Why would you short Tassals *now*?, page-329

@dilu We all love a good Graham / Buffett / Munger quote on HC, particularly in this deep value stock I hope you managed to read Buffett's letter, some great pearlers and zingers this year.

@bug1 While the Statement of Assets and Liabilities of course are important, this for me is definitely not an asset play. Treasury Wine Estates is the best asset play around at the moment in my opinion, particularly in the food and beverage sector. But for Tassals, as long as they are not facing huge impairments or inability to operate because of the balance sheet, I'm not too phased. Their debt is manageable: go nuts, borrow if it means you can increase the ROE and have good market opportunity in prawns in my opinion - interest rates are ridiculously low. And their assets are real: over half a billion in property, plant and equipment that's not simple to set up, their rights of use assets (licenses) which are probably worth more than the $200m reported because you simply can't get some of them granted anymore, and the almost half a billion in biological assets would take years for someone to accumulate to be competitive against TGR. So for me, there is a moat because I think their assets can't easily be replaced, but the value of which I don't think influences the price so much. It's the operating earnings and the free cash flow.

And the market simply thinks the current level of earnings is 'risky' which is why it trades at a discount, while other contrarians out there (me included) think there is significant upside. Whether it is cyclical or not @rustynailz, I really think your point about the capital cycle is important. We saw this before when they invested huge amounts to expand their salmon business to what it is today, but the market didn't want to own that risk or didn't believe in the future returns. We're at that point now with the prawns. A large portion of capex has been expended for tomorrow's earnings, yet it isn't captured in the share price. Without sounding like a broken record, I strongly suspect that when capex reduces by - what is it, 40%? - and operating earnings increases by up to 50% depending on your time horizon, the market will then be willing to pay for the free cash flow the company will be generating.

Meanwhile, anyone notice we have marched up 10% from our recent lows? I am so bad at timing anything, but quite happy I bottom picked it on Feb 19th at $3.17. Should have bought more, of course.