GeoEye--Eyeing Value in Satellite Imaging

Description:

GeoEye (NASDAQ: GEOY) is an integrated satellite imaging firm that owns the satellites in space and the on-ground image processing.  The company contracts these resources and the accompanying service to various government and private sector entities.  GeoEye has two satellites in orbit already—the IKONOS and the GeoEye-1—with a third preparing for launch sometime during the course of 2013.  GeoEye-1 has a resolution of 41 centimeters, while GeoEye-2 will have a resolution of up to 25 centimeters, with the highest precision reserved for the U.S. government only.  Satellite imaging is used for a variety of purposes, including but not limited to defense, disaster response, air and marine transportation, oil and gas exploration, mining production and exploration, mapping of remote regions, location-based services, insurance and risk management, agricultural crop management, etc. 

Valuation:

The stock is trading at a discount to book value at $22.01/share.  Tangible book value checks in at $18.17/share.  Where the book value analysis gets more interesting is in trying to build out a reproduction value for the company.  GEOY carries their satellite value at $817 million on their balance sheet, with $145 million of accumulated depreciation.  The company’s first satellite, IKONOS has been fully depreciated since 2008, yet it remains in space and producing revenues for the company.  The company operates in a capital intensive business, with significant barriers to entry, where the useful life of the assets is demonstrably longer than the time in which they become fully depreciated. 

Looking at this first from the asset valuation lens, it becomes clear that for a competitor to reproduce the business that GEOY has already built would cost substantially more than the carried value on the books of the satellites.  For the sake of simplicity, I think it’s fair to say that at the very least, a competitor would have to spend an amount equal to the carried value of the satellites, plus the already accumulated depreciation of $145 million, in order to viably compete with GEOY.  In adding that back to the tangible book value of the company (all goodwill has been excluded) you get an adjusted reproduction value that is approximately $24.50 per share.  That is a 20% premium to today’s share price.

There is further hidden value at the company in the form of a cost-share agreement with the US Government for the launch of GeoEye-1, the first color, high-precision commercial image satellite launched into space.  GEOY accounts for the cost-share payments in the following way: “amounts received from the U.S. government are recorded as deferred revenue when received and recognized as revenue on a straight-line basis over the useful life of the satellite.”  The gross amounts of the deferred revenue are carried in the company’s backlog and not on the books themselves until the payments are actually received from the government.  Once the payments are received they are then carried as deferred revenue until they are recorded as revenue alongside the corresponding amount of depreciated cost for the satellite itself. 

For 2012 and beyond, there is a total of $148 million left of repayment for the cost on the GeoEye-1 that the government pays out as $6.0 million monthly, or $24 million per quarter.  Using a 12% discount rate on the remaining contract, it has a net present value of $110 million to the company.   I added $110 million to the company’s reproduction value, because this provides further clarity about what a private market valuation would be, and what a potential purchaser would have to pay to buy the company.  Plus there is a substantially high degree of certainty that this money will reach the company, irregardless of whether the government scales back on commercial satellite contracts (to be discussed more in risk factors below).  When this is added to the tangible asset value, it gives the company an adjusted book value of $29.50, a 40% premium to today’s market price.

Next, I added the $110 million in NPV for the backlogged GeoEye-1 cost share into the cash value for my earnings power valuation and subtracted the $24 million annual amount that will be recorded as revenue from the actual earnings themselves.  This helps provide a more realistic valuation of the company’s actual earnings power.

At present, the company’s earnings power value is below both its carried book value and my adjusted book value.  This typically indicates that management is destroying value equal to the difference between the actual book value and the earnings power value, for even a company in a perfectly competitive environment’s earnings should be equal to the value of the underlying assets themselves.  That begs the question, is management destroying value?  And I think the answer is clearly no.  There are several factors that negatively impact the earnings power value, one of which is the revenue recognition for government contracts, and the accelerated depreciation schedule for these satellites compared to the actual useful life.  Also relevant is that once the GeoEye-2 enters space, the company has an existing contract with the government that will have the U.S. paying an additional $183 million per year for imaging and the commensurate services.  When this is in place, the company’s earnings power will be $22.60 per share using a 12% WACC.

Competitive Advantages

It’s important to assess the competitive advantages for any company, particularly one in which the claim is made that the reproduction value is greater than both the asset value and the present earnings power value.  Further, in order for a company to earn real economic profit, they need some kind of competitive advantage.  Here is where the company is particularly unique, as GeoEye benefits from several crucial advantages, many of which pertain to barriers to entry.  First, is the capital intensity of the business, as satellites are expensive to build and expensive to launch.  For a startup company in the field, they would have to raise substantial capital just to get into a position to win a contract, let alone, develop the team and experience to manage the equipment itself. 

