It's quadruple witching Friday today in the market which is unfortunately just the day where stock index futures, stock index options, stock options, and single stock futures all expire and not the day where the market finally gets a 5-some with Elizabeth Montgomery, Barbara Eden, Melissa Joan Hart, and Omarrosa. While this is usually a volatile day, the market has been quieter than the Clinton's bedroom as there has been little macro or company news released today. That said, owners of gold are being showered with rewards as gold has reached a record high today thanks to investors betting against the current fiat system remaining viable. While it's likely we'll hit a deflationary period before inflation takes off like Shawn Kemp from a delivery room, holding gold as part of your portfolio right now as a hedge against volatility and the potential crash of the Euro makes more sense than pairing Suaterenes with a nice foie gras. In other US news, Tim Geithner is apparently getting new and more power which he has easily earned given how he has revived this economy from dead to about to die again and helped to bail out the firms who caused this mess. Geithner is set to lead a new council run by the Treasury Department to identify companies that might be shut down because they pose a risk to the financial system. So does that mean the government is going to shut down the SEC, FCIC, FINRA, FDIC, and NAMBLA? Don't they all do the same fucking thing? Hey, I know how to solve a problem, let's just create other fucking groups to do the same thing that current groups do but hope they do it better. Unbelievable. Money McBags just wants to know when more bureaucracy has ever fixed anything other than creating meaningless jobs. Somewhere Josef K. is scratching his head.
Internationally, the Eurozone added Estonia as the lastest member in their global ponzi scheme. Estonia now has to pay $1B to Greece, and then Greece will pay 80% of that up to Spain, who will then pay 80% of that up to Germany. Funding problems solved. While it is certainly odd timing for a country to be joining the eurozone, Estonia said they had no choice after the University of Texas decided to stay in the Big 12 and and Utah beat them out for the last spot in the Pac 10. “It’s a great day for Estonia,” remarked Estonian prime minister Andrus Ansip, who was perhaps (an)sipping on a little too much Saku Originaal as getting in to the Eurozone right now is about as desirable as joining a tv show co-starring Ted McGinley or being drafted by the Washington Generals. Anyway, for those of you unfamiliar with Estonia, here are some quick facts: They were 4th out of 173 countries in the Worldwide Press Freedom Index narrowly being edged out by Canada and their NSFW Naked News, they've previously been occupied by more countries than Zsa Zsa Gabor's vagina, and the person they most admire is Yosemite Sam. They've been independent since 1991 and are finally looking to settle down after 20 years of hard drinking and nordic flirtations in order to raise their favorite offspring Tiiu Kuik in a stronger family environment. So welcome to the Euro Estonia, just don't burn all those Kroons quite yet. In other international news, the IMF backed Spain's austerity measures after downing one sangria too many and learning about imaginary numbers.
In stock news, C is planning on raising $3B because they haven't lost enough investor capital already. Just remember, this bank is so poorly run and has such bad judgment that they fired someone for being too hot, and she's not even really that hot, I mean we're not talking about Sara Carbonero for fucksake. And the best part about this is that they are raising money for their private equity and hedge fund groups right before Paul Volcker slaps his rule on the table and bans banks from owning those type of funds. Wow. Good for the funds but that makes about as much sense for C as it did for Saddam Hussein to build a new palace in Baghdad in March of 2003 or Simona Halep to go bra shopping right before the summer of 2009. Money McBags is sure C's CEO Vikram Pandit will retain some type of personal interest in these funds when the Volcker Rule takes effect so I guess it makes sense for him but for C shareholders it seems like a whole lot of wasted time and energy (though if you're a C shareholder, you have bigger problems to worry about than the company raising money for funds they are going to have to give up soon). In other news, CVS and WAG decided to end their snit over prescription drug benefit reimbursement and just go back to screwing Medicare and the American health care system together. Finally Moody's lowered their ratings of BP by 3 notches from the unintelligible Aa2 to the just as unintelligible A2 (or maybe it was the other way around, who the fuck knows). It's nice to see that weeks in to one of the biggest environmental disasters in history, Moody's is still on the ball. Good job guys, Money McBags eagerly awaits your downgrade of daguerreotype companies within the next 6 months. Though to be honest, any investor who needs Moody's to tell them BP is more fucked than a cupcake in Kirstie Alley's house probably shouldn't be investing.
In small cap news CRUS continues to rocket up. Money McBags believes $24 (20x his $1.20 estimates) is a plenty fair price but at $20 he'd start to think about trimming to take some of the hella sweet profits you've made off the table (and rememeber Money McBags first brought CRUS to your attention when they were trading under $8 and he told you he bought them shortly thereafter. The fact that he dumped them after the "Flash crash" for liquidity reasons doesn't change his valuation, it only makes him angrier that he believes the market structure is so broken that fundamentals may not matter). And if any of you are interested in a high flying small volatile momentum name, check out SPRT. Money McBags will try to break them down next week but they are basically outsourced and remote computer repair. It's like Geek Squad only you don't have to have a fat smelly skeevy fuck show up at your house and stink the place up while he wipes all of the porn off your computer to clean up whatever virus you downloaded while searching for that Miley Cyrus upskirt pic (and Money McBags will not be linking to the pic since he believes in the legal system). It's certainly an interesting and potential low cost business model and the company is currently scaling up their technicians faster than a young hollywood starlet scales up her ambitions. It is doubtful that in this market Money McBags would ever own this stock because a lot has to go right for it to be valued even near what it is trading today, but it has a nice story has some real opportunity, and more than anything it has strong momentum and a rapidly accelerating business. If you have money you don't care about, send it to Money McBags for a night out at Rick's, otherwise, do some research here as this might be a good trade.
Showing posts with label EU. Show all posts
Showing posts with label EU. Show all posts
Friday, June 18, 2010
Tuesday, June 8, 2010
6/8/10 Midevening Report: Bernanke speech fails to significantly rally the market, says he'll overpromise more next time
The market was relatively quiet today as there was a lack of macro news though Fed Chairman Ben Bernanke was out late Monday saying: "My best guess is that we’ll have a continued recovery, but it won’t feel terrific like a blumpkin from Sara Varone followed by a nice wipe with that oh so soft aloe infused Cottonelle. Instead, it will feel more like having your nut hairs pulled out while listening to the smooth adult contemporary sounds of Sade". Ok, Money McBags made part of that up but that's not the point, the point is, Bernanke is hedging on this recovery like he just bought FAZ in his IRA. While he says the economy won't likely have a double dip recession, he did not say it wouldn't have a single dip recession followed by a falling off the cliff depression, so it's merely a matter of semantics. Bernanke also dusted off his Phillips curve (though it wasn't as curvy as Kimberly Phillips) and added that the central bank would raise rates before the economy returns to full employment, which should be any century now. That's great, but Money McBags would like to know what the full employment rate is? Is it 4%, 6%, or whatever proof the whiskey was that Milton Friedman was drinking when he came up with NAIRU (seriously Milt, you couldn't have come up with a catchier name than the Non-Accelerating Inflation Rate of Unemployment? Really? That name could put Ritalin out of business because just reading it has to make even the most hyperactive person drowsy.)? The point is, the full employment rate is a bogus hurdle as there is no set rate so saying rates will rise before we reach that level is as helpful as saying you'll stop running when you catch the horizon. With the stimulus funds coming to an end over the next few quarters and the economy already starting to show signs of coming down from its stimulus induced bender where it got drunk off of bail outs and hand outs and now finds itself waking up in a pool of its own spending while dry humping Greece's Aegean coast to the sweet whisperings of Benjamin S. Bernanke and and his magical money making machine, the economy is in a precarious position (though not as precarious of a position as Kirstie Alley's girdle).
Internationally, the new government in Hungary has announced a set of austerity measures aimed at solving their debt crisis. The austerity measures include cutting public wages, overhauling the tax system, banning mortgage lending in foreign currencies, and stopping free cookie day at the National Assembly. Also, the European Union's finance ministers met in Luxembourg with the most important outcomes being an agreement to allow tighter oversight on countries suspected of falsifying economic data and an agreement that Ginger Spice was the hottest of the Spice Girls.
In stock news, AAPL introduced a $199 iPhone which has a front facing camera that should now allow users to masturbate on chatroulette wherever they may be. The new iPhone is slimmer than the previous version, has better picture quality, and doesn't insist on cuddling when you are done with it. In other stock news, MCD had better than guessed at growth for the month of May of 4.8% worldwide thanks to the fact that they sell cheap shit and people can only afford to eat cheap shit. The company announced the falling Euro would impact yearly earnings but announced that to make up for those lost earning they are forming a partnership with American Heart Association to get a portion of the profits from all angiograms caused by eating their food. Finally, analysts were busy today with INTC downgraded by SIG to neutral because the analyst had to do something to try to drum up trading business for SIG and Dick Bove, who never saw a financial stock he didn't like and didn't understand, cut his price target at JP Morgan from jizztastic to just ballticklingly good.
In small cap stocks, Money McBags favorite KITD continues to get pounded like Alexis Texas on payday. With ~70% of their revenues coming from Europe, topline should be impacted by the 15%-20% drop in the Euro with investors seemingly betting on worse. Given that, it is difficult to come up with a short term valuation for KITD as the Euro appears to be falling off worse than proper grammar or Britney Spears' top. Last Q, the $/Euro exchange rate was somewhere around $1.38 and this Q, it's likely going to be around $1.25, and after that, who knows? So lets take a worse case scenario where we assume the exchange goes to parity. So that would be a 28% drop in the exchange rate from last Q. Money McBags thinks at the high end KITD can do $150MM of revenue next year, but let's call it $130MM because of the global uncertainty. The thing is, that number was derived off of the old $/EU exchange so if we knock 70% of their revenue (their EU exposed revenue) by 28%, revenue decreases by ~$25MM. So insted of $130MM, a worst case scenario yields revenue of $105MM and at 20% EBITDA margins, that is ~$21MM EBITDA. The company currently has a market cap of $210MM but they have somewhere around $30MM in cash after their last deal so they have an enterprise value of roughly $180MM and thus are currently at a worst case scenario of ~9x EV/EBITDA and topline growth in that scenario would still be ~20% (and dollar euro parity is almost as bad a scenario for the financial markets as having your daughter bring home Jordan Van Der Sloot for Thanksgiving Break). Of course all of this assumes that their costs and revenue are tied together so if the euro drops by 28% the associated costs with that will drop by 28% and thus margins will remain intact. The point is, Money McBags still likes this company longterm as they are in a rapidly growing space that is going to continue to grow for several years, but there are certainly short term currency issues. However, they are diversifying their revenues in to the US and Asia so as to become less dependent on Europe so while things look bad now, in the long run this company should be fine. With uncertainty comes opportunity and it is getting to the point where this company is just getting stupid cheap.
Internationally, the new government in Hungary has announced a set of austerity measures aimed at solving their debt crisis. The austerity measures include cutting public wages, overhauling the tax system, banning mortgage lending in foreign currencies, and stopping free cookie day at the National Assembly. Also, the European Union's finance ministers met in Luxembourg with the most important outcomes being an agreement to allow tighter oversight on countries suspected of falsifying economic data and an agreement that Ginger Spice was the hottest of the Spice Girls.
