Saturday, May 10, 2014

The Funnest Sport You'll Ever Play: Bubble Soccer | Bubble Football

These videos being passed around the internet of this hilarious sport has to be the most entertaining thing I've watched in years. Full-contact soccer!



I actually had an opportunity to play recently and its even more entertaining to play than it is to watch. Half the time I couldn't even stand up I was laughing so hard. Could definitely play this with my friends on a regular basis.

I found the website from the National Association of Bubble Soccer that you can find a league in your area and register to play. They connected me to a league in South Florida immediately and my first game is next week. I've already invited a ton of other people in Fort Lauderdale and Miami to play and they're all psyched up about it.

I recently just went on the website again yesterday and it looks like there are leagues starting up in New York City as well, would be pretty cool to play some bubble soccer right in Manhattan, maybe even Central Park.

Anyways, cool sport and looking forward to it. Good to know if I ended up moving to NYC ever, there's some bubble football action going on up there too!

If you want to register to play on my team, or just find a league in your city, you can register to play here.


Monday, April 14, 2014

What Movie Production Can Teach You About Success

Somewhat obsessed with this website "The Numbers," its a huge database of film budgets, box office results, and star bankability analyses to assist production companies cast for movies. The most interesting thing so far...how much value do the most bankable stars bring to a major motion picture? Not as much as you'd think. Steven Spielberg for example, who is undeniably the most bankable person in Hollywood, on average only brings about $26M in value to a major motion picture. "But John that can't be right, his movies have bring in billions," so what gives?

What the data shows is that no matter how big a celebrity's bankability is, its nowhere near the bankability of when they team up with the right people. Not just any people, the RIGHT people. Scorsese and DiCaprio, Spielberg and Tom Hanks...these divine combinations along with the other smaller relationships within a production are what yield results whose sum is greater than its parts.

Which goes to show you, even if you are a celebrity, you are NOT directly responsible for your own success, no matter how big you are. Success is what happens when talented people team up with other talented people who thus enhance each other's talents.

Its about relationships, but not just any relationships, the RIGHT relationships. One of those universal truths I'd say you could probably apply to more than just movies.




Thursday, February 13, 2014

The Tree of Wisdom

Drinking my pre-workout drink and staring at a tree outside my balcony window and started thinking, "ya know, a tree is a living thing, but it doesn't move, it doesn't talk, it doesn't even have eyes to enjoy its surroundings. Imagine if you were a tree, what would even be the point of life?" So I thought what a typical tree does in its lifetime...well, it grows and endures harsh weather until it matures, then it provides a home for bugs & birds, it produces oxygen for us to breathe, provides shade & aesthetic beauty, produces fruit, and eventually someday will get chopped down to produce wood. And I looked at all those reasons for a tree's existence, and I noticed two words: produce & provide. And I had a little "Aha" moment...

Nature's meaning for any individual existence is to mature and endure long enough to produce and provide for other individuals. That's also what makes a successful business if you think about it; the best and most successful businesses produce and provide for millions of people, so the fundamental natural law of business mirrors that of nature itself. Interesting...

So there's really only two questions you need to ask yourself: 1) what am I producing and providing that is needed, and 2) what do I want to produce and provide that is needed?

When the answer to those two questions are the same, the rewards are massive success and natural fulfillment.




Tuesday, January 14, 2014

John Anthony's Wager

Do you believe in destiny? I see a lot of philosophical stuff on my Facebook newsfeed and it seems people fall into one of two camps: the "your destiny is already written" camp and the "there is no destiny, you need to work hard to achieve your dreams" camp. Neither one is provably wrong as you could site countless examples of people who have become successful by going with the flow and who have clawed and scratched their way to success. So I've come up with an outlook that I'll just call John Anthony's Wager.

In case you've never heard of Pascal's Wager, basically in a nutshell it says that given the choice between believing in God or not, logic would dictate you should because your downside is the least compared to the alternative choices. If you are right, you would live a fortuitous life and be greeted with open arms at the Pearly Gates. If you were wrong, well you may have missed out on doing some less than fortuitous deeds, but you would still live a great and fruitful life.

Similarly, my wager is this. Given the choice between believing in a written destiny or not, you would be best suited to work hard everyday in the anticipation that there isn't. The reason is because if you are right, you will have worked hard your entire life to achieve your dreams and will have a better shot at achieving them. If you are wrong and there IS such thing as destiny, then any attempt contrary to your destiny will be rightfully thwarted and you'll end up fulfilling your destiny anyways once you do find yourself on the right path. Not only that, you will have developed great habits and character along the way. Its a "heads you win, tails you don't lose" scenario.

Wednesday, October 9, 2013

Attacking The Drug Problem Globally

I saw on LinkedIn that Richard Branson spent all of last week in Geneva debating drug policy at the Global Commission on Drug Policy. He welcomed suggestions on a slogan in the comments, but it got me thinking about how to tackle the drug problem as a whole. Do we legalize drugs and regulate them? Do we impose stiffer penalties? What results would they manifest? My approach is a little different. I say, tackle the problem at its source: the economics of the industry.