Next and most importantly, are the regulatory barriers to entry.  Not anyone can just launch a satellite into space.  Permissions are needed at various steps along the way.  Permission must be obtained for the launch itself, permission must be obtained to allow the satellite to orbit, and last, permission is needed from both a Defense and Intelligence standpoint from the government in order to take imaging of the entirety of the Earth.  For logical reasons, the government doesn’t want anyone and everyone to be able to take whatever pictures of the Earth that they would like, and as a result, the government has historically monopolized and dominated this field for themselves.  Collectively, the governments of the world with the capacity for astrodynamics have complete control in deciding who can and cannot launch and operate satellites, and as such, the regulatory barriers are substantial.  Further, once a satellite is in space, orbiting and providing a service, it is increasingly unlikely that the government would allow yet another satellite for the same commercial purposes.  The reasoning here again is simple, while space itself is vast, the space in which imaging satellites can orbit is finite.  The more crowded that orbit zone is, the more likely it is that some problem would arise. 

One limit to the GEOY’s competitive advantage is that in exchange for the government subsidizing a portion of the build and launch fees, and having done so following a competitive bid process, the company has little bargaining power for the costs of its services with its largest customer.  This limitation is mitigated however, as the government authorizes GEOY to seek additional clients, including foreign governments and private companies, for services in which there is little competition for the reasons mentioned above.  As such, the amount of services that can inevitably be sold are very scalable once the satellites are in orbit. 

Customers

As of now, the US government remains the largest client of GEOY, and this should continue to be the case as the government scales down its own space operations.  The US government itself represents approximately 2/3rds of the company’s revenues.  GEOY has several long-term contracts with the government, the largest of which was signed in August 2010 and can reach a value up to $3.8 billion.  The problem with this particular contract, and one of the overhangs plaguing the stock, is the government’s option to renew the contract annually, instead of it being guaranteed for the full term.    

With the government’s budget under scrutiny and in a state of uncertainty, particularly with regard to defense spending, investors are discounting the potential value of this contract over the longer-term.  The large contracts are with the National Geospatial Intelligence Agency (NGA) within the Defense Department.  Duncan Scot Currie, the director of NGA’s commercial satellite operations had the following to say: “It’s a tough budget environment, but I am confident we can demonstrate the value of this program to the Congress.  We have a contract that is providing tremendous value to the U.S. government and we are on schedule and on budget for developing the next generation of commercial satellites. It is reasonable to assume that budgets across the board are going to be reduced. Everybody’s going to be affected. We hope we can manage it.”

GeoEye-2 is slated to launch during 2013 along with the NGA’s other large commercial satellite customer, DigitalGlobe.  The NGA has asserted they think all contracts would “stand up to the scrutiny” (quoting a paraphrase).  It seems as of now the repercussion may be adding an additional “passenger” in the form of another satellite to the slated launch on the Atlas 5, a comparatively expensive spaceship, but one that is fully domestic in terms of build and operation within the US.

Beyond the US government, other governments around the world have contracted for GeoEye’s services, and in the private sector.  In the private sector, Google uses GeoEye’s satellites for Google Earth.   Just this year the company announced a “multi-million dollar contract” with the Russian government to provide imaging services, however the full terms have yet to be disclosed.

Large Buyer of Shares

Cerberus Capital Management is the single largest stockholder in GeoEye and they keep on growing.  The relatively secretive private equity firm, with an outstanding track-record has bought shares as high as the $40s, and continues to accumulate their stake today.  Cerberus so badly wants to buy GeoEye that they negotiated with the company and its other large stockholders to allow for an increase in the maximum beneficial ownership interest one can take before becoming an “Acquiring Person” which triggers a poison-pill against acquisition.  The poison-pill was adopted during the course of 2011 and limited the maximum ownership to 20% of the outstanding stock before triggering “Acquiring Person” status.  In late 2011, this maximum threshold was raised to 25%, and in early 2012 it was again raised, this time to 30%.  Each time this threshold was raised, Cerberus quickly commenced further open market share purchases.  Cerberus also holds debt positions in the company’s stock.

