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@VIC: Jeffrey Schwartz of Metropolitan Capital Advisors- Taking What the Defense Gives You

by: Todd Sullivan October 07, 2008 | about stocks: GLNG / UFS    
Todd Sullivan

Todd Sullivan

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Todd Sullivan attended this week's Value Investing Congress on behalf of Seeking Alpha.

Jeffrey E. Schwarz is the Co-Chief Executive Officer of Metropolitan Capital Advisors, Inc., which he co-founded in 1992. He is the Chairman of the Board of Bogen Communications International, Inc. and a member of the Board of Cyberonics Inc. (CYBX). Mr. Schwarz is a Summa Cum Laude graduate of the University of Pennsylvania’s Wharton School, where he received both his BS in Economics and his MBA.

  • Schwarz compared investing to a two-minute drill in the NFL. When your team is behind, rather than trying to score a touchdown on one play with a deep pass against a defense specifically designed to stop that, he says many successful game winning drives are accomplished by taking the shorter passes, the defense is essentially giving up.
  • Rather than buying the "flavor of the month" he says the place to make money is in the "unloved and unwanted sectors".
  • Avoid renewables (solar, wind etc.) as the sector will experience a "washout".
  • The market is insistent on being rewarded instantly "like a small child".
  • After the 1987 crash, has not used leverage.
  • By using leverage you have to be right twice, both on the idea and time.
  • The market always extrapolates current conditions into the future (used $140 oil as an example.
  • Likes offshore drillers as they have contractual cash flows locked in (Transocean (RIG), SeaDrill (SDRL)).
  • Has invested in rigs that have a 25 year life span.
  • Stocks have followed commodity prices down even though contracts in place are not affected by it.
  • Presents two ideas:

    Golar LNG (GLNG)

  • Currently buying at today's prices.
  • Has rigs that can transport and then re-gassify LNG.
  • The first company in the world to produce these rigs.
  • Has contracts to supply these rigs around the world and is paid $100,000 a day for each rig.
  • Predicts over $10 a share in FCF in four years and the stock currently trades around $9.

     Domtar (UFS)

  • Manufacturer and marketer of uncoated freesheet paper and also manufactures papergrade, fluff and specialty pulp.
  • Using debt to pay down free cash flow.
  • "The world will always need paper".
  • Competition is shrinking.
  • Successful at implementing price increases.
  • Selling non-core businesses.
  • Trading at 4 times FCF in a business he feels is relatively recession-proof .

Disclosure: None

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This article has 1 comment:

  •  
    Oct 08 06:57 PM
    GLNG and SDRLF (Seadrill) are both John Fredriksen companies with good dividends. JF's philosophy is that the shareholder is a co-owner, and the shareholder is always foremost in his thoughts. To that end, he is committed to seeing the shareholder be rewarded with dividends, no matter what.
    Reply
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