Unfortunately, stiffer prison terms for dealers by itself will only be marginally effective because the payoff remains relatively the same. Legalizing drugs won't do much because a legal market with regulation cannot thrive when a healthier black market exists for the same commodity. Anybody who's ever read "Freakonomics" by Steven Levitt will recall the lengthy chapter on the bursting of the "crack" bubble in the early 1990's. So this got me thinking: perhaps the way to control the drug problem is to create an artificially induced market crash.

The approach would be a 4-prong approach, but in order to implement it, we need to look at the supply chain of drugs, their players, and their incentives:


According to Levitt, the 'crack' bubble burst in the early 1990's happened because when 'crack' hit the market, the market price of cocaine dropped as 'crack' was a cheaper alternative to cocaine. This lead to drug-dealers starting to undercut each other, which eventually caused the crash because the risks associated with dealing were not worth the low payoff (getting killed, shot, arrested, etc. vs. the earnings of the average crack dealer of $7/hour*). So the first step would be to get the drug dealers to start undercutting each other in price to unload their inventory. 

To do this though, a few more things are required. Getting dealers to price cut each other and the second step of the approach, requires making the wholesale price of drugs cheaper. Temporarily higher margins to the dealers will make the industry attractive to price-cutters. In any commodity-based industry where no one supplier has a competitive advantage, the return on investment becomes compressed downwards towards the cost of capital because the only thing participants can compete on is price. So where a 70% margin is attractive to one participant, other participants are perfectly willing to settle for a 60% margin, 50% margin, etc. etc.

So to make the wholesale price cheaper, we need to increase the inventory of the manufacturers, which leads to our third step, have local governments subsidize sourcers that reach a certain production quota (lots utilized and total yield) and penalize sourcers who do not reach this benchmark with a "Agricultural Inefficiency Tax." This will incentivize all sourcers to both keep their total yield high and require minimum order quantities from manufacturers to hit the subsidy benchmark. Manufacturers now being forced to take on excess inventory, will both require mininum distribution quotas from their dealers. Dealers will then become loaded with excess inventory and thus incentivizes them to lower their prices just to move their stuff in larger sized deals.

But we're not done there, the fourth and final step is to make prison sentences even higher for drug dealers. What this does is increase the risk profile to drug dealers. Because of this higher risk, the dealers will demand for higher reward in the form of pricing pressure on the manufacturers to expand their profit margins. So what ends up happening is the entire supply chain becomes pressurized from both ends, and the incentive to each player gets flips on its head:


In these conditions, the market becomes unstable and cannot self-sustain, which inevitably will cause conflict between all participants and cause the market to eventually crash.

At least, that's my theory...implementing it is another story.


*See the financial statement of the average crack dealer provided by Steven Levitt in "Freakonomics."

Thursday, September 19, 2013

Zuoan Fashion Ltd (ZA): A No-Brainer For Big Returns

Just took a long position in Zuoan Fashion, Ltd. (NYSE: ZA), opportunities like this come few and far between. Not far from its IPO back 2011, Zuoan Fashion is a design-driven fashion menswear company in China that has taken a beating for no apparent reason.

The No-Brainer Aspect

The reason to me this is a no-brainer investment is because while the company is currently priced at $2.17/share, a quick look at their balance sheet in 2012 shows they have $5.96/share in net cash alone (cash minus debt). Furthermore, if we take all the current assets and pay off all outstanding debt, we're left with $11.79/share. What this means is that if the company liquidated everything tomorrow, that's how much shareholders would receive per share, which makes this a textbook Buffet/Graham/Klarman value play with a 82% margin of safety. Wow...

And the story gets better. The company has no long-term debt and no short interest whatsoever. Below is my analysis of the fundamentals versus the stock price over a 5-year period:

Zuoan Fashion Quality of Earnings Vs. Stock Price (2008-2013)
(click to enlarge)

So what we have is a company who's fundamentals are clearly growing stronger over time while the stock price is diverging to reflect the opposite. No financial shenanigans here either, their financial reports were signed off by Crowe Horwathe, one of the top 10 auditing firms in the United States. Zuoan is essentially like a straight-A student in a bad high school, the top institutions are overlooking her just because she's small and didn't go to Harvard Academy. Their loss...

Not only has their fundamentals improved, but their ability to self fund with cash is getting stronger too (defensive), which means they can weather any storm that may lie ahead because their industry is so competitive.

Industry Recognition

So what about the company? Well, the fashion industry is highly fragmented. While the company has no defensible competitive advantage against competition and its success is dependent upon its ability to recognize and create appealing fashion styles in the years to come, the company has received the #1 spot of fashion designers in China by Apparel Magazine two years in a row now, beating out major competitors such as True Religion, Ralph Lauren, Nike, Urban Outfitters, & lululemon, two times over. From the July 2013 issue of Apparel:

(click to enlarge)

And as apparel magazine mentions, they sponsor and are regularly featured on the Chinese equivalent of Project Runway, "Hello Gorgeous." What better marketing avenue could a fashion company ask for? As China's middle class grows, Zuoan's affordable fashion line stands to benefit which makes this not only a value opportunity, but a growth one as well.

