Thursday, March 18, 2010

3/18/10 Midday Report: Market pauses to watch NCAA tournament, hopes boss isn't looking

There was a flurry of economic data released today but unfortunately it was less decisive than a sugar addict with a severe case of ADD in a candy store with only $.50 to spend.  Consumer prices remain unchanged, rising only .1% sequentially excluding food and fuel (or as they're better known as, essentials).  Consumer prices are now up 2.1% since last year but that is not enough for policy makers to be concerned about inflation as they they continue to test their thesis that if they ignore it, it will just go away.  In other macro news, the index of leading economic indicators was up .1% which was the smallest gain in a year and could signal slower growth ahead.  Of course since this is a ridiculous metric Money McBags could give a shit what it says.  He cares about as much about the leading economic indicators index as he does about creationism, show tunes, or Roseanne Barr's vagina.  New claims for unemployment  also came out and were down 5k to 457k which is still too high to signal a recovery (though no longer as high as Ron Washington during the seventh inning stretch).  Unemployment remains stagnant but at least the volatility has abated for now which is good news for anyone who still has a job, though remains bad news for those looking for one. Finally, manufacturing in the Philadelphia region rose again and at the fastest pace this year which should be good for handgun owners and anyone brave enough to drive into Philly to pick up whatever is being produced there.

In international news, Greece is dong a worse job of staying out of headlines than Peggy Eaton in 1829 (and for the record, Money McBags would love to have seen her petticoat).  Oh Greece, Money McBags thought he was done with you but you keep coming back like indigestion from a saganaki appetizer.  We all really wanted to believe in your austerity plan and the EU's tacit promise to back you up (thus figuratively taking you the Greek Way), but now there are doubts that the EU will really bail you out and Money McBags is stuck trying to think of more jokes about Hellenic culture.  Ugh.  Honestly, Money McBags may be more tapped out than Pheidippides during the Persian Wars.  So please EU, just bail these fuckers out or let them collapse but finish it already.  Otherwise Money McBags is going to have to start dipping into his Socrates pedophile jokes ("Did you know Socrates tried to start a clown college?  Yeah, he let his students juggle his balls.") and noboby wants to hear those.  Making things worse is Greek Prime Minister George Papadapolis trying to engage in some type of bail out game of chicken with the EU and German leader Angela Merkel (who in this pic gives a new definition to Merkle's boner) by claiming if the EU does not commit to a bail out plan, he will run like a jilted lover to the IMF to get some of that sweet sweet sugar.  The IMF coming to bail out Greece would be a blow to the solidarity of the Euro Union and not a delightful full tongue and lip blow, but one with lots of teeth.  In other international news, US ambassador to China John Huntsman spoke to students in China and said that China needs to let their currency rise because with the renminbi pegged to the US dollar, Chinese exports remain cheaper than Gary Coleman's rate sheet.

In stock news, Nike just did it (see look, Money McBags can write lame mainstream puns as well as anyone employed by Jay Leno) by putting up a huge quarter and reporting a jump in future orders (see, another mainstream pun).  Nike beat analysts estimates of $.89 eps by posting earnings of $1.01 per share as sales in the US and China were robust as more people are walking places after having their cars reposessed.  Also,  Teva is buying German drug maker Ratiofarm for $5B and the rights to their leading generic drug scatagra which is said to increase bowel movements and thus is widely used in Germany's top industry of scat film making. Finally, telecom company Vimpel was popped like a puss filled whitehead after missing analyst earnings estimates by $.14 per share.

In small cap news, Money McBags' short WGO announced their Q and surprised the whole investing world by actually putting up a profit of a whopping $.02 if you read the headlines.  Though apparently those same headline writers gave you Dewey defeats Truman and Four Stars for Ishtar because WGO only earned a profit due to a tax benefit of $2.2MM.  Take out the tax benefit and the company had an operating loss of $.07 which plays in to Money Mcbags thesis which he broke down for you all in December which is that this company will not make money in 2010.   Sure they put up a decent Q on the top line (short of analyst estimates though above Money McBags' estimates) as revenues were up 247% to $110.5MM as a result of increased orders for Class A vehicles (A standing for "Absolutely ridiculous that anyone would buy one of these things new," as the used market is more flooded than Faye Reagan's eye socket after the final scene of her last bukakke film).  WGO's sales order backlog was also up 250% and they now have $50MM in cash and short term investments thanks to the plethora of government tax benefits.  Even with this seemingly strong balance sheet (though apparently strong in the way that Richard Simmons is strong), they filed a shelf to raise $35MM.  Ummm, excuse me?  Guess what people, you don't dilute equity holders to raise $35MM of cash if the business is turning around.  It's not like they're going to acquire a smaller company so why do they need the $35MM?  Are they going to have a blow out night at Rick's Cabaret or are they going to try to blow up their vertical integration and build out more nimble production facilities?  Their overall cash was up $5MM in the past 6 months but if you strip out the $15MM tax benefit and the $5MM from sale of securities, they blew through $15MM.  With only $50MM left on the balance sheet (or a year and half worth at this rate), it's no wonder they are seeking to raise capital.  Inventories and receivables alone in the past 6 months have been a negative $21MM hit to their cash flow which I guess is good in that they are taking orders and building back up, but it's bad from you know, a fucking working capital standpoint.  Not only that, but their EBITDA was $0 for the Q which is better than the negative EBITDA they have been running but you know what zero EBITDA buys you?  It buys you a mix tape of Vern Troyer's greatest basketball dunks or a copy of Jessica Simpson's MENSA acceptance letter.  Look, it's good for their business that the Class A market is seemingly coming back, and it's good that they no longer have negative gross margins, but if anyone can tell Money McBags what valuation metric gets this company to their current $13.50 price (other than a 30x P/E multiple on FOS estimates, with FOS of course being "full of shit," or the new DCF type-valuation where the terminal value denominator is determined by picking the smallest known positive number), he'll buy you a share of ZAGG.  Look, Money McBags does not think WGO is going out of business, especially if they can raise another $35MM, but unless you think the recovery will be strong and unless you are using 2015 made-up estimates, there is just no way to defend the current valuation.  Fuck, Jim Bowie had an easier time defending the Alamo than anyone can in defending the WGO valuation.  Money McBags maintains that this is a $7 to $8 stock based on at best 15x their not going to make $.50 2011 EPS.  Money McBags has yet to listen to the call, so perhaps they shed light on the equity raise but he would rather own a used Magic Johnson leaky condom than WGO.


infrequentcamper said...

A couple of sell side analysts raised estimates for this and next year such that forward 2011 PE is around 15. Perhaps WGO sales are coming back albeit at a lower but profitable level and that it is a leading indicator of frivolous spending. Heck all vacation spending is frivolous isn't it?

Anonymous said...

Nice call on WGO, chump.