Cerberus, through its portfolio companies, is one of the 100 largest government contractors, and has deep ties with the Defense Department and government itself.  They clearly understand the risks inherent in the Defense Department budgeting process, yet despite these known risks they continue to buy more.  It’s unclear exactly what Cerberus intends to do with their massive stake in GeoEye (i.e. whether they intend to eventually take over the company, or just hold it passively), but what is clear is they believe that the valuation here offers a very compelling long-term investment opportunity.

In the past there had been abundant takeover rumors regarding Cerberus’ stake, having either Cerberus buying out the remainder of the firm, or setting up an acquisition by one of the other defense contractors looking to gain a foothold in the satellite imaging sector.  While that is a possibility, I am not factoring in that likelihood in my analysis of the stock.  More realistically, what I think Cerberus may do is facilitate commercial contracts between GeoEye and their various portfolio companies offering contract services to the government.

Risks:

The primary risks to the company today relate to the uncertainty over the Defense Department’s budget moving forward.  Any large contract is subject to scrutiny, and as such, it’s impossible to determine exactly which ones will remain in force and which will be cut.  As of now, the NGA’s budget has been cut by 10% for 2012, but not all the cuts will necessarily reach through to GEOY and the NGA's budget itself is classified so it's impossible to determine exactly what the impact will be as of yet.  In April of this year, the White House will release the results of their own review of the EnhancedView contracts for satellite imaging services, and at that time there is the potential for further cuts from 2013 on, or for the confirmation that the conracts will proceed as planned. 

As part of the review, the government is looking into the scheduled launch of GeoEye-2 aboard the Atlas 5 rocket.  There is the potential for the government to require additional space-bound projects on the launch, which could delay GeoEye-2’s launch date.  Any delay in the launch would push back the revenues GEOY is set to receive.

While it’s certainly possible that the contracts are scaled back, it seems highly unlikely that they would be cut entirely.  The NGA has asserted that they “support commercial imagery as a vital part of geospatial intelligence, and EnhancedView as part of the commercial imagery program.”  President Obama specifically credited the NGA with their crucial help in the operation to capture Osama Bin Laden and in this age of heightened tensions in the Middle East, combined with an increasingly war-weary American populace, satellite imaging is an invaluable tool in modern warfare.  Further, with global warming increasingly a problem, satellite imaging has emerged as an important tool in disaster readiness and disaster response management.  It's hard to imagine cuts will run too deep in this space.

Author Disclosure: No position, but may initiate within the next 72 hours.

Evgeni Malkin Scores an Amazing Goal

Yesterday Evgeni Malkin scored one of those hockey goals that will stand out for a while.  Malkin, starting at his own blue line, took no more than six strides in cruising past the entire Tampa Bay Lightning team on his way to slamming the puck into the back of the net:

On HFT, Liquidity, and the Flash Crash

“I think the notion that liquidity of tradable common stock is a great contributor to capitalism is mostly twaddle.  The liquidity gives us these crazy booms, so it has as many problems as virtues.” –Charlie Munger

Today it seems like CNBC has designated high frequency trading and liquidity collectively as the topic du jour.  I find this slightly amusing, because the talking heads on TV and in my Twitter feed who I'd label as perma-bears are the ones complaining most loudly and frequently about market structure, liquidity and HFT.  Market structure is unquestionably something I view to be a problem, although the more long-term investors in the marketplace, the less short-term liquidity is actually all that important anyway.  Short-term liquidity creates profitable trading opportunities, but it in no way impacts the quality (or lack thereof) of an individual long-term investment.  

Liquidity in this context takes on a different meaning than what I think it really should mean.  We have used the term to drive spreads to within a penny on the bid and ask, but has moving from quarter to nickel to penny spreads changed the capacaty for individuals or institutions to make long-term investments?  Liquidity does seriously matter in terms of creating systemic opportunities for investment, but only to a point.  An entire marketplace without good liquidity increases the cost of investment substantially and that's not a good thing, yet, at the end of the day, none of these complaints about HFT are dealing with the fundamental question anyway.  We have plenty of systemic liquidity upon which any long-term investor could accumulate or distribute a substantial ownership interest, but we have a marketplace that is harder to make short-term money off of price spreads.  Those are two different questions.