Valuation

Baseline valuation is $9.08/share (assuming a 50% write-off of Accounts Receivable in a liquidation event), but if the trend continues I may hold on until $12-14, making this one a potential 6 or 7-bagger. Estimated time to value realization, 2 years, maybe even sooner.





Tuesday, September 17, 2013

A Great Value Play: Lihua International, Inc. (LIWA)

Just took a position in Lihua International (NASDAQ: LIWA) and I usually like to do some sort of writeup so I can remember in the future why I took particular positions. Lihua International is a Chinese reverse-merger company that is in the copper wiring/electrical arena. They're currently trading at about $5.07 per share ($158M market capitalization).

Asset Valuation


First thing that jumped out to me about this company is that while the market is valuing them at $158M, they have $144M in cash equivalents alone in the bank. Ignoring the $854M in revenue in 2012, this at first glance seemed to be a complete misvaluation by the market because if you divided up the cash alone, each share outstanding would receive about $4.80. In fact if you look back to 2011, if all assets were liquidated and debt paid off, net current assets per share alone are worth $11.69, and that was over two years ago:

Lihua's Net Current Asset Value/Share (2011)
(click to enlarge)

Attractive Margins

Another thing worth noting is Lihua's supply chain management. Unlike its competitors, Lihua isn't making its wiring from virgin copper, but instead scrap copper. The benefit of this is that its margins are not compressed like it's competition's because its costs are not as high, so its management of scrap copper suppliers has given it a competitive advantage:

Chinese Copper Suppliers
(click to enlarge)

Product Mix

Besides it's supply chain management, Lihua also has the benefit of focusing on one of its core product innovations, copper-clad aluminum wiring (CCA). Their high-quality pure copper wiring alternative is priced much cheaper than pure copper wiring (almost 1/3) which provides significant cost advantages in larger projects from the lower commodity price of aluminum.


Copper-Clad Aluminum (CCA) Wiring Structure


Why is this important? Because the PRC government just approved $240B to be invested in the development of China's Smart Grid infrastructure over the next five years so all of its citizens are able to receive affordable power. Along with this comes miles and miles of necessary wiring and cable running, and what better use of CCA wiring/cables than for large projects over thousands of miles. Why is Lihua set up best to benefit from this? Because they currently are the only company that has the proper license in place to import scrap copper to China from places like the United States, which makes them the only company currently able to even approach filling such large orders. Besides CCA wiring, its product mix does still include pure copper wiring, in addition to copper anodes, rods, and magnetic wiring.

In addition to China's investment in its infrastructure, China is the number one consumer and importer of copper:

Copper Demand By Region
(click to enlarge)

The trend is in no way slowing down either, current predictions are that given the trend, China's consumption and utilization of copper could soon exceed world supply, which means scrap copper suppliers are going to become vital, and Lihua is already in position to benefit from this. As far as copper commodity fluctuations go, even though copper pricing is expected to remain stable with the growing demand, Lihua's products are all priced on a cost-plus basis, which means any movement of commodity prices would not erode its profit margins.

Risk

So why does this price of $5.07/share seem too good to be true? Well, its China, which means shady business practices, and its a Chinese reverse-merger, which means potentially even shadier accounting practices. However, due to the fate of its fellow reverse-merger companies such as China MediaExpress Holdings (CCME), all Chinese reverse-mergers are being painted with the same brush by institutional investors.

In 2011, Absaroka Capital, who had taken a short position on Lihua, released a study it commissioned on Lihua trashing the company's practices and accounting methods. Among things claimed in the study included doubt regarding Lihua's financial statements, its executives' backgrounds, supplier relations, and its auditor's track record. In response to this allegations, Lihua's CFO directly addressed all claims (seen here) made by Absaroka, which in my opinion rendered them moot. In addition to that, Lihua has made strides over the past year to be as transparent as possible to the market regarding its accounting methods, even going so far as to having forensic accounting firms such as John Lees Associates do a full investigative confirmation of its cash balances. Besides this, its auditor is Crowe Horwath. While technically using Crowe Horwath's Hong Kong division, Crowe Horwath has a reputation here as one of the top ten auditing firms in the US.

Also, since these allegations were made two years ago in 2011, I'd presume Absaroka has already left its short position by now after the stock tumbled 22% from its study. In other words, they made their money, and now with Lihua's transparency of accounting practices, there's little more to gain for Absaroka or any other institution with a short interest.

Conclusion

Taking a long position in LIWA, committed half my capital allocated to this position for now in case of a dip in the price, this will allow me to average down a bit for a bigger return later. My estimated fair value of the stock is about $15, with a hedge of at least $11.69 from a net asset valuation. Expected time for value manifestation is about 2-3 years, with a option for future review of fundamentals at the $12/share mark.