Could someone please throw a couple of tickers at me with great value stocks you bought post-crisis that have realised by now?
I am learning value investing and wanted to look at a more recent example (post-crisis) of a value stock and how it progressed.
Ideally something from 2010+, US or EU
Thanks!
You could look at GGP listed in the US. It is more of a turnaround play(as coined by Peter Lynch) if you want to be more specific.
General Growth Properties is a fully integrated, self-managed and self-administered real estate investment trust focused exclusively on owning, managing, leasing, and redeveloping high-quality regional malls throughout the United States. GGP’s portfolio is comprised of 120 regional malls in the United States totaling approximately 125 million square feet. GGP is headquartered in Chicago, Illinois, and publicly traded on the NYSE under the symbol GGP. General Growth is the second largest retail property REIT in the U.S.
From Wikipedia, GGP reported in excess of $25 billion in debt (mostly mortgages) as of September 30, 2008. In late November 2008, GGP missed a deadline to repay $900 million in loans backed by two Las Vegas retail properties. This meant that GGP lenders could issue a notice of default, which would make GGP seek protection from its creditors under Chapter 11 bankruptcy. In December 2008 the Wall Street Journal reported that GGP would seek bankruptcy protection if it could not renegotiate its loans. Its share price had fallen by 97% over the previous six months.
In 2009, company filed for Chapter 11 and i remember that Bill Ackman of Pershing Capital bought in big and became one of its biggest shareholder, both equity and debt.
I got in before they went into Chap 11 and the company managed to refinance its loans through Ackman's help and came out from Chapter 11 without wiping out existing GGP shareholders. It was a 4 bagger for me if i remember correctly.
The company also spun off Howard Hughes Corp at around 38USD/share. I sold it off immediately because i did understand what HHC was doing at that time and it was a mistake because the stock price is now at 140USD. A 270% increase!
Could someone please throw a couple of tickers at me with great value stocks you bought post-crisis that have realised by now?
I am learning value investing and wanted to look at a more recent example (post-crisis) of a value stock and how it progressed.
Ideally something from 2010+, US or EU
Thanks!
You could look at GGP listed in the US. It is more of a turnaround play(as coined by Peter Lynch) if you want to be more specific.
General Growth Properties is a fully integrated, self-managed and self-administered real estate investment trust focused exclusively on owning, managing, leasing, and redeveloping high-quality regional malls throughout the United States. GGP’s portfolio is comprised of 120 regional malls in the United States totaling approximately 125 million square feet. GGP is headquartered in Chicago, Illinois, and publicly traded on the NYSE under the symbol GGP. General Growth is the second largest retail property REIT in the U.S.
From Wikipedia, GGP reported in excess of $25 billion in debt (mostly mortgages) as of September 30, 2008. In late November 2008, GGP missed a deadline to repay $900 million in loans backed by two Las Vegas retail properties. This meant that GGP lenders could issue a notice of default, which would make GGP seek protection from its creditors under Chapter 11 bankruptcy. In December 2008 the Wall Street Journal reported that GGP would seek bankruptcy protection if it could not renegotiate its loans. Its share price had fallen by 97% over the previous six months.
In 2009, company filed for Chapter 11 and i remember that Bill Ackman of Pershing Capital bought in big and became one of its biggest shareholder, both equity and debt.
I got in before they went into Chap 11 and the company managed to refinance its loans through Ackman's help and came out from Chapter 11 without wiping out existing GGP shareholders. It was a 4 bagger for me if i remember correctly.
The company also spun off Howard Hughes Corp at around 38USD/share. I sold it off immediately because i did understand what HHC was doing at that time and it was a mistake because the stock price is now at 140USD. A 270% increase!
Interesting example. Let's learn more in depth. So you went in before Chapter 11, and what was your investment thesis then?
I mean it was down 97%, there were reports that they may go Chapter 11 (but not yet). What made you think that it will indeed turnaround? Was it based on relative value to assets or?
Thanks for sharing in adv.
