The market is bouncing around today even though GDP grew 5.7%, the fastest pace in 6 years and beat estimates of 4.7% growth. The upside was led by a restocking of inventories from their depressed levels (and inventories were more depressed than Kathy Griffin's bikini waxer the time she ran out of rubber gloves). The change in inventories accounted for 3.4% of the growth with purchases of equipment and software up 13%, negating the 15% drop in commercial construction because building cardboard boxes is so much cheaper than actual homes. So the question becomes is this a one quarter inventory rebuilding and stimulus induced anomaly or are we really on the way to a recovery? In the delightful Elisabeth Kubler-Ross's model on the stages of grief (and for those who missed Ms. Kubler-Ross's induction into the National Women's Hall of Fame in 2007, the finger sandwiches were to die for), the economy has passed steps one and two by moving past denial (we are definitely fucked) and anger (openly calling for Dick Fuld to have his dick folded) and is now in the bargaining stage (please hire me, please, please). Unfortunatley the next stage is depression, which hopefully isn't caused by another market crash when inventories fail to turn and/or by China's bubble bursting like Christina Hendricks' bustier. Of course the last stage is acceptance and with any luck we will be accepting growth and recovery and not the realization that we are Japan circa 1989 or Taylor Rain's lovely backside in her brilliant performance in 2004's much overlooked film, Apprentass.
What is most concerning to Money McBags is that the market has been selling good news and is trading down now that the expected results are coming in much better. Of the 195 companies in the S&P 500 that have reported earnings since Jan. 11, 154 have beaten analysts’ estimates, according to Bloomberg data. That is an amazing stat and yet the market rally seems to have fizzled out like Lindsay Lohan's singing career (and acting career, and pretty much anything other than her whoring career, which actually makes us all winners).
The other big news of the day is that Ben Bernanke was confirmed by the Senate for another 4 year term by a 70 to 30 vote. The thirty who voted against him also voted for Mountain Dew in the Pepsi challenge, Curly Joe as their favorite of the 3 Stooges, and Anna Karenina as their favorite Tolstoy novel. Money McBags is a Bernanke supporter and thinks he has done a perfectly reasonable job as Fed Chairman, so kudos and huzzah for the Senate who took a wide stance and voted bi-partisanly on this one.
In stock news, MSFT earnings were up 60% thanks to Windows 7 and a little something they refer to as a "monopoly." They beat estimates by $.15 by earning $.74 per share and promised that with earnings like this Bill Gates may finally be able to move out of his mother's basement. Amazon also put up a huge quarter with sales rising 43% and earnings coming in at a robust $.85 per share, well ahead of the $.72 estimates. They also announced a $2B share buyback which boggles the mind considering that they are trading at 50x next year's earnings and with the iPad coming in to the market and potentially taking share away from the Kindle. Why a commodity business with low barriers to entry should trade at 50x is beyond me, but then again, so is M-theory and all of it's absurdly thought out 11 dimensions.
In small cap news MED and ZAGG continue to trade down while EBIX gives back some of their gains from yesterday. CRUS is also down despite their better than street guidance yesterday and run of analyst upgrades today. Money McBags did dip his toe into the CRUS waters yesterday (and it was delightfully stripper piss warm) and buy a small position so go buy some iPhones. Next week promises to be a wild week in the small cap space with more earnings announcements than Jack Nicholson has chins, so enjoy your weekend and be prepared.
Showing posts with label Money McBags. Show all posts
Showing posts with label Money McBags. Show all posts
Friday, January 29, 2010
Tuesday, January 26, 2010
1/26/10 Midday Report: An Apple a day will keep the recession away (especially if it's one of those new tablets)
The market is bouncing around after Apple put up a ginormous quarter and is likely to announce their tablet on Wednesday while the global economy still sputters. In macro news, US consumer confidence rose to 55.9 from 53.6 and we all know how important it was to break that 55 barrier (actually, I'm just kidding, I don't have a fucking clue as to the difference between 53.6 and 55.9, and I am guessing no one else does either, but bigger is better, just ask Keeley Hazell). Also in the US, the Case-Shiller home price index was either up or down, again depending on which news source you use. According to Bloomberg, home prices rose sequentially in November by .2% while according to the Wall Street Journal, home prices declined .2% sequentially in November. As always, our tie breaker is the NY Times because the irony of having a newspaper noted for their lapses of fact act as our determining factor makes me giddier than Charlie Sheen at a hoedown. According to the NY Times, home prices rose by .2%, so woofuckinghoo, home prices were slightly up, or not. I think the moral of this story is that home prices remain stagnant and you can't believe everything you read, unless it is about Money McBags' way with the ladies, and then all reports are 100% accurate, and delicious.
In international macro news, Standard and Poor's lowered Japan's outlook to negative and warned that they might cut Japan's debt rating if Japan can not trim their mounting public debt and reliance on Pokemon cards to spur their economy. Seeing as how the S&P credit ratings analysts did such a good job assessing US financial institutions before the biggest failure of the US banking system since the Great Depression (and yes, that is sarcasm), Japan yawned at the reports and went back to their game of Dance Dance Revolution. In Europe, the UK announced that they have momentarily come out of their longest recession since the 1930s as GDP rose .1%, or by its more familiar name "a rounding error." The growth disappointed most Brits, though not as much as their disappointment in General Cornwallis or dental floss. Weighing most on the global economy though continues to be China where some banks are said to have been ordered to stop lending for the month. With China threatening to make their monetary policy tighter and already less rigid than Joan Rivers' face, the global economy may be in for a bigger slow down than the current market implies. Be wary of what is going on in China as they are currently driving the global economic rebound so if they put on the brakes, we all may get Chris Henry-ed.