On the day of the Flash Crash, before it was even dubbed the Flash Crash, I wrote a pretty emotional and frustrated rant, lashing out on HFT and supplemental liquidity providers.  I still think my statements from that day sum up the spectrum of my feelings about HFT.  Without getting into it any further, here's my post from May 6th, 2010, the day of the Flash Crash in its entirety:

So there's a report going around that a Citigroup trader hit the "b"illion button instead of the "m"illion and I just want to right off that bat make clear that not only do I not buy that story, but I am absolutely certain that it is not THE cause behind today's collapse.  I believe today's collapse is a confluence of factors that generated the perfect storm of volatility, chaos and panic.  Here are a few of those factors:

1. Global fear levels are elevated amidst talks of a Greece default and trouble in Spain.
2. Markets traded aggressively higher off of the February lows without a substantial pullback.  This led to large pent up selling demand.  People were waiting for the first downtick to sell, and when the selling begat selling.
3. With high frequency trading accounting for an ever-increasing percentage of total market volume, when the volatility storm, hit the computers shut off.  I was staring right at it in the Level IIs...the bids in just about every stock disappeared.  There was no liquidity.
4. Proctor and Gamble (PG) alone dropped almost $25 points from its intraday highs.  With the Dow being a price-weighted index--with each components $1 move correlating to 7.2 Dow points--PG alone accounted for 180 of the Dows nearly 1,000 point crash.  That's insane for a stable company.   I'm not a huge Cramer fan, but I LOVE what he had to say live on TV: "if that stock is there just go buy it...that's not real...just go buy it!"  Major props to Cramer for speaking some truth and bringing sanity to the panic.

Now just for some personal thoughts during all this and a rant: I got terribly scared today.  The speed with which the market dropped 700 Dow points, I could not help but think the worst.  My head was running wild.  Was there a terrorist attack?  A coup in Greece?  Hedge fund blowup?  Bank failure?  Sure enough there was not a single new story.  Nothing in the world changed!  Well not entirely true.  Trillions of dollars moved around, but absolutely NOTHING really changed.  The state of the economy and I'm sure investor and consumer confidence all took major hits today, but really, NOTHING CHANGED!  Sure it was perfectly explicable that there were sellers and the market went down today, but what happened?

I want to rant about #3 from my list of causes.  A considerable portion of high frequency trading is run by "supplemental liquidity providers."  These SLP's are supposed to be the good HFT programs which step in when bidders leave the market.  They are supposed to provide liquidity when there is none.  SLP programs run each and everyday and are incredibly profitable for their firms.  Sure enough, the largest such service provider and NYSE's primary partner in the SLP initiate is none other than Goldman Sachs.  Where was the liquidity?  What happened!?!?  These SLPs run each and everyday, yet today when liquidity evaporates they're not there?  I saw it.  There were NO BIDS!  Where were you Goldie when we need you?   Not necessarily saying it happened on purpose, but maybe just maybe we'd be better off bringing back a human specialist as opposed to a money-making machine.  HFT is not good liquidity and doesn't seem to play itself out in a market-neutral manner.  It steamrolls on itself.

What an absolutely insane day.  I really cannot explain the emotions that run through while staring at capitalism spontaneously combust and rebound in a matter of minutes.  Yeah we had our 2008 when everything melted down, but that was a process.  There was news.  Things happened.  This was 2008 and 2009 combined into one 5 minutes bar on a candlestick chart.  What a joke.  If this was a computer glitch then bring back the specialists.  It makes everything seem so fake and unreal.  Since when was an economy measured by green and red digitized numbers flashing on a computer screen?  What ever happened to REAL things?  Innovation, production, etc.  Today was/is ridiculous and is a sign of the lack of progress we have made since this "financial crisis" began.

End Rant.

Is Stock Picking Dead?

In these times of macro-volatility, it’s a line heard more each day: “stock picking is dead.”  The reasons listed are plentiful, but all focus on the increased correlations across the stock market and various asset classes today.  There is certainly an element of truth to the notion that in these volatility storms, everything moves closer together, but the claim that stock picking is dead is not a necessary outcome of the idea that correlations are higher.  There are factors that go beyond just what is happening in today’s market that have led to this misguided conclusion that stock picking is dead, so let’s take a deeper look at what’s behind this financially harmful directive.

Just the other day, Jason Zweig, in his Wall Street Journal column, took a look at whether “index funds are complicating the market,” and if so, what the consequences are.   This is an important conversation, and relates directly to whether stock picking is in fact dead, or not.

Who makes the claim:

There are several different groups behind this claim, and they are important.  In terms of economics, one of the core arguments for the efficient market hypothesis (EMH) is the notion that there is no alpha (outperformance), as prices reflect all known information, and therefore it is nearly impossible to beat the broader indices.  In a rational and efficient world, where information is ubiquitous, why would anyone sell to another with exactly the same information?  Or so the EMHers ask.  