In stock news, AAPL introduced a $199 iPhone which has a front facing camera that should now allow users to masturbate on chatroulette wherever they may be. The new iPhone is slimmer than the previous version, has better picture quality, and doesn't insist on cuddling when you are done with it. In other stock news, MCD had better than guessed at growth for the month of May of 4.8% worldwide thanks to the fact that they sell cheap shit and people can only afford to eat cheap shit. The company announced the falling Euro would impact yearly earnings but announced that to make up for those lost earning they are forming a partnership with American Heart Association to get a portion of the profits from all angiograms caused by eating their food. Finally, analysts were busy today with INTC downgraded by SIG to neutral because the analyst had to do something to try to drum up trading business for SIG and Dick Bove, who never saw a financial stock he didn't like and didn't understand, cut his price target at JP Morgan from jizztastic to just ballticklingly good.
In small cap stocks, Money McBags favorite KITD continues to get pounded like Alexis Texas on payday. With ~70% of their revenues coming from Europe, topline should be impacted by the 15%-20% drop in the Euro with investors seemingly betting on worse. Given that, it is difficult to come up with a short term valuation for KITD as the Euro appears to be falling off worse than proper grammar or Britney Spears' top. Last Q, the $/Euro exchange rate was somewhere around $1.38 and this Q, it's likely going to be around $1.25, and after that, who knows? So lets take a worse case scenario where we assume the exchange goes to parity. So that would be a 28% drop in the exchange rate from last Q. Money McBags thinks at the high end KITD can do $150MM of revenue next year, but let's call it $130MM because of the global uncertainty. The thing is, that number was derived off of the old $/EU exchange so if we knock 70% of their revenue (their EU exposed revenue) by 28%, revenue decreases by ~$25MM. So insted of $130MM, a worst case scenario yields revenue of $105MM and at 20% EBITDA margins, that is ~$21MM EBITDA. The company currently has a market cap of $210MM but they have somewhere around $30MM in cash after their last deal so they have an enterprise value of roughly $180MM and thus are currently at a worst case scenario of ~9x EV/EBITDA and topline growth in that scenario would still be ~20% (and dollar euro parity is almost as bad a scenario for the financial markets as having your daughter bring home Jordan Van Der Sloot for Thanksgiving Break). Of course all of this assumes that their costs and revenue are tied together so if the euro drops by 28% the associated costs with that will drop by 28% and thus margins will remain intact. The point is, Money McBags still likes this company longterm as they are in a rapidly growing space that is going to continue to grow for several years, but there are certainly short term currency issues. However, they are diversifying their revenues in to the US and Asia so as to become less dependent on Europe so while things look bad now, in the long run this company should be fine. With uncertainty comes opportunity and it is getting to the point where this company is just getting stupid cheap.
Wednesday, May 19, 2010
5/19/10 Midafternoon Report: VIX shoots up, claims it doesn't have a problem, just wants to try to take its mind off global recession
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Tuesday, May 18, 2010
5/18/10 Midafternoon Report: If you want to short in Germany, you now have to wear pants
The markets fell again today as US macro news was mediocre at best, fears in China have risen from red alert to Kung Pao levels, and Germany has banned naked short selling of stocks and CDS (though you are still encouraged to get long Salzgitter and Money McBags' "salzgitter" would get very long for Sonya Kraus and he would certainly let her take the other side of his Siemens trade). With the ban on naked short selling in Germany, the markets floundered as traders sought to unwind positions and find alternative ways, or countries, to continue with the same bets they have been making. This market reeks of dislocation worse than Ronnie Brown's lisfranc.
Not helping matters was that US macro data was more mixed than a can of nuts (and please, write your own punchline). Home building rose in April with new home starts up 5.8%, the most since October 2008 as home builders prove to be more optimistic than Brooklyn Decker's bikini waxer. However, construction plans fell to their lowest level this year as the tax credit ran out and people remain unfucking employed. Building permits were down 11.5% and economists had guessed that they would be moderately up which once again proves that a broken clock is wrong 86,498 times a day. In other macro news, seasonally adjusted PPI was down .1% last month due to more people keeping their eyelids shut as a result of allergies (and yes Money McBags has used the PPI pun before, but it is still horribly funny). Core PPI, which excludes the essentials such as food, energy, and oxygen, was up .2%. Money McBags always loves that economists apparently don't care about food and energy prices as a gauge of inflation which is as rational as a pareto inefficient nash equilibrium like the prisoner's dilemma (and if Money McBags were ever a prisoner, he would have no dilemma because he simply wouldn't pick up the soap). Interestingly, energy prices actually slumped by .8% thanks to natural gas prices retreating from booming to silent but deadly and food prices declined by .2% despite meat rising 5.1% and thus beating meat price rises going back seven years. The good news though is that inflation appears to be tamer than a Dane Cook stand up routine.
Internationally, in addition to Germany banning naked shorting (and Money McBags hopes they don't ban naked cavorting), the EU sent 14.5B euro to Greece today and told them to keep the tip. With that 14.5B, the EU hopes to stave off Greek defaults, restore order to the European financial system, and receive a free two-liter of coke with their souvlaki since their order exceeded $20. Also, the ZEW Center for European Economic Research (ZEW of course standing for zero economic worth) said its indicator of German economic sentiment fell in May to 46 from 53. The good news is that the indicator’s historical average is 27, the bad news is that the 46 was below the consensus guess of 47, and the even worse news is that Lucy Pinder has never been in my kitchen. But it's not just Europe that is going in to the crapper like last night's bean burrito washed down with an extra large cup of metamucil and healthy dollop of "we're fucked," but also China as Chinese investors are also starting to get more nervous than Jackie Chan trying to roll his "r"s. The stock market in China remains lackluster, down 21% for the year despite being sprinkled with MSG to keep investors coming back for more. Driving the sell off has been expectations of rising interest rates, fear of tighter bank lending to help rein in inflation and quiet soaring property prices, and fortune cookies throughout the region reading "You're going down" (in bed. Booooyah!!). The markets remain more jittery than Sarah Palin in a spelling bee, so remain careful.
In stock news, Walmart put up a good quarter beating analyst guesses of $.85 eps by $.03. The world's largest seller of cheap crap had sales of $99B which were up 6% despite a 1.4% drop in same store sales. Guidance was generally inline though management said sales are shifting away from entertainment and apparel and into do-it yourself auto repairs, pharmacy, and tight fitting tops. Home Depot announced a good quarter and raised their outlook, yet the stock traded down as analysts think the outlook to be too rosy after Lowe's took a giant dump on Q2 forecasts yesterday. Finally, financials fell again as potential new credit card regulations hit card issuers and fear of Europe imploding hit banks. In all, it is uglier out there than Minnie Driver's face and tomorrow could get much much worse as fear has seeped back in to the market.
In small cap stocks, everything sucked. KITD got hit with another big block trade around midday despite both Merriman Curhan Ford and Roth Capital's analysts raising price targets after yesterday's Q. Money McBags promised he would listen to or watch their quarterly call today but he has been too busy to follow through on that, so his analysis from yesterday still stands. The fact is it is a weird little company, exposed to many different currencies, and highly acquisitve in a market that may soon like none of those three things. So the market may trade this down on technicals and fears, but fundamentally, if you don't mind some pain for awhile, it is worth holding on to like a drowning straight man would hold on to Christina Hendricks' life preservers.
Not helping matters was that US macro data was more mixed than a can of nuts (and please, write your own punchline). Home building rose in April with new home starts up 5.8%, the most since October 2008 as home builders prove to be more optimistic than Brooklyn Decker's bikini waxer. However, construction plans fell to their lowest level this year as the tax credit ran out and people remain unfucking employed. Building permits were down 11.5% and economists had guessed that they would be moderately up which once again proves that a broken clock is wrong 86,498 times a day. In other macro news, seasonally adjusted PPI was down .1% last month due to more people keeping their eyelids shut as a result of allergies (and yes Money McBags has used the PPI pun before, but it is still horribly funny). Core PPI, which excludes the essentials such as food, energy, and oxygen, was up .2%. Money McBags always loves that economists apparently don't care about food and energy prices as a gauge of inflation which is as rational as a pareto inefficient nash equilibrium like the prisoner's dilemma (and if Money McBags were ever a prisoner, he would have no dilemma because he simply wouldn't pick up the soap). Interestingly, energy prices actually slumped by .8% thanks to natural gas prices retreating from booming to silent but deadly and food prices declined by .2% despite meat rising 5.1% and thus beating meat price rises going back seven years. The good news though is that inflation appears to be tamer than a Dane Cook stand up routine.
Internationally, in addition to Germany banning naked shorting (and Money McBags hopes they don't ban naked cavorting), the EU sent 14.5B euro to Greece today and told them to keep the tip. With that 14.5B, the EU hopes to stave off Greek defaults, restore order to the European financial system, and receive a free two-liter of coke with their souvlaki since their order exceeded $20. Also, the ZEW Center for European Economic Research (ZEW of course standing for zero economic worth) said its indicator of German economic sentiment fell in May to 46 from 53. The good news is that the indicator’s historical average is 27, the bad news is that the 46 was below the consensus guess of 47, and the even worse news is that Lucy Pinder has never been in my kitchen. But it's not just Europe that is going in to the crapper like last night's bean burrito washed down with an extra large cup of metamucil and healthy dollop of "we're fucked," but also China as Chinese investors are also starting to get more nervous than Jackie Chan trying to roll his "r"s. The stock market in China remains lackluster, down 21% for the year despite being sprinkled with MSG to keep investors coming back for more. Driving the sell off has been expectations of rising interest rates, fear of tighter bank lending to help rein in inflation and quiet soaring property prices, and fortune cookies throughout the region reading "You're going down" (in bed. Booooyah!!). The markets remain more jittery than Sarah Palin in a spelling bee, so remain careful.
In stock news, Walmart put up a good quarter beating analyst guesses of $.85 eps by $.03. The world's largest seller of cheap crap had sales of $99B which were up 6% despite a 1.4% drop in same store sales. Guidance was generally inline though management said sales are shifting away from entertainment and apparel and into do-it yourself auto repairs, pharmacy, and tight fitting tops. Home Depot announced a good quarter and raised their outlook, yet the stock traded down as analysts think the outlook to be too rosy after Lowe's took a giant dump on Q2 forecasts yesterday. Finally, financials fell again as potential new credit card regulations hit card issuers and fear of Europe imploding hit banks. In all, it is uglier out there than Minnie Driver's face and tomorrow could get much much worse as fear has seeped back in to the market.
In small cap stocks, everything sucked. KITD got hit with another big block trade around midday despite both Merriman Curhan Ford and Roth Capital's analysts raising price targets after yesterday's Q. Money McBags promised he would listen to or watch their quarterly call today but he has been too busy to follow through on that, so his analysis from yesterday still stands. The fact is it is a weird little company, exposed to many different currencies, and highly acquisitve in a market that may soon like none of those three things. So the market may trade this down on technicals and fears, but fundamentally, if you don't mind some pain for awhile, it is worth holding on to like a drowning straight man would hold on to Christina Hendricks' life preservers.