In terms of stocks, the big news is that Apple demolished numbers like they were auditioning for the lead role in a Monsters of Cock video. They earned $3.67 a share, up from $2.50 and had $15.68B in revenue, which was 32% topline growth. This was led by Mac sales which were up 33% and grew at twice the rate of the computer market thanks to a 70% increase in iMacs. Sure Apple did an accounting switcheroo from non-GAAP to GAAP which essentially pulled iPhone revenue forward by about $2B or so, but it's not like Apple has ever had other accounting issues so there's probably nothing to see here (though there is something to see here). Some analysts were disappointed that the 100% growth of the iPhone was a bit below expectations, but being disappointed in 100% growth is a bit like faulting Brooklyn Decker for having bad breath for like one second every few years (though even her bad breath must smell of gold).
In small cap news, ZAGG continues to get pulverized, though it is unclear that there is any news, except for perhaps people realizing that this one trick pony's trick may not be that hard to repeat, like walking or dividing by 1. As the market for smart phone covers has fewer barriers to entry than Paris Hilton's pants, ZAGG's business model should remain challenged. EBIX also continues to trade down making Money McBags glad he sold his EBIX holdings to avoid the attack of the shorts there who may or may not have something on EBIX's accounting. Also RICK has been selling off with the market but Money McBags missed a key announcement from them last week (unfortunately the announcement did not involve the words "free," "champagne," and "room"). Last week RICK said their high end spender is coming back. CEO Eric Langan said: "What we are seeing is customers are spending more money on higher-ticket items. For example, last year, guys who were (used to) drinking $1,000 bottle champagne were ordering the $300 bottle. Now, we are back to selling... those premium bottles of wine and champagne again." In that same interview, RICK forecast fiscal 2011 to have 20% growth to $100MM of revenue. They also expect operating margins to start expanding in Q2 and op margins were at 17.8% last year after being at a 26% the year before. So let's say RICK can earn $100MM in fiscal 2011 and their operating margins go back to only 20%. That is $20MM of operating earnings and then subtract out $3MM of scheduled interest payments and tax them at 34% and you get around $1.20 per share for their year ending September 2011. They are currently trading less than 10x that number and margins could be a lot stronger than 20%. As always, Money McBags is aware that there is a taint on this stock (pun intended) as they are just one rusty trombone away from being in serious trouble, but as long as they can keep the ladies walking that fine line of legality and awesomeness, this company should have improving financials and strong growth. Money McBags is an owner of RICK and this is one time where he tries to do as much primary research as possible.
In international macro news, Standard and Poor's lowered Japan's outlook to negative and warned that they might cut Japan's debt rating if Japan can not trim their mounting public debt and reliance on Pokemon cards to spur their economy. Seeing as how the S&P credit ratings analysts did such a good job assessing US financial institutions before the biggest failure of the US banking system since the Great Depression (and yes, that is sarcasm), Japan yawned at the reports and went back to their game of Dance Dance Revolution. In Europe, the UK announced that they have momentarily come out of their longest recession since the 1930s as GDP rose .1%, or by its more familiar name "a rounding error." The growth disappointed most Brits, though not as much as their disappointment in General Cornwallis or dental floss. Weighing most on the global economy though continues to be China where some banks are said to have been ordered to stop lending for the month. With China threatening to make their monetary policy tighter and already less rigid than Joan Rivers' face, the global economy may be in for a bigger slow down than the current market implies. Be wary of what is going on in China as they are currently driving the global economic rebound so if they put on the brakes, we all may get Chris Henry-ed.
In terms of stocks, the big news is that Apple demolished numbers like they were auditioning for the lead role in a Monsters of Cock video. They earned $3.67 a share, up from $2.50 and had $15.68B in revenue, which was 32% topline growth. This was led by Mac sales which were up 33% and grew at twice the rate of the computer market thanks to a 70% increase in iMacs. Sure Apple did an accounting switcheroo from non-GAAP to GAAP which essentially pulled iPhone revenue forward by about $2B or so, but it's not like Apple has ever had other accounting issues so there's probably nothing to see here (though there is something to see here). Some analysts were disappointed that the 100% growth of the iPhone was a bit below expectations, but being disappointed in 100% growth is a bit like faulting Brooklyn Decker for having bad breath for like one second every few years (though even her bad breath must smell of gold).
In small cap news, ZAGG continues to get pulverized, though it is unclear that there is any news, except for perhaps people realizing that this one trick pony's trick may not be that hard to repeat, like walking or dividing by 1. As the market for smart phone covers has fewer barriers to entry than Paris Hilton's pants, ZAGG's business model should remain challenged. EBIX also continues to trade down making Money McBags glad he sold his EBIX holdings to avoid the attack of the shorts there who may or may not have something on EBIX's accounting. Also RICK has been selling off with the market but Money McBags missed a key announcement from them last week (unfortunately the announcement did not involve the words "free," "champagne," and "room"). Last week RICK said their high end spender is coming back. CEO Eric Langan said: "What we are seeing is customers are spending more money on higher-ticket items. For example, last year, guys who were (used to) drinking $1,000 bottle champagne were ordering the $300 bottle. Now, we are back to selling... those premium bottles of wine and champagne again." In that same interview, RICK forecast fiscal 2011 to have 20% growth to $100MM of revenue. They also expect operating margins to start expanding in Q2 and op margins were at 17.8% last year after being at a 26% the year before. So let's say RICK can earn $100MM in fiscal 2011 and their operating margins go back to only 20%. That is $20MM of operating earnings and then subtract out $3MM of scheduled interest payments and tax them at 34% and you get around $1.20 per share for their year ending September 2011. They are currently trading less than 10x that number and margins could be a lot stronger than 20%. As always, Money McBags is aware that there is a taint on this stock (pun intended) as they are just one rusty trombone away from being in serious trouble, but as long as they can keep the ladies walking that fine line of legality and awesomeness, this company should have improving financials and strong growth. Money McBags is an owner of RICK and this is one time where he tries to do as much primary research as possible.