In the stock market, indexers are a direct outgrowth of the EMH. Burton Malkiel’s Random Walk is probably the most visible bridge between the intellectual economics community and actual asset allocators.  Indexers carry out the theoretical consequences of the efficient market theory in buying broad baskets of stocks designed to mirror the performance of the economy at large. 

Next up are the class of speculators that call themselves technical analysts.  There are many kinds of technical analysts, and I use technicals as an important tool myself for timing and scaling into positions, as well as a basic risk management tool.   I do not mean those types of technical analysts.  More particularly, I am speaking of the technicians who use technicals as their one and only metric through which to buy a stock.  Stock picking doesn’t matter to these people, because they believe that charts rule the market and therefore only charts matter.  They buy the best looking lines on charts, and sell the worst, without “picking” a company based on its own intrinsic metrics.  Their intellectual ancestors are Charles Dow and Roger Babson.

Last are the perma-bears.  They believe that correlations are high, because volatility is here to stay as a direct result of some sort of serious global economic malady that will lead to the “end of the economic world” as we know it.  You’ll know these people based on their zealotry for gold as an asset class, complete conviction that they know exactly why everything is going to shit when markets are crashing, and ongoing claims that the market is “inflated, manipulated and rigged” whenever prices are moving higher. To them, everything is on its way to zero, so why bother?

Taking the other side:

The EMHers like to ask what information one person could possibly possess that the other does not, leading to the belief that buying Company A’s stock is worthwhile for oneself, while selling Company A’s stock is worthwhile for the counterparty?  The problem with this question is that there are far more reasons why one type of market participant would sell a stock than just a question about the known information pertaining to the value of a particular business. 

This is a crucial point in why the efficient market theory breaks down.  It only works in an environment when people are buying and selling based on the same information, focusing on the same companies, and thinking about only factors related to the underlying businesses.  There are plenty of people who don’t base their decisions on “information” at all, and are acting based on emotion like sellers in a panic or buyers in a bubble.  There are other examples outside the emotional realm: Indexers, macro-traders, technicians, and short-term speculators.  Importantly, in practice, indexing itself is a major source of company-specific inefficiencies, rather than a factual outgrowth of the EMH.  Legendary value investor, Seth Klarman, has specifically referenced his affinity for investment opportunities that directly arise out of inefficiencies during index rebalancing (Hat tip to Distressed Debt Investing), and this is but one example.

Beyond styles, there are many reasons that people may sell (or buy) stocks that have nothing to do with company-specific beliefs.  This list includes, but is not limited to, young workers’ deposits into 401(k)s, retirees selling savings to live off of, and mutual funds that are forced to sell shares in a spin-off which is worth a price below the fund’s mandated minimum capitalization.  All of the above transactions have nothing to do with what the person inspiring the purchase (or sale) of an equity thinks about that one particular company.  Again, this is important.

Why we have markets in the first place:

While financial headlines swing from "the end of the financial world" to dramatic rescues, it's necessary to take a step back and think about what investing in markets is all about.  Stock picking is precisely it. 

When we look to the essence of the stock market, we realize that it is an arena for companies to sell fractional ownership interests in exchange for the capital necessary to build, grow and/or maintain a business (forget for a second that most IPOs today are to cash out early investors).  This is not a transaction based on the belief that one person is wrong and the other right, nor is it a situation where one person must lose at the other’s expense.  It’s really supposed to be a win/win for the buyer and seller—the buyer gets an ownership stake in a company, and the seller gets the capital they need to deploy in order to increase the value of the buyer’s ownership interest.  At the end of the day, unless people are in markets to invest in companies themselves, then everything else is illusory, and that’s not really the case.

Somehow, the meaning of markets has been so greatly abstracted by the proliferation of types of participants that this existential fact ends up forgotten.   In many ways, it’s thanks to actual inefficiencies in markets that people learned ways beyond just investing in businesses in order to make substantial sums of money in capital markets.  This is why they say that “stock picking” aka investing in companies is dead.

Pulling it All Together:

These other strategies have made money for periods of time, but the most consistent through all time periods is investing in strong businesses for the long-term.  This is not to discount the efficacy and importance of other types of analysis.  In some ways, it is the generalist who is most adequately equipped for long-term investment, for knowledge of macroeconomics, technicals, etc. are invaluable tools for an actual company-specific investor.  It’s important for any kind of investor to understand who the market participants are, and why happenings play out as they do.  Use these other strategies as tools to maximize the returns from investing in really solid long-term businesses, not as ends in and of themselves. 

