The market was down in the morning with conflicting economic data having been released. Retail sales increased in February by .3% which easily beat estimates of a .2% decline (though the difference is so insignificant it could be contributed to a rounding error or some d-bag buying that one extra pair of Joes Jeans). Excluding auto sales, retail sales were up .8% which should give investors confidence that people will still buy shit even though they can't get jobs (and snowstorms in the Northeast didn't stop people from continuing to run down their savings either). Alternatively, making matters worse was the University of Michigan's consumer sentiment index coming in below expectations. The index came in at 72.5 (not 72.4 or 72.6 for those of you scoring at home) and was below last month's 73.6 and expectations of 74. Look, Money McBags continues to be befuddled by what any of those numbers mean. How much worse is 72.5 than 74? Really? If the number had been up just an additional 1.5 points then the market would have been fine. The consumer sentiment number seems more fictitious than Larry Craig's wife and more preposterous than someone with a constipation fetish (and I'm pretty sure that guy is not a mathematician even though he apparently likes to work things out with a pencil). So retail sales were good, but consumers apparently feel bad about spending on shit they can't afford. Welcome to America, no go buy a flat screen (that you can't afford).
In other news, apparently Janet Yellen, the current president of the Federal Reserve Bank of San Francisco (where everyday is funday) is set to take over for Donald Kohn as Ben Bernanke's #2 in charge after a strong showing in the swim suit competition. It was neck and neck between Yellen and Federal Reserve Bank of Boston president Eric Rosengren until Rosengren went for the hail mary by breaking out a thong and prancing down the runway to the Go-Gos "We've Got the Beat." In the end (both literally and figuratively), the thong worked against him. Yellen is said to be in favor of low rates, economic stimulus, and long walks on the beach. In her free time she studies the labor markets, authors economic texts, and makes a mean peach cobbler. She is also married to a Nobel Prize winning economist who won the award for his work on assymetric information, though he clearly understood the work better than the Nobel judges (and for you non-economics geeks out there, trust me, that was hella funny). So welcome to the job Janet, working directly under Benny B should be quite an experience, just ask Mrs. Bernanke (Oh! drumshot please).
In stock news Schwab warned that Q1 will fall short of Q4 as trading volume in February was down 14% and the company now expects to earn around $.10 per share which is below estimates of $.15. Most troubling is that trading volume was down despite February being the first month of lowered prices for small investors. This either says that trading is inelastic (which it is) and thus they should raise their prices (oligarchy be damned) or they should just keep prices where they are and start a monthly contest to stimulate trading. Money McBags would propose a contest where each time a trade is made, that person should get an entry in to an end of month drawing with the prize being a momentum day trading session with CNBC's Amanda Drury where she'll interpret your bollinger bands and show you how your wiener process can cause her some brownian motion (and yes Money McBags used that joke the other day, but it needed to be said twice). Look Money McBags knows Schwab has to lower prices in order to be competitive with other online brokers to bring customers in, not to actually stimulate trading, but still, the whole industry needs to either just make trading free, or stop lowering prices in their poorly played game of chicken. Online brokers are so bad at game theory they must think the Prisoner's Dilemma is whether the prisoner should pick up the soap or not once he has dropped it in the shower. In other news, POT raised their Q1 earnings guidance from $.70-$1.00 per share to $1.30-$1.50, well ahead of analysts $.94 estimates. The increased guidance was caused by a rebound in potash demand and higher-than-expected margins in nitrogen and phosphate, or to put it more simply, more people were buying the shit out of POT's nutrients at much higher prices. Money McBags has owned POT for quite some time as a way to diversify his portfolio (he found that simply reading The Biography of Frederick Douglass to his portfolio was not an effect diversyfing tool, though it did increase his portfolio's empathy) so he'll take the increased guidance.
In small cap news WILC finally placed their 3MM shares to raise $20MM of cash to go with the $26MM of cash they already have while diluting shareholders by 15% (or about what the stock is down today). The offering price was $6.05 so Money McBags is a fucking idiot for not selling yesterday when he told all of you readers he was a "Vern Troyer taint hair" away from selling. This company is Biz-fucking-zarre. We might as well hold on now until the phone call so Zwi can share his wisdom with us as to why a $70MM market cap company needs almost $50MM in cash and perhaps he'll also let us know why he includes discontinued operations in his quarterly earnings summaries. Money McBags is less happy about this share offering price than when he found out that that no talent assclown Mario Lopez was boning this chick (and Money McBags would love to be saved by her bells). IMAX is also trading down today after their big Q yesterday which may have triggered a momentary short squeeze while also likely triggering a few cases of epilepsy in those who actually sat through Avatar in 3D.
Money McBags is short on time today and will likely be short on time next week but will still try to pump out a daily market update. Stock analysis may just be lagging. Either way, join Money McBags on twitter and enjoy the weekend.
Friday, March 12, 2010
Thursday, March 11, 2010
3/11/10 Midday Report: Yield curve spread continues to fatten, claims it wants to star in Precious sequel
The market is holding steady today as foreclosures in the US rose at their slowest pace in four years. While slowing rates of foreclosures are sort of pyrrhic news similar to declining new cases of AIDS or slumping sales of country music cds, a slower rate means a slower rising homeless population and that can't be bad (unless you're scabies). Though foreclosures were up 6% from last year, they were down 2% from January, and were aided by government legislation and loan modification programs such as helping homeowners to lower monthly payments, refi to lower rates, and break in to loan officers' file cabinets to burn original copies of their mortgage documents. California saw default filings down 15% though still remained the state with the most default notices, but interestingly Florida's defaults rose by 16% and Michigan was up a ridonkulous 59% which begs the question "who knew people still lived in Michigan?" Also making the market nervous today is investors increasing their bets on inflation with the yield curve within spitting distance of swallowing up its all time high. The spread between thirty year bonds and two year bonds is now 377 bps as investors are starting to demand more yield for buying long term bonds thanks to the potentially Madoff-ian style recovery the US government is attempting to manufacture by borrowing $7ishT which they will pay back later once they raise some more debt or win the Powerball lottery just a few billion times. Jobless claims were also out today and they fell by 6k to 462k which is also about the number of people who caught ear herpes from inadvertently turning on the radio to a Black Eyed Peas song. Economists were expecting claims to fall by 8k, so the number was slightly disappointing but the difference between dropping by 1.3% instead of the expected 1.7% is less meaningful than William Henry Harrison's presidency or Tom Cruise's marriage. While initial claims were slightly down, 4.56MM people continue to receive unemployment benefits and to put that number in perspective, it's more people than the entire population of Irleand and only slightly less than the number of "working" actresses Ron Jeremy and Peter North combined to bone in the 1980s.
In international news, Greek workers have continued to strike with no flights, trains, or buses operating in Greece yesterday so it's good that tourism only accounts for 15% of their GDP (and yes that was sarcasm). The Greeks contiue to cut their well chiseled greek noses just to spite their faces (and if they go near Maria Menounos's face, they will have to answer to Money McBags). Courts also shut down while hospitals remained with just emergency staff. Wow. So with no transportation, no laws, and little medical attentions, Greece has just become the Detroit of Europe. In other international news the Chinese CPI was up 2.7% which is below the government's 3% target but a bit higher than estimates. Depending on which news source you read, the 2.7% number is either manageable or way too high, so draw your own conclusion (though if Money McBags were to draw a conclusion, it would probably look something like this(maybe NSFW)).
In stock news, financials continue to rally with AIG and C leading the way as Enron executives now lament not receiving a government bailout as they opine: "if only we had more time." Money McBags remains less interested in owning C than he is in getting in to a tickle fight with Eric Massa (and honestly, Money McBags doesn't care if it's your 50th birthday but if you ever try to tickle him and your name isn't Kate Bosworth or you weren't born with a uterus, there will be a fucking problem). In other stock news Navistar continues to plunge after driving itself off of a cliff with an earnings number the other day that was only 1/3 of what analysts were expecting ($.23 per share vs. expectations of $.85). A spokesman for the company said "if you just round up the nearest dollar, we at least met expectations." He then pointed to a spot behind reporters and yelled "Hey look. Kool Aid!" before bolting out of the room.
In small cap news, Money McBags still eagerly waits for a response from WILC COO Zwi Williger to the questions posed yesterday on When Genius Prevailed. Money McBags' finger is now a Vern Troyer taint hair away from hitting the sell button on his computer to ditch his WILC shares. IMAX was out with their 4Q results last night and posted a profit while forecasting a "very strong year" ahead. Avatar helped fuel their profit for the year as people love getting motion sickness while not moving, yet it was not a huge contributor to Q4. The company continues to perform well as box office receipts for the first two months of the year are up 6x to $187MM. Additionally, their JV strategy has increased gross margins from 24% to 51% and they believe that they have a continued strong upcoming movie schedule with Alice in Wonderland, How to Train Your Dragon, and a 3D remake of Ishtar. The company just earned $60MM of EBITDA for the year and $20MM in the quarter with about $30MM of net debt so they are trading at around 13x an $80MM annual EBITDA run rate which isn't crazy expensive for a compay producing these results. Of course one could argue that the current EBITDA run rate is way too low based on recent performance and growth of JVs. Now look, Money McBags has said the stock seems expensive, and it's certainly not cheap, but they just blew away his expectations. They continue to outpace his skepticism so it is definitely worth doing more research on the name. The 3D trend apears to have more staying power than an American Idol winner and the JV strategy is ridiculously profitable. Money McBags only wishes they would show any of Gracie Glam's heartwarming movies in 3D, that is if he could have the theatre to himself.
In international news, Greek workers have continued to strike with no flights, trains, or buses operating in Greece yesterday so it's good that tourism only accounts for 15% of their GDP (and yes that was sarcasm). The Greeks contiue to cut their well chiseled greek noses just to spite their faces (and if they go near Maria Menounos's face, they will have to answer to Money McBags). Courts also shut down while hospitals remained with just emergency staff. Wow. So with no transportation, no laws, and little medical attentions, Greece has just become the Detroit of Europe. In other international news the Chinese CPI was up 2.7% which is below the government's 3% target but a bit higher than estimates. Depending on which news source you read, the 2.7% number is either manageable or way too high, so draw your own conclusion (though if Money McBags were to draw a conclusion, it would probably look something like this(maybe NSFW)).
In stock news, financials continue to rally with AIG and C leading the way as Enron executives now lament not receiving a government bailout as they opine: "if only we had more time." Money McBags remains less interested in owning C than he is in getting in to a tickle fight with Eric Massa (and honestly, Money McBags doesn't care if it's your 50th birthday but if you ever try to tickle him and your name isn't Kate Bosworth or you weren't born with a uterus, there will be a fucking problem). In other stock news Navistar continues to plunge after driving itself off of a cliff with an earnings number the other day that was only 1/3 of what analysts were expecting ($.23 per share vs. expectations of $.85). A spokesman for the company said "if you just round up the nearest dollar, we at least met expectations." He then pointed to a spot behind reporters and yelled "Hey look. Kool Aid!" before bolting out of the room.