A stock well bought is half sold - Ben Graham
Price is the most important factor to use in relation to value - Walter Schloss
Could someone please throw a couple of tickers at me with great value stocks you bought post-crisis that have realised by now?
I am learning value investing and wanted to look at a more recent example (post-crisis) of a value stock and how it progressed.
Ideally something from 2010+, US or EU
Thanks!
You could look at GGP listed in the US. It is more of a turnaround play(as coined by Peter Lynch) if you want to be more specific.
General Growth Properties is a fully integrated, self-managed and self-administered real estate investment trust focused exclusively on owning, managing, leasing, and redeveloping high-quality regional malls throughout the United States. GGP’s portfolio is comprised of 120 regional malls in the United States totaling approximately 125 million square feet. GGP is headquartered in Chicago, Illinois, and publicly traded on the NYSE under the symbol GGP. General Growth is the second largest retail property REIT in the U.S.
From Wikipedia, GGP reported in excess of $25 billion in debt (mostly mortgages) as of September 30, 2008. In late November 2008, GGP missed a deadline to repay $900 million in loans backed by two Las Vegas retail properties. This meant that GGP lenders could issue a notice of default, which would make GGP seek protection from its creditors under Chapter 11 bankruptcy. In December 2008 the Wall Street Journal reported that GGP would seek bankruptcy protection if it could not renegotiate its loans. Its share price had fallen by 97% over the previous six months.
In 2009, company filed for Chapter 11 and i remember that Bill Ackman of Pershing Capital bought in big and became one of its biggest shareholder, both equity and debt.
I got in before they went into Chap 11 and the company managed to refinance its loans through Ackman's help and came out from Chapter 11 without wiping out existing GGP shareholders. It was a 4 bagger for me if i remember correctly.
The company also spun off Howard Hughes Corp at around 38USD/share. I sold it off immediately because i did understand what HHC was doing at that time and it was a mistake because the stock price is now at 140USD. A 270% increase!
Interesting example. Let's learn more in depth. So you went in before Chapter 11, and what was your investment thesis then?
I mean it was down 97%, there were reports that they may go Chapter 11 (but not yet). What made you think that it will indeed turnaround? Was it based on relative value to assets or?
Thanks for sharing in adv.
Basically at that time, GGP was the no.2 mall operator in the US, behind Simon Property Group. Its business was not affected by the financial crisis. Occupancy was high and it had a wonderful portfolio of assets, with over 70 Class A grade malls(good locations with good foot traffic, think of Capitaland's Mall vs FCT's Bedok Point). NOI was steady and its leases were signed for long term and there was nothing to suggest that the retailers will default on their rentals.
Most importantly, Assets - Liabilities > Market Cap by a huge margin. When GGP filed from bankruptcy, it reported assets of $29.6 billion, liabilities of $27.3 billion. Market cap was $100-200m at that time, i can't remember the exact figure.
The problem was with the refinancing of their CMBS debt. Due to the great financial crisis back then, the credit markets totally shut down and GGP was unable to refinance its maturing debts and had to go into Chapter 11.
There is a 68 page presentation by Bill Ackman of Pershing Square from the May 2009 Ira Sohn conference. It is a detailed presentation and he gave his view on why he believed at that point common shareholders will not be wiped. He got in around Jan 2009.
Yawnyawn, congrats on that buy. It was a great insight
Would like to seek your opinion because I was doing a backstudy on GGP.
1) You are right that assets > liabilities in this instance and it was more of a liquidity problem than networth problem. But had there been a disapproval by the courts for the initiation of Chapter 11, would it not mean a Chapter 7 liquidation under the extreme bottom of the crisis that would have lead to firesale of the properties?
2) Had there not been DIP financing by hedge funds to navigate the negotiation process, do you think the investment had still work out given the possibility of the lenders pushing of chapter 7?
Just trying your thought process here. Appreciate your comments.
(30-03-2014, 10:15 AM)scottleey Wrote: Yawnyawn, congrats on that buy. It was a great insight
Would like to seek your opinion because I was doing a backstudy on GGP.
