EXCELLENT REPEATED POST by Airdale
Why not buy into Home Depot? Why isn’t our share price moving up?
Much like the 1940’s post WWII when oil and the automobile were king, the U.S. tied up perpetual oil contracts with the Saudi’s. This ensured long-term affordable transportation for the growth of the country. Now, the situation is reversed and the Middle East is coming to North America for resources. They can’t get a government contract for product so their long-term deals for softwood are through publicly traded entities. This will help ensure the long term growth of their country.
Emaar/Wessal is smart enough to know if they need unfathomable quantities of steel, cement, wood and fixtures for their projects, they might as well make money on both ends. They will purchase as much as possible from a very reliable source, themselves. Why let someone else make all those billions on product sales when they can keep it in house. They can also control their own supply lines.
Why not buy into Home Depot? They could buy 5% of the shares in the $70 billion dollar Depot for $3.5 billion. What percent return would they get if they owned less than 5% of HD? It wouldn’t be in the billions and not even close. Probably 10% a year if they are lucky. Not much upside really, this would be a very expensive and very long-term return on their investment.
What not go private and just own a supply company outright? They would have to use much of their own seed capital and they would get straight earnings. They have to hire and manage a system to provide materials for them. If they purchase $5 billion in materials this year from themselves as suppliers, they probably make about $1 billion in profit. A twenty percent annual return is excellent. But, what if there is a way to make an even greater return?
Why select a relatively small insignificant company like Sulja Brothers? They have experience, they’ve been around 25+ years, they understand logistics and have been successful. Their management is sharp enough to know the construction industry as they are making 30+% net income. They have some existing supply lines and they have a softwood export license with a nearly inexhaustible amount of timber/lumber.
Why go public with this whole thing? The key word is leverage. The reason you use the capitalisit stock market is PE ratios times earnings. If they buy 25% of Sulja Brothers in the open market for say an average of .25 per share, (open market, just like they would have to do with Home Depot) it would cost them $31 million for 125 million shares. That is 1% of the cost of buying into HD.
What is the upside on income? If they nail the NASDAQ, like they claim they will at $5.00 and those $31 mil in shares are now worth $625 million. If they crack $10 per share they’re at $1.2 billion. They can probably leverage $30 million or so into a billion dollars. Why Sulja?, because they make more money this way. If they were to hit $5 per share in a year, that would be a 2000% return. The US stock market is geared toward multiples and they know how to work it.
Why isn’t our share price rising? Mother Nature says the biggest dog always eats first and the scraps go to the little guys. The big dogs are currently at the trough and eating up the bulk of the shares IMO. There are scraps that most of us will get. This little piss ant investor is very willing risk $50K for a shot at $6 million.
Yes, I think this deal is real.
AIMVHO
Airdale
AI