In small cap news, Money McBags still eagerly waits for a response from WILC COO Zwi Williger to the questions posed yesterday on When Genius Prevailed. Money McBags' finger is now a Vern Troyer taint hair away from hitting the sell button on his computer to ditch his WILC shares. IMAX was out with their 4Q results last night and posted a profit while forecasting a "very strong year" ahead. Avatar helped fuel their profit for the year as people love getting motion sickness while not moving, yet it was not a huge contributor to Q4. The company continues to perform well as box office receipts for the first two months of the year are up 6x to $187MM. Additionally, their JV strategy has increased gross margins from 24% to 51% and they believe that they have a continued strong upcoming movie schedule with Alice in Wonderland, How to Train Your Dragon, and a 3D remake of Ishtar. The company just earned $60MM of EBITDA for the year and $20MM in the quarter with about $30MM of net debt so they are trading at around 13x an $80MM annual EBITDA run rate which isn't crazy expensive for a compay producing these results. Of course one could argue that the current EBITDA run rate is way too low based on recent performance and growth of JVs. Now look, Money McBags has said the stock seems expensive, and it's certainly not cheap, but they just blew away his expectations. They continue to outpace his skepticism so it is definitely worth doing more research on the name. The 3D trend apears to have more staying power than an American Idol winner and the JV strategy is ridiculously profitable. Money McBags only wishes they would show any of Gracie Glam's heartwarming movies in 3D, that is if he could have the theatre to himself.
Wednesday, March 10, 2010
3/10/10 Midafternoon Report: Is that a bank rally in your pants or are you just happy to see me?
The market is higher today on the strength of a banking sector rally, positive economic news from China, and a likely date tonight with Izabel Goulart (because why else would it be this excited?). The macro news today has been slightly positive with wholesale inventories down only .2% sequentially in January after being down 1% in December. While this is the 13th consecutive month of wholesale inventory declines, the second derivative continues to sink like John Meriwether's hedge fund career and a continued decline in the rate of inventory cuts is certinaly a positive sign. The Commerce Department, led by esteemed Secretary Gary Faye "Reagan" Locke also said that sales were up 1.3% and that dropped the ratio of inventories to sales to a record low of 1.10. This is an interesting metric as company inventories are now leaner than James Polk's credentials in 1844 or Adam Sandler's Oscar trophy shelf. If the economy can somehow forget about the 10% unemployment rate, the mounds of money printed by the US government, and Hillary Swank's Academy Awards dress (and really, where did those come from?), and just start to gradually build back some inventories there could be some real recovery, despite what the great Roubini is out saying today about the increasing odds of a double dip recession (ugh). New unemployment data is also out at the state level with the unemployment rate increasing in 30 states (though more if one includes the states of panic, fear, and pants shitting) and decreasing in 9. One of the states to see declining unemployment was Michigan where the rate dropped from a national high of 14.5% to a still "you're fucked" rate of 14.3%. But those three extra people who got hired to man the Burger King drive-through line in Kalamazoo could be a signal (unfortunately that signal is "we need some fucking jobs").
In international news, Greece's economic crisis is more over than Corey Haim (what, too soon?) according to Romano Prodi who is a former Italian Prime Minister, now teaching at a college in Shanghai. Money McBags has always said if you can't trust an Italian Prime Minister, especially one who has been out of office for years and has had absolutley no real role in anything having to do with the Greek crisis, then you can't trust anyone. Prodi will continue his "speaking out of my ass" tour by taking part in a roundtable on how global warming has finally ended before chairing a conference on the demise of the internet. Also fueling the market today is that China's exports rose 46%. This likely signals increased consumer demand for products that cause nervous system and kidney damage to infants, or as they are more commonly known as: toys. Infant nephrologists across the nation are excited by this uptick in China and are anxiously awaiting orders of their new CT scan machines to be delivered.
In market news, the always delightful Dick "Don't call me Richard" Bove (with the last syllable of Bove pronounced like the last syllable of oy-vey), was on CNBC talking up the financial sector. Mr. Bove (Money McBags refuses to call anyone Dick), said he thinks bank dividends will go back up to their previous levels in the next two years and he gave a vote of confidence to Citi. And let Money McBags tell you, getting a vote of confidence from an analyst who missed the symptoms of the ride down is as valuable as being dong-less in Vietnam (though to be fair, they all missed the ride down except perhaps the lovely Meredith Whitney whom Money McBags has such a crush on that he would body slam Mr. Whitney and put him in the Camel Clutch were he ever to meet him).
In small cap news, WILC had their quarter last week and Money McBags promised he would break it down for all of you this week. Unfortunately, Money McBags needed a fucking talmudic scholar to decipher WILC's press release as it was more confusing than a plague of frogs (no really, you're doling out 10 plagues and frogs is the best you can do for one of them? Really? You ever hear of small pox, syphilis, or grizzly bears?). Money McBags wonders if he should have read the release from right to left to better understand exactly which numbers were real numbers and what went in to them. Unsurprisingly, WILC's conference call contained enough jibberish and was hard enough to hear that it made the press release look like a fucking Dr. Seuss book. Between COO Zwi Williger's accent and the fact that they refused to take questions, WILC's conference call was as helpful as giving a band aid to a hemophiliac or an all expense paid trip to the Mustang Ranch to a eunuch. Seriously guys, you're running a fucking public company, can you at least, you know, present the information in a user friendly manner to your shareholders (and Money McBags is a shareholder). Anyway, on the surface, their Q was pretty good. They grew sales 12% in NIS (New Israel Shekels) and increased their gross margins which they said was the result of continuing to introduce new higher margin products. They said they earned $.20 per share in US which puts them at $.80 for the year. They have $26MM of cash on the balance sheet which is roughly 1/3 of their market cap. That said, their selling expense was up as a % of sales from 11% to 15% which they attribute to promotions, and their G&A was up as a % of sales as a result of management bonuses. On the call they also talked about product launches to a big box US/Canadian retailer but ZWI's accent was thicker than the always lovely Carmella Bing so Money McBags could not make out to whom or to what he was referring. Now look, Money McBags is also a Jew and while his hebrew language skills are more non-existent than Satyrs, weapons of mass destruction in Iraq, or money shots in lesbian porn, he honestly feels he would have got more out of the call had ZWI just spoken in his native language. The most confounding part was that he did not take any questions, citing their pending share offering of $20MM. Come on Zwi let's sit down and talk about this yid to yid. We can kibbitz a bit about the old days and all of the shiksas we'd like to have boned, but just be fucking honest with me so we can avoid any Jew on Jew crime. If you're not going to take questions on the call, then perhaps you'll answer them here for your shareholders. Below are things investors need to know:
1. Why is there no quarterly income statement or cash flow statement? Why only give the annual summary? For fucksake, even in your share registration statement you filed with the SEC the day of the earnings release, you only include Q3 numbers. WTF? Can you give your shareholders a break and just give us the information without making us break out excel and remember how to run a fucking vlookup table?
2. Along those lines, you quote a $.20 eps and a net income of $2.12MM. Yet in the same paragraph you say income before taxes was $1.84MM. Now look, I'm no Harry Markopolos, but how the fuck is your net income higher than income before taxes seeing as how you are a tax payer? Honestly, this is more confusing than a Thomas Pynchon novel or trying to figure out exactly of what Captain Crunch is the captain (and don't say crunch). Money McBags broke out his proverbial magnifying glass and it looks like $.04 of your $.20 eps this Q was from discontinued operations. And that extra $.04 is almost enough to meet the discrepancy. Even if that is not the discrepancy, why the fuck are you quoting earnings of $.20 when only $.16 of it was from continuing operations?? As of 9/30/09 you had earned $.59 per share with $0 from discontinued operations and for the year you earned $.79 with $.04 coming from discontinued operations. So that sounds like a $.16 Q4 to me. So why would you quote the $.20 number? Work with me here.
3. How much of your increased gross margin was due to currency effects? It's great that margins are rising but you have talked about the advantage you get through currency differences between your costs and revenues, so would it kill you to break that out for us? You said some of the margin increase was due to selling higher margin products, but how much? Could you do shareholders a mitzvah here and let us know how the actual business is tracking ex. currency effects?
4. Why did your cash balance go down in the quarter if you were profitable? Since there was no cash flow statement, Money McBags had to copy/paste the last two balance sheets into his outdated excel and use the delicious text-to-columns feature just to figure out what was going on and let me tell you, when Money McBags has to start breaking out old school excel functions, he is less happy than Mark Sanford's wife on a family trip to Argentina. You earned $2.1MM from continued and discontinued operations and yet your cash balance was down by about $2MM. With your PP&E remaining about the same (and in Money McBags younger club days, he would often see people pee-peeing some E) it looks like the cash outflow was from a $4.5MM increase in inventory and $2.5MM increase in trade receivables. Hmmmmmmmm. Care to answer WTF caused this cash decline?
5. As related to what we found in question 4, why did inventories go up by more than 50%? Seriously, can you help me on this one? Is this a normal seasonal inventory tick-up of matzo, gefilte fish, and grape juice for the upcoming Passover seders or is something else going on here? You said you are launching more products so is this the ramp up of that?
6. Why are you raising $20MM? Is this really related to expansion or does this have to do with the declining cash balance in the quarter? You have $26MM of cash on your balance sheet and are a $75MM market cap company, why do you need to dilute share holders by 20%ish to bring in $20MM? You have stated that you are looking to buy a distribution center in the US or form a JV, but do you really need to an additional $20MM for that kind of acquisition?
So ZWI, if you're reading this, and I know you are, can you help a fellow semite out a bit? I mean it's not like I am asking you where the afikoman is (don't tell me, it's in the bookcase?), just help me analyze your actual business. Money McBags wants to be a longterm shareholder but he is thinking about selling despite the ridiculously cheap valuation because he is not clear what the actual earnings power is. You said you will answer questions after the share offering which will likely include or be followed shortly thereafter by some "important announcement" (hopefully that announcement isn't that you have run off with the cash), but can you tickle Money McBags' balls just a bit here and give some real information? And let Money McBags be brutally honest with you, if you ever quote your eps/net income number again and include discontinued operations, Money McBags will go to the Wailing Wall and pray for someone else to take over the company. The whole press release/call/equity raise is just so fucking meshugganah that shareholders need to know you are not boozing on Manischewitz and can actually run a public company.
The dreidle is in your court Zwi. You know where to reach me. MoneyMcbags@gmail.com or www.twitter.com/moneymcbags. I'll be here all day.
In international news, Greece's economic crisis is more over than Corey Haim (what, too soon?) according to Romano Prodi who is a former Italian Prime Minister, now teaching at a college in Shanghai. Money McBags has always said if you can't trust an Italian Prime Minister, especially one who has been out of office for years and has had absolutley no real role in anything having to do with the Greek crisis, then you can't trust anyone. Prodi will continue his "speaking out of my ass" tour by taking part in a roundtable on how global warming has finally ended before chairing a conference on the demise of the internet. Also fueling the market today is that China's exports rose 46%. This likely signals increased consumer demand for products that cause nervous system and kidney damage to infants, or as they are more commonly known as: toys. Infant nephrologists across the nation are excited by this uptick in China and are anxiously awaiting orders of their new CT scan machines to be delivered.