Wednesday, January 20, 2010
1/20/10 Midday Report: China flexes pimp hand and vows to curb lending, businesses cower in the corner and promise to work harder for daddy
The big news bringing the market down today is that China is beginning to realize they may have a bit of a bubble on their hands as they opened up their fortune cookie last night and saw their fortune was written on the back of a yuan (as for the fortune, it said "man who puts balls in peanut butter is fucking nuts"). As a result, China will reel in their profligate lending. The chairman of the China Banking Regulatory Commission said that he expects banks in China to decrease their loans by 22% in 2010. So in the year of the golden tiger (and also the year of Tiger Wang), businesses may not receive the showers of money they saw in 2009 (now aptly renamed from the year of the Ox, to the year of the golden shower). It is good that China is realizing that they need to reign in their stimulus sooner rather than later, but this news of course is putting fear in to investors who worry about the short term recovery from the global recession.
In US macro news, US wholesale prices showed virtually no inflation as energy price declines offset increases in food prices. This is bad news for fat people but good news for the Tin Man.
In stock news, BAC and WFC reported earnings, well to be more precise, WFC reported earnings and BAC reported losses. BAC underperformed analyst expectations by posting a loss of $.60 per share vs. estimates of a $.52 loss per share. They blamed the $.08 miss on analysts being really bad at math. Without the TARP repayment and dividends paid on preferred stock, the Q4 loss would have only been $194MM, and in related news, if I didn't have a dick, I'd be a chick, so unfortunately the details matter (and if I were a chick, I would be totally gay for Aubrey O'Day). BAC also raised their provision for credit losses to $10.1B in Q4, from $8.5B a year earlier because of some little thing I believe they referred to as "people not wanting to fucking pay shit back." They also had total write-downs for the year of $33.7B, more than double the $16.2B in 2008, so at least we finally know the price of dignity.
The point is, BAC benefited from the investment banking gains of Merrill Lynch while they still took it in the yingus from their consumer portfolio. They suffered a loss of $4.9B on their consumer credit card business, compared with a $3.3 billion loss a year earlier. So guess what market, things aren't getting much better. People still love charging off like Martha Coakley loves being bad at politics (and I need to digress for a second here. Money McBags does not get involved in politics. He does not care one iota what the fuck happens in this world as long there is world peace, no capital gains tax, and free blumpkins for all. And to be honest, he'd be happy with just one of those three, unless that one was world peace, and then he'd need at least one of the other two. The point is, Money McBags is completely apolitical, for all he cares, a gay person could marry an abortion while smoking a joint through the barrel of a shotgun in the middle of the oval office while spraying chlorofluorocarbons all over a bald eagle, so the fact that he has an opinion on this senate race is unusual. But this must be said. For a democrat to lose Ted fucking Kennedy's senate seat in Massachusetts after having a 30 point lead in the polls and without having killed someone, been arrested for fraud, or openly rooted for the Yankees and claimed Bill Russell was a bitch, is perhaps the worst performance not just in the history of politics, but in the history of anything. Think about it. Ted Kennedy killed a lady and that couldn't stop him form winning election after election. All this Coakley broad had to do was be alive, and yet somehow she fucked that up. Sure the dude who beat her (and yes this is really him, and sorry to my straight male readers) had a secret weapon in his lovely daughter Ayla, for whom Money McBags would cure cancer (though not one of those hard cancers like nut cancer, something much easier, like cancer of the mouth, also known as Kathy Griffin), but Coakley's loss is so colossal it should be part of the lexicon. So here we go, BAC did not lose $.60 per share this Q, they Coakleyed $.60 per share. Diatribe over).
Most interesting was the verbiage from BAC's CEO who said "economic conditions remain fragile and we expect high unemployment levels to continue, creating an ongoing drag on consumer spending and growth.” Which seemed at odds with WFC's CEO's statement that: “While losses remained elevated during the quarter as expected, a more favorable economic outlook and improved credit statistics in several portfolios further increase our confidence that our credit cycle is turning, provided economic conditions do not deteriorate.” Of course, WFC managed to turn an $.08 profit compared with a ginormous loss last year, so things are looking a bit rosier for them, except if you look at their charge-off numbers which were up sequentially $300MM to$5.4B driven by commercial and consumer real estate.
So are all banks created equal or will performance differences really start to show now that the economy has sort of recovered? More importantly, has the economy actually recovered? Here are four interesting stats from this NYTimes article (as always, buyer beware with facts and the NYTimes):
1. Bank of America said the percentage of credit card loans it thinks will never be paid hit 13.53 percent in December. JPMorgan Chase expects to charge off 10.5 percent of its credit card portfolios in the first half of 2010.
2. Fourth quarter of 2009, the number of domestic credit card accounts has declined by 20 percent from its peak in the second quarter of 2008, to 341 million from 426 million
3. the amount of available credit on cards has declined by 21 percent since its peak, from $3.51 trillion in the third quarter of 2008 to $2.77 trillion in the fourth quarter of 2009, the data shows
4. Hayley Atwell is still really hot, and Money McBags will drive this bandwagon into the ground until playboy drops by the Atwell residence.
So available credit is shrinking for the US consumer. What would be interesting to know is how utilization rates have changed and whether anything can be gleaned from this other than people got rid of their 3rd and 4th credit cards which they rarely used anyway and unemployment is still high (no word on how it can afford to keep getting high though).
