One Coronavirus risk I haven’t seen people talk much about is sequencing risk. The assets may be good and cash generative over the long term but it doesn’t matter if the creditors are the new owners and your equity gets wiped out.
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Look what do I know about viruses? 0. But if companies go under OR need to dilute at discounts because of liquidity issues the future cash flow only matters so much. Having hotels on Boardwalk & Park Place is only good if you’re solvent long enough for people to land on them.
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Replying to @LAForeverHall
It’s funny, right before I saw this tweet, I looked at the stock chart for
$ASH. Went from >$30 to ~$3 over leverage and oil fears in 2008/09. In 2 years it had totally recovered. 2 years after that, it was at $45. In 2018, it was at 85.1 reply 0 retweets 1 like -
Replying to @ragnarisapirate @LAForeverHall
If you bought at $10 & held on til now: 18.5% CAGR. If you timed perfectly & bought at $3 and sold at $85, you’d have 45%... point being, if you can thread the needle and get the co that doesn’t go bankrupt; your entrance and exit can be less than perfect & you’ll do amazing
1 reply 0 retweets 4 likes -
Replying to @ragnarisapirate @LAForeverHall
This said, I wasn’t near smart enough to buy and Ashland Oil stock. I was too busy buying net-nets, profitable low p/b cos, liquidations, and doing reverse share split arbitrage. Unscalable small ball stuff that was pretty time intensive...
2 replies 0 retweets 5 likes
All good points for sure. Hope we get more opportunities like that!
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