Thanks to a generous reader:
BURRY_Scion_3Q_2006 and BURRY_Scion_1Q_2008
Dalio_Leveraging and Deleveraging
Hiring Money Managers or Buy High and Sell Low
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To steal ideas from one person is plagiarism; to steal from many is research.–Steven Wright
We discussed the Xerox (XRX) here: http://wp.me/p1PgpH-zH.
Is the company over-leveraged?
You can download my comments here: http://www.yousendit.com/download/M3BsUXVpeFUwMEdLRmNUQw
Our goal is to have you practice skimming through the 10-K to find the critical information for making a particular judgment. There is no clear black or white answer since most investing requires judgment honed by practice and experience.
When determining the appropriate leverage, we have to understand the terms and conditions of the debt as well as the quality/cash flows of the assets being financed by that debt. Segment the different types of financing to gain a clearer understanding of the business and credit risks.
This wasn’t the best example, but the more you practice reading a 10-K the faster you will be able to organize your time.
If you take the time to understand LEAPS (long-dated options) and combine this tool with your search for bargains, you can craft specific risk reward investments with 100% to 1,000% upside. In certain situations, you can design much better risk and reward outcome than investing in stock. When LEAPS work well, they can becoming addictive, so portion control is critical.
The Professor looks at options/LEAPS in a unique way.
Go here: http://www.scribd.com/doc/68687870/Lecture-8-on-LEAPS
Posted in Risk Management, Special Situations
Tagged LEAPS, Lectures, Leverage, portfolio management