In small cap news, KITD, a company Money McBags is following closely announced they will be issuing shares in both the US and Prague (where they will soon be listed). They are seemingly raising capital for more acquisitions where they buy companies for their customers, fire all the employees, and enjoy the benefits of leverage. KITD is basically a large database of videos for internet/IP delivery. They get raw video from customers and then help clients manage, view, distribute, manipulate, and store that data. They have a greater than 99% customer renewal rate because once a customer gives them their data, it is a huge pain in the ass for that customer to get all of the data back and have to reformat it, etc. (it is more of a pain in the ass than Valentine's day). KITD's market is growing 100% a year as IP takes off, they have little competition, they also have a ton of NOLs, and 93% of their business is outside of the US. IP video is cheaper and better than digital and it represents only 23% of the global video market so there is a lot of room to grow. That said, the company is a bit odd as it has had headquarters in Dubai and now Prague and they are still unprofitable from an operating eps standpoint. Also, the CEO loves himself almost as much as he loves money and looking silly at the movies and the company basically just relaunched less than a year ago when this new CEO came in and developed a new strategy. Now the good news is that the CEO is the biggest owner and has a substantial portion of his net worth in the company, the bad news is that the CEO has led failed companies before. But he has had success recently and at least we are betting with him. Also, despite little US exposure, they did win the business of Verizon Fios which is the only IPTV telco user in the US. The company has little sell side coverage but recently announced fiscal 2010 guidance for revenue to increase at least 60% to more than $75 million, with an annual operating EBITDA margin exceeding 17.5%. Ok, so EBITDA will be somewhere around $13MM and their market cap $120MM is with $13MM of net cash as of their last 10Q, so they are trading at around 8x EV/EBITDA before their just announced capital raise and at around 1.5x revenues when companies like this who use the software as a service model tend to trade at between 2x and 6x revenues. These are relatively cheap multiples for a growing company with a high recurring revenue base which contains many blue chip customers. Money McBags does not yet own KITD because he is still trying to fully understand the company's competitive advantage, but he is thinking about buying a starter position and will throw down the gauntlet to his loyal readers to do some of their own research here and see if they come up with anything else important.
Oh yeah, a Money McBags longtime reader e-mailed him about a Korean-American bank HAFC which is apparently now trading at around .5x of TBV (even with today's big run-up) and promises to love you long time. Money McBags knows nothing about HAFC and how real their TBV really is but if it is even 80% correct then there is room to grow here. So you should all do some due diligence.
In US macro news, US wholesale prices showed virtually no inflation as energy price declines offset increases in food prices. This is bad news for fat people but good news for the Tin Man.
In stock news, BAC and WFC reported earnings, well to be more precise, WFC reported earnings and BAC reported losses. BAC underperformed analyst expectations by posting a loss of $.60 per share vs. estimates of a $.52 loss per share. They blamed the $.08 miss on analysts being really bad at math. Without the TARP repayment and dividends paid on preferred stock, the Q4 loss would have only been $194MM, and in related news, if I didn't have a dick, I'd be a chick, so unfortunately the details matter (and if I were a chick, I would be totally gay for Aubrey O'Day). BAC also raised their provision for credit losses to $10.1B in Q4, from $8.5B a year earlier because of some little thing I believe they referred to as "people not wanting to fucking pay shit back." They also had total write-downs for the year of $33.7B, more than double the $16.2B in 2008, so at least we finally know the price of dignity.
The point is, BAC benefited from the investment banking gains of Merrill Lynch while they still took it in the yingus from their consumer portfolio. They suffered a loss of $4.9B on their consumer credit card business, compared with a $3.3 billion loss a year earlier. So guess what market, things aren't getting much better. People still love charging off like Martha Coakley loves being bad at politics (and I need to digress for a second here. Money McBags does not get involved in politics. He does not care one iota what the fuck happens in this world as long there is world peace, no capital gains tax, and free blumpkins for all. And to be honest, he'd be happy with just one of those three, unless that one was world peace, and then he'd need at least one of the other two. The point is, Money McBags is completely apolitical, for all he cares, a gay person could marry an abortion while smoking a joint through the barrel of a shotgun in the middle of the oval office while spraying chlorofluorocarbons all over a bald eagle, so the fact that he has an opinion on this senate race is unusual. But this must be said. For a democrat to lose Ted fucking Kennedy's senate seat in Massachusetts after having a 30 point lead in the polls and without having killed someone, been arrested for fraud, or openly rooted for the Yankees and claimed Bill Russell was a bitch, is perhaps the worst performance not just in the history of politics, but in the history of anything. Think about it. Ted Kennedy killed a lady and that couldn't stop him form winning election after election. All this Coakley broad had to do was be alive, and yet somehow she fucked that up. Sure the dude who beat her (and yes this is really him, and sorry to my straight male readers) had a secret weapon in his lovely daughter Ayla, for whom Money McBags would cure cancer (though not one of those hard cancers like nut cancer, something much easier, like cancer of the mouth, also known as Kathy Griffin), but Coakley's loss is so colossal it should be part of the lexicon. So here we go, BAC did not lose $.60 per share this Q, they Coakleyed $.60 per share. Diatribe over).
Most interesting was the verbiage from BAC's CEO who said "economic conditions remain fragile and we expect high unemployment levels to continue, creating an ongoing drag on consumer spending and growth.” Which seemed at odds with WFC's CEO's statement that: “While losses remained elevated during the quarter as expected, a more favorable economic outlook and improved credit statistics in several portfolios further increase our confidence that our credit cycle is turning, provided economic conditions do not deteriorate.” Of course, WFC managed to turn an $.08 profit compared with a ginormous loss last year, so things are looking a bit rosier for them, except if you look at their charge-off numbers which were up sequentially $300MM to$5.4B driven by commercial and consumer real estate.
So are all banks created equal or will performance differences really start to show now that the economy has sort of recovered? More importantly, has the economy actually recovered? Here are four interesting stats from this NYTimes article (as always, buyer beware with facts and the NYTimes):
1. Bank of America said the percentage of credit card loans it thinks will never be paid hit 13.53 percent in December. JPMorgan Chase expects to charge off 10.5 percent of its credit card portfolios in the first half of 2010.
2. Fourth quarter of 2009, the number of domestic credit card accounts has declined by 20 percent from its peak in the second quarter of 2008, to 341 million from 426 million
3. the amount of available credit on cards has declined by 21 percent since its peak, from $3.51 trillion in the third quarter of 2008 to $2.77 trillion in the fourth quarter of 2009, the data shows
4. Hayley Atwell is still really hot, and Money McBags will drive this bandwagon into the ground until playboy drops by the Atwell residence.
So available credit is shrinking for the US consumer. What would be interesting to know is how utilization rates have changed and whether anything can be gleaned from this other than people got rid of their 3rd and 4th credit cards which they rarely used anyway and unemployment is still high (no word on how it can afford to keep getting high though).