In market news, the always delightful Dick "Don't call me Richard" Bove (with the last syllable of Bove pronounced like the last syllable of oy-vey), was on CNBC talking up the financial sector. Mr. Bove (Money McBags refuses to call anyone Dick), said he thinks bank dividends will go back up to their previous levels in the next two years and he gave a vote of confidence to Citi. And let Money McBags tell you, getting a vote of confidence from an analyst who missed the symptoms of the ride down is as valuable as being dong-less in Vietnam (though to be fair, they all missed the ride down except perhaps the lovely Meredith Whitney whom Money McBags has such a crush on that he would body slam Mr. Whitney and put him in the Camel Clutch were he ever to meet him).
In small cap news, WILC had their quarter last week and Money McBags promised he would break it down for all of you this week. Unfortunately, Money McBags needed a fucking talmudic scholar to decipher WILC's press release as it was more confusing than a plague of frogs (no really, you're doling out 10 plagues and frogs is the best you can do for one of them? Really? You ever hear of small pox, syphilis, or grizzly bears?). Money McBags wonders if he should have read the release from right to left to better understand exactly which numbers were real numbers and what went in to them. Unsurprisingly, WILC's conference call contained enough jibberish and was hard enough to hear that it made the press release look like a fucking Dr. Seuss book. Between COO Zwi Williger's accent and the fact that they refused to take questions, WILC's conference call was as helpful as giving a band aid to a hemophiliac or an all expense paid trip to the Mustang Ranch to a eunuch. Seriously guys, you're running a fucking public company, can you at least, you know, present the information in a user friendly manner to your shareholders (and Money McBags is a shareholder). Anyway, on the surface, their Q was pretty good. They grew sales 12% in NIS (New Israel Shekels) and increased their gross margins which they said was the result of continuing to introduce new higher margin products. They said they earned $.20 per share in US which puts them at $.80 for the year. They have $26MM of cash on the balance sheet which is roughly 1/3 of their market cap. That said, their selling expense was up as a % of sales from 11% to 15% which they attribute to promotions, and their G&A was up as a % of sales as a result of management bonuses. On the call they also talked about product launches to a big box US/Canadian retailer but ZWI's accent was thicker than the always lovely Carmella Bing so Money McBags could not make out to whom or to what he was referring. Now look, Money McBags is also a Jew and while his hebrew language skills are more non-existent than Satyrs, weapons of mass destruction in Iraq, or money shots in lesbian porn, he honestly feels he would have got more out of the call had ZWI just spoken in his native language. The most confounding part was that he did not take any questions, citing their pending share offering of $20MM. Come on Zwi let's sit down and talk about this yid to yid. We can kibbitz a bit about the old days and all of the shiksas we'd like to have boned, but just be fucking honest with me so we can avoid any Jew on Jew crime. If you're not going to take questions on the call, then perhaps you'll answer them here for your shareholders. Below are things investors need to know:
1. Why is there no quarterly income statement or cash flow statement? Why only give the annual summary? For fucksake, even in your share registration statement you filed with the SEC the day of the earnings release, you only include Q3 numbers. WTF? Can you give your shareholders a break and just give us the information without making us break out excel and remember how to run a fucking vlookup table?
2. Along those lines, you quote a $.20 eps and a net income of $2.12MM. Yet in the same paragraph you say income before taxes was $1.84MM. Now look, I'm no Harry Markopolos, but how the fuck is your net income higher than income before taxes seeing as how you are a tax payer? Honestly, this is more confusing than a Thomas Pynchon novel or trying to figure out exactly of what Captain Crunch is the captain (and don't say crunch). Money McBags broke out his proverbial magnifying glass and it looks like $.04 of your $.20 eps this Q was from discontinued operations. And that extra $.04 is almost enough to meet the discrepancy. Even if that is not the discrepancy, why the fuck are you quoting earnings of $.20 when only $.16 of it was from continuing operations?? As of 9/30/09 you had earned $.59 per share with $0 from discontinued operations and for the year you earned $.79 with $.04 coming from discontinued operations. So that sounds like a $.16 Q4 to me. So why would you quote the $.20 number? Work with me here.
3. How much of your increased gross margin was due to currency effects? It's great that margins are rising but you have talked about the advantage you get through currency differences between your costs and revenues, so would it kill you to break that out for us? You said some of the margin increase was due to selling higher margin products, but how much? Could you do shareholders a mitzvah here and let us know how the actual business is tracking ex. currency effects?
4. Why did your cash balance go down in the quarter if you were profitable? Since there was no cash flow statement, Money McBags had to copy/paste the last two balance sheets into his outdated excel and use the delicious text-to-columns feature just to figure out what was going on and let me tell you, when Money McBags has to start breaking out old school excel functions, he is less happy than Mark Sanford's wife on a family trip to Argentina. You earned $2.1MM from continued and discontinued operations and yet your cash balance was down by about $2MM. With your PP&E remaining about the same (and in Money McBags younger club days, he would often see people pee-peeing some E) it looks like the cash outflow was from a $4.5MM increase in inventory and $2.5MM increase in trade receivables. Hmmmmmmmm. Care to answer WTF caused this cash decline?
5. As related to what we found in question 4, why did inventories go up by more than 50%? Seriously, can you help me on this one? Is this a normal seasonal inventory tick-up of matzo, gefilte fish, and grape juice for the upcoming Passover seders or is something else going on here? You said you are launching more products so is this the ramp up of that?
6. Why are you raising $20MM? Is this really related to expansion or does this have to do with the declining cash balance in the quarter? You have $26MM of cash on your balance sheet and are a $75MM market cap company, why do you need to dilute share holders by 20%ish to bring in $20MM? You have stated that you are looking to buy a distribution center in the US or form a JV, but do you really need to an additional $20MM for that kind of acquisition?
So ZWI, if you're reading this, and I know you are, can you help a fellow semite out a bit? I mean it's not like I am asking you where the afikoman is (don't tell me, it's in the bookcase?), just help me analyze your actual business. Money McBags wants to be a longterm shareholder but he is thinking about selling despite the ridiculously cheap valuation because he is not clear what the actual earnings power is. You said you will answer questions after the share offering which will likely include or be followed shortly thereafter by some "important announcement" (hopefully that announcement isn't that you have run off with the cash), but can you tickle Money McBags' balls just a bit here and give some real information? And let Money McBags be brutally honest with you, if you ever quote your eps/net income number again and include discontinued operations, Money McBags will go to the Wailing Wall and pray for someone else to take over the company. The whole press release/call/equity raise is just so fucking meshugganah that shareholders need to know you are not boozing on Manischewitz and can actually run a public company.
The dreidle is in your court Zwi. You know where to reach me. MoneyMcbags@gmail.com or www.twitter.com/moneymcbags. I'll be here all day.
Tuesday, March 9, 2010
3/9/10 Midafternoon Report: Happy birthday bear market low, now go fuck yourself
Today marks the one year anniversary of the bear market's devilish low of 666. To celebrate the nearly 70% rise since then, unemployed workers throughout the country are taking a day off from job hunting to resole their well worn and tattered shoes while Wall Street bankers are wiping their delicate behinds with their beluga caviar scented toilet paper made from the eyelashes of the Dalai Lama as a symbol of their spoils. That said, macro news is more non-existent today than John Edwards' ethics. The only slight news comes from Federal Reserve Bank of Chicago President Charles Evans saying that weakness in the job market will cause the Fed to keep rates low for some time and they will continue to be more accommodative than Mr. Roarke was to Heather Locklear when she visited Fantasy Island (and one can only imagine the fantasies Tattoo had about her islands). Mr. Evans also said that as a result of the deep recession, policy makers may need to shift their view of full employment to correspond to a 5.25% unemployment rate as opposed to the 4.75% they currently use as a base line. So good on you Charles. Way to lower the bar instead of trying to find proactive solutions. It's like if Perfect 10 magazine(NSFW) all of a sudden started putting 9s in their photo spreads or if Einstein rejiggered his theory of general relativity by adding some fictitious comological constant (umm, ok, maybe scratch that last one). At least we now know why Charles Evans is considered to be one of the Fed's fluff girls as he is a Federal Reserve Bank President and yet not a voting member of the FOMC.
In international news Greek Prime Minister George Papadopolis is supposed to meet with President Obama, though there is no word as to whether Mr. Papadopolis will be bringing Webster along with him. In the meeting, the Greek Prime Minister will walk through his detailed plans of economic recovery with President Obama which will include vilifying hedge funds who bet against Greece and their faltering economy while placing the rest of the blame on a faulty johnson rod Greece had installed last year.
In stock news, Burger King had disappointing same store sales numbers for the first two months of the year posting 8% declines across the US and Canada. They blamed 3% of the decline on bad weather and the other 5% on shitty food. This comes a day after McDonalds posted slightly up US same store sales. Burger King's CFO Ben Wells said "For us weather is a big deal because you don't stroll to a Burger King restaurant, you have to be in an automobile." Now look, Money McBags is no Le Corbusier so he is not an authority on how cities are laid out, but if the weather is bad, wouldn't more people be getting in to their fucking cars and driving places than walking? Yeah, I get that if you're snowed in you're not going anywhere, but that should have hit McDonalds too. Consider Money McBags skeptical of that excuse.
In small cap news MLNK came out with their earnings last night and to call their earnings crappy would be an insult to crap everywhere. Now Money McBags is an owner of MLNK and has been touting them on When Genius Prevailed from time to time, so this just shows that nobody is perfect (except for maybe Jayde Nicole). This was Money McBags' break down of MLNK last Q, the key part being management said this Q (their fiscal Q2) would be flat with fiscal Q1 and the end of the year would see an uptick. So they earned $18MM of EBITDA in fiscal Q1 and taking their guidance that put them at a $72MM run rate or an EV/EBITDA so ridonkuously cheap that even Matthew Lesko couldn't believe it. That said, they fell short of their guidance this Q and earned only $13MM of EBITDA and then took down guidance for next Q (fiscal Q3) saying it will be flat to lower than fiscal Q2, with fiscal Q4 then being up sequentially from fiscal Q3 (though unclear if it will be up from this Q). Oy, fucking vey. So let's use $13MM as the new EBITDA run rate assuming it drops next Q but picks up to this level again in 2Qs, with anything after that being unknown (though it should be up). So a $52MM annual EBITDA run rate with $163MM in cash on the balance sheet and no debt yields an EV/EBITDA of still only 5.5x after today's drop. So it is still cheap and Money McBags has no intention of selling, but the fact that they were down when ther biggest customer HP had revenue up 8% this Q (and HP is 28% of revenue) is a bit head scratching (though if it were Money McBags' head and Destiny Dixon were doing the scratching, everything would be ok). MLNK revenues in the Q were down 9% Y/Y and 4.5% sequentially, but those numbers include $4.8MM of revenue from their acquisition of Tech For Less, so comparable revenues were actually down about 2% more than that (though they said this is usually a sequentially down Q). The good news is that gross margins were up 100bps and they generated about $30MM of FCF and guided to positive FCF for the year. Europe was a main driver of weakness, down 16%, as were getting new engagements which were down 62% from last year's fiscal Q2 which probably isn't a great sign unless you hate making money. They said this was "a direct result of our clients delayed decision-making due to the economic headwinds in the spring and summer of 2009" but then later they say that the six month lead times they get should put them at the front of the cycle. Hmm, Money McBags is now more confused about their business cycle than Larry Craig is about his sexuality (or at least publicly about his sexuality, because he knows in private he loves burgling turds). Luckily, Money McBags is not the only astute one out there as some guy from Harvest Capital Strategies spoke up on the conference call and asked: "you initially had expected Q2 to be flattish with Q1 and then a gradual uptick in Q3 and Q4 to now a down Q2 versus Q1 and the subsequent down Q3 versus Q2 before we see a resumption of sequential growth. Maybe if you can can just provide a little more color around what changed in the last three months?” Management said there were three reasons for the change: 1. Volumes were simply less than they expected in their base business. 2. Start-up activity is taking longer to get up and running so new business that was supposed to be in Q2 will now be in late Q3 and early Q4. 3. A little something called "Shut the fuck up" (ok, maybe they didn't say this one). Anyway, to sum this all up Money McBags can't be right all of the time. With consumer technology spending bottoming out, he though MLNK would see the benefits (as did their management) and they didn't. That said, the company remains cheap (thanks to the 10% drop today) but their growth may now take longer to come back than John Travolta's career after Staying Alive or Tiger Woods' dignity (ok, hopefully not that long). Money McBags is not selling here, but he's not buying either. This company simply should have done better.