Friday, May 14, 2010
5/14/10 Midafternoon Report: Market loses again but Nets and Knicks still said to be interested
Oh shit, the market sunk today like Bernie Madoff's grandchildren's hopes and dreams or like a booze cruise captained by Joseph Hazelwood. Just when you thought investors had forgotten about Greece like John Edwards forgot about dignity (though perhaps he never had any) or Britney Spears forgot about underwear, it is back in the news bringing down the Euro. Fears remain that Greece won't be able to service its debt (and it won't, unless perhaps Julia Alexandratou does the servicing), that the Euro may be doomed (is everyone else riding out EUO with Money McBags?), and that Nia Vardalos will finally make a sequel to My Big Fat Greek Wedding. Making matters worse are that Sony warned that they may suffer a “significant impact” if Europe’s deficit spreads, Chinese Premier Wen Jiabao said the foundations for a worldwide recovery aren’t “solid” thanks to the continuing debt crisis and the foundations being made out of tofu (and not extra firm tofu, but the regular mushy shit) and paper (the paper of course being the dying Euro), and Hannah Hilton still remains "retired." Things are looking so bleak today that even the cheering of Alison Preston likely won't cure the markets (though Money McBags would still like to put his rah in her sis-boom-bah). One way to stop the debt contagion from spreading is to go all Weimar Republic and inflate the shit out of the Euro, another is to break up the EU and stop rewarding moral hazard which seems to be at what Gremany is now hinting. Breaking up the EU would not only allow Germany and its strong economy to avoid taxing its workers in order to save its freespending neighbors, but it would also allow Germans to practice their favorite past time of schadenfreude. It is scary out there today so take a deep breath and start booking your vacation to Paris because the Louvre is getting cheaper by the day.
In the US, the banking sector is taken a beating like it's 1986 and it just walked up to Mike Tyson and told him he talks like girl. Politicians finally seem to want to try to regulate the industry that gave poor people loans in order to sell those loans off to greedy rich people not paying attention and thus destroy the global economy. First off, credit card companies are taking it in the first bucket today (that was for all you credit card analysts out there) as the Senate voted on legislation to limit interchange fees. AXP, COF, MA, and V are all down 5% to 10% as a key source of their revenue appears to be drying up like Soul Glo-less jheri curls. Not only are politicians going after card issuers, but they are trying to fix the rating agencies by creating a middleman (or lucky pierre if you will) to determine who will rate bonds. This is a bassackward solution, but still better than having rating agencies bid for business and thus completely take objectivity out of just a little something called objectively rating fucking bonds. First of all, Money McBags doesn't know why any bonds need third party ratings. Investors should just do their fucking work themselves or rely on the sellside or fucking Yelp.com for all Money McBags cares. Most importantly though, the current system is more screwed up than Oedipus' sex life or Tori Spellings' face, so Money McBags applauds the baby fucking steps politicians are taking but it's a bit like showering before you bone a hooker because at the end of the day you're still going to get herpes. Finally, the SEC and NYAG are still going after banks who may have lied to ratings agencies about what they were actually putting in CDOs. Look, Money McBags has said this before, but they were all fucking complicit. Honestly, it would take about 3 minutes going through e-mails to convict every bank and every ratings agency of screwing the consumer like the consumer was walking home and hitched a ride on the the Bang Bus. It was a big shell game only the shell was the global economy and the game was gay chicken and no one flinched so we're all left with flacid cock in our hands. Be very wary of the financials space right now because if the government wants to be serious and prosecute, there will be no winners, like a Wilford Brimley-Kathy Bates sex tape.
As for macro news, US consumer sentiment was up in May and inline with analyst guesses as the average US consumer can't find Canada on a map, much less Greece, so it just proves that ignorance, and Madelyn Marie, are truly bliss. Also retail sales rose by .4% which beat analyst guesses of .2%. However, if autos, gas, and building materials are excluded, retail sales dropped .2%. Up .4%, down .2%, whatever, it's all rounding to Money McBags, but the point is, and Money McBags has to put this extrememly elegantly because he expects his readers all to be very cunning linguists, shit is still fucked up.
In stock news, it was what Money McBags calls an AC Green or a celibate day as shorts were up and longs were down. In addition to credit card issuers having their balances transfered, chipmaker Nvidia put up a big quarter but was down on a forecast more lacking than diction on an NBA studio show. The stock was down 10%+ as they guided to a 3% to 5% revenue decline for the upcoming quarter and analysts were guessing flat to moderately up revenue growth. Videogame makers are also all getting hit as an industry tracker showed the worst year over year sales decline since the Mario Brothers were implicated in the steroid ring and thus became a bit less "super." Software sales were down 23% and analysts were expected sales to rise, especially off of a week April number last year while hardware sales were down and amazing 37% as teenagers spent more time playing Scrabble on Facebook and learning to YoYo from the way ahead of his time K-Strass.
In small cap news, everything tumbled except sleepy Money McBags holding DFZ and IBKR. IBKR is a bit of an interesting play here as the CEO (who also owns 80% of the company) thinks there is $2 of eanrings power in his business but they face lumpy Qs as their market making business is always long volatility to hedge. Well guess what, unless you have been on the planet Melmac for the past week eating pussy, you are probably aware that volatility is spiking up and thus IBKR's long vol play should bring earnings back to their market making business. The company takes little balance sheet risk as they are making markets in listed options and hedging their exposures and they have a nice other business which is an online trading platform that is growing 20%+. This business has been more of a value trap than going to the backroom in a Vegas strip club (and as a word of advice, save the $150 and just get 7 lap dances), but this is the kind of environment where they should excel. So if you are itching for risk, this is one way to play the financials space relatively safely and with the trends going in your favor and it's still pretty cheap trading at only ~8.5x their earnings potential.
So enjoy your weekend and remember to tell a friend or 10,000 about When Genius Prevailed because the Money McBags's revolution is underway. And feel free to follow Money McBags on twitter.
In the US, the banking sector is taken a beating like it's 1986 and it just walked up to Mike Tyson and told him he talks like girl. Politicians finally seem to want to try to regulate the industry that gave poor people loans in order to sell those loans off to greedy rich people not paying attention and thus destroy the global economy. First off, credit card companies are taking it in the first bucket today (that was for all you credit card analysts out there) as the Senate voted on legislation to limit interchange fees. AXP, COF, MA, and V are all down 5% to 10% as a key source of their revenue appears to be drying up like Soul Glo-less jheri curls. Not only are politicians going after card issuers, but they are trying to fix the rating agencies by creating a middleman (or lucky pierre if you will) to determine who will rate bonds. This is a bassackward solution, but still better than having rating agencies bid for business and thus completely take objectivity out of just a little something called objectively rating fucking bonds. First of all, Money McBags doesn't know why any bonds need third party ratings. Investors should just do their fucking work themselves or rely on the sellside or fucking Yelp.com for all Money McBags cares. Most importantly though, the current system is more screwed up than Oedipus' sex life or Tori Spellings' face, so Money McBags applauds the baby fucking steps politicians are taking but it's a bit like showering before you bone a hooker because at the end of the day you're still going to get herpes. Finally, the SEC and NYAG are still going after banks who may have lied to ratings agencies about what they were actually putting in CDOs. Look, Money McBags has said this before, but they were all fucking complicit. Honestly, it would take about 3 minutes going through e-mails to convict every bank and every ratings agency of screwing the consumer like the consumer was walking home and hitched a ride on the the Bang Bus. It was a big shell game only the shell was the global economy and the game was gay chicken and no one flinched so we're all left with flacid cock in our hands. Be very wary of the financials space right now because if the government wants to be serious and prosecute, there will be no winners, like a Wilford Brimley-Kathy Bates sex tape.
As for macro news, US consumer sentiment was up in May and inline with analyst guesses as the average US consumer can't find Canada on a map, much less Greece, so it just proves that ignorance, and Madelyn Marie, are truly bliss. Also retail sales rose by .4% which beat analyst guesses of .2%. However, if autos, gas, and building materials are excluded, retail sales dropped .2%. Up .4%, down .2%, whatever, it's all rounding to Money McBags, but the point is, and Money McBags has to put this extrememly elegantly because he expects his readers all to be very cunning linguists, shit is still fucked up.
In stock news, it was what Money McBags calls an AC Green or a celibate day as shorts were up and longs were down. In addition to credit card issuers having their balances transfered, chipmaker Nvidia put up a big quarter but was down on a forecast more lacking than diction on an NBA studio show. The stock was down 10%+ as they guided to a 3% to 5% revenue decline for the upcoming quarter and analysts were guessing flat to moderately up revenue growth. Videogame makers are also all getting hit as an industry tracker showed the worst year over year sales decline since the Mario Brothers were implicated in the steroid ring and thus became a bit less "super." Software sales were down 23% and analysts were expected sales to rise, especially off of a week April number last year while hardware sales were down and amazing 37% as teenagers spent more time playing Scrabble on Facebook and learning to YoYo from the way ahead of his time K-Strass.
In small cap news, everything tumbled except sleepy Money McBags holding DFZ and IBKR. IBKR is a bit of an interesting play here as the CEO (who also owns 80% of the company) thinks there is $2 of eanrings power in his business but they face lumpy Qs as their market making business is always long volatility to hedge. Well guess what, unless you have been on the planet Melmac for the past week eating pussy, you are probably aware that volatility is spiking up and thus IBKR's long vol play should bring earnings back to their market making business. The company takes little balance sheet risk as they are making markets in listed options and hedging their exposures and they have a nice other business which is an online trading platform that is growing 20%+. This business has been more of a value trap than going to the backroom in a Vegas strip club (and as a word of advice, save the $150 and just get 7 lap dances), but this is the kind of environment where they should excel. So if you are itching for risk, this is one way to play the financials space relatively safely and with the trends going in your favor and it's still pretty cheap trading at only ~8.5x their earnings potential.
So enjoy your weekend and remember to tell a friend or 10,000 about When Genius Prevailed because the Money McBags's revolution is underway. And feel free to follow Money McBags on twitter.
Tuesday, May 11, 2010
5/11/10 Midafternoon Report: Europe bailout signals "too PIIGS to fail" policy
Did I miss something yesterday? Jeesh, Money McBags takes a day off to fine tune his factors of production and Europe decides to mimic Ben Bernanke's "too big to count" strategy by printing up enough Euros to finally finish off the Bialowieza Forest or to get 36 very straight hours with the lovely Ashley Dupre. Perhaps the EU just wanted to test out the theoretical economic J-curve as part of some bs study by INSEAD to help future business leaders understand the value of exporting, but if they really wanted to devalue their currency, they should have just married it to Mickey Rourke. But hey, as long as the EU is content to continue to tickle John Maynard Keynes' shriveled balls with their embracing of debt, perhaps they'll go shock thumb on Sir Thomas Gresham's law by creating a shittier currency than the Euro in order to reinflate the dying currency's value. Ugh. This bail out continues to promote moral hazard and serves to merely put a band aid on a gun shot wound or a regular condom on Lexington Steele. Giving more money to countries who spent it like Kirtstie Alley at a Sizzler on rib night is just bad business. If your kid ran up a credit card bill, odds are you'd take it the fuck away from them and not increase their credit line which is basically what is happening in Europe. So Greece, Spain, Lucy Pinder, keep buying the shit out of whatever you want because Jean-Claude Trichet and Christine LaGarde have the printing presses on full bore and it's lend one lend one free day across the continent. And Europeans, start spending those Euros because the currency is about to become as worthless as campaign funds to John Edwards, binoculars to Stevie Wonder, or a lap dance to Richard Simmons.
