In their recent episode of the VALUE: After Hours Podcast, Brewster, Taylor, and Carlisle discussed A Number Of Acquirer’s Multiple Deep Value Stocks Trading Cheap. Here’s an excerpt from the episode:
Tobias: The other thing I looked at was the number of Acquirers Multiple stocks around sub three. So, three times EV/EBIT.
Tobias: Yeah, so I cut up the Chinese ideas out of the list. That was all domestic US, as far as I could make it. Here’s Billy.
Jake: Yeah, what’s better. Oftentimes, net-net will show up as inventory heavy or AR maybe heavy, or was it better to have it in the cash pile like a pharmaceutical? But who knows where it depends on whether you’re getting liquidated or not, huh?
Tobias: It does make sense. I’ve never looked at that specifically. I think if you have a whole lot of inventory and it suits that’s probably not what you want. Fast fashion inventory is not what you want.
Jake: Oh, suits are maybe making a comeback, though.
Tobias: Maybe you can shift it. I don’t know. Yeah, but it will be like that.
Tobias: The cut will be 10 years old, will be like flared.
Jake: Yeah. Real baggy, zoot suits.
Tobias: [crosstalk] [laughs] Yeah. Big shoulders. I guess that stuff comes back around. You just stick it in inventory from the 10 years.
Jake: Right. Yeah, keep moths out and you’re fine.
Tobias: Yeah, I have gone through the big suits and the skinny suits and I guess, we’re going back to big suits now.
Jake: I’m not a fan.
Tobias: Big suits?
Tobias: When we were in the skinny suits, the stovepipe pants, not that long ago. Five years ago, whenever that was, the really loose-fitting suits look like–
Jake: They look like a slob, right?
Tobias: You look like you got two yards of excess fabric on you.
Tobias: Yeah, so, the other things– [crosstalk]
Bill: The Hammer pants.
Tobias: The Hammer pants, yeah.
Tobias: He made them out of curtains or something.
Bill: Yeah, those look great.
Tobias: The other thing that I looked at was the number of– Just before you came, Bill, I was saying, I looked at the number of net-nets. There’s more net-nets available now than they have been at any time since 1999. Vast majority– [crosstalk]
Bill: You have to get bearish. Nothing to buy.
Tobias: Most of them are net-nets. Most of them are biotech– [crosstalk]
Tobias: So, they’ve raised money. I think that in 2008 that was a pretty good hunting space. They did pretty well as a group. Their rate of discovery is still going to be the same. Now, you’re just getting a bet on solid cash, which is probably pretty good bet as a– [crosstalk]
Jake: What, anything that stands out and looking at that list of the 3x EV to EBIT?
Tobias: I didn’t know them well enough. I just haven’t spent enough time digging around the net-nets. The thing about net-nets is though, they don’t really pay for much additional work in there, I don’t think.
Tobias: Too hard to predict.
Tobias: The sub phrase was interesting, too. I ran the Acquirers Multiple sub three times. Just as an antidote to where bear market, who knows? We could be down another 20%, 30%. Who knows? We could rally another 20%, 30% from here. No one’s got any idea. All of the news flow is really bearish. I just have a look and see what the value was beginning to look like, really deep value. So, three times EV/EBIT, there are almost a record number around. So, we’re very close to the last quarters of 2008, the last quarter of 2000– [crosstalk]
Jake: Q1, 2009.
Tobias: Yeah. I said according to that account, I thought the beginning of Q4 2008, which means it’s like, maybe there’re two quarters to go. Who knows? It’s good time to get hunting. Probably, a lot of volatility to come. Potentially, it doesn’t mean there’s not a lot of volatility good time to go on. Hoover up some cheap value. We’ll spend some time over the next few quarters hoovering them up.
Jake: Stuff like Lehman and October 2008.
Tobias: We haven’t really had a moment like that yet, have we?
Jake: No. Maybe crypto, you could say, yeah.
Tobias: The crypto had a few. I thought about that, too.
Jake: I don’t know.
Bill: I don’t know. Is it big enough to count?
Tobias: I don’t know.
Jake: [crosstalk] That was your whole net worth, I guess.
Bill: Yeah, but then you’re an idiot.
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