Also, WILC is up almost 10% today on big volume after their Q last week. Money McBags will break that Q down in the next couple of days, but he has let you know many times that this company isn't just chopped liver.
In international news Greek Prime Minister George Papadopolis is supposed to meet with President Obama, though there is no word as to whether Mr. Papadopolis will be bringing Webster along with him. In the meeting, the Greek Prime Minister will walk through his detailed plans of economic recovery with President Obama which will include vilifying hedge funds who bet against Greece and their faltering economy while placing the rest of the blame on a faulty johnson rod Greece had installed last year.
In stock news, Burger King had disappointing same store sales numbers for the first two months of the year posting 8% declines across the US and Canada. They blamed 3% of the decline on bad weather and the other 5% on shitty food. This comes a day after McDonalds posted slightly up US same store sales. Burger King's CFO Ben Wells said "For us weather is a big deal because you don't stroll to a Burger King restaurant, you have to be in an automobile." Now look, Money McBags is no Le Corbusier so he is not an authority on how cities are laid out, but if the weather is bad, wouldn't more people be getting in to their fucking cars and driving places than walking? Yeah, I get that if you're snowed in you're not going anywhere, but that should have hit McDonalds too. Consider Money McBags skeptical of that excuse.
In small cap news MLNK came out with their earnings last night and to call their earnings crappy would be an insult to crap everywhere. Now Money McBags is an owner of MLNK and has been touting them on When Genius Prevailed from time to time, so this just shows that nobody is perfect (except for maybe Jayde Nicole). This was Money McBags' break down of MLNK last Q, the key part being management said this Q (their fiscal Q2) would be flat with fiscal Q1 and the end of the year would see an uptick. So they earned $18MM of EBITDA in fiscal Q1 and taking their guidance that put them at a $72MM run rate or an EV/EBITDA so ridonkuously cheap that even Matthew Lesko couldn't believe it. That said, they fell short of their guidance this Q and earned only $13MM of EBITDA and then took down guidance for next Q (fiscal Q3) saying it will be flat to lower than fiscal Q2, with fiscal Q4 then being up sequentially from fiscal Q3 (though unclear if it will be up from this Q). Oy, fucking vey. So let's use $13MM as the new EBITDA run rate assuming it drops next Q but picks up to this level again in 2Qs, with anything after that being unknown (though it should be up). So a $52MM annual EBITDA run rate with $163MM in cash on the balance sheet and no debt yields an EV/EBITDA of still only 5.5x after today's drop. So it is still cheap and Money McBags has no intention of selling, but the fact that they were down when ther biggest customer HP had revenue up 8% this Q (and HP is 28% of revenue) is a bit head scratching (though if it were Money McBags' head and Destiny Dixon were doing the scratching, everything would be ok). MLNK revenues in the Q were down 9% Y/Y and 4.5% sequentially, but those numbers include $4.8MM of revenue from their acquisition of Tech For Less, so comparable revenues were actually down about 2% more than that (though they said this is usually a sequentially down Q). The good news is that gross margins were up 100bps and they generated about $30MM of FCF and guided to positive FCF for the year. Europe was a main driver of weakness, down 16%, as were getting new engagements which were down 62% from last year's fiscal Q2 which probably isn't a great sign unless you hate making money. They said this was "a direct result of our clients delayed decision-making due to the economic headwinds in the spring and summer of 2009" but then later they say that the six month lead times they get should put them at the front of the cycle. Hmm, Money McBags is now more confused about their business cycle than Larry Craig is about his sexuality (or at least publicly about his sexuality, because he knows in private he loves burgling turds). Luckily, Money McBags is not the only astute one out there as some guy from Harvest Capital Strategies spoke up on the conference call and asked: "you initially had expected Q2 to be flattish with Q1 and then a gradual uptick in Q3 and Q4 to now a down Q2 versus Q1 and the subsequent down Q3 versus Q2 before we see a resumption of sequential growth. Maybe if you can can just provide a little more color around what changed in the last three months?” Management said there were three reasons for the change: 1. Volumes were simply less than they expected in their base business. 2. Start-up activity is taking longer to get up and running so new business that was supposed to be in Q2 will now be in late Q3 and early Q4. 3. A little something called "Shut the fuck up" (ok, maybe they didn't say this one). Anyway, to sum this all up Money McBags can't be right all of the time. With consumer technology spending bottoming out, he though MLNK would see the benefits (as did their management) and they didn't. That said, the company remains cheap (thanks to the 10% drop today) but their growth may now take longer to come back than John Travolta's career after Staying Alive or Tiger Woods' dignity (ok, hopefully not that long). Money McBags is not selling here, but he's not buying either. This company simply should have done better.
Also, WILC is up almost 10% today on big volume after their Q last week. Money McBags will break that Q down in the next couple of days, but he has let you know many times that this company isn't just chopped liver.
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).
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).
Friday, March 5, 2010
3/5/10 Midafternoon Report: With Oscars approaching, the market is "Up" as economists "Blind Side"d by fewer job losses while strength of recovery remains "Up in the Air"
The market is running again as a result of the jobs report and inertia. According to the (No)Labor Department, the economy lost 36k jobs in February while the unemployment rate stayed steady (and for those cunning linuists or Nabokov fans, that is back to back anagrams) at 9.7%. This was better than the estimates of 68k job losses but is not a definitive enough number (like 42) to give investors a real read on the direction of the economy. However, beating estimates is all that matters even though we know estimates are inherrently flawed like a supermodel with a hairy ass. Some economists partially blamed snowstorms for the job losses, while others blamed companies for wanting to be profitable. The (No)Labor Department chimed in and said job losses from snowstorms were unquantifiable like the square root of a negative number (imaginary numbers be damned), the number of one night stands by Paris Hilton, or how many licks it takes to get to the center of a tootsie pop.
In international markets, the Greeks are still protesting their loss of free lunches (and if those lunches were chicken gyros with a dollop of tzatzki sauce, who can blame them?) but now they are rioting in the street causing police to employ Greek helmets for protection. German Chancellor Angela Merkel pulled herself away from the daily German scat film break to say she feels Greece has done enough to cut their deficit which has made the market guess as to whether the EU will continue to provide support. This was not helped by Germany's economic minister Rainer Bruederle who tried to "rainer" on Greece's parade (and since it has been sunny in Greece today, it was quite a golden shower) by saying Germany "does not intend to give a cent" to Greece. Of course Money McBags isn't falling for that sleight of language, knowing that Greece wants euros and not cents, so it was only an idle threat by Herr Bruederle. Also, some guy named Jean-Claude Juncker (and one can only hope he isn't a bond sales man because Juncker bonds would be a name almost as unfortunate as if Mary Turdy sold bottled water, hence Turdy Water) who heads a group of euro-area finance ministers is soothing the market by saying “We’re telling financial markets: Look out, we’re not abandoning Greece." Money McBags has been saying all along that Greece isn't going anywhere (well unless the Anatolian plate keeps moving westward) and the EU will be there to bail them out regardless. This Greek default hysteria has been a more overblown news story than Tiger Wood's love of filth or anything having to do with tea baggers that doesn't involve Kim Kardashian.
In stock news, Apple has announced that April 3rd will be the launch of their unfortunately named iPad (no word on when their super powered iPad, to be known as the Max-iPad, will come out to sop up sales) while financials continue to shoot up like Robert Downey Jr. in the 1990s. The market is in full blast off mode as the economy is not getting worse today, just getting sideways.
In small stock news, everything is fucking up so good on you for owning anything that is publicly traded. Money McBags promised to take a look at NTRI the other day after their craptastic guidance and he has finally had a chance to go through their call. The stock is down 50% in the past 3 months after a massive rally on expected sales improvement. Unfortunately, performance has not accelerated as hoped as investors remember that fat people are fucking lazy and thus are not apt to sign up for dieting even if they feel that the economy is getting better (though to be fair, NTRI costs less than actually buying groceries, but the up front costs are prohibitive for some). NTRI's Q was actually not too bad. Without one time charges they earned $.18 on a shrinking sales decline of only 7%. These numbers were better than estimates with the company also earning $14.5MM of EBITDA in the Q and a delicious $69MM of EBITDA for the year. The stock traded down though as their guidance for Q1 was so far below estimates that estimates needed an electron microscope to see it. The company said that ad rates in Q1 have gone up by 50% to 100% in some cases as companies come back into the advertising market and drive up prices for everyone. They guided to $.10 to $.13 for Q1 eps and analysts were estimating $.54 eps. That is a bigger let down than for a gold digger who married into the Madoff family. Not only is that guidance bad, but they said earnings will be negatively impacted by around $.17 in the Q with 60% of it coming from the marketing spend uptick and 40% coming from sunk costs to build out their retail channel. So even if we add back those one time charges, guidance would have been around $.30 or still way fucking below estimates. Revenue guidance is for around $155MM which is only 10% below expectations but the company said their retail sales partnerships other than Costco (Walmart, Walgreens, Old Country Buffet) posted disappointing and immaterial results. While Nutri System D (geared towards diabetics) performed well and they saw new customers sign-ups flat and not down for the first time in over two years, their profitability crumbled like a Taco Bell Chalupa in the hands of one of their target customers. Look, I'm no Norman Einstein but if you want to sell shit to fat people, why not sell some fucking Oreos instead of diets? Really. It's like trying to sell an agoraphobic Super Bowl tickets instead of indoor furniture. Either way, the company is back down to where it was in October before the anticipation of better things to come. That said, if we step back for a second and look at the company, it's actually not a terrible buy right now. Earnings guidance is basically flat with the midpoint being $1.07 for the year, so it is trading at 15x that. NTRI has a 4.5% dividend yield and spits out a ton of cash. The company is trading at an EV/EBITDA of around 6x last year's EBITDA and with guidance for 2010 in the same range, the multiple should be the same. Sure they have not grown in a while (while pseudo competitors like MED are growing like weeds on anabolic steroids), and sure they are facing huge headwinds and uncertainties with more expensive marketing costs and their retail sales programs belly flopping from the high dive, but the time to buy companies with decent track records, good returns, and solid balance sheets, is when every one fucking hates them. NTRI has fixed some of their operations and still has solid brand equity and remains profitable. It may be too early to get in to this, but it is worth keeping on your radar as this country will remain chock full o' fat people and thus there will always be potential customers (though if I were NTRI, I would partner like fuck with insurance providers and businesses as a way to get employees to lose weight and thus get premiums and high risk patients down). Anyway, do your own research here but more than anything, enjoy the weekend.