The market however is rallying again today as apparently the UK is talking about instituting budget cuts. What is encouraging is that Britain is doing this despite its current hung parliament (and an English parliament hasn't been this hung since the aptly named Dick Long dangled his legislation in the House of Commons in the late 1600s). With all of this commotion in Europe, let's not forget that China may still be a problem as inflation is rising with home prices up 12.8%. China continues to boom with retail sales up 18.5% and bank lending in the month of April up to $113B. Hey EU, why not just quit screwing around and sell yourselves to China and be done with it. With China's economy bubblerific, it would be a bit like AOL buying Time Warner, but that worked out well for everyone right (and by everyone, Money McBags means Steve Case)?
In US news, the SEC is getting exchanges to institute new circuit breakers to stop stocks from falling too much too quickly. In this way the SEC hopes to remanipulate the market from the high frequency traders who currently manipulate it. Money McBags still has no faith in the current market structure after last week's crash that was only stopped by dumb luck. In macro news, wholesale inventories in the US rose .4% in March which was a tick below analyst guesses but puts wholesale inventories at their eight month high which is marginally not bad news for the economy.
In stock news, LM beat expectations, announced a potential $1B buyback, and apparently cured cancer as the stock is up 13%. They earned $.39 per share which bested analyst guesses of $.35 even though they still had $10.9B of outflows. LM also announced a "profit boosting" plan which consists of boosting more people out of jobs to increase overall profit as the investment manager continues to lose assest (though at a much slower pace). Alternatively, Priceline is down 10% today causing investors to all ask the questions "Priceline is still in business? Will they take Beenz?" Apparently PCLN's guidance was weaker than Money McBags knees after encountering the lovely Raven Alexis as they warned of a slowdown in their international business for the upcoming quarter thanks to a series of events including the Iceland volcano erupting, the weakening of the Euro, and a week long Hanna Hilton marathon on Spice.
In small cap news, CRUS continues to rally after apparently Jim Cramer slathered all over it last night. Money McBags has been pimping CRUS for quite a while now even though he sold it the other day to mitigate his risk (but hey, who needed the extra 20% upside, ugh). Money McBags thinks $1.20 in eps is not unreasonable for CRUS which puts the company at ~10x + $2 in cash. He wouldn't be buying here because Cramer's picks tend to get a pop up before sliding back down, but this is a solid growth company (you can read for yourself if you just type CRUS in to the search box here, speaking of which, Money Mcbags would love to search Hayley Atwell's box). Money McBags is still concerned about the market structure and the influence high frequency traders have so he is not sure fundamental analysis is really all that worthwhile right now. If you believe in the markets though, KITD is ridonkulously cheap after the sell off last week and has yet to rebound. The issue that Money McBags is trying to work through though is KITD's reliance on Europe with 70% of their revenue coming from European companies. Money McBags will ponder this as he swapped his holding into GLD but will be back analyzing companies tomorrow.
The market however is rallying again today as apparently the UK is talking about instituting budget cuts. What is encouraging is that Britain is doing this despite its current hung parliament (and an English parliament hasn't been this hung since the aptly named Dick Long dangled his legislation in the House of Commons in the late 1600s). With all of this commotion in Europe, let's not forget that China may still be a problem as inflation is rising with home prices up 12.8%. China continues to boom with retail sales up 18.5% and bank lending in the month of April up to $113B. Hey EU, why not just quit screwing around and sell yourselves to China and be done with it. With China's economy bubblerific, it would be a bit like AOL buying Time Warner, but that worked out well for everyone right (and by everyone, Money McBags means Steve Case)?
In US news, the SEC is getting exchanges to institute new circuit breakers to stop stocks from falling too much too quickly. In this way the SEC hopes to remanipulate the market from the high frequency traders who currently manipulate it. Money McBags still has no faith in the current market structure after last week's crash that was only stopped by dumb luck. In macro news, wholesale inventories in the US rose .4% in March which was a tick below analyst guesses but puts wholesale inventories at their eight month high which is marginally not bad news for the economy.
In stock news, LM beat expectations, announced a potential $1B buyback, and apparently cured cancer as the stock is up 13%. They earned $.39 per share which bested analyst guesses of $.35 even though they still had $10.9B of outflows. LM also announced a "profit boosting" plan which consists of boosting more people out of jobs to increase overall profit as the investment manager continues to lose assest (though at a much slower pace). Alternatively, Priceline is down 10% today causing investors to all ask the questions "Priceline is still in business? Will they take Beenz?" Apparently PCLN's guidance was weaker than Money McBags knees after encountering the lovely Raven Alexis as they warned of a slowdown in their international business for the upcoming quarter thanks to a series of events including the Iceland volcano erupting, the weakening of the Euro, and a week long Hanna Hilton marathon on Spice.
In small cap news, CRUS continues to rally after apparently Jim Cramer slathered all over it last night. Money McBags has been pimping CRUS for quite a while now even though he sold it the other day to mitigate his risk (but hey, who needed the extra 20% upside, ugh). Money McBags thinks $1.20 in eps is not unreasonable for CRUS which puts the company at ~10x + $2 in cash. He wouldn't be buying here because Cramer's picks tend to get a pop up before sliding back down, but this is a solid growth company (you can read for yourself if you just type CRUS in to the search box here, speaking of which, Money Mcbags would love to search Hayley Atwell's box). Money McBags is still concerned about the market structure and the influence high frequency traders have so he is not sure fundamental analysis is really all that worthwhile right now. If you believe in the markets though, KITD is ridonkulously cheap after the sell off last week and has yet to rebound. The issue that Money McBags is trying to work through though is KITD's reliance on Europe with 70% of their revenue coming from European companies. Money McBags will ponder this as he swapped his holding into GLD but will be back analyzing companies tomorrow.
Thursday, May 6, 2010
5/6/10 Midafternoon Report: Europe to be the new Australia as european debt falls "down under"
The market continues to sell off as Angela Merkel happily plays her fiddle atop the Zugspitze while Europe burns below. The debt crisis in Europe continues to gain momentum like it has an improbable, though theoretically possible, coefficient of restitution greater than one or as if it were running for office with the promise that Amanda Carrier will personally "thank" every voter. ECB president Jean-Claude Trichet (also known as the peon from Lyon from his starring roles in Bubble Impact and Wall Street Fighter) warned of an uncertain outlook for the EU after the ECB held rates at 1%. The uncertainty stems from the EU not being sure if Europe's impending bankruptcy will be caused by hyperinflation or just good old fashioned default. He also defended the ECB's decision to suspend Greece's bond ratings by saying "well, we didn't have a rating lower than junk, so it wasn't really a tough choice" and when queried about Spain and Portugal, he responded that they are "not in the same boat" as Greece, before mumbling "They're in the boat that is sinking next to Greece's boat." Trichet then lauded Greece's austerity measures and shrugged while claiming if they didn't work "c'est la vie." Slightly positive news is that while Spain's cost of raising debt was up by ~80bps and a quart of paella, demand remained strong with their latest bond offering being oversold by ~2.5x. However, rumors are that the EU is looking into what is being called a "nuclear option" of buying government debt in the secondary market in order to help keep demand and liquidity at reasonable levels and if that doesn't work, they will try the "nuclear cough option" which is trickier and has a stronger possibility of backfiring. The point is there is some bad shit going down in Europe and the scary part is that the US suffers from many of the same issues since we love eating hamburgers today, even though we'll have to pay for five of them on Tuesday. Money McBags prefers to think about baseball, bunny rabbits, and Alice Eve and thus sweep the impending economic crisis under the rug because if he stops and focuses on the real issues he gets nauseated enough to give even the most discerning emetophiliac a stiffy.
In the US, Retail sales slumped a bit in April with some analysts blaming the earlier Easter season and others blaming something called 10% unemployment. Speaking of unemployment, new claims for unemployment dropped last week by 7k to 444k or as Moses Malone would say "fo fo fo." Economists were guessing claims would drop by 11k so the number was a bit of a disappointment, though not as much of a disappointment as Ron Palillo's career. One thing that may be keeping claims down is the productivity rate in the US which grew 3.6% and bested economist guesses of 2.5%. See as workers and production become more efficient, employers need to hire fewer people thus prolonging the unemployment cycle. So a big fuck you to all of you efficient workers who are keeping the unemployment rate so high that the economy is still struggling. If Money McBags were president, and trust me he has turned down the nomination many times, the first thing he would do would be to hire Alan Greenspan, just so he could fire him again, the second thing he would do is make Hayley Atwell his Undersecretary of State, and the third thing he would do is promote the terribly NSFW guesshermuff to the work force thus sinking their productivity as they spend hours mastering the competitive sport of muff guessing. And with that one move, producitivity would decrease enough to cause companies to hire more people and thus unemployment would start to abate. Problem fucking solved (and to be honest, Money McBags would love to solve any problem the still NSFW 1600 has).
In stock news, MGM posted a loss thanks in part to their CityCenter development on the Las Vegas strip which had a $255MM operating loss. Apparently people stopped buying overpriced condos in overdeveloped Las Vegas and CityCenter went through a drastic hooker shortage. MGM is trading down 6% on the day but promises it will make it up to investors tonight when they finally hit a hot streak at the craps table. Nintendo is down 3% on a disappointing Q as apparently Mario finally saved the Princess from Donkey Kong thereby leaving the franchise to spend some time alone with his long lost fair maiden. Sales of the Wii were down 20% for the year and the company is guiding to further declines as the market becomes more competitive and saturated and teenagers start to discover something called "outside."