In small cap news, KITD, a company Money McBags is following closely announced they will be issuing shares in both the US and Prague (where they will soon be listed). They are seemingly raising capital for more acquisitions where they buy companies for their customers, fire all the employees, and enjoy the benefits of leverage. KITD is basically a large database of videos for internet/IP delivery. They get raw video from customers and then help clients manage, view, distribute, manipulate, and store that data. They have a greater than 99% customer renewal rate because once a customer gives them their data, it is a huge pain in the ass for that customer to get all of the data back and have to reformat it, etc. (it is more of a pain in the ass than Valentine's day). KITD's market is growing 100% a year as IP takes off, they have little competition, they also have a ton of NOLs, and 93% of their business is outside of the US. IP video is cheaper and better than digital and it represents only 23% of the global video market so there is a lot of room to grow. That said, the company is a bit odd as it has had headquarters in Dubai and now Prague and they are still unprofitable from an operating eps standpoint. Also, the CEO loves himself almost as much as he loves money and looking silly at the movies and the company basically just relaunched less than a year ago when this new CEO came in and developed a new strategy. Now the good news is that the CEO is the biggest owner and has a substantial portion of his net worth in the company, the bad news is that the CEO has led failed companies before. But he has had success recently and at least we are betting with him. Also, despite little US exposure, they did win the business of Verizon Fios which is the only IPTV telco user in the US. The company has little sell side coverage but recently announced fiscal 2010 guidance for revenue to increase at least 60% to more than $75 million, with an annual operating EBITDA margin exceeding 17.5%. Ok, so EBITDA will be somewhere around $13MM and their market cap $120MM is with $13MM of net cash as of their last 10Q, so they are trading at around 8x EV/EBITDA before their just announced capital raise and at around 1.5x revenues when companies like this who use the software as a service model tend to trade at between 2x and 6x revenues. These are relatively cheap multiples for a growing company with a high recurring revenue base which contains many blue chip customers. Money McBags does not yet own KITD because he is still trying to fully understand the company's competitive advantage, but he is thinking about buying a starter position and will throw down the gauntlet to his loyal readers to do some of their own research here and see if they come up with anything else important.
Oh yeah, a Money McBags longtime reader e-mailed him about a Korean-American bank HAFC which is apparently now trading at around .5x of TBV (even with today's big run-up) and promises to love you long time. Money McBags knows nothing about HAFC and how real their TBV really is but if it is even 80% correct then there is room to grow here. So you should all do some due diligence.
Wednesday, January 13, 2010
1/13/10 Midday Report: Google threatens to pull out of China, claims "not properly protected," but does offer to finish on China's back
With macro news today apparently scarcer than free speech in Chinese search engines or free standing buildings in Haiti (too soon?), the big news moving the market is Google's threat to leave China after China left the toilet seat up one too many times and refused to take out the trash. Google's panties are currently in a bunch (and honestly, this is why Money McBags suggests young ladies wear thongs) over sophisticated cyber attacks on the company and human rights advocates originating from somewhere in China (and investigators may want to start by looking in the offices of a certain chinese internet company that rhymes with Shmaidu). Google issued a statement claiming they now know "it is China pretending to be the Nigerian Prince, and we will not fall for that again. Though we would like our $1k back." GOOG's threat to leave China (where they have 33% market share) has shares of BIDU soaring like the price of tequila on Cinco de Mayo. BIDU is the #1 internet search provider in China with about 2/3 of the market so GOOG's potential exit should turn them into a monopoly, or as the Chinese call it, government. Estimates are that GOOG may lose $600MM in annual revenue by leaving China, which isn't much considering they had $22B in revenue last year, but as China is a potential larger area of growth than the front of Lexington Steele's pants, a departure could have longer term implications. The guess here is that a sell-off in GOOG will create a good buying opportunity for long term investors as GOOG and China will find a way to get back together and once again enjoy candlelight dinners over hot bowls of the famous Chinese delicacy, Cream of Sum Yung Gai.
In other market news, bank CEOs are sitting in front of congress and letting congress have their way with them like starry eyed young ladies in a Bangbus video. No word on whether when the questioning is over, banking CEOs will be allowed to switch seats with the congressmen and ask them the same pointed questions about their pitiful job performance. The highlight of the day has been Morgan Stanley CEO John Mack claiming "Many firms were too highly leveraged," which is a bit like OJ saying the knife was too sharp or Ken Lay claiming some accounting rules were too vague. There has also been a bit of disagreement with Goldman Sachs CEO Lloyd "Big Tank" Blankfein claiming mark to market accounting helped them avoid some of the pitfalls while new BAC CEO Brian Moynihan correctly pointed out that mark to market accounting exacerbated the downfall. Marking illiquid securities to a crumbling market where clearing prices were non-existent or less steeped in reality than Bernie Madoff's profits, and then requiring reserves to be raised to fill in these fictitious book value declines is the most underreported non-sensical catch-22 of the entire market collapse. It made less sense than a Thomas Pynchon novel or raisinets (seriously, chocolate covered raisins? Why not just piss on the chocolate too?).
In stock news, Kraft raised their outlook and simply claimed "umm guys, haven't you seen all of the fucking fat people in this country? You know we make Oreos, right?" while financials have bounced around today with analysts on the street now saying investment banking profits may not be so outsized this quarter as fixed income revenues fell with decreased volatility. This has caused Goldman to dial up the White House on their special diamond encrusted phone and tell them to "freak everyone out again, daddy needs the new Apple Tablet when it comes out."