In 2010, I conducted an interview of Justin Fox (now the editorial director of the Harvard Business Review Group) shortly after he wrote The Myth of the Rational Market, a comprehensive review of the history of the competing types of investment theories and how they came together to form competing bases of economic theory.  Fox concludes that Benjamin Graham-style value investing is the only conssitent strategy through all time, but asserts that t is psychologically draining to consistently instill a sense of discipline on oneself, and therefore people tend to float dangerously towards alternatives. The book is an excellent read that traces the history of investing and economics from Irving Fisher to Benjamin Graham to Eugene Fama all the way through the physics-drive Santa Institute.  In my interview with Fox, we had the following exchange that I think very aptly sums up the problem with the question "is stock picking dead" and why the answer is conclusively no:

Elliot: Now, correct me if I’m wrong but one of the concepts that I took to be a semi-conclusion in “The Myth of the Rational Market” was the idea that the Benjamin Graham model of value investing has withstood the test of time, that people who are able to take the information and come up with what they think is a fair value and have the ability to ignore what “Mr. Market” is telling them on a daily basis have an edge over time.  Do you think that’s a valid interpretation?

Justin: Absolutely – I completely think that’s true.  And I think one of the interesting things that is sort of common sense, but that finance scholars have finally started studying and recognizing, is that one of the big reasons for why it’s really hard for a professional investor to stick it out as a value investor is that it requires being unfashionable and going against the crowd.  And unless you’ve either built up this incredible reputation—although even that doesn’t really help you that much in investing as people forget your reputation and a year or two if you fail to beat the market—or you get a situation like Berkshire Hathaway where it’s actually not the investors’ discretionary money that you’re investing, but the cash flow from Berkshire.  There’s really no way anybody can discipline Buffett except over maybe a really long period that gives you the freedom to do it.

The flip side of that is that as an investor you have a situation where there’s such little control over the investment decisions.  That’s the difficult situation that our investors fear. There’s a reason why people invest in mutual funds.  They like the flexibility of being able to take their money out.  But the very fact that they do that, and that if you’re some value fund and it’s 1999, everybody wants to take their money out of your fund regardless of your own performance; that’s exactly why it’s hard to be a value investor, and a good economic reason for why value investing works.  Beyond that is the individual as a value investor.  Obviously, you don’t have to worry about customers but you just need a pretty strong constitution and maybe a different psychological wiring than most people to be able to stick that out.

Links for Thought -- February 17th

The IPO of the Decade? My Valuation of Facebook (Musings on Markets) -- Aswath Damodaran, professor at finance at NYU, takes his stab at constructing a valuation analysis on Facebook.  This is an outstanding post for anyone who has an interest in the Facebook IPO, and even better for those who want to learn the "how to" of valuation analysis from an outstanding teacher.

Memo to Lyle LaMothe: The Die is Cast (The Reformed Broker) -- Josh Brown offers some strong points on why the Registered Investment Advisor (RIA) platform is gaining momentum at the expense of the traditional wirehouse brokers.  Great read on the state of the investment industry today.

Kodak: A Parable of American Competitiveness (Harvard Business School) -- Very interesting analysis of Kodak's decline as a company and what lessons can be drawn for America at large.  A key point is the idea that outsourcing manufacturing resulted in the outsourcing of the means through which people derive innovation.

Allan Mecham: The 400% Man (Frankly Speaking) -- Frank Voisin takes a look at the recent SmartMoney profile on an under-the-radar investor from Utah who has earned a 400% return for his investors over the past 12 years.  Embedded in this post is an interview with Mecham conducted by the Manual of Ideas in 2010 which is a must read on how to become a successful investor (clue: one must think differently than the herd).

Lasry Sees Europe Bankruptcy Bonanza as Bad Debts Obscure Good Assets (Bloomberg) -- This article is as much an expression of Marc Lasry's belief that there are good values to be bought in Europe, as it is a mini-biography on one of my favorites in the investment business.  Lasry is a Moroccan immigrant, who studied hard to become a lawyer and then a successful investor.  A lot can be learned from this man, both as a person and a fund manager.

What Does Declining Gasoline Consumption Mean (Ritholtz) -- With oil prices on the rise yet again, James Bianco bring to light an important fact.  Gasoline consumption in America has been falling since 2007, and recently accelerated the pace of the decline.  What does this mean?  Go ahead and read the link to find out what Bianco thinks.