In international markets, the Greeks are still protesting their loss of free lunches (and if those lunches were chicken gyros with a dollop of tzatzki sauce, who can blame them?) but now they are rioting in the street causing police to employ Greek helmets for protection. German Chancellor Angela Merkel pulled herself away from the daily German scat film break to say she feels Greece has done enough to cut their deficit which has made the market guess as to whether the EU will continue to provide support. This was not helped by Germany's economic minister Rainer Bruederle who tried to "rainer" on Greece's parade (and since it has been sunny in Greece today, it was quite a golden shower) by saying Germany "does not intend to give a cent" to Greece. Of course Money McBags isn't falling for that sleight of language, knowing that Greece wants euros and not cents, so it was only an idle threat by Herr Bruederle. Also, some guy named Jean-Claude Juncker (and one can only hope he isn't a bond sales man because Juncker bonds would be a name almost as unfortunate as if Mary Turdy sold bottled water, hence Turdy Water) who heads a group of euro-area finance ministers is soothing the market by saying “We’re telling financial markets: Look out, we’re not abandoning Greece." Money McBags has been saying all along that Greece isn't going anywhere (well unless the Anatolian plate keeps moving westward) and the EU will be there to bail them out regardless. This Greek default hysteria has been a more overblown news story than Tiger Wood's love of filth or anything having to do with tea baggers that doesn't involve Kim Kardashian.
In stock news, Apple has announced that April 3rd will be the launch of their unfortunately named iPad (no word on when their super powered iPad, to be known as the Max-iPad, will come out to sop up sales) while financials continue to shoot up like Robert Downey Jr. in the 1990s. The market is in full blast off mode as the economy is not getting worse today, just getting sideways.
In small stock news, everything is fucking up so good on you for owning anything that is publicly traded. Money McBags promised to take a look at NTRI the other day after their craptastic guidance and he has finally had a chance to go through their call. The stock is down 50% in the past 3 months after a massive rally on expected sales improvement. Unfortunately, performance has not accelerated as hoped as investors remember that fat people are fucking lazy and thus are not apt to sign up for dieting even if they feel that the economy is getting better (though to be fair, NTRI costs less than actually buying groceries, but the up front costs are prohibitive for some). NTRI's Q was actually not too bad. Without one time charges they earned $.18 on a shrinking sales decline of only 7%. These numbers were better than estimates with the company also earning $14.5MM of EBITDA in the Q and a delicious $69MM of EBITDA for the year. The stock traded down though as their guidance for Q1 was so far below estimates that estimates needed an electron microscope to see it. The company said that ad rates in Q1 have gone up by 50% to 100% in some cases as companies come back into the advertising market and drive up prices for everyone. They guided to $.10 to $.13 for Q1 eps and analysts were estimating $.54 eps. That is a bigger let down than for a gold digger who married into the Madoff family. Not only is that guidance bad, but they said earnings will be negatively impacted by around $.17 in the Q with 60% of it coming from the marketing spend uptick and 40% coming from sunk costs to build out their retail channel. So even if we add back those one time charges, guidance would have been around $.30 or still way fucking below estimates. Revenue guidance is for around $155MM which is only 10% below expectations but the company said their retail sales partnerships other than Costco (Walmart, Walgreens, Old Country Buffet) posted disappointing and immaterial results. While Nutri System D (geared towards diabetics) performed well and they saw new customers sign-ups flat and not down for the first time in over two years, their profitability crumbled like a Taco Bell Chalupa in the hands of one of their target customers. Look, I'm no Norman Einstein but if you want to sell shit to fat people, why not sell some fucking Oreos instead of diets? Really. It's like trying to sell an agoraphobic Super Bowl tickets instead of indoor furniture. Either way, the company is back down to where it was in October before the anticipation of better things to come. That said, if we step back for a second and look at the company, it's actually not a terrible buy right now. Earnings guidance is basically flat with the midpoint being $1.07 for the year, so it is trading at 15x that. NTRI has a 4.5% dividend yield and spits out a ton of cash. The company is trading at an EV/EBITDA of around 6x last year's EBITDA and with guidance for 2010 in the same range, the multiple should be the same. Sure they have not grown in a while (while pseudo competitors like MED are growing like weeds on anabolic steroids), and sure they are facing huge headwinds and uncertainties with more expensive marketing costs and their retail sales programs belly flopping from the high dive, but the time to buy companies with decent track records, good returns, and solid balance sheets, is when every one fucking hates them. NTRI has fixed some of their operations and still has solid brand equity and remains profitable. It may be too early to get in to this, but it is worth keeping on your radar as this country will remain chock full o' fat people and thus there will always be potential customers (though if I were NTRI, I would partner like fuck with insurance providers and businesses as a way to get employees to lose weight and thus get premiums and high risk patients down). Anyway, do your own research here but more than anything, enjoy the weekend.
Thursday, March 4, 2010
3/4/10 Midafternoon Report: Market to Greece: "Your bonds are the one that I want," just hope they don't leave "Tears on My Pillow"
The market is bouncing around today as initial jobless claims were out and they fell by 29k to 469k, almost exactly the 470k number that economists estimated proving the old adage that "even a broken economist is almost right once a decade." While the drop is positive, it didn't drop by as much as claims rose in the past two weeks which we were told was the result of "weather," an "administrative backlog," and "more people getting laid off than expected, stupid." Also, pending sales of existing homes fell by 7.6% in January as an extension of the government tax credit for first time home buyers failed to spur sales (and Money McBags went through this before, but any first time buyer thinking about purchasing a house rushed to buy before the tax credit ran out last year and thus extending the tax credit now is like if California had reinstated same sex marriage a month after repealing it. Anyone who wanted to get gay married had already done so, thus the remaining opportunity set was thinner than an aneroxic with food allergies.). All of the data will continue to be lumpy as unemployment still remains higher than River Phoenix at the Viper Room and more stagnant than the writing here at When Genius Prevailed (but give Money McBags a break, 1k words of dick jokes and market analysis a day is more draining than being slowly exsanguinated by baby leeches and more draining (and infinitely less fun) than a 12 hour hummer, but Money McBags digresses). In other macro news factory orders were up 1.7% last month and were slightly below estimates but still positive and driven once again by aircraft sales as people have to fly around the globe for job interviews.
In international news, Greece offered up 5 billion of euro denominated bonds or as antiquities dealers will call them in a mere 2 years, worthless relics. Greece claimed there was actually demand for another 2B euros worth of the bonds, and seeing as how they need to raise 20B euros, their decision to not offer the extra 2B fits right in with their previous budget management. If I need $20, why would I sell you $5 worth of my shit when I could sell you $7 worth of it, I mean it doesn't take Euclid to fucking figure out the math here (and yes Money McBags understands the interest payments, etc., but we're talking about a country that needs money like Lindsay Lohan needs a case of Valtrex and a hot shower.)? Meanwhile traders are seeking out the next Greece in Europe claiming that it is only logical another country would be close to collapse as for every Bear Stears there is a Lehman Brothers, for every American Home Mortgage there is a New Century Mortgage, and for every Disney World there is a Kingdom of the Little People. Greek workers remain on strike as they are apparently protesting that the government overpaid them for the past several years. Really a brilliant strategy, right up there with fully clothed strip clubs (and yes I am talking about you Manhattan) and the Segway.
In stock news, retail sales climbed in February from Heidi Montag's singing bad to Heidi Montag's acting bad (and that is a slight uptick if it isn't clear). Same store sales were up 4% beating analyst estimates by 1% or so, but that rise was off of a 4.7% drop last year we so shouldn't lose perspective, like an MC Esher painting. Most interestingly e-commerce sales were up 16% which should bode well for companies like ARTG, AMZN, and Vivid Video. Large cap stocks moving up today include Disney, Coke, and Boeing, all receiving analyst upgrades. Disney was upgraded by Bank of America-Merrill Lynch in anticipation of a strong advertising market, a strong film docket, and unemployment coming down thus making it easier for people to throw away money on a crappy amusement parks just so their kids can get an overpriced picture with a minimum wage worker dressed as Cinderella. A UBS analyst upgraded KO based on the sell-off after they purchased their bottler and after reading When Genius Prevailed on 2/25/10 while UBS also upgraded Boeing because apparently airlines want more planes sooner than later.
In small cap news, RICK continues to drop and is making Money McBags feel emptier than he does after making it rain for an hour at his local Rick's Cabaret. Kind readers, you all know Money McBags has been in RICK with you for this stimulating ride, and you all know of his $16 price target (which it bounced up to before collapsing like Taryn Thomas's anus after one too many cavity searches. And yes, read the wikipedia page, it really did), but we all have to remember that when momentum stocks go bad, they really go bad. Given that, and the fact that Money McBags thought their quarter was worse than a Dan Brown novel and their acquisition of VCGH could be a bit of a clusterfuck (and not in the literal sense, which would be good, but in the "oh shit, we paid what for that?" sense), Money McBags may be bailing on this momentarily and happily taking his profits. He will likely sit it out for a day or two, but if it pops up above $15 again, that will likely be his selling floor. In other small cap news, CRTX annonuced their earnings last night and put together a decent Q while maintaining their guidance. Money McBags broke down CRTX a bit in December as a potential big upside company that needed to show some results. Well this Q could be the start of those results as numbers were generally in-line with Curosurf coming in at $8MM in revenues for the 3 months which is a good sign. While their reporting still seems to be a bit lacking (I mean for fucksake, would it kill you to put a table comparing sales of each product and maybe not lump in Spectracef sales with Factive sales since no one gives a fuck about Spectracef?) and their sales of Factive were probably a bit on the low end since they combined with Spectracef for $3.6MM in revenue and Factive should have been around $3MM by itself, this company continues to trade at around 1x estimated sales. The company maintained their guidance of $115MM but their leading drugs continue to face headwinds so they need to be able to show strong sales of Factive and Curosurf. Money McBags has not had a chance to listen to the call, but the quarter didn't contain any obvious misses and the company is cheap. If you have some gambling money that you're itching to put into play, this is the kind of company it may be worth doing some work on because if they can maintain a $100MM+ revenue run rate, they should easily trade at 2x-3x that. Plus they have a nice cash balance remaining to continue their acquisition strategy. Not the best company in the world, but cheap with upside.
In international news, Greece offered up 5 billion of euro denominated bonds or as antiquities dealers will call them in a mere 2 years, worthless relics. Greece claimed there was actually demand for another 2B euros worth of the bonds, and seeing as how they need to raise 20B euros, their decision to not offer the extra 2B fits right in with their previous budget management. If I need $20, why would I sell you $5 worth of my shit when I could sell you $7 worth of it, I mean it doesn't take Euclid to fucking figure out the math here (and yes Money McBags understands the interest payments, etc., but we're talking about a country that needs money like Lindsay Lohan needs a case of Valtrex and a hot shower.)? Meanwhile traders are seeking out the next Greece in Europe claiming that it is only logical another country would be close to collapse as for every Bear Stears there is a Lehman Brothers, for every American Home Mortgage there is a New Century Mortgage, and for every Disney World there is a Kingdom of the Little People. Greek workers remain on strike as they are apparently protesting that the government overpaid them for the past several years. Really a brilliant strategy, right up there with fully clothed strip clubs (and yes I am talking about you Manhattan) and the Segway.
