonica.

The top 3 shareholders:

1. HPS Investments Partners: 27% of outstanding shares
2. GIC Special Investments Pte Ltd (yes, our GIC): 23%
3. Farallon Capital Management LLC: 15.86%

The public free float according to Leo is 7-8%.

These majority shareholders have own ATTO for about 6 years and if we understand private equity, there comes a point where they will exit their investments and it’s almost at the 7-year mark.

While earnings look bad, Leo estimates that the company trades at 5-6 times forward EV/EBITDA.

If you listen to Andrew on you would know he pushes back on the bull case quite a fair bit.

A Great Historical Summary of Apple’s Chipset Evolution

René Ritchie, one of the very best Apple-watchers, with the technical chops to understand the engineering and the communication skills to explain it in a simple manner.

This is a great summary:

What happened in the last 3 years for Shipping with J Mintzmyer

Bill Brewster interviewed J Mintzmyer on his Business Brew Podcast.

Shipping has been on a tear in 2021. The Dry Bulk Shipping ETF BDRY have gone up from $7.60 at the start of the year to $36 today.

J Mintzmyer runs a standard value research service but solely focus on shipping.

In this podcast he takes us back into history and talks about the 8 year bear for shipping, and what happen in the last 3 years.

It is very interesting that for those who shit on the efficient market, the shipping stocks actually tank a couple of months before COVID hits.

J also answers some interesting questions such as:

1. What are the habitual things we can do to catch red flags in shipping?
2. What do the next 5 years look at for shipping? (Read tankers)
3. The Pros and Cons of owning and leasing ships
4. He did a lot of PhD on the Transpacific Partnership (TPP). He talks about it.

Natural Gas Price Appreciation May Not be Over Yet

Tom McClellan, whose dad came up with the McClellan Oscillator, gave this update on his view on natural gas:

Natgas futures prices zooming up, but curiously the big-money "commercial" traders are still net long as a group, as of last week's COT Report. We have seen such price spikes before, and the commercials get to neutral or short as they are ending. Message: It's not over yet. pic.twitter.com/KsmjBkJUvk

— Tom McClellan (@McClellanOsc) October 4, 2021

Trailing and Forward Price Earnings Coming down

I notice FactSet, the data provider tweet this out:

The trailing 12-month P/E ratio for $SPX is 25.4, which is below the P/E ratio of 30.7 on June 30 and below the P/E ratio of 33.3 on March 31. https://t.co/7v31jB2gMO pic.twitter.com/YzwyObmdFq

— FactSet (@FactSet) October 3, 2021

I was surprised by the change in PE as I thought it should be expanding over time.

I was able to find the trailing and forward PE work done by Yardeni:

What I notice is that 21 times forward PE is rather high, historical wise.

Even though operating earnings and reported earnings is good, price-earnings still contract over a 4-5 years period! Most PE bottom below 20 times.

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