In small cap news, everything is pretty much getting shit on like it is playing the foil (or perhaps the saran wrap) in a German scat film. One company Money McBags has talked about before though never felt comfortable enough to own, HIL, just put up a craptastic quarter and is down a whopping 24%. HIL is a project and claims manager for construction projects with most of their revenue coming from outside the US. Money McBags has not listened to their call yet but he went through their release and it looks like the problem stemmed from cost controls worse than those of Stephen Baldwin. Revenue was flattish and basically in line at $104.5MM vs analyst guesses of $106MM but eps missed by a wider spread than Larry Craig in a Manhole bathroom. Analysts guessed eps would be $.11 and it came in at $.06 as SG&A rose from 31.4% to 33.0% of their consulting fee revenue which is a heck of a lot of nights out at the Dubai Rick's Cabaret. Not only was SG&A up, but backlog fell from $620MM to $540MM, 12 month backlog fell from $280MM to $240MM, and Money McBags' back log fell after eating a bean burrito with extra hot sauce. Most of the damage was done in their claims management business which is ~75% of revenue and was down ~8% organically largely driven by business in the Middle East (perhaps they lost out to the Bluth Company in building construction in Iraq). Money McBags isn't sure what the fuck is going on with this business as managament had mostly indicated that things were ok so it is not clear why they managed costs like Corey Feldman has managed his career. If you annualize this Q's EPS and EBITDA, the company is trading at 20x eps and ~9x EV/EBITDA even with the down 24% today. Unfortunately, that seems a little too pricey until we can understand why SG&A went up so much and how they are going to backfill the loss of organic growth in the Middle East (and speaking of backfill, Money McBags would love fill Marissa Miller's back).
And loyal readers, don't forget Money McBags is on twitter and since he is providing you with top level analysis, insights, and plenty of dick jokes all out of the goodness of his way too big heart, how about telling a friend or 10,000 about When Genius Prevailed? Could you help an analyst out?
In the US, Retail sales slumped a bit in April with some analysts blaming the earlier Easter season and others blaming something called 10% unemployment. Speaking of unemployment, new claims for unemployment dropped last week by 7k to 444k or as Moses Malone would say "fo fo fo." Economists were guessing claims would drop by 11k so the number was a bit of a disappointment, though not as much of a disappointment as Ron Palillo's career. One thing that may be keeping claims down is the productivity rate in the US which grew 3.6% and bested economist guesses of 2.5%. See as workers and production become more efficient, employers need to hire fewer people thus prolonging the unemployment cycle. So a big fuck you to all of you efficient workers who are keeping the unemployment rate so high that the economy is still struggling. If Money McBags were president, and trust me he has turned down the nomination many times, the first thing he would do would be to hire Alan Greenspan, just so he could fire him again, the second thing he would do is make Hayley Atwell his Undersecretary of State, and the third thing he would do is promote the terribly NSFW guesshermuff to the work force thus sinking their productivity as they spend hours mastering the competitive sport of muff guessing. And with that one move, producitivity would decrease enough to cause companies to hire more people and thus unemployment would start to abate. Problem fucking solved (and to be honest, Money McBags would love to solve any problem the still NSFW 1600 has).
In stock news, MGM posted a loss thanks in part to their CityCenter development on the Las Vegas strip which had a $255MM operating loss. Apparently people stopped buying overpriced condos in overdeveloped Las Vegas and CityCenter went through a drastic hooker shortage. MGM is trading down 6% on the day but promises it will make it up to investors tonight when they finally hit a hot streak at the craps table. Nintendo is down 3% on a disappointing Q as apparently Mario finally saved the Princess from Donkey Kong thereby leaving the franchise to spend some time alone with his long lost fair maiden. Sales of the Wii were down 20% for the year and the company is guiding to further declines as the market becomes more competitive and saturated and teenagers start to discover something called "outside."
In small cap news, everything is pretty much getting shit on like it is playing the foil (or perhaps the saran wrap) in a German scat film. One company Money McBags has talked about before though never felt comfortable enough to own, HIL, just put up a craptastic quarter and is down a whopping 24%. HIL is a project and claims manager for construction projects with most of their revenue coming from outside the US. Money McBags has not listened to their call yet but he went through their release and it looks like the problem stemmed from cost controls worse than those of Stephen Baldwin. Revenue was flattish and basically in line at $104.5MM vs analyst guesses of $106MM but eps missed by a wider spread than Larry Craig in a Manhole bathroom. Analysts guessed eps would be $.11 and it came in at $.06 as SG&A rose from 31.4% to 33.0% of their consulting fee revenue which is a heck of a lot of nights out at the Dubai Rick's Cabaret. Not only was SG&A up, but backlog fell from $620MM to $540MM, 12 month backlog fell from $280MM to $240MM, and Money McBags' back log fell after eating a bean burrito with extra hot sauce. Most of the damage was done in their claims management business which is ~75% of revenue and was down ~8% organically largely driven by business in the Middle East (perhaps they lost out to the Bluth Company in building construction in Iraq). Money McBags isn't sure what the fuck is going on with this business as managament had mostly indicated that things were ok so it is not clear why they managed costs like Corey Feldman has managed his career. If you annualize this Q's EPS and EBITDA, the company is trading at 20x eps and ~9x EV/EBITDA even with the down 24% today. Unfortunately, that seems a little too pricey until we can understand why SG&A went up so much and how they are going to backfill the loss of organic growth in the Middle East (and speaking of backfill, Money McBags would love fill Marissa Miller's back).
And loyal readers, don't forget Money McBags is on twitter and since he is providing you with top level analysis, insights, and plenty of dick jokes all out of the goodness of his way too big heart, how about telling a friend or 10,000 about When Genius Prevailed? Could you help an analyst out?
Thursday, February 25, 2010
2/25/10 Midfternoon Report: Goldman Sachs seeks nobel prize for literature after (under)writing biggest Greek tragedy since Euripides
Greece's debt issues are once again scaring the market like the snake ridden visage of the famous gorgon from ancient Greek mythology known more familiarly as Lady GaGa. Rising debt, a spiraling deficit, and a massive bidding up of CDS by traders betting against Greece has created somewhat of a Foucault current around the Greek islands which is now threatening to pull the entire EU and global economy in with it. Greece hasn't been in such imminent trouble since the Battle of Thermopylae and they can only hope that the bankers whom they used for currency swaps did not run to the other side and push up the price of CDS with their inside knowledge of the obfuscated rising Greek debt and hence betray them like Ephialtes did in that same battle. Moodys is now threatening to downgrade Greece (perhaps to Jamaica, or maybe even Puerto Rico), so the global markets are very skittish today, since we all know how great Moodys is at predicting debt defaults (except when they happened to miss something called the entire global financial system meltdown). As if the Greek issue weren't bad enough, the EU came out today (luckily their parents already knew) and forecast 2010 to be a year of fragile growth, even more fragile than the tears of a newborn unicorn upon learning it is just the figment of someone's imagination.
In US macro news, orders for durable goods excluding transportation fell .6% which was below estimates of a 1% gain though they rose 3% when including the jump in aircraft orders. While durable good orders may have been down, non-durable goods orders or as their better known as, "shit made in China," appear to still be doing very well. The new claims for unemployment number was also out today and it was much worse than expectations as it was up by 22k to 496k people filing first time claims. Luckily the labor department shrugged it off as being partially inflated by poor weather in the Northeast causing construction jobs to be cancelled over the past few weeks and also partially being inflated due to something else called employers laying a lot of fucking people off. They said without the weather, new claims would have been down by a "healthy" 10k to 440k jobs lost and if 440k job losses is considered healthy, then the labor department must think Michael Jackson has "just a little breathing problem."
In stock news, CCE is up 33% on a takeout offer from KO, while KO is down 4% on that same news. KO's CEO and Chairman said the move was a way to convert "passive capital into active capital" and when asked to clarify what exactly he meant by that, he simply said "Chewbacca was a wookie." While Money McBags is an owner of KO, and thus 4% less happy today than he was yesterday, the global sales growth trends and brand equity have not changed at all by the deal and thus he is content to hold and potentially add a bit as soon as he can get a hold of some numbers on the deal. In other stocks reporting, SIRI somehow turned a profit this last quarter even if it was still less than $.01 per share. Subscriber growth in satellite radio has largely been stagnant due to the recession and the hundreds of other ways to get music for cheaper prices. With Howard Stern's contract ending at the end of the year, Sirius may be more fucked than Houston during her 500 man gang bang. This company sells a product that is becoming outdated faster than the eight track or Jennifer Aniston (and take a few seconds on that pun, it will hit you in a bit, but e-mail me if you need help) as the prevelance of iPods, smart phones, and internet radio make paying a monthly fee for that same content as bad of a financial decision as the Olympics were for NBC or plastic surgery was for Greta Van Susteren. Money McBags would stay further away from SIRI stock than he would a hemophiliac AIDS patient in the throes of leprosy.
In small cap news PALM annouced their smartphones aren't selling as well as they hoped as they have seemingly failed to put a dent in the duopoly that is the iPhone and the Blackberry (and honestly, taking on those two behemoths was about as smart of a move as introducing a soft drink to compete with Coke and Pepsi, a search engine to compete with Google and Yahoo!, or a cure for herpes to compete with Valtrex and staying 100 feet away from Paris Hilton). Palm also said their sales will be "well below" their forecasts like Vern Troyer is "well below" the clown's hand to ride the roller coaster as apparently even a color blind lepidopterist is better at his/her job than Palm's head of strategy is at his. Also Money McBags favorite WILC is up 10% today after a ridiculous and unwarranted sell-off over the past week. WILC remains the most ridiculous, cheapest name Money McBags has ever run across which is a bit worrisome because the last thing he thought was too good to be true was marriage, so buyer beware. And finally SMSI put up a decent Q and is up 14%. SMSI is a pretty interesting name in that they sell software that allows netbooks internet connectivity and net books continue to grow faster than a steroid user also suffering from pituitary gigantism. While the Board of Directors looks like they are waiting for the comet Hale-Bopp to hit the Earth, the company has done a decent job over the years of buying technologies in growing markets. SMSI is pretty much a one-trick pony right now with that one trick being connectivity and the pony having been purchased, but they are relatively cheap. Their wireless business grew 22% this year, though the pace slowed as the year wore on while overall topline growth was 9%. They guided to around 20% top line growth for 2009 and estimates are for them to earn in low $.70s per share which is about what they earned this year but their tax rate will be going up. The company has a nice balance sheet with $45MM of cash and no debt and is only trading at 12x estimates despite growing the topline 20%ish (again, profit growth may be negligible due to the tax rate increase). The issue with this company is that they have missed guidance before, have really only one product/area of focus, and rely on acquisitions to find the next new technology. While they have already wrapped up most of the big netbook producers as clients, competition is getting fiercer. So it's not the best business model but it is moderately cheap with good prospects. The jump today is likely short covering but it is worth reading the transcript of the call and figuring out if a good entry point will exist once the short covering is over.
In US macro news, orders for durable goods excluding transportation fell .6% which was below estimates of a 1% gain though they rose 3% when including the jump in aircraft orders. While durable good orders may have been down, non-durable goods orders or as their better known as, "shit made in China," appear to still be doing very well. The new claims for unemployment number was also out today and it was much worse than expectations as it was up by 22k to 496k people filing first time claims. Luckily the labor department shrugged it off as being partially inflated by poor weather in the Northeast causing construction jobs to be cancelled over the past few weeks and also partially being inflated due to something else called employers laying a lot of fucking people off. They said without the weather, new claims would have been down by a "healthy" 10k to 440k jobs lost and if 440k job losses is considered healthy, then the labor department must think Michael Jackson has "just a little breathing problem."