Finally, Money McBags wrote about EBIX in this space just a few short days ago. In his write-up, he mentioned his concerns about the company: "the CEO's ego is bigger than Alexis Texas's voluptuous backside (and that is if she had elephantitus of the anus) and there is always something Enron/Satyam-ish to be concerned about when investing in a complex/hard to define business that shuns the street, relies on acquisitions, and has a cult following centered around their egotistical CEO" and yet said he was willing to overlook those issues as the company remained cheap. Well my friends, Money McBags has lost his appetite for EBIX. After reading CFRA's scathing short report citing EBIX's changing of auditors, accounting irregularities, and potentially misleading topline growth, Money McBags just doesn't want to be involved and is trading out of his position. While CFRA could be wrong, Money McBags has no edge on this company and does not want to get into a "he said-she said" with a company in which he already expressed some real concerns. One could stay long EBIX and hedge it with long-dated out of the money puts, but one could also walk around town with no pants screaming "free lunch," so one could do many different things. If the company is operating as they say they are, EBIX is a phenomenal buy, but Money McBags prefers to invest in companies in which he can be more confident (and yes, Money McBags owns RICK which is always one champagne room hummer away from massive litigation, so he realizes the potential folly of his previous statement). So do your own research, but be aware that Money McBags is no longer involved in EBIX. It could be a great buy here as short stories can create unheard of buying opportunities, like a 2007 Ashley Dupre, but you need to have more confidence than Money McBags currently does.
In other market news, bank CEOs are sitting in front of congress and letting congress have their way with them like starry eyed young ladies in a Bangbus video. No word on whether when the questioning is over, banking CEOs will be allowed to switch seats with the congressmen and ask them the same pointed questions about their pitiful job performance. The highlight of the day has been Morgan Stanley CEO John Mack claiming "Many firms were too highly leveraged," which is a bit like OJ saying the knife was too sharp or Ken Lay claiming some accounting rules were too vague. There has also been a bit of disagreement with Goldman Sachs CEO Lloyd "Big Tank" Blankfein claiming mark to market accounting helped them avoid some of the pitfalls while new BAC CEO Brian Moynihan correctly pointed out that mark to market accounting exacerbated the downfall. Marking illiquid securities to a crumbling market where clearing prices were non-existent or less steeped in reality than Bernie Madoff's profits, and then requiring reserves to be raised to fill in these fictitious book value declines is the most underreported non-sensical catch-22 of the entire market collapse. It made less sense than a Thomas Pynchon novel or raisinets (seriously, chocolate covered raisins? Why not just piss on the chocolate too?).
In stock news, Kraft raised their outlook and simply claimed "umm guys, haven't you seen all of the fucking fat people in this country? You know we make Oreos, right?" while financials have bounced around today with analysts on the street now saying investment banking profits may not be so outsized this quarter as fixed income revenues fell with decreased volatility. This has caused Goldman to dial up the White House on their special diamond encrusted phone and tell them to "freak everyone out again, daddy needs the new Apple Tablet when it comes out."
Finally, Money McBags wrote about EBIX in this space just a few short days ago. In his write-up, he mentioned his concerns about the company: "the CEO's ego is bigger than Alexis Texas's voluptuous backside (and that is if she had elephantitus of the anus) and there is always something Enron/Satyam-ish to be concerned about when investing in a complex/hard to define business that shuns the street, relies on acquisitions, and has a cult following centered around their egotistical CEO" and yet said he was willing to overlook those issues as the company remained cheap. Well my friends, Money McBags has lost his appetite for EBIX. After reading CFRA's scathing short report citing EBIX's changing of auditors, accounting irregularities, and potentially misleading topline growth, Money McBags just doesn't want to be involved and is trading out of his position. While CFRA could be wrong, Money McBags has no edge on this company and does not want to get into a "he said-she said" with a company in which he already expressed some real concerns. One could stay long EBIX and hedge it with long-dated out of the money puts, but one could also walk around town with no pants screaming "free lunch," so one could do many different things. If the company is operating as they say they are, EBIX is a phenomenal buy, but Money McBags prefers to invest in companies in which he can be more confident (and yes, Money McBags owns RICK which is always one champagne room hummer away from massive litigation, so he realizes the potential folly of his previous statement). So do your own research, but be aware that Money McBags is no longer involved in EBIX. It could be a great buy here as short stories can create unheard of buying opportunities, like a 2007 Ashley Dupre, but you need to have more confidence than Money McBags currently does.
Tuesday, January 12, 2010
1/12/10 Midday Report: China trying to cool economy, hires Justin Timberlake to dole out stimulus funds
The big macro news today is that China raised the reserve ratio that banks need to hold aside as deposits, signalling that China's central bank is starting to become acutely aware of inflation concerns (whereas the world is starting to become acutely aware of Christina Hendricks' "concerns"). Given that China is going to spend roughly 4 trillion yuan in stimulus through 2010, inflationary worries are less surprising than learning that Mark McGwire used steroids, Bea Arthur was really a man, or Napoleon was a bit touchy about his height.
In US market news, the US trade deficit widened more than expected (though not as much as Nicole Eggert's waistline) as imports outpaced exports thanks largely to consumer goods, capital goods, and Malawain babies. The good news is that this should start to reverse itself as the dollar continues to plummet like Lindsay Lohan's acting career, the bad news of course is that the dollar continues to plummet. Also, the government is said to be getting all loan sharky on banks and demanding their TARP money back or they will start breaking deposit caps. The rumor is that the government will somehow put an unenforcable tax on the banks to recoup the money they lent to them as part of the bail out. It only took a year for the government to realize that lending money to failing banks may result in losses, so we'll call that progress.
Earnings season got underway today and has largely been a disappointment, like your first kiss or any Wes Anderson movie of the past ten years (And don't give me that Fantastic Mr. Fox crap, if I want to see an animated fox I'll break out an old VHS tape and watch Jessica Rabbit). Alcoa kicked off earnings season by missing estimates as analysts were expecting AA to exhibit more leverage on the cost side while Electronic Arts lowered estimates as sales of their newest titles RockBand: Milli Vanilli, The Sims: Guantanamo Bay, and Paris Hilton's Great Herpes Adventure were all below expectations.