In stock news, retail sales climbed in February from Heidi Montag's singing bad to Heidi Montag's acting bad (and that is a slight uptick if it isn't clear). Same store sales were up 4% beating analyst estimates by 1% or so, but that rise was off of a 4.7% drop last year we so shouldn't lose perspective, like an MC Esher painting. Most interestingly e-commerce sales were up 16% which should bode well for companies like ARTG, AMZN, and Vivid Video. Large cap stocks moving up today include Disney, Coke, and Boeing, all receiving analyst upgrades. Disney was upgraded by Bank of America-Merrill Lynch in anticipation of a strong advertising market, a strong film docket, and unemployment coming down thus making it easier for people to throw away money on a crappy amusement parks just so their kids can get an overpriced picture with a minimum wage worker dressed as Cinderella. A UBS analyst upgraded KO based on the sell-off after they purchased their bottler and after reading When Genius Prevailed on 2/25/10 while UBS also upgraded Boeing because apparently airlines want more planes sooner than later.
In small cap news, RICK continues to drop and is making Money McBags feel emptier than he does after making it rain for an hour at his local Rick's Cabaret. Kind readers, you all know Money McBags has been in RICK with you for this stimulating ride, and you all know of his $16 price target (which it bounced up to before collapsing like Taryn Thomas's anus after one too many cavity searches. And yes, read the wikipedia page, it really did), but we all have to remember that when momentum stocks go bad, they really go bad. Given that, and the fact that Money McBags thought their quarter was worse than a Dan Brown novel and their acquisition of VCGH could be a bit of a clusterfuck (and not in the literal sense, which would be good, but in the "oh shit, we paid what for that?" sense), Money McBags may be bailing on this momentarily and happily taking his profits. He will likely sit it out for a day or two, but if it pops up above $15 again, that will likely be his selling floor. In other small cap news, CRTX annonuced their earnings last night and put together a decent Q while maintaining their guidance. Money McBags broke down CRTX a bit in December as a potential big upside company that needed to show some results. Well this Q could be the start of those results as numbers were generally in-line with Curosurf coming in at $8MM in revenues for the 3 months which is a good sign. While their reporting still seems to be a bit lacking (I mean for fucksake, would it kill you to put a table comparing sales of each product and maybe not lump in Spectracef sales with Factive sales since no one gives a fuck about Spectracef?) and their sales of Factive were probably a bit on the low end since they combined with Spectracef for $3.6MM in revenue and Factive should have been around $3MM by itself, this company continues to trade at around 1x estimated sales. The company maintained their guidance of $115MM but their leading drugs continue to face headwinds so they need to be able to show strong sales of Factive and Curosurf. Money McBags has not had a chance to listen to the call, but the quarter didn't contain any obvious misses and the company is cheap. If you have some gambling money that you're itching to put into play, this is the kind of company it may be worth doing some work on because if they can maintain a $100MM+ revenue run rate, they should easily trade at 2x-3x that. Plus they have a nice cash balance remaining to continue their acquisition strategy. Not the best company in the world, but cheap with upside.
Wednesday, March 3, 2010
3/3/10 Midday Report: Service sector expands thus providing most valuable service: A rising market
The market is up again as the service industry grew more than forecast last month thanks to more people stopping off at McDonalds on their way to the unemployment office and then washing their sorrows away by watching touching interpretative dances at their local Rick's Cabaret in order to warm the cockles of their jobless hearts. The ISM's index of non-manufacturing businesses was up to 53 from 50.5 and in theory measures 90% of the legal economy (it doesn't take the lovely Ashlee Dupre to let us know there are many illegal services performed in this country). That was higher than the 51 estimate and we are all acutely aware that a number above 50 signals growth (while a number above 36DD usually signals growth for Money McBags). Also ADP was out with a report estimating companies cut 20k jobs in February which would be the smallest drop in 2 years were that number not likely to be revised next month. Economic data gets revised more often than a politician's stance on issues (cough Harold Ford cough Mitt Romney cough), modern history, or the background of an old rich guy's wife (she was a student, she worked with kids, they were my kids and she was in high school, but....). The good news is that there is the whiff of real recovery in some of these numbers, though that could also just be the smell of Ben Bernanke's taint after an all-nighter spent trying to right this economy.
In international news, Greece has approved an economic plan which will save $5.5B through a 30% cut in holiday bonuses, a 2% increase in value added sales tax, and a promise to cut down their spending on noise pollution by simply having Nia Vardalos shut the fuck up. Money McBags is anxiously looking forward to the day Greece's fiscal problems are solved and not because it will help shore up the market but because he has fewer Greek jokes left in his arsenal than a eunuch has balls. Seriously, if Money McBags knew he was going to have to write so many one-liners about hellenic culture he would have majored in Greek history, Epic poetry, or Maria Menounos while in college. For fucksake Money McBags may have to stress his long syllable and start writing this blog in dactylic hexameter if the Greeks don't get their shit together (and if he is going to stress his long syllable, he can assure you that Alice Eve will be very involved). Of course the Greeks were less than thrilled with the cuts, including taxi drivers who apparently stayed home for a second day because according to the NY Times (so it could be totally fictional), they were "protesting tax reforms which would oblige them to issue receipts, keep account books and pay tax according to their income." While that would make Charles Rangel proud since he loves finding ways around the means of paying taxes, protesting the loss of the ability to cook one's books is as preposterous as Heidi Montag's singing career or anyone finding Jay Leno funny.
In stock news today Ethan Allen is running (though this time not from the British) as they said their orders for the first two months of 2010 were up 25% as apparently it was time to buy new furniture for Fort Ticonderoga. Dine Equity announced their quarterly results and decimated estimates thanks to increased traffic at Applebees and only a moderate downtick in IHOP business. Adjusted earnings came in at $.76 cents easily beating analyst estimates of $.15 as the company was able to create significant operating leverage, pay down debt, and somehow disguise the taste of their food to make people actually want to eat it. Money McBags is not saying that Applebees is bad, but not even chronic ageusia sufferers will go there. So it is understandable that analysts would have underestimated earnings, that said, being off by a factor of 5 is as bad as trying to forecast the length of Lindsey Vonn's celebrity and using any metric loner than days. Finally, BJ's Wholesale club reported earnings up 4.6% but guidance was below estimates sending BJs down on the day. Money McBags is a bit confused as he doesn't find anything disappointing with BJs, but should they continue to gag or see a lenghty decrease, they may be forced to change their name to Blumpkin's Wholesale Club.
In small stock news, LOV received a take out offer for $3.10 per share and "other possible business combination transactions" from big shareholder Great Hill Partners. The stock has shot up to $3.30 so those "other possible business combination transactions" either mean "another $.20" or merger-arb traders are betting the company put themselves on buyashittycompany.com and are expecting a counter offer. Money McBags broke LOV down last week and came up with a $2 valuation so either Great Hill Partners has more of a Jewish fetish than anyone who has dated Barbara Streisand (because why else would anyone want to date that?) and thus needs to own JDate or "Great Hills" is yiddish for "Sucker." Yesterday Money McBags briefly mentioned QCOR but he finally had time to go over their Q last night and he loves what he sees. Money McBags has followed this stock for almost a year and a half and has watched the issues they have had with their FDA filing for IS marketing approval, their asstastic sales into the IS market last Q, their sales force ramp up in MS, and their out of nowhere medicade reimbursement and reserving issues from last quarter. Honestly, their last Q finally got Money McBags out of the stock as it wasn't clear what was going on with their sales as a potential competitor had emerged and the reserving issue they reported was more confusing than a post-op lesbian tranny (I mean if you like chicks, why cut the thing off?). Money McBags still liked the company though as their management team had generally done a good job on strategy (with their execution being a bit concerning because how many times does it really take to file a fucking sNDA? One? Maybe two? But having to refile more than twice creates more red flags than a Beijing pennant maker.). That said, this quarter easily beat Money McBags' top line estimates and their phone call was chock full of goodness. Money McBags had an estimate of $23MM in net sales for QCOR based on IS sales remaining flat (it was down big last Q in what looks like an anomaly) and 15% Q/Q growth in MS sales. Well IS sales rebounded to the mean of their historical range and MS sales grew 50% Q/Q. While the reimbursement rate was about 1.5% higher than Money McBags estimated, their net sales still came in about $2.5MM above his estimates. Sales were strong enough to give shareholders spasmodic seizures (which of course should be good for QCOR since that what their drug aims to stop). Anyway, there were many other positives such as the potential emergence of a market for Achtar (the drug QCOR sells) into the nephrotic market. QCOR sold 14 vials to this market and estimates that there are 50k people their drug could treat and those people on average would use 2x the doses of an IS patient and 4x to 5x the doses of a MS patient. The company estimates this as a potential $1B market for them and will start allocating a bit of their sales force's time to contacting nephrologists. Now look, it is way too early to get too excited about this as the data is very sparse but it does mimic the MS market for them just two years ago so there is some real potential here. Additionally QCOR has straightened out their Tricare reimbursement issue which may now contribute to 10% growth and said the FDA will get back to them on their ability to market to IS doctors by June 11, 2010. Oh yeah, the CEO addressed the potential competitive drug Sibril and said in the six months it has been on the market, they have not seen it make a dent in their sales. The only way this quarter could have been bette for QCOR was if they found out Achtar also acts as a pheremone for Brooklyn Decker's mouth. In terms of forecasting a baseline, just assume they get nothing from the nephrotic market, IS remains at its historical mean (so flat from here), and MS grows 20% per Q (which is aggressive, but whatever). Additionally assume a modest uptick in operating costs, no more reimbursement issues (they claim they are fully reserved for past medicare claims), and a 500k per q share buyback (they bought back 2MM shares last Q and have 5MM left on their buyback so it could be more), and you get to around $.76 eps for 2010. So on those baseline earnings, the company is still trading at less than 10x earnings even after being up almost 30% in two days. Plus they are only trading at 2.5x or so EV/sales and companies like this trade at 3x to 4x. Of course that $.76 eps number could be too low if the nephrotic market can get traction, the FDA approves them to market IS to doctors, and MS continues to run. The concerns still remain that the drug is hella expensive and the quarters can be lumpier than Alexis Texas' backside, especially as they have little control on IS sales, so there is a reason for it to trade at a bit of a discount. Also, QCOR's hiring of a Chief Medical Officer to investigate buying other assets with all of their cash is a bit worrisome because a company with their supposed growth opportunities in MS and NS shouldn't need to be wasting time on non-core products. That said, there could still be a ton of value here. Plus with borrowing rates only to go up, M&A is getting hotter than Olivia Munn on the planet Mercury, so this could be a nice little take out candidate. Money McBags will likely buy on a pull back and is kicking himself for not having owned this, but their last Q was so bad it made it Lady Gaga look fuckable.
Oh yeah, Money McBags picked up some KITD yesterday at around $10.