In stock news, CCE is up 33% on a takeout offer from KO, while KO is down 4% on that same news. KO's CEO and Chairman said the move was a way to convert "passive capital into active capital" and when asked to clarify what exactly he meant by that, he simply said "Chewbacca was a wookie." While Money McBags is an owner of KO, and thus 4% less happy today than he was yesterday, the global sales growth trends and brand equity have not changed at all by the deal and thus he is content to hold and potentially add a bit as soon as he can get a hold of some numbers on the deal. In other stocks reporting, SIRI somehow turned a profit this last quarter even if it was still less than $.01 per share. Subscriber growth in satellite radio has largely been stagnant due to the recession and the hundreds of other ways to get music for cheaper prices. With Howard Stern's contract ending at the end of the year, Sirius may be more fucked than Houston during her 500 man gang bang. This company sells a product that is becoming outdated faster than the eight track or Jennifer Aniston (and take a few seconds on that pun, it will hit you in a bit, but e-mail me if you need help) as the prevelance of iPods, smart phones, and internet radio make paying a monthly fee for that same content as bad of a financial decision as the Olympics were for NBC or plastic surgery was for Greta Van Susteren. Money McBags would stay further away from SIRI stock than he would a hemophiliac AIDS patient in the throes of leprosy.
In small cap news PALM annouced their smartphones aren't selling as well as they hoped as they have seemingly failed to put a dent in the duopoly that is the iPhone and the Blackberry (and honestly, taking on those two behemoths was about as smart of a move as introducing a soft drink to compete with Coke and Pepsi, a search engine to compete with Google and Yahoo!, or a cure for herpes to compete with Valtrex and staying 100 feet away from Paris Hilton). Palm also said their sales will be "well below" their forecasts like Vern Troyer is "well below" the clown's hand to ride the roller coaster as apparently even a color blind lepidopterist is better at his/her job than Palm's head of strategy is at his. Also Money McBags favorite WILC is up 10% today after a ridiculous and unwarranted sell-off over the past week. WILC remains the most ridiculous, cheapest name Money McBags has ever run across which is a bit worrisome because the last thing he thought was too good to be true was marriage, so buyer beware. And finally SMSI put up a decent Q and is up 14%. SMSI is a pretty interesting name in that they sell software that allows netbooks internet connectivity and net books continue to grow faster than a steroid user also suffering from pituitary gigantism. While the Board of Directors looks like they are waiting for the comet Hale-Bopp to hit the Earth, the company has done a decent job over the years of buying technologies in growing markets. SMSI is pretty much a one-trick pony right now with that one trick being connectivity and the pony having been purchased, but they are relatively cheap. Their wireless business grew 22% this year, though the pace slowed as the year wore on while overall topline growth was 9%. They guided to around 20% top line growth for 2009 and estimates are for them to earn in low $.70s per share which is about what they earned this year but their tax rate will be going up. The company has a nice balance sheet with $45MM of cash and no debt and is only trading at 12x estimates despite growing the topline 20%ish (again, profit growth may be negligible due to the tax rate increase). The issue with this company is that they have missed guidance before, have really only one product/area of focus, and rely on acquisitions to find the next new technology. While they have already wrapped up most of the big netbook producers as clients, competition is getting fiercer. So it's not the best business model but it is moderately cheap with good prospects. The jump today is likely short covering but it is worth reading the transcript of the call and figuring out if a good entry point will exist once the short covering is over.
Monday, February 22, 2010
2/22/10 Midday Report: M&A picking up as small companies take out their diaphrams hoping to trap acquirers before rates increase
The market is running in place today as it awaits further earnings and macro news later this week. The big M&A news today is that Schlumberger is buying Smith International for $11B, while the big T&A news today is that Rhian Sugden is hot. Schlumberger, which sounds like what is served for lunch in Berlin on the set of scat films in order to best prepare actors for their upcoming scenes, is purchasing Smith to improve their drilling technology. Wow, $11B seems like a lot of dough to get better at drilling when if they really wanted to learn how to drill better they could have just rented a Peter North compilation video for $5 and gone on their way (thanks, I'll be here all week, enjoy the soup). This is the biggest M&A deal of the year so far and with rates as low as they are and only likely to go up (since it's unlikely Bernanke would lower them below zero and thus pervert the entire financial system like Roman Polanksi on the set of High School Musical 4: Who Ordered the Pizza?), Money McBags is betting the M&A market only heats up from here so it is worth looking at small take-out candidates (like KITD or Meredith Eaton).
In international news, the Euro continues to sell off as investors grow more worried about Europe slipping back in to recession as a result of the potential Greek bail out. The WSJ has a long and narcolepsy curing expose today on Europe's clandestine use of complex financial instruments to prop up their economy over the past few years which served to hide the actual amount of debt and deficit on the continent. Apparently European countries used currency swaps like a tranny uses a gaff to doll themselves up and make themselves presentable. Well with Greece leading the debt spiral, Europe's adam's apple is beginning to show and those investors who put money into Europe and quietly wondered why Europe would only give them moderate returns (oral) are now finding out exactly why that was. Things are still a bit dodgy overseas which will likely cause further market volatility over the next few weeks, but it could also offer some solid opportunities.
In market news, Lowe's put up a good Q with top line revenue growth of 2% and 27% growth in earnings as they beat estimates by $.02. Lowe's CEO said the results ''suggest the worst of the economic cycle is likely behind us" and cited an uptick in the sale of big ticket items, like bulldozers to demolish foreclosed upon houses and storage sheds to keep one's valuables while the owners huddle in masses of cardboard boxes yearning to breathe air free from pollutants and disease. Lowe's gave conflicting guidance saying they expect the recovery to boost sales but that the spring quarter's profit will be below expectations and as a result, the stock is flatter than the singing voice of an American Idol contestant or the state of Illinois.
In the small cap space RICK is shaking off their awful quarter (which Money McBags broke down for you last week) and is up 10%. Now loyal readers know Money McBags was more disappointed with Rick's quarter than Abraham Lincoln was with General McClellan's slow pace in 1861, but somehow investors seem to be buying into the VCGH deal. Money McBags was considering selling some RICK after the Q, but he is glad he held on for now. That said, his target price was $16 and as RICK inches closer to that Money McBags will be reevaluating the company more often than Elin Woods reevalutes marriage or Christopher Reeve reevaluated riding horse back. In other small cap stocks, CTGX (a holdng of Money McBags) is due to report this week. CTGX has two businesses, one of them is basic, boring, and less sexy than Betty White in a GMILF video, and the other one has the potential to be hotter than any of the great Janine Lindemulder's classic Where The Boys Aren't movies. Their boring business is basically staffing and solutions to IBM for IBM's server installation business. CTGX provides people and knowledge to allow IBM to outsource this function. It's more boring than a Jane Austen novel and they have less control over it than an incontinent has over their urethra after drinking a 7-11 Big Gulp. Basically, if IBM is installing servers, CTGX gets work, if not, there is nothing they can do about it. The problem with this is that the staffing business has 3% margins and is 2/3 of their revenues with IBM being about 1/2 of that (and for you non-maffematicians, 1/2 of 2/3 is 1/3). Plus that business has been down 40ish% due to the economic decline. This is one of the reasons they started a new strategy a few years ago to focus on the health care IT market. The most exciting part of this strategy has been their foray into the electronic medical records business. Say what you want about Obama-care, but EMR is coming and the government will be funding it. CTGX's health care IT business is now 25% of their revenues and growing (with EMR being about 1/3 of that). They are one of only 8 companies that can install EMR systems and they focus on the smaller hospitals and charge on the order of 40% less than competition (which of course means they can move their price up as the demand picks up). The goverment is already giving big monetary incentives to hospitals to install EMR but are mandating that hospitals have these systems up and running by 2015. Now look, Money McBags is not a health care expert but he does know there are a fuckload of hospitals and only 8% of them currently have adequate EMR systems. So the demand is going to be huge while the supply is shorter than a Britney Spears mini-skirt or an Ogden Nash couplet (for example, the government thinks it will take 212k people over ten years to install adequate systems and there are currently only 10k people trained to do this). CTGX won 6 new EMR deals last Q but they say the market is still slow as hospitals are having trouble getting funding due to banks tightening up on lending. That should pass and government incentives are picking up and CTGX thinks this business will take off in 2011. The company is trading at around 20x 2010 earnings estimates which is hella expensive for a 3% operating margin staffing business, but their health care business has higher margins and is growing. CTGX is basically an option right now. As long as their staffing business doesn't completely fall off (and it appears to have stabilized), they should earn enough in the next few years to support their EMR busines while it continues to grow. It's a small position for Money McBags as it is a bit early, but it will be interesting to see if their core business was able to maintain in the past quarter.
In international news, the Euro continues to sell off as investors grow more worried about Europe slipping back in to recession as a result of the potential Greek bail out. The WSJ has a long and narcolepsy curing expose today on Europe's clandestine use of complex financial instruments to prop up their economy over the past few years which served to hide the actual amount of debt and deficit on the continent. Apparently European countries used currency swaps like a tranny uses a gaff to doll themselves up and make themselves presentable. Well with Greece leading the debt spiral, Europe's adam's apple is beginning to show and those investors who put money into Europe and quietly wondered why Europe would only give them moderate returns (oral) are now finding out exactly why that was. Things are still a bit dodgy overseas which will likely cause further market volatility over the next few weeks, but it could also offer some solid opportunities.
In market news, Lowe's put up a good Q with top line revenue growth of 2% and 27% growth in earnings as they beat estimates by $.02. Lowe's CEO said the results ''suggest the worst of the economic cycle is likely behind us" and cited an uptick in the sale of big ticket items, like bulldozers to demolish foreclosed upon houses and storage sheds to keep one's valuables while the owners huddle in masses of cardboard boxes yearning to breathe air free from pollutants and disease. Lowe's gave conflicting guidance saying they expect the recovery to boost sales but that the spring quarter's profit will be below expectations and as a result, the stock is flatter than the singing voice of an American Idol contestant or the state of Illinois.