In small cap news CRUS pre-announced a ginormous quarter last night, easily beating analyst estimates as revenue is expected to soar 49% year over year with gross margin rising 200ish basis points to 54%. New guidance for the March quarter is for a 58% revenue improvement. CRUS makes ICs for the portable audio and the energy exploration markets. A few quarters ago they won business to be one of the audio chips for the iPhone and being a chip supplier to the iPhone is like being the stylus provider to Palm Pilots in 1998, in other words, the technology g-spot. Their revenue had been in decline as their energy exploration business sank like John Edwards' political career (except without getting anyone pregnant) but their audio business was up 67% in the September Q. The pre-announcement last night said growth was mainly from new products but said they are seeing "increased demand from our customers for a broad mix of both our audio and energy products." The key here is that if the energy business can rebound to say a $80MM a year revenue run rate (they had quarters in excess of $20MM in this business previously and were at $14MM last Q which was up sequentially), and the audio business can continue to grow, CRUS could exceed their current forecast. Even taking their current forecast as inline, analysts have raised their estimates to around $.60 eps for fiscal 2011 and around $.40 eps for fiscal 2010. While Money McBags does not know how much of an energy rebound those numbers include, he is guessing they undervalue the potential for growth in CRUS's smart grid products. Either way, just say analysts are right and the company earns $.60 in fiscal 2011, CRUS is now trading at 13x that not including the $124MM of cash on the balance sheet. Yes, the easy money has been made and the jump today could be on short covering (though I have no idea why anyone would have been short a stock this cheap, but then again I have no idea why anyone thinks Jay Leno is funny, so what do I know?), so Money McBags would hold off on buying today, but there is still probably $2-$4 of upside (15x FY 2011 $.60 estimates + $2ish in cash per share) and that is if the energy market does not have a big comeback. It is worth tuning into their 1/28/10 call to see what they have to say, so put this on your watch list and be ready to buy the dip.
In US market news, the US trade deficit widened more than expected (though not as much as Nicole Eggert's waistline) as imports outpaced exports thanks largely to consumer goods, capital goods, and Malawain babies. The good news is that this should start to reverse itself as the dollar continues to plummet like Lindsay Lohan's acting career, the bad news of course is that the dollar continues to plummet. Also, the government is said to be getting all loan sharky on banks and demanding their TARP money back or they will start breaking deposit caps. The rumor is that the government will somehow put an unenforcable tax on the banks to recoup the money they lent to them as part of the bail out. It only took a year for the government to realize that lending money to failing banks may result in losses, so we'll call that progress.
Earnings season got underway today and has largely been a disappointment, like your first kiss or any Wes Anderson movie of the past ten years (And don't give me that Fantastic Mr. Fox crap, if I want to see an animated fox I'll break out an old VHS tape and watch Jessica Rabbit). Alcoa kicked off earnings season by missing estimates as analysts were expecting AA to exhibit more leverage on the cost side while Electronic Arts lowered estimates as sales of their newest titles RockBand: Milli Vanilli, The Sims: Guantanamo Bay, and Paris Hilton's Great Herpes Adventure were all below expectations.
In small cap news CRUS pre-announced a ginormous quarter last night, easily beating analyst estimates as revenue is expected to soar 49% year over year with gross margin rising 200ish basis points to 54%. New guidance for the March quarter is for a 58% revenue improvement. CRUS makes ICs for the portable audio and the energy exploration markets. A few quarters ago they won business to be one of the audio chips for the iPhone and being a chip supplier to the iPhone is like being the stylus provider to Palm Pilots in 1998, in other words, the technology g-spot. Their revenue had been in decline as their energy exploration business sank like John Edwards' political career (except without getting anyone pregnant) but their audio business was up 67% in the September Q. The pre-announcement last night said growth was mainly from new products but said they are seeing "increased demand from our customers for a broad mix of both our audio and energy products." The key here is that if the energy business can rebound to say a $80MM a year revenue run rate (they had quarters in excess of $20MM in this business previously and were at $14MM last Q which was up sequentially), and the audio business can continue to grow, CRUS could exceed their current forecast. Even taking their current forecast as inline, analysts have raised their estimates to around $.60 eps for fiscal 2011 and around $.40 eps for fiscal 2010. While Money McBags does not know how much of an energy rebound those numbers include, he is guessing they undervalue the potential for growth in CRUS's smart grid products. Either way, just say analysts are right and the company earns $.60 in fiscal 2011, CRUS is now trading at 13x that not including the $124MM of cash on the balance sheet. Yes, the easy money has been made and the jump today could be on short covering (though I have no idea why anyone would have been short a stock this cheap, but then again I have no idea why anyone thinks Jay Leno is funny, so what do I know?), so Money McBags would hold off on buying today, but there is still probably $2-$4 of upside (15x FY 2011 $.60 estimates + $2ish in cash per share) and that is if the energy market does not have a big comeback. It is worth tuning into their 1/28/10 call to see what they have to say, so put this on your watch list and be ready to buy the dip.
Thursday, January 7, 2010
1/7/10 Midday Report: Low end retailers post good sales numbers as formerly rich learn to slum it
Before we get to the better than expected December sales numbers for most retailers, we need to address the macroeconomy (So hello macroeconomy, would you like some viagra for your slow growth?). Today's initial claims for unemployment came out and were slightly better than expectations (and all sources tend to agree about this, unlike yesterday's free for all where there was less agreement by news sources about expectations than there is typically agreement by Bjork's stylists). There were 434k newly filed claims, up only 1k from last week, so that is a slightly positive sign (though not as positive as this sign). However, analysts/economists/reporters/Bea Arthur are overlooking the fact that those who are unemployed are remaining unemployed for longer as claims for extended unemployment benefits climbed by 165k to 5.44MM (and I can understand how Bea Arthur overlooked this fact since she is not an economist, and dead, but the the others overlooking this puzzles me a bit). Anyway, the data has continued to show that those with jobs should become less worried and those without jobs should become more screwed as the chasm between the haves and have nots gets wider than Jessica Simpson's cleavage.
In other macro new today, China is raising a key interest rates as they move closer to admitting that inflation may be a problem (which is a bit like the first mate of the Titanic telling Edward Smith that the upcoming icebergs may case some slight turbulence). The dollar is bouncing up a bit on this news as gold and commodities tick down.
