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Speaker 1: Global business news twenty four hours a day. It's Bloomberg

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Speaker 1: dot Com the radio plus mobile lact and on your radio.

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Speaker 1: This is a Bloomberg business flag from Bloomberg World Handquarters.

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Speaker 1: I'm Charlie Pellett, deal making Tuesday's stocks wrenching higher. We

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Speaker 1: have got thirteen minutes to go ahead of the close.

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Speaker 1: The Dow, the SMP nastac All Advancing SMP five hundred

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Speaker 1: indecks up four now four, a gain of two tenths

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Speaker 1: of one percent. The Dow is up thirty one points,

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Speaker 1: also a gain of two tenths of one percent. NASDAK

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Speaker 1: hired by four tenths of one percent. The tenure up

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Speaker 1: seventeen thirty seconds, the yield one point five four percent,

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Speaker 1: Gold up twenty six sixty ounce, the thirteen forty nine

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Speaker 1: again there of two percent, and crude oil West Texas

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Speaker 1: Intermediate up nine tenths of one percent, forty four dollars

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Speaker 1: eighty five cents. I'm Charlie Palett, and that's a Bloomberg

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Speaker 1: business flash. Charlie Pellot, thank you so very much. Time

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Speaker 1: now for the e t F Report, brought to you

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Speaker 1: by e t F Exchange sixteen B and y Melons

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Speaker 1: Annual et F Symposium September ninety one in Data Point, California.

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Speaker 1: A must attend for r I A S. Space is limited,

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Speaker 1: so register now at bny melon dot com slash e

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Speaker 1: t F so do. The jobs report affects some of

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Speaker 1: the most popular e t f s around. Katherine Cowdery

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Speaker 1: is here with her report. Some e t s were

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Speaker 1: quick to respond to the latest jobs report. Bloomberg Intelligence

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Speaker 1: analyst Eric val Tuna says after major economic reports and

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Speaker 1: comments from Federal Reserve officials, he always checks E E

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Speaker 1: M and h y G, the ICE shares, Emerging markets

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Speaker 1: e t F and the I shares I box High

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Speaker 1: Yield Corporate Bond ETF. Those are the ones that will

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Speaker 1: probably see and get hit hard the hardest if there

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Speaker 1: were concerns over in strate hike, because if rates were

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Speaker 1: to go up, it makes treasuries a little more attractive

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Speaker 1: versus a risk asset, and that's why val Tuna says

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Speaker 1: a low interest rate environment has been helping emerging markets

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Speaker 1: this year. Emerging markets ETF is taken in two and

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Speaker 1: three billion this year. That is a boatload of assets now.

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Speaker 1: Emerging markets e t f s have traditionally been very

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Speaker 1: sensitive to concerns of our FED right hike. So if

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Speaker 1: you go right to them and you see that e

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Speaker 1: M is up one point three percent today, which is

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Speaker 1: a good bump, you can see that the job's report

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Speaker 1: has given investors confidence that the Fed will not raise rates.

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Speaker 1: E E M gained one point six percent and h

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Speaker 1: y G was up half a percent. That's your Bloomberg

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Speaker 1: ETF report. I'm Katherine Cowdery. You're listening to are taking

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Speaker 1: stuff with Kathleen and Gim Fox on Bloomberg Radio. His

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Speaker 1: Intrepid Capital Fund is up more than twelve percent so

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Speaker 1: far this year. That's nearly double the six and a

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Speaker 1: half percent increase for the S and P five hundred.

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Speaker 1: Mark Travis is the president and lead manager for the

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Speaker 1: Intrepid Capital Fund, and he joins us now from Jacksonville, Florida. Mark,

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Speaker 1: thanks very much for being with us. Hell, I'm glad

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Speaker 1: to be here. Tell people the strategy that you employ

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Speaker 1: at a Trepid Capital well PIM. I like to think

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Speaker 1: of it as classical security analysis. We have a seven

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Speaker 1: person analytical team and we try to discern long term

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Speaker 1: business value in relation to where the shares trade in

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Speaker 1: the market. Um. Some people use the term private market value,

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Speaker 1: some people who use the term intrinsic value. We're trying

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Speaker 1: to first ascertain the values and conservative assumptions about growth

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Speaker 1: and margins and sales um. And then we we we

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Speaker 1: use some what some people consider to be kind of

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Speaker 1: punitive discount rates, which helps adjust to the risk and

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Speaker 1: growth um and then we try to buy those business

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Speaker 1: values in a discount in the stock market. Sometimes those

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Speaker 1: are one off, sometimes those are more you know macro events. UM.