In the small cap space RICK is shaking off their awful quarter (which Money McBags broke down for you last week) and is up 10%. Now loyal readers know Money McBags was more disappointed with Rick's quarter than Abraham Lincoln was with General McClellan's slow pace in 1861, but somehow investors seem to be buying into the VCGH deal. Money McBags was considering selling some RICK after the Q, but he is glad he held on for now. That said, his target price was $16 and as RICK inches closer to that Money McBags will be reevaluating the company more often than Elin Woods reevalutes marriage or Christopher Reeve reevaluated riding horse back. In other small cap stocks, CTGX (a holdng of Money McBags) is due to report this week. CTGX has two businesses, one of them is basic, boring, and less sexy than Betty White in a GMILF video, and the other one has the potential to be hotter than any of the great Janine Lindemulder's classic Where The Boys Aren't movies. Their boring business is basically staffing and solutions to IBM for IBM's server installation business. CTGX provides people and knowledge to allow IBM to outsource this function. It's more boring than a Jane Austen novel and they have less control over it than an incontinent has over their urethra after drinking a 7-11 Big Gulp. Basically, if IBM is installing servers, CTGX gets work, if not, there is nothing they can do about it. The problem with this is that the staffing business has 3% margins and is 2/3 of their revenues with IBM being about 1/2 of that (and for you non-maffematicians, 1/2 of 2/3 is 1/3). Plus that business has been down 40ish% due to the economic decline. This is one of the reasons they started a new strategy a few years ago to focus on the health care IT market. The most exciting part of this strategy has been their foray into the electronic medical records business. Say what you want about Obama-care, but EMR is coming and the government will be funding it. CTGX's health care IT business is now 25% of their revenues and growing (with EMR being about 1/3 of that). They are one of only 8 companies that can install EMR systems and they focus on the smaller hospitals and charge on the order of 40% less than competition (which of course means they can move their price up as the demand picks up). The goverment is already giving big monetary incentives to hospitals to install EMR but are mandating that hospitals have these systems up and running by 2015. Now look, Money McBags is not a health care expert but he does know there are a fuckload of hospitals and only 8% of them currently have adequate EMR systems. So the demand is going to be huge while the supply is shorter than a Britney Spears mini-skirt or an Ogden Nash couplet (for example, the government thinks it will take 212k people over ten years to install adequate systems and there are currently only 10k people trained to do this). CTGX won 6 new EMR deals last Q but they say the market is still slow as hospitals are having trouble getting funding due to banks tightening up on lending. That should pass and government incentives are picking up and CTGX thinks this business will take off in 2011. The company is trading at around 20x 2010 earnings estimates which is hella expensive for a 3% operating margin staffing business, but their health care business has higher margins and is growing. CTGX is basically an option right now. As long as their staffing business doesn't completely fall off (and it appears to have stabilized), they should earn enough in the next few years to support their EMR busines while it continues to grow. It's a small position for Money McBags as it is a bit early, but it will be interesting to see if their core business was able to maintain in the past quarter.
Friday, February 12, 2010
2/12/2010 Pre-Market Report: China tired of Greece stealing headlines, raises reserve rate to try to be January's Economist centerfold, promises to show their Shanghai if selected
It's a travel day for Money McBags so we'll get to the market news early. The big story which should give pause to the market (and by pause, I mean send it into a bit of a downward hissy fit like someone at Fox News after trying to spell USA without a teleprompter) is that China is raising their bank reserve requirement once again in order to put a damper on growth. China has been fueling the global recovery as they not only provide cheap, flimsy, and lead ridden goods for the world, but they are growing internally faster than a metastasizing anal fissure. This is the second time in month China is raising this reserve rate in their attempt to show the world that they are not fucking around and will try to avoid Greenspan's folly.
Also likely to send the market down today is Europe's recovery being more stagnant than Demond Wilson's acting career. GDP rose .1% in Europe which was only slightly below the .3% estimate but traders will likely overreact because volatilty to them is like spinach to Popeye or like Amanda Seyfried to Money McBag's "popping eye" (and yes that is a very bad euphemism, but you get for what you pay). This slow down in Europe's economy could not come at a worse time as markets are still trying to figure out when/how the EU intends to bail out Greece. It's like the EU has hired the underpants gnomes to solve the potential debt crisis. Step 1: Hint that you will bail out Greece. Step 3: Recover. Unfortunately, those people with actual working cerebral cortexes (Which rules out the delightful Carrie Prejean and the guy who invented Nuts 'n Gum) understand that there has to be a more substanial plan (and as an aside is the plural of cortex, cortexes or corti? Can someone exhume William Safire and get a ruling on this? Money McBags is not always a cunning linguist). Money McBags is sure that the EU will come to Greece's aid, because the Euro is not going anywhere, so until then, traders will just have their fun by continuing to bring volatility to the market.
There's not a lot of stock news yet but Berkshire Hathaway will be entering the S&P 500 today which should nudge it up a bit higher and maybe even cause Warren Buffet to take off his trifocals, pull up his breeches, tighten his cravat and gingerly smile before going back to his game of whist. In small caps, EHTH announced their quarter and revenue was a bit light on application growth struggles. EHTH is an interesting name in that they provide a network for people who do not have employee sponsored health care to get health insurance. The company should be booming right now with so many people signing up for Cobra that GI Joe may get slaughtered (and yes, that was an unfunny and terrible joke). EHTH has had a solid balance sheet, great ROEs, and a terrific business model, but Money McBags is a bit confused as to why they haven't been able to see stronger growth and if they are not booming in this environment, when will they? Money McBags has not had a chance to go through their quarter yet or listen to their call, but will be surprised if they don't sell off today.
Enjoy the weekend.
Also likely to send the market down today is Europe's recovery being more stagnant than Demond Wilson's acting career. GDP rose .1% in Europe which was only slightly below the .3% estimate but traders will likely overreact because volatilty to them is like spinach to Popeye or like Amanda Seyfried to Money McBag's "popping eye" (and yes that is a very bad euphemism, but you get for what you pay). This slow down in Europe's economy could not come at a worse time as markets are still trying to figure out when/how the EU intends to bail out Greece. It's like the EU has hired the underpants gnomes to solve the potential debt crisis. Step 1: Hint that you will bail out Greece. Step 3: Recover. Unfortunately, those people with actual working cerebral cortexes (Which rules out the delightful Carrie Prejean and the guy who invented Nuts 'n Gum) understand that there has to be a more substanial plan (and as an aside is the plural of cortex, cortexes or corti? Can someone exhume William Safire and get a ruling on this? Money McBags is not always a cunning linguist). Money McBags is sure that the EU will come to Greece's aid, because the Euro is not going anywhere, so until then, traders will just have their fun by continuing to bring volatility to the market.
There's not a lot of stock news yet but Berkshire Hathaway will be entering the S&P 500 today which should nudge it up a bit higher and maybe even cause Warren Buffet to take off his trifocals, pull up his breeches, tighten his cravat and gingerly smile before going back to his game of whist. In small caps, EHTH announced their quarter and revenue was a bit light on application growth struggles. EHTH is an interesting name in that they provide a network for people who do not have employee sponsored health care to get health insurance. The company should be booming right now with so many people signing up for Cobra that GI Joe may get slaughtered (and yes, that was an unfunny and terrible joke). EHTH has had a solid balance sheet, great ROEs, and a terrific business model, but Money McBags is a bit confused as to why they haven't been able to see stronger growth and if they are not booming in this environment, when will they? Money McBags has not had a chance to go through their quarter yet or listen to their call, but will be surprised if they don't sell off today.
Enjoy the weekend.
Thursday, February 11, 2010
2/11/10 Midday Report: EU says they will bail Greek out but offers few details, claims they were drunk at the time
The Greek debt crisis in Europe is still causing uncertainty in the markets as the leaders of the EU gave a tepid, vague, and Spicoli-ian response to their discussions and plans to bailout the Greeks. The president of the EU, some guy named Jose Barroso who also doubles as the Prime Minister of some place called Portugal where he is said to survive off of the magic lillies from the river Tejo opined: “There is an accord." He then went on to give a little more detail by saying: "it's a Honda Accord, but still it's an accord. Oh I keed I keed. We have a great accord, for me to poop on" as apparently Triumph the Insult Comic Dog is big in Portugal these days. German Chancellor Angela Merkel then said: “Greece won’t be left alone but there are rules and these rules must be adhered to. On this basis we will agree on a statement.” Of course the rules are that Greece has to drastically cut its spending, increase many of its taxes, and be home before 9pm, but the good news is that the leaders of the EU have finally agreed on a statement. So whoop-de-dam-doo, we have a statement. Unfortunately Money McBags has yet to find that statement anywhere and unless the statement is "we're bailing out Greece, now pass the saganaki," it is unclear what has actually been accomplished despite Herman Von Rompuy claiming that the EU will provide "determined and coordinated action if needed." That's great to know, really, but if you could provide that action BEFORE THE FUCKING EU IMPLODES, that would be much appreciated. You know Mr. Von Rompuy, if that's even your real name, the rest of the world is trying to run an economic recovery here so could you stop pussyfooting around (unless it's your foot and Abbey Lee's pussy, then please take your time) and lend the Greeks some fucking money already. Jeesh. I haven't seen a supposed plan with fewer details since Hank Paulson scribbled his TARP strategy on the back of a napkin using only ketchup packets and Alan Greenspan's tears. The EU leaders are being so vague they are making Sorities paradox look easier to reach a conclusion about than Sarah Jessica Parker's gender (trick question, because she's a tranny).
As for the US macro economy, initial claims for unemployment were out today showing a drop of 43k last week to 440k overall. This is lowest level in five weeks and may signal a "drop in the administrative backlog" which of course was likely caused by not having enough administrators to process the claims since most of the administrators had been laid off. The US economy appears to be stagnant right now and the question remains how long any recovery will take.
As for stocks, Pepsi reported an inline quarter and reaffirmed guidance and announced they will be increasing their share buy backs due to stronger than expected free cash flow. Earnings were driven by their snacks business line which feature such products as Doritos, Lays, and their new launch of Cheetos's Atherosclerosis sticks with the slogan "turning even your heart attacks orange." The company thinks they will have low teens 2010 earnings growth and is currently trading at a perfectly respectable 15x 2010 estimates. If Money McBags did not pick KO in the Pepsi challenge, he might consider adding a little PEP here.
In small cap news, not a lot is going on today as WGO is about to drop through ther support levels and EBIX is about to test the $14 level. As far as new information, an analyst from SocGen initiated coverage on KITD with a sell rating and a $9 price target citing concerns about KITD's lack of profitability, potential future goodwill impairments, and receivables growth outpacing revenue growth. Now just two weeks ago Money McBags broke down KITD for all of you with the main points being that they are in a growing market and are forecasting $13.5MM of EBITDA next year while trading at cheap EV/EBITDA and revenue multiples. As for SocGen's criticisms, first of all, a bank that almost went under due to a fraudulent trade shouldn't throw stones, unless those stones are made of diamonds, gold bullion, and Alexs Texas's behind and aimed at those investors who lost money. Secondly, KITD's receiveables did rise as they made several acquisitions and consolidated those receivables. The hope is that their collections will be better than the acquiree's and that they can churn out better revenue growth. Money McBags does agree that it is something which needs to be watched. However, SocGen's valuation might as well have been written in French because it makes less sense than people who give a crap about the Sports Illustrated Swimsuit issue (not that Money McBags is against scantily clad lovely ladies, but we have something called the internet which makes the SI Swimsuit model look about as risque as a Nun showing some ankle or Jay Leno's monolgues. Honestly, the most entertaining part of the SI Swimuit issue this year was finding out there is a model named Cintia Dicker (dicker? Money McBags doesn't even know her. Though to be honest, he would do more than just dick her)). The analyst's $9 valuation is achieved by taking some weighted valuations (including a $10.60 value derived from a DCF, which is higher than the current $10 price) and applying some sort of sector, company, and speculative discounts to that weighted valuation (why the discount isn't just put into the actual discount rate of the valuation is beyond Money McBags, but then again, so is the appeal of American Idol, so what do I know?). Anyway, Money McBags hasn't seen anything that contrived since Michael Jackson married Elvis's granddaughter. The analyst took down the valuation by 5% based on "company appeal" because of KITD's low liquidity. Excuse-moi? Comment t'appelles tu? Merde Tete? The main point is KITD is a speculative play, something which Money McBags said in his initial review of them and that is why Money McBags is not yet an owner. That said, the company is a market leader in a fast growing market. Yes, the acquisition model is a bit worrisome and the management team is a bit too salesy, but there is real potential for a company like this with locked in recurring revenues from Fortune 100 companies, to be a big winner. It is worth following KITD and maybe even buying if you can comfortable with the risks, that said, it is not a "sell" as SocGen so daintily pulled out of their derrieres.
