F Vail

[Harvey]

Anytime you see stock buybacks from a seasonal, capital intensive business like Vail, it is time to head for the hills.

Could you explain why this is?

 

[x10003q]

Could you explain why this is?

Most of the time a stock buyback is a short term play to make the stock look better than it is. The beneficiaries are usually upper management (they make the decision and have the most to gain based on bonus structures) and then stockholders (but it depends on the stockholder).

Generally, there are better ways to deploy the cash to make the company more profitable:
Increasing R&D
Reinvesting in current businesses and workforce to drive sustainable growth
Buying other businesses
Reducing debt

Too many C-level operators come from the quick hit and get out method of business.

For Vail, there are probably many capital projects at these ski areas that would improve the ski areas and drive more business, but if you are looking at a short horizon then who cares. You just need to get your money and be on your way to the next one. Its not about building a great business, it is about getting a max payout.

 

[TonyC]

Could you explain why this is?

The proper way for management to best serve shareholders is to buy back stock when it's cheap and issue more when it's expensive. You can be 99% assured that when Berkshire Hathaway buys back stock, that means Buffett thinks it's undervalued. Conversely when Tesla stock ran way up in 2019-2021, Tesla raised billions in capital by issuing more shares.

But yes, most of these companies that buy back stock every quarter are doing it to boost the executives' stock option/incentive plans. FYI Berkshire Hathaway does not believe in stock based compensation for executives.

The interview with the Alterra CEO highlighted the tensions of running a large multi-area ski business. Being private, Alterra can invest more long term and have much less short term earnings pressure than a publicly traded company. But this advantage is temporary, as the private equity investors typically want to cash out for a profit after 5-7 years. The CEO said that's not where Alterra is right now, so the 2017 investors who wanted out have been replaced by new ones. He also admitted that as Alterra grows larger, this process cannot be done indefinitely so it eventually will have to go public.

 

[TonyC]

Update:
Below are selected good Utah snowfall seasons before and all seasons after the pandemic. The second number is Rocky Mountain visits excluding Utah.
1996-97: 3.0 million, 15.9 million
2001-02: 3.0 million, 15.1 million
2004-05: 3.9 million, 15.7 million
2010-11: 4.2 million, 16.7 million
2016-17: 4.6 million, 17.1 million
2018-19: 5.1 million, 19.3 million
2020-21: 5.3 million, 17.3 million
2021-22: 5.8 million, 19.5 million
2022-23: 7.1 million, 21.1 million
2023-24: 6.7 million, 20.0 million
Those are very modest dropoff numbers in 2023-24 considering the terrible November/December of 2023.

 

[Andy_ROC]

Seems to me the sking industry was never meant to be a commodity that was appropriate for investors looking for wall street maximized returns, especially quarter to quarter. It definitely has its growth limits.

There's a majority of mountains, independent, that operate with a vision and mission much greater than simply maximizing ROI.

Hopefully this is only the start of Vails long-term backslide. Probably not, but a guy can dream.

 

[Benny Profane]

Yeah, but, be careful what you hope for. They can take a lot of ski areas down with them. And stay rich. Les Otten is a wealthy man.

 

[Campgottagopee]

Seems to me the sking industry was never meant to be a commodity that was appropriate for investors looking for wall street maximized returns, especially quarter to quarter. It definitely has its growth limits.

There's a majority of mountains, independent, that operate with a vision and mission much greater than simply maximizing ROI.

Hopefully this is only the start of Vails long-term backslide. Probably not, but a guy can dream.

I agree with this.

I believe the owner of my hill does it for the love of skiing, our area and it's people. Skiing has soul and always should, imo. Take that away and what do you actually have. Then it becomes just skiing.