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Speaker 1: We haven't had many kind of macro events really in

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Speaker 1: the last five years. On the fixed income side, we

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Speaker 1: want to find a credit where we know how we'll

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Speaker 1: get our money back USUS there's a collateral or the

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Speaker 1: free cash flows, and we don't want to make any

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Speaker 1: assumptions about interest rates, so we try to take little

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Speaker 1: of any interest rate risk, and we want a reasonable

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Speaker 1: spread to treasuries UM. So we tend to focus in

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Speaker 1: smaller cap equity where the markets are less efficient, not

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Speaker 1: only in the US but across the globe. And we

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Speaker 1: tend to focus in shorter duration, high yield debts somewhere

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Speaker 1: in the you know double B single B of five

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Speaker 1: year maturity or less fixed income Okay, Mark, A lot

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Speaker 1: of people, of course, are shortening up duration, not uncertainty

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Speaker 1: over the FED and the economy and so much more.

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Speaker 1: I'd like to get into some of your the stocks

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Speaker 1: you like, But I have to ask you about e

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Speaker 1: T s and you're concerned that the inflows, and they've

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Speaker 1: been huge, are actually laying the seeds for not only

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Speaker 1: heightened volatility, but value destruction. Why well, Kathleen, I think

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Speaker 1: we've got some assets that are probably not as well

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Speaker 1: suited to something that has to provide liquidity daily. I mean,

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Speaker 1: we've had a few, you little hiccups. We haven't had

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Speaker 1: many in the market's really in the last five years.

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Speaker 1: To me, it goes back to the debt downgrade kind

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Speaker 1: of early August of eleven. We saw a little bit

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Speaker 1: of action with the currency devaluation in China last August,

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Speaker 1: and all of a sudden, you couldn't price I believe

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Speaker 1: some ET s. We we had a problem with the

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Speaker 1: open ended Third Avenue Fund late in the year. But

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Speaker 1: my take on ets is the conceptually their low cost

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Speaker 1: and they make sense long term, but I think the

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Speaker 1: reality is they're traded quite rapidly, and at some point

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Speaker 1: that may be problematic. I think that um, you know so,

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Speaker 1: I think that will be a source of opportunity for

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Speaker 1: a firm like in Trepid Capital at some point in

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Speaker 1: the future. Mark, I want to take you north to

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Speaker 1: to to Canada, and I want you to give us

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Speaker 1: the case for Chorus Entertainment. They have television, radio, as

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Speaker 1: well as digital and content businesses. This is a Canadian

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Speaker 1: entertainment company that pays a dividend of over nine well

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Speaker 1: if nothing else, UM PIM. It's what I like to say,

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Speaker 1: you're paid to wait um. And this environment is certainly attractive,

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Speaker 1: but that's really not how we got there. Honestly, I

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Speaker 1: think that UM. The business in Canada, the cable TV

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Speaker 1: business has gone through what we might call the States

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Speaker 1: pick or pay, where they're going to allow cable TV

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Speaker 1: subscribers to decide whether they want ESPN in their package

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Speaker 1: or HCTV or what have you. Chorus has been very

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Speaker 1: dominant in women's and children's programming. Heathershaw is h this

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Speaker 1: chairman of Chorus and Shaw Communications. They've just brought those

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Speaker 1: two business together, so they've levered up somewhat, but it's

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Speaker 1: a very dominant provider of those that program They also

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Speaker 1: have radio uh uh radio stations as well. So it's

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Speaker 1: a business that generates right at two hundred million in

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Speaker 1: free cash for a lot of it comes out to

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Speaker 1: us as a dividend. And when we did the business valuation,

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Speaker 1: we came up with twenty dollars Canadians. As I like

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Speaker 1: to tell readers or listeners or viewers, shadow and us

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Speaker 1: can be painful, um, And a lot of times things

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Speaker 1: go down in price after we first initiate a purchase.