In international news, Greece has approved an economic plan which will save $5.5B through a 30% cut in holiday bonuses, a 2% increase in value added sales tax, and a promise to cut down their spending on noise pollution by simply having Nia Vardalos shut the fuck up. Money McBags is anxiously looking forward to the day Greece's fiscal problems are solved and not because it will help shore up the market but because he has fewer Greek jokes left in his arsenal than a eunuch has balls. Seriously, if Money McBags knew he was going to have to write so many one-liners about hellenic culture he would have majored in Greek history, Epic poetry, or Maria Menounos while in college. For fucksake Money McBags may have to stress his long syllable and start writing this blog in dactylic hexameter if the Greeks don't get their shit together (and if he is going to stress his long syllable, he can assure you that Alice Eve will be very involved). Of course the Greeks were less than thrilled with the cuts, including taxi drivers who apparently stayed home for a second day because according to the NY Times (so it could be totally fictional), they were "protesting tax reforms which would oblige them to issue receipts, keep account books and pay tax according to their income." While that would make Charles Rangel proud since he loves finding ways around the means of paying taxes, protesting the loss of the ability to cook one's books is as preposterous as Heidi Montag's singing career or anyone finding Jay Leno funny.
In stock news today Ethan Allen is running (though this time not from the British) as they said their orders for the first two months of 2010 were up 25% as apparently it was time to buy new furniture for Fort Ticonderoga. Dine Equity announced their quarterly results and decimated estimates thanks to increased traffic at Applebees and only a moderate downtick in IHOP business. Adjusted earnings came in at $.76 cents easily beating analyst estimates of $.15 as the company was able to create significant operating leverage, pay down debt, and somehow disguise the taste of their food to make people actually want to eat it. Money McBags is not saying that Applebees is bad, but not even chronic ageusia sufferers will go there. So it is understandable that analysts would have underestimated earnings, that said, being off by a factor of 5 is as bad as trying to forecast the length of Lindsey Vonn's celebrity and using any metric loner than days. Finally, BJ's Wholesale club reported earnings up 4.6% but guidance was below estimates sending BJs down on the day. Money McBags is a bit confused as he doesn't find anything disappointing with BJs, but should they continue to gag or see a lenghty decrease, they may be forced to change their name to Blumpkin's Wholesale Club.
In small stock news, LOV received a take out offer for $3.10 per share and "other possible business combination transactions" from big shareholder Great Hill Partners. The stock has shot up to $3.30 so those "other possible business combination transactions" either mean "another $.20" or merger-arb traders are betting the company put themselves on buyashittycompany.com and are expecting a counter offer. Money McBags broke LOV down last week and came up with a $2 valuation so either Great Hill Partners has more of a Jewish fetish than anyone who has dated Barbara Streisand (because why else would anyone want to date that?) and thus needs to own JDate or "Great Hills" is yiddish for "Sucker." Yesterday Money McBags briefly mentioned QCOR but he finally had time to go over their Q last night and he loves what he sees. Money McBags has followed this stock for almost a year and a half and has watched the issues they have had with their FDA filing for IS marketing approval, their asstastic sales into the IS market last Q, their sales force ramp up in MS, and their out of nowhere medicade reimbursement and reserving issues from last quarter. Honestly, their last Q finally got Money McBags out of the stock as it wasn't clear what was going on with their sales as a potential competitor had emerged and the reserving issue they reported was more confusing than a post-op lesbian tranny (I mean if you like chicks, why cut the thing off?). Money McBags still liked the company though as their management team had generally done a good job on strategy (with their execution being a bit concerning because how many times does it really take to file a fucking sNDA? One? Maybe two? But having to refile more than twice creates more red flags than a Beijing pennant maker.). That said, this quarter easily beat Money McBags' top line estimates and their phone call was chock full of goodness. Money McBags had an estimate of $23MM in net sales for QCOR based on IS sales remaining flat (it was down big last Q in what looks like an anomaly) and 15% Q/Q growth in MS sales. Well IS sales rebounded to the mean of their historical range and MS sales grew 50% Q/Q. While the reimbursement rate was about 1.5% higher than Money McBags estimated, their net sales still came in about $2.5MM above his estimates. Sales were strong enough to give shareholders spasmodic seizures (which of course should be good for QCOR since that what their drug aims to stop). Anyway, there were many other positives such as the potential emergence of a market for Achtar (the drug QCOR sells) into the nephrotic market. QCOR sold 14 vials to this market and estimates that there are 50k people their drug could treat and those people on average would use 2x the doses of an IS patient and 4x to 5x the doses of a MS patient. The company estimates this as a potential $1B market for them and will start allocating a bit of their sales force's time to contacting nephrologists. Now look, it is way too early to get too excited about this as the data is very sparse but it does mimic the MS market for them just two years ago so there is some real potential here. Additionally QCOR has straightened out their Tricare reimbursement issue which may now contribute to 10% growth and said the FDA will get back to them on their ability to market to IS doctors by June 11, 2010. Oh yeah, the CEO addressed the potential competitive drug Sibril and said in the six months it has been on the market, they have not seen it make a dent in their sales. The only way this quarter could have been bette for QCOR was if they found out Achtar also acts as a pheremone for Brooklyn Decker's mouth. In terms of forecasting a baseline, just assume they get nothing from the nephrotic market, IS remains at its historical mean (so flat from here), and MS grows 20% per Q (which is aggressive, but whatever). Additionally assume a modest uptick in operating costs, no more reimbursement issues (they claim they are fully reserved for past medicare claims), and a 500k per q share buyback (they bought back 2MM shares last Q and have 5MM left on their buyback so it could be more), and you get to around $.76 eps for 2010. So on those baseline earnings, the company is still trading at less than 10x earnings even after being up almost 30% in two days. Plus they are only trading at 2.5x or so EV/sales and companies like this trade at 3x to 4x. Of course that $.76 eps number could be too low if the nephrotic market can get traction, the FDA approves them to market IS to doctors, and MS continues to run. The concerns still remain that the drug is hella expensive and the quarters can be lumpier than Alexis Texas' backside, especially as they have little control on IS sales, so there is a reason for it to trade at a bit of a discount. Also, QCOR's hiring of a Chief Medical Officer to investigate buying other assets with all of their cash is a bit worrisome because a company with their supposed growth opportunities in MS and NS shouldn't need to be wasting time on non-core products. That said, there could still be a ton of value here. Plus with borrowing rates only to go up, M&A is getting hotter than Olivia Munn on the planet Mercury, so this could be a nice little take out candidate. Money McBags will likely buy on a pull back and is kicking himself for not having owned this, but their last Q was so bad it made it Lady Gaga look fuckable.
Oh yeah, Money McBags picked up some KITD yesterday at around $10.
Tuesday, March 2, 2010
3/2/10 Midevening Report: Market rises as member of the Fed retires, economists worried more retirements could cause bubble
The Fed is getting all jiggy with the markets today and the markets seem to like it. First Ben Bernanke's number one henchman, the honorable Donald L. Kohn who in 40 years of service at the Fed never saw a market he couldn't inflate, announced he is resigning from his position as Vice Chairman of the Fed in order to pursue other ventures more productive to society like finding out where the all the bees went, calculating Pi to the 1 billionth decimal (hint: 7), or figuring out how to get a money shot in lesbian porn (and squirting is not an acceptable answer). When asked why he was retiring, Kohn cited his age, his family, and his annoyance at always having to leave the seat down for Janet Yellen in the Federal Reserve bathroom (and I am told the right stall still contains the graffiti from 1934 of former Fed Chairman Eugene Black stating "Once you go Black, rates will never come back," which helps explain why he was only in that position for only 1 year). Journalists have begun speculating on who Obama will nominate to fill Kohn's seat at the Fed with leading candidates being the esteemed former President of Harvard Larry Summers who was forced to resign from that position due to a vote of "no confidence" (and seeing how the Fed is supposed to help instill confidence in to the economy, Summer's "no confidence" vote may be a bit of a red flag), some lady named Christina Romer who actually looks a bit like Larry Summers in drag (no really, check it out, this is Larry Summers, this is Christina Romer, have you ever seen them in the same room?), and of course When Genius Prevailed's own Money McBags (and Money McBags will certainly turn down the nomination as it would impede on his time at his not safe for working at the Fed, yet imminently important, hobby of guessing muffs (NSFW)). Not only is Donald Kohn retiring, but rogue Federal Reserve Board Member Thomas "T-Ho" Hoenig who is the yin to Bernanke's yang, the Mary Kate to Bernanke's Ashley, and the turd to Bernanke's punchbowl, is out again saying rates need to move up sooner rather than later. While Benny B seemingly dissed T-Ho last week when congress axed him about rates and he said they would be kept low for an extended period of time, T-Ho got all upitty on Benny B and went on CNBC to air his grievances about indefinite low rates, inflation, and Benny B not keeping it real (rates that is). T-Ho said: "You are inviting future problems" and then removed his gold teef, took a swig on his 40 of Mickeys, and reiterated that a zero percent fed-funds rate is "inviting future excesses, and we all know my baby momma ain't need no more excesses." But he didn't stop there, T-Ho took it one step further, opining "I think we shouldn't be guaranteeing markets a zero rate for an extended period." Rates "could be higher, and the effects would be minor" and "We should start that process sooner rather than later." He then lamented that that "Bitch ass Benny B better recognize and check himself before he wrecks himself, because this aint no round the way girl he's messing with, this is Uncle fucking Sam."
In international news, continued hopes of a Greek bailout and a rally in India hepled the US market today. Greece was expected to release their austerity plan which was to shave $3.5B off of their deficit and was to include an increase in their value-added sales tax on things such as Ouzo, saganaki, and greek sodas. India's government reported increases in manufacturing and exports, which along with strong sales from leading auto producer TaTa Motors (who are now said to beoffering lube jobs with their TaTas), helped send the market to it's high for the month.
In US stock news, Ford became the top auto seller for the month with a 43% increase in sales thanks to the Toyota recall and consumers apparently not giving a shit about buying crappy cars. This was the first time in 12 years Ford has outsold GM in a month which means they are 3 years ahead of their 15 year plan. In earnings, Staples Q4 profit dropped 18% as a result of restructuring and disappointing sales of big ticket items like furniture and oversized checks for lottery winners. The stock dropped 10% as their guidance of $1.23 to $1.33 per share was worse than Rosie O'Donnell's girlfriend's breath after downing a lipsmacking day old tuna fish sandwich. Estimates were for $1.40 per share and anytime a company lowers earnings by greater than 10%, nothing good happens. Also, QCOM was up 7% after taking shareholder friendly actions of raising their dividend, announcing a big share buyback, and booking Hannah Hilton as the lunchtime entertainment for their next shareholder meeting (and Money McBags wishes she would hold his shares).