In stock news today, retail sales came out for the most part stronger than expectations and retailers, led by Sears, Macy's, The Limited Brands, and BJ's Wholesale Club, upped their earnings estimates. BJ's said they would have had double the 2.7% growth if not for the snowstorms in the Northeast and the computer viruses people got when inadvertently going to BJ.com (instead of the actual company website BJS.com) and learning it wasn't really the place to buy footlong packs of Tums (though it was the place to see many other things that were a foot long). Sears is having a huge day as KMart showed a 5.3% increase in sales thanks to toys and home goods and they raised Q4 estimaes to $3.36, much higher than analyst estimates of $2.75. Eddie Lampert hopes this can stave off the 2 year Blue Light Special on his SHLD shares.
It wasn't all champagne and hummers for the retail sector though as specialty retailer HOTT showed a 10% drop in same store sales as their market strategy may be reaching it's twilight (for those of you who don't follow HOTT, the last line is punny because they rely on sales of crappy t-shirts from that movie Twilight to drive business. Hit me up in the comments section if anything else needs explaining).
And in small cap news, CRTX came out today with revenue estimates for 2010 of $115MM, almost exactly what Money McBags said a few short days ago. In fact, Money said "this company could easily do $115MM of revenue in 2010 (maybe $130MM at the top end)." This new guidance looks like that $115MM may not be so easy as sales of their legacy generic drugs are likely falling faster than expectations, but the analyst on the street had $148MM in revene for 2010, so just remember who loves you (and I would toot my own here, but that job is being reserved for the lovely Olivia Munn). Either way, Money McBags' intial analysis holds. The stock is ridiculously cheap for a drug company, but you have to be a bit wary that they can grow given the decline of their legacy drugs and the yet to be proven future of the drugs they purchased. The stock could easily double from here since it is trading at less than 1.5x sales, but we're going to sit this one out until we get some more data.
In other macro new today, China is raising a key interest rates as they move closer to admitting that inflation may be a problem (which is a bit like the first mate of the Titanic telling Edward Smith that the upcoming icebergs may case some slight turbulence). The dollar is bouncing up a bit on this news as gold and commodities tick down.
In stock news today, retail sales came out for the most part stronger than expectations and retailers, led by Sears, Macy's, The Limited Brands, and BJ's Wholesale Club, upped their earnings estimates. BJ's said they would have had double the 2.7% growth if not for the snowstorms in the Northeast and the computer viruses people got when inadvertently going to BJ.com (instead of the actual company website BJS.com) and learning it wasn't really the place to buy footlong packs of Tums (though it was the place to see many other things that were a foot long). Sears is having a huge day as KMart showed a 5.3% increase in sales thanks to toys and home goods and they raised Q4 estimaes to $3.36, much higher than analyst estimates of $2.75. Eddie Lampert hopes this can stave off the 2 year Blue Light Special on his SHLD shares.
It wasn't all champagne and hummers for the retail sector though as specialty retailer HOTT showed a 10% drop in same store sales as their market strategy may be reaching it's twilight (for those of you who don't follow HOTT, the last line is punny because they rely on sales of crappy t-shirts from that movie Twilight to drive business. Hit me up in the comments section if anything else needs explaining).
And in small cap news, CRTX came out today with revenue estimates for 2010 of $115MM, almost exactly what Money McBags said a few short days ago. In fact, Money said "this company could easily do $115MM of revenue in 2010 (maybe $130MM at the top end)." This new guidance looks like that $115MM may not be so easy as sales of their legacy generic drugs are likely falling faster than expectations, but the analyst on the street had $148MM in revene for 2010, so just remember who loves you (and I would toot my own here, but that job is being reserved for the lovely Olivia Munn). Either way, Money McBags' intial analysis holds. The stock is ridiculously cheap for a drug company, but you have to be a bit wary that they can grow given the decline of their legacy drugs and the yet to be proven future of the drugs they purchased. The stock could easily double from here since it is trading at less than 1.5x sales, but we're going to sit this one out until we get some more data.
Friday, November 20, 2009
What the fuck this blog is
Money McBags is starting this blog because there are too few dick jokes out there having to do with finance. There are not enough jokes about Ito and his Lemma (or Judge Ito and his dilemma which was that he had to let OJ go even though he was guilty), not enough jokes about Asset Backed Securities (and Money loves him some back assets), and clearly not enough jokes about the merger of Dick's and Chick's from 2007.
It's not clear what this blog will evolve (or devolve) in to, but there will be three constants:
1. Smart analysis and commentary of the markets and/or stock picks.
2. Dick jokes, dick jokes, and more dick jokes.
3. Information that will help make your "portfolio" rise.
Why shoud you listen to Money McBags on this random internet blog? It's very simple.
Money McBags knows the differences between Black-Sholes and Dr. Scholls, heck he even knows the difference between Fisher Black, The Fisher King, and Fisher Price.
Money McBags also knows that John Maynard Keynes was the shiznit and Milton Friedman suffered from profit envy.
Most importantly though, Money McBags knows that there are inefficiencies in the market and he is here to help you exploit them while hopefully making you laugh.
So while this blog is in its nascent stage, stick with it as Money McBags is here to help you understand Wall Street in all it's lunacy.
It's not clear what this blog will evolve (or devolve) in to, but there will be three constants:
1. Smart analysis and commentary of the markets and/or stock picks.
2. Dick jokes, dick jokes, and more dick jokes.
3. Information that will help make your "portfolio" rise.
Why shoud you listen to Money McBags on this random internet blog? It's very simple.
Money McBags knows the differences between Black-Sholes and Dr. Scholls, heck he even knows the difference between Fisher Black, The Fisher King, and Fisher Price.
Money McBags also knows that John Maynard Keynes was the shiznit and Milton Friedman suffered from profit envy.
Most importantly though, Money McBags knows that there are inefficiencies in the market and he is here to help you exploit them while hopefully making you laugh.
So while this blog is in its nascent stage, stick with it as Money McBags is here to help you understand Wall Street in all it's lunacy.
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