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Speaker 1: So you know today those shares are where are they Canadian? Yeah?

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Speaker 1: And so you multiply that today as the dollars dropping, Um,

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Speaker 1: it's a point seven and seven. We think they're worth

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Speaker 1: right at twenty dollars Canadians. So if I get the

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Speaker 1: nine of security in form of the dividend, and I've

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Speaker 1: got it a discount, Um, I'm going to just sit

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Speaker 1: and wait till that discount has breached. Okay, let's take

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Speaker 1: a look at another company that you like, and that

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Speaker 1: would be Center. They make conveyor belts and services for

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Speaker 1: the coal mining industry. Well, Kathleen, I think at least

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Speaker 1: in the US, it seems like coal mine is a

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Speaker 1: dirty word. Uh no pun intended. Um, Yeah, I would

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Speaker 1: point out to Elon musk at Tesla that coal mine

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Speaker 1: is probably generating a lot of electricity for the model

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Speaker 1: s UM. You know it's somewhere in the range, but

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Speaker 1: Fentners of British company. UM. Again, it has attractive dynamics

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Speaker 1: that we like, UM, attractive dividend, and it's really a

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Speaker 1: long tenure business and it's a service model. I don't

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Speaker 1: know if you've ever looked at businesses that' say service elevators, UM,

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Speaker 1: but it's some of the similar properties and it's gotten

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Speaker 1: beat up with what's happening in the coal mine business.

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Speaker 1: So that's what attracted us to it. What attracted you

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Speaker 1: to oak Tree Capital Group? The co chairman and the

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Speaker 1: co founder, of course, Howard Marks, an often frequent guest

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Speaker 1: on Bloomberg. Oak Tree Capital paying about a five and

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Speaker 1: a quarter percent dividend. Well, it's interesting um him. You've

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Speaker 1: probably read as many people in the investment industry, Howard

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Speaker 1: Marks um misses that come out quarterly, and I think

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Speaker 1: they're eagerly anticipated by a lot of the stafford in

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Speaker 1: TREPI Capital and I'm sure many places across the globe

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Speaker 1: and Howard's insights. I think that one is a pretty

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Speaker 1: complex security due to all the different partnerships they hold

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Speaker 1: um and people look at the dividend that again I

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Speaker 1: would caution listeners. It's not what I call a ratable dividend,

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Speaker 1: but it is one that they're committed to pay and

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Speaker 1: dependent on the realizations of the underlying partnerships. So I

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Speaker 1: think to me, one of the more interesting things is

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Speaker 1: what they carry double on capital for on their books.

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Speaker 1: They carry it for about twenty million dollars. They helped you,

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Speaker 1: Jeff Gunlock, leave TCW to form Double Line. Today that

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Speaker 1: firm Double lines about a hundred billion dollars. So I've

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Speaker 1: got a very well known distressed investor, which we haven't

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Speaker 1: had a lot of distress recently in terms of Howard Marks,

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Speaker 1: with about a hundred billion dollars worth of separate accounts

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Speaker 1: and partnerships with an incentive fee I embedded in them.

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Speaker 1: Couple with a rapidly growing well known fixed income manager,

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Speaker 1: and again I'm paid to wait. I wouldn't. I wouldn't. Uh,

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Speaker 1: I wouldn't annualize the five percent dividend. It could be higher,

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Speaker 1: it could be lower, But I think the free cash

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Speaker 1: flow generation properties of an asset management business one that

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Speaker 1: I'm very familiar with. Frankly Um, leave me to think

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Speaker 1: that those shares are worth probably around sixty sixty dollars

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Speaker 1: versus where they are today in the mid forties. Okay,

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Speaker 1: Mark Travis, thanks so much for joining us, President lead

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Speaker 1: manager for the Intrepid Capital Fund I C M b X.

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Speaker 1: He likes Finner, he likes Chorus, he likes oak Tree

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Speaker 1: Capital and more. I'm Kathleen Haze, along with pim Fox,

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Speaker 1: Dave Wilson, coming back to look at the market close

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Speaker 1: with us. This is Bloomberg