In small cap news a flurry of companies reported today with QCOR shaking off their string of bad quarters while NTRI and NLS helped their shareholders lose weight by making them hurl after each company put up craptastic quarters. Money McBags will dive into NTRI and NLS a bit later in the week, though he welcomes NLS supporter and long time When Genius Prevailed reader Matty McSacks to chime in and help Money McBags understand which of the 4 earnings from continuing operations numbers realeased today is best to use to evaluate NLS's business. Money McBags hasn't seen a release so confusing since he hit puberty and shot his first load to the imagined Lisa Whelchel-Nancy McKeon tryst which would have redefined Edna's Edibles. As for QCOR, Money McBags broke them down in December concluding that "they could have real upside if they continue to penetrate the MS market and can get on-label IS approval." Money McBags was waiting to see some more results though before buying as they had run in to reimbursement issues and some sales hiccups and today they certainly put up some strong results with 223% growth in their MS segment and 56% growth in their paid commercial IS segment, plus they had some sales into the nephrotic syndrome market. Money McBags will break QCOR down later in the week as well as he is pressed for time today but today's 18% rise was likely a short squeeze (and Money McBags realizes he said that about the last time QCOR rallied, but there is something to say about consistency), that said, if they are now back up to a $.52 annual eps run rate with their $.13 eps quarter today, there is no reason they shouldn't trade at 15x that and thus put their value at around $7.50 per share. The company has been well run and is shareholder friendly, but they need to continue to execute.
In international news, continued hopes of a Greek bailout and a rally in India hepled the US market today. Greece was expected to release their austerity plan which was to shave $3.5B off of their deficit and was to include an increase in their value-added sales tax on things such as Ouzo, saganaki, and greek sodas. India's government reported increases in manufacturing and exports, which along with strong sales from leading auto producer TaTa Motors (who are now said to beoffering lube jobs with their TaTas), helped send the market to it's high for the month.
In US stock news, Ford became the top auto seller for the month with a 43% increase in sales thanks to the Toyota recall and consumers apparently not giving a shit about buying crappy cars. This was the first time in 12 years Ford has outsold GM in a month which means they are 3 years ahead of their 15 year plan. In earnings, Staples Q4 profit dropped 18% as a result of restructuring and disappointing sales of big ticket items like furniture and oversized checks for lottery winners. The stock dropped 10% as their guidance of $1.23 to $1.33 per share was worse than Rosie O'Donnell's girlfriend's breath after downing a lipsmacking day old tuna fish sandwich. Estimates were for $1.40 per share and anytime a company lowers earnings by greater than 10%, nothing good happens. Also, QCOM was up 7% after taking shareholder friendly actions of raising their dividend, announcing a big share buyback, and booking Hannah Hilton as the lunchtime entertainment for their next shareholder meeting (and Money McBags wishes she would hold his shares).
In small cap news a flurry of companies reported today with QCOR shaking off their string of bad quarters while NTRI and NLS helped their shareholders lose weight by making them hurl after each company put up craptastic quarters. Money McBags will dive into NTRI and NLS a bit later in the week, though he welcomes NLS supporter and long time When Genius Prevailed reader Matty McSacks to chime in and help Money McBags understand which of the 4 earnings from continuing operations numbers realeased today is best to use to evaluate NLS's business. Money McBags hasn't seen a release so confusing since he hit puberty and shot his first load to the imagined Lisa Whelchel-Nancy McKeon tryst which would have redefined Edna's Edibles. As for QCOR, Money McBags broke them down in December concluding that "they could have real upside if they continue to penetrate the MS market and can get on-label IS approval." Money McBags was waiting to see some more results though before buying as they had run in to reimbursement issues and some sales hiccups and today they certainly put up some strong results with 223% growth in their MS segment and 56% growth in their paid commercial IS segment, plus they had some sales into the nephrotic syndrome market. Money McBags will break QCOR down later in the week as well as he is pressed for time today but today's 18% rise was likely a short squeeze (and Money McBags realizes he said that about the last time QCOR rallied, but there is something to say about consistency), that said, if they are now back up to a $.52 annual eps run rate with their $.13 eps quarter today, there is no reason they shouldn't trade at 15x that and thus put their value at around $7.50 per share. The company has been well run and is shareholder friendly, but they need to continue to execute.
Monday, March 1, 2010
3/1/10 Midevening Report: Semis conduct market higher, next up, Beethoven's Fifth
Wow. The market ripped up today like it was competing for the Ansari X Prize in 2004 or like it was rushing to claim the last seat in a dream Hayley Atwell-Kate Bosworth Ultimate Surrender match (nsfw, unless your work doesn't suck). Technology led the way thanks to an upbeat report on chip sales and the fact that we are at the inflection point of exponential technological growth, regardless of the economy (or at least Ray Kurzweil's fancy graphs say so*). Chip sales were up 47% from last year and .3% from December leaving Semiconductor Industry Association President George Scalise (whose last name is an unfortunate anagram for one of the world's worst afflictions, "ass lice") to explain that sales were helped by "growing demand for semiconductors used in personal computers, cell phones, automobiles and industrial applications." He then pointed to the reporter and while being egged on by his minions used the old SIA favorite line, "Is that a pre-Moore's Law semiconductor in your pants or are you just happy to see me." Along wth a positive report on semi sales, consumer spending was up .5% despite incomes only being up .1% which led to the lowest savings rate since January of 2008, you know, back when the market was crashing because EVERYONE WAS FUCKING OVERLEVERAGED. So at least it looks like that problem has been solved. This country continues to treat savings like Lindsay Lohan treats vaginal hygiene or Larry Craig treats truthfulness, but hey, at least spending more than one earned sent the market on an orgiastic run today, so damn you common sense. In other macro news today, the ISM’s factory index fell to 56.5 from January’s 58.4, which was a 5 year high. While a number falling is usually a bad thing, unless it's the number of times Sweet Homa Alabama is played on the radio, the ISM index was still above 50 and that magical made-up line of delineation apparently indicates the economy is still in expansion based on the at times subjective inputs of the purchasing managers reporting to the ISM. However, according to the ISM website, a "PMI in excess of 42 percent, over a period of time, generally indicates an expansion of the overall economy," so that magical 50 number that people are claiming is good, could be as low as 42 and everything would still be ok. Whew, I am glad we have an arbitrarily declining scale to measure whatever it is the PMI measures, though perhaps they should hire some of the 20MM unemployed people to take more exact readings on what managers are purchasing.
In stock news, AIG sold their Asian life insurance unit to Prudential for $35.5B and PRU's promise to love them long time. The sale will allow AIG to pay back the government and strategically rids them of one of their most profitable companies, thereby continuing AIG's policy of doing things that suck. While selling assets is something AIG needs to do to get out of debt, selling their profitable business is a bit like McDonalds selling Burger King the rights to the Big Mac and thus leaving them with just the Filet O'Fish and Salmonella McNuggets. AIG is also determined to sell their US life business to MET, which means they can focus on their prized P&C business which was only one of the biggest reasons they underperformed last quarter. In other large cap news, Sandisk was up 11% today after raising their first quarter revenue guidance by 6% during Friday's analyst day. This caused analysts to upgrade the stock including Wedbush's Betsy Van Hees who had a sell on the company but was able to finally get the sand(isk) out of her vagina and raise SNDK to neutral.
In small cap news, Money McBags favorite MLNK shot up 6% likely on the positive semi news which should augur well for the computer market. MLNK still remains more undervalued than a taint licking. Money McBags broke MLNK down for all of you in January, but the company has treaded water since then despite the fact that their $.17 quarterly eps can easily turn into $.22 with just continued cost cutting. Add in just a Pam Anderson's dignity amount of growth and you're at $.25 per quarter eps or $1 for the year. So with very little positive news, MLNK could take off and rise out of it's way too cheap valuation of 10.5x eps and 4x-5x EBITDA with a ton of cash on the balance sheet. This stock should be owned by anyone who hates being poor, so Mickey Rourke need not apply. Also, another Money McBags stock which is frequently blogged about on When Genius Prevailed, RICK, briefly bounced up to Money McBags sell target of $16 today before getting absolutely ass raped around noon. No one has witnessed a nooner that violent since David Carradine dined alone in his hotel closet. Look at the chart below and notice right at 12:45 someone wanted to get the fuck out like RICK was two girls and they were the one cup. Huge volume. The stock usually trades about 200k shares a day and in a 15 minute span almost 600k shares blew out on the market. Perhaps every quant fund had Money McBags $16 price target hardwired in as the sell time as we all know Money McBags moves markets, or perhaps one of the 20 funds who own 600k+ shares had a little too much champagne in the chanmpagne room, but fuck did someone want out of this thing.
Money McBags is a bit flummoxed by the need to puke out so many shares and it reeks of a capital call, except funds should be relatively stable now, so this run for the door is more perplexing (and nowhere near as delicious) as teenage girls claiming that having anal sex still leaves them virgins.
Tomorrow's blog may be out late, so follow Money McBags on twitter for updates.
*For those futurist tech geeks out ther Money McBags hopes to put his singularity near Kurzweil's prophesized spiritual machines, especially if they're as frisky as Riley Steele. So keep grokking Spock, my friends, keep grokking Spock).
In stock news, AIG sold their Asian life insurance unit to Prudential for $35.5B and PRU's promise to love them long time. The sale will allow AIG to pay back the government and strategically rids them of one of their most profitable companies, thereby continuing AIG's policy of doing things that suck. While selling assets is something AIG needs to do to get out of debt, selling their profitable business is a bit like McDonalds selling Burger King the rights to the Big Mac and thus leaving them with just the Filet O'Fish and Salmonella McNuggets. AIG is also determined to sell their US life business to MET, which means they can focus on their prized P&C business which was only one of the biggest reasons they underperformed last quarter. In other large cap news, Sandisk was up 11% today after raising their first quarter revenue guidance by 6% during Friday's analyst day. This caused analysts to upgrade the stock including Wedbush's Betsy Van Hees who had a sell on the company but was able to finally get the sand(isk) out of her vagina and raise SNDK to neutral.
In small cap news, Money McBags favorite MLNK shot up 6% likely on the positive semi news which should augur well for the computer market. MLNK still remains more undervalued than a taint licking. Money McBags broke MLNK down for all of you in January, but the company has treaded water since then despite the fact that their $.17 quarterly eps can easily turn into $.22 with just continued cost cutting. Add in just a Pam Anderson's dignity amount of growth and you're at $.25 per quarter eps or $1 for the year. So with very little positive news, MLNK could take off and rise out of it's way too cheap valuation of 10.5x eps and 4x-5x EBITDA with a ton of cash on the balance sheet. This stock should be owned by anyone who hates being poor, so Mickey Rourke need not apply. Also, another Money McBags stock which is frequently blogged about on When Genius Prevailed, RICK, briefly bounced up to Money McBags sell target of $16 today before getting absolutely ass raped around noon. No one has witnessed a nooner that violent since David Carradine dined alone in his hotel closet. Look at the chart below and notice right at 12:45 someone wanted to get the fuck out like RICK was two girls and they were the one cup. Huge volume. The stock usually trades about 200k shares a day and in a 15 minute span almost 600k shares blew out on the market. Perhaps every quant fund had Money McBags $16 price target hardwired in as the sell time as we all know Money McBags moves markets, or perhaps one of the 20 funds who own 600k+ shares had a little too much champagne in the chanmpagne room, but fuck did someone want out of this thing.
Money McBags is a bit flummoxed by the need to puke out so many shares and it reeks of a capital call, except funds should be relatively stable now, so this run for the door is more perplexing (and nowhere near as delicious) as teenage girls claiming that having anal sex still leaves them virgins.
Tomorrow's blog may be out late, so follow Money McBags on twitter for updates.
*For those futurist tech geeks out ther Money McBags hopes to put his singularity near Kurzweil's prophesized spiritual machines, especially if they're as frisky as Riley Steele. So keep grokking Spock, my friends, keep grokking Spock).
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