Monday, March 8, 2010

3/8/10 Midafternoon Report: Market more mixed than reviews of Oscar telecast (and for the record, Money McBags gave it two thumbs in the ears)

The market is quiet today, likely still in bed after staying up all night to watch something called The Hurt Locker win so many Oscars that that the people who couldn't get tickets to Avatar may now go see it (that is if Alice in Wonderland is also sold out and they hate fun).  The biggest news in the markets today is that AIG sold the second of its crown jewels, their foreign life insurance business Alico, to Met Life for $15B and with both of the AIG family jewels gone, they now qualify for a spot in the 2010 Eunuch Olympics.  A business hasn't sold off two profitable units like this since Pam Anderson downsized her boobs (of course she had them re-inserted faster than Warren Buffett talks up his own book because you always have to keep the things that make you money).  This sale gives AIG enough cash to pay some of their debt back to Uncle Sam and thus keeps their proverbial kneecaps intact for at least another couple of months because Uncle Sam doesn't play when you have his money, just ask Wesley Snipes.  Unfortunately, AIG still owes the US government another $50B and seeing as how they have now sold off two of their biggest profit centers and their business won't generate $50B in profits until sometime around the year "two thousand and go fuck yourself," it is unclear what tricks they will do next to appease Uncle Sam (Perhaps Uncle Sam will "lend out" some of AIG's CDS expertise to China to try to smooth over relations and yield a happy ending for the two super powers).  You just don't take daddy's money and get away with it.

In stock news MCD same store sales were up 4.8% in February driven by overseas sales and the $1 menu in the US.  Money McBags is an owner of MCD as he believes in their affordability and brand equity in the fast growing developing nations.  So even if Money McBags won't get high off his own supply by refusing to eat the swill that they serve at McDonald's (he would rather eat a Gabourey Sidibe burger out of the bun than whatever it is they serve at MCD's), Money McBags believes in the company.  In other large cap names, RIMM got an upgrade from the Bank of Montreal today which has driven the stock up almost 5%.  The BMO analyst raised his price target to $88 citing expected strong Q4 sales, a potential guidance raise, and Apple aboot (BMO and RIMM are Canadian after all, eh?) to go out of business because iPhones are for sissies (ok, that last one may have been made up).  Now look, Money McBags is never a fan of owning the second best competitor in a space (he'll go Bang Bus any day over Backseat Bangers), but he will admit that he owns some RIMM simply because it is as cheap as a homless man's balls for it's growth as it is trading at less than 20x 2010 EPS estimates and less than 15x 2011 eps estimates despite continuing to dominate the business handset market like Nipsey Russell dominated the 1970s game show circuit (where he did more than just fill in Brett Somers' blanks).  RIMM is getting 20% topline growth and 30%+ bottomline growth and you're only paying 15x for that.  The stock is still a reasonable buy but it is unlikely to be a longterm holding for Money McBags as their end game is becoming more challenging than playing herpes roulette with Paris Hilton.

In small cap news, apparently a fuckload of people dropped some acid this weekend and went down to the local IMAX to see Alice in Wonderland (and Money McBags would march his hairs to the IMAX if it were Alice Eve's wonderland they were showing.  He'd definitely let young Ms. Eve mock his turtle while he chesired her cat.).  IMAX theatres pulled in nearly $12MM this weekend as this 3D spectacle eclipsed even Avatar's opening run and led IMAX to sell out every seat they had for the entire weekend.  This has sent IMAX stock up 9% but Money McBags is still not buying as the stock is expensive and the movement today is likely retail money on the announced headlines.  IMAX could run some more as its momentum coming out of Oscar weekend could be so great that it attempts to defy the laws of physics and create a coefficient of restitution greater than 1, but this story is longer in the tooth than Kirsten Dunst.  In other small cap news, EBIX annonuced their quarter and is trading down despite a 55% increase in revenue, a 53% increase in net income (operating leverage be damned), a 99.5% customer retention rate for the year, $12MM in cash flow for the Q, and a forward p/e less than 15x.  Money McBags has written about EBIX many times as nothing about the company makes sense and their financials and business are more opaquely complex than the Weiner process of Brownian motion (and I can assure you that is nowhere as dirty as it sounds).  The stock is ridiculously cheap based on the fundamentals of the business but shorts have been all over it due to aggressive acquisition accounting, receivables growth outpacing revenue, the CEO having a bigger ego than Joe Francis has, and a proclivity to switch auditors at the drop of a questionable debit.  Short activity was addressed on the call as a caller brought up that short exposure has climbed from 200k shares to 10MM in six months and the fact that EBIX has changed their auditors more times than Heidi Montag changed her face.  CEO Robin Raina addressed this with some kind of Jedi mind trick ping pong analogy (no really he did) and a quote from some Latin American intellect whose name yields zero google hits (the transcript from the call has Robin "Making it" Raina quoting some guy named Joe Moppi which is either spelled wrong or more fictitious than EBIX's growth rate, can we get an auditor on this?).  Kidding aside, Money McBags still has no idea what to do with this company.  He has a hard time believing it is total fraud but there is enough smoke to just keep him away from it.  That said, if you can get comfortable with their numbers, the stock is ridonkuously cheap.  Money McBags wouldn't short it, but as always, there are easier ways to make money (like KITD, MLNK, or CRUS).

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