1) You are right that assets > liabilities in this instance and it was more of a liquidity problem than networth problem. But had there been a disapproval by the courts for the initiation of Chapter 11, would it not mean a Chapter 7 liquidation under the extreme bottom of the crisis that would have lead to firesale of the properties?
2) Had there not been DIP financing by hedge funds to navigate the negotiation process, do you think the investment had still work out given the possibility of the lenders pushing of chapter 7?
Just trying your thought process here. Appreciate your comments.
I am not trained in law but if you went into more closely into the hearings, some creditors were more interested to dismiss the motion as they argued that certain assets(malls) were not under financial duress. Basically, they just want to take over the malls and be its new owner.
Anyway, I think going into Chapter 7 liquidation will be a lose-lose situation for GGP, its creditors and the commercial real estate. Going back to late 2008/early 2009, the credit market in the US totally shut down. If all of GGP's properties had to be liquidated, it will have to go at fire-sale prices. This will affect other operators' real estate values in the vicinity, causing their debt covenants to be tripped. Considering that GGP was the second largest mall operator in the US, this is quite a likely scenario. Moreover, at fire-sale prices, the banks holding GGP's debt will definitely not get back a dollar for a dollar for their loans to GGP so i did not feel a compelling logic for Chapter 7.
DIP financing was really important at that time because it allowed the business to operate as per normal. If there was no DIP financing proposed by Bill Ackman, though GGP later accepted Farallon Capital which offered terms superior of Ackman's firm, I believe GGP can still seek other financing methods to keep their daily operations going, albeit at higher rates.
It is difficult to say if the investment would have worked out because there were so many factors besides the DIP financing that would have affected the outcome.
But since you have invested, you'd figured that the rewards are many times the risk of permanent loss of capital eh?
Yeah I have read reports that say the senior secureds want to dismiss the motion because the banks would have to mark to market the losses on their loan books. But wouldn't that also mean that they can repossess malls that sort of gives them a free call option on the properties plus full recovery of the loan amount? I don't seem to understand why the banks don't want to do that.
So am I right to say that the DIP financing was a big determining factor of this investment? That if there were no Ackman with DIP financing + equity, things would have turn out worst?
Anyway since the hedge funds have pair trades in DIP financing and equity, their risk/reward exposure would have been significantly better than us normal guys with a pure equity exposure isnt it?
Or did you went for just the net nets into the investments where you figured the odds are still good even with the firesale/without DIP financing?
(31-03-2014, 09:35 PM)scottleey Wrote: But since you have invested, you'd figured that the rewards are many times the risk of permanent loss of capital eh? i figured out since assets > liabilities and due to the presence of a activist investor(Bill Ackman) on the common shareholders' side, my odds were pretty good
Yeah I have read reports that say the senior secureds want to dismiss the motion because the banks would have to mark to market the losses on their loan books. But wouldn't that also mean that they can repossess malls that sort of gives them a free call option on the properties plus full recovery of the loan amount? I don't seem to understand why the banks don't want to do that. I am not sure about this but I understand that the US courts dismissed the motions
So am I right to say that the DIP financing was a big determining factor of this investment? That if there were no Ackman with DIP financing + equity, things would have turn out worst? yeah, Ackman with his approach to kick start as a DIP financer certainly helped GGP a lot. Without that I think GGP may have to sell some malls to finance their daily operations which in Chapter 11. Though I am not sure if they can sell some assets during Chapter 11.
Anyway since the hedge funds have pair trades in DIP financing and equity, their risk/reward exposure would have been significantly better than us normal guys with a pure equity exposure isnt it? I believe Ackman had exposure to GGP's debt too, so did Bruce Berkowitz.
Or did you went for just the net nets into the investments where you figured the odds are still good even with the firesale/without DIP financing?
Just for your pure interest, Bill Ackman and Bruce Berkowitz have stakes in Fannie Mae and Freddie Mac. Ackman has roughly 11% of the common shares and Berkowitz has stakes in common and preferred(greater %). It is a current event and quite a good stock to learn even if not vested
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