As for the US macro economy, initial claims for unemployment were out today showing a drop of 43k last week to 440k overall. This is lowest level in five weeks and may signal a "drop in the administrative backlog" which of course was likely caused by not having enough administrators to process the claims since most of the administrators had been laid off. The US economy appears to be stagnant right now and the question remains how long any recovery will take.
As for stocks, Pepsi reported an inline quarter and reaffirmed guidance and announced they will be increasing their share buy backs due to stronger than expected free cash flow. Earnings were driven by their snacks business line which feature such products as Doritos, Lays, and their new launch of Cheetos's Atherosclerosis sticks with the slogan "turning even your heart attacks orange." The company thinks they will have low teens 2010 earnings growth and is currently trading at a perfectly respectable 15x 2010 estimates. If Money McBags did not pick KO in the Pepsi challenge, he might consider adding a little PEP here.
In small cap news, not a lot is going on today as WGO is about to drop through ther support levels and EBIX is about to test the $14 level. As far as new information, an analyst from SocGen initiated coverage on KITD with a sell rating and a $9 price target citing concerns about KITD's lack of profitability, potential future goodwill impairments, and receivables growth outpacing revenue growth. Now just two weeks ago Money McBags broke down KITD for all of you with the main points being that they are in a growing market and are forecasting $13.5MM of EBITDA next year while trading at cheap EV/EBITDA and revenue multiples. As for SocGen's criticisms, first of all, a bank that almost went under due to a fraudulent trade shouldn't throw stones, unless those stones are made of diamonds, gold bullion, and Alexs Texas's behind and aimed at those investors who lost money. Secondly, KITD's receiveables did rise as they made several acquisitions and consolidated those receivables. The hope is that their collections will be better than the acquiree's and that they can churn out better revenue growth. Money McBags does agree that it is something which needs to be watched. However, SocGen's valuation might as well have been written in French because it makes less sense than people who give a crap about the Sports Illustrated Swimsuit issue (not that Money McBags is against scantily clad lovely ladies, but we have something called the internet which makes the SI Swimsuit model look about as risque as a Nun showing some ankle or Jay Leno's monolgues. Honestly, the most entertaining part of the SI Swimuit issue this year was finding out there is a model named Cintia Dicker (dicker? Money McBags doesn't even know her. Though to be honest, he would do more than just dick her)). The analyst's $9 valuation is achieved by taking some weighted valuations (including a $10.60 value derived from a DCF, which is higher than the current $10 price) and applying some sort of sector, company, and speculative discounts to that weighted valuation (why the discount isn't just put into the actual discount rate of the valuation is beyond Money McBags, but then again, so is the appeal of American Idol, so what do I know?). Anyway, Money McBags hasn't seen anything that contrived since Michael Jackson married Elvis's granddaughter. The analyst took down the valuation by 5% based on "company appeal" because of KITD's low liquidity. Excuse-moi? Comment t'appelles tu? Merde Tete? The main point is KITD is a speculative play, something which Money McBags said in his initial review of them and that is why Money McBags is not yet an owner. That said, the company is a market leader in a fast growing market. Yes, the acquisition model is a bit worrisome and the management team is a bit too salesy, but there is real potential for a company like this with locked in recurring revenues from Fortune 100 companies, to be a big winner. It is worth following KITD and maybe even buying if you can comfortable with the risks, that said, it is not a "sell" as SocGen so daintily pulled out of their derrieres.
Wednesday, February 10, 2010
2/10/10 Midday Report: Bernanke's statement stuns meteorologists, causes it to rain on market's parade in the middle of a snowstorm
The big news moving the market down today was the statement from Ben Bernanke about the FED's future policy plans. Bernanke was supposed to testify in front of the House Financial Services Committee but the snow storm in Washington caused the hearing to be postponed giving Barney Frank more time to make snow angels and less time to suck at his job. Bernanke did release his full statement which serves to make Crime and Punishment read like a fucking Dr. Seuss book (I will kill her with an axe, I will kill her with hot wax. It will be an act of enormous enormance! No rational performer's performed this performance!). I'm not saying it was boring to read, but Ambien is said to be suing Bernanke's statement for patent infringement. However, since Money McBags is here to serve the people, he made it through the whole statement and can sum it up in fourteen words: "We did a bunch of shit, now we are going to try other shit." The important parts are that eventually rates will rise (duh), though not in the immediate future, and in the meantime, the FED will investigate other ways to control interest rates and bank lending, such as paying banks interest on reserve balances held at the FED. Below are Bernanke's actual words on this (no jokes, real information):
"By increasing the interest rate on reserves, the Federal Reserve will be able to put significant upward pressure on all short-term interest rates, as banks will not supply short-term funds to the money markets at rates significantly below what they can earn by holding reserves at the Federal Reserve Banks. Actual and prospective increases in short-term interest rates will be reflected in turn in longer- term interest rates and in financial conditions more generally"
The FED has also been developing a number of additional tools to use to reduce the large quantity of reserves held by the banking system. Those tools include offering term deposits, selling securities, and using reverse repos and their more deliciously effective cousin, the reverse cowboy.
In macro news, the US trade deficit increased, widening to $40B as both exports and imports increased. However, the rise in the dollar over the last couple of months may be hurting export growth in a classic Catch-22 situation, like mark to market accounting for bank balance sheets in a declining asset economy or finding Gia Carangi in your bed in 1985 and not having any condoms. While the trade gap was driven to some degree by a larger quantity of petroleum being imported, and while a 3% growth in exports is still growth, the US needs exports to take off like a young Milton Friedman in the mid 1940s in the University of Chicago Economics department where he proved the hypothesis that chicks dig rising permanent income (generally speaking).
Internationally, China's exports grew 21% while imports grew 85%. Container companies were said to have raised their shipping rates as export growth is causing steel containers to become more scarce in China than Andrew Johnson supporters in 1867 or female smurfs. The export growth in China has increased the calls to unpeg the renminbi and let it float to reflect its actual value, of course if it were up to Money McBags, he would just peg all currency to the the Vietnamese Dong (and yes, learning that Vietnam's currency is named the dong was pure comic gold for Money McBags, like whe he ran in to Tiger Wang on linkedin. Of course it does make Money McBags wonder if Lexington Steele would be the richest man in Vietnam due to the amount of dong he carries. Thanks, and don't forget to tip the waitress, though not too much because she has a bit of vertigo).
And we can't forget about Greece where civil servants went on strike and walked off the job for 24 hours thus shutting down airports, hospitals, and schools, in their attempt to become Camden, New Jersey. The EU's bailout will force the country to freeze salaries, raise the retirement age, and require citizens to purchase deodorant. But it's nice to see the workers protesting these cuts becuase I am sure they didn't receive any benefits from the enormous amount of debt taken on by the Greek government (and yes that was sarcasm).
In stock news, The New York Times had a quarter that beat expectations but the company continues to run a declining and outdated business. Their newspaper advertising revenue was down 17%, slightly better than the 30% decline from the first three quarters of the year, but still about as good as Emo Phillips hosting a Def Comedy Jam remake or Jennifer Love Hewitt's ass. New director of strategy, Phil Von Werescrewed, said "we expect the newspaper advertising revenue to level out any quarter now, unfortunately that level is going to be zero, so we're actively looking at new ways to be profitable, like shutting down, or restarting out dauggerotype business." In comparison to the Times' 1940's business, BIDU announced first quarter revenues to be above estimates as they gained advertising dollars from Google's potential pull out of China (which would make GOOG the most famous thing to pull out of Chyna since Triple H).
In small cap news, DFZ continues to rise after their huge Q which Money McBags broke down for you yesterday. Money McBags did have a chance to go through their call last night and it all sounded pretty good. They did say they expect to be unprofitable for the next six months which is consistent with previous years as the first six months of the calendar year is mostly replacement and replenishment business (hence their desire to make an acquisition to counter the seasonality of the slipper business). However, they did guide for slight revenue growth, though to be somewhat offset by an increase in marketing, but gross margins should be over 40% for the year, operating margins between 10% and 12%, and they are having no input pricing issues in China. The company has earned $.95 so far this year, so let's just call it $.90 in total for the fiscal year assuming a loss of $.05 in the next two quarters (though Money McBags thinks they might actually earn a profit with international sales increasing and the Dearfoam brand getting increased marketing, but whatever). They are now trading at 11x this number which is for the fiscal year ending in June (so not even really forward earnings). That is a ridiculously low multiple for a cheap growing company with a solid balance sheet. Money McBags thinks this is at a minimum at $12 stock but could easily see $15 if they continue to execute.
"By increasing the interest rate on reserves, the Federal Reserve will be able to put significant upward pressure on all short-term interest rates, as banks will not supply short-term funds to the money markets at rates significantly below what they can earn by holding reserves at the Federal Reserve Banks. Actual and prospective increases in short-term interest rates will be reflected in turn in longer- term interest rates and in financial conditions more generally"
The FED has also been developing a number of additional tools to use to reduce the large quantity of reserves held by the banking system. Those tools include offering term deposits, selling securities, and using reverse repos and their more deliciously effective cousin, the reverse cowboy.
In macro news, the US trade deficit increased, widening to $40B as both exports and imports increased. However, the rise in the dollar over the last couple of months may be hurting export growth in a classic Catch-22 situation, like mark to market accounting for bank balance sheets in a declining asset economy or finding Gia Carangi in your bed in 1985 and not having any condoms. While the trade gap was driven to some degree by a larger quantity of petroleum being imported, and while a 3% growth in exports is still growth, the US needs exports to take off like a young Milton Friedman in the mid 1940s in the University of Chicago Economics department where he proved the hypothesis that chicks dig rising permanent income (generally speaking).
Internationally, China's exports grew 21% while imports grew 85%. Container companies were said to have raised their shipping rates as export growth is causing steel containers to become more scarce in China than Andrew Johnson supporters in 1867 or female smurfs. The export growth in China has increased the calls to unpeg the renminbi and let it float to reflect its actual value, of course if it were up to Money McBags, he would just peg all currency to the the Vietnamese Dong (and yes, learning that Vietnam's currency is named the dong was pure comic gold for Money McBags, like whe he ran in to Tiger Wang on linkedin. Of course it does make Money McBags wonder if Lexington Steele would be the richest man in Vietnam due to the amount of dong he carries. Thanks, and don't forget to tip the waitress, though not too much because she has a bit of vertigo).
And we can't forget about Greece where civil servants went on strike and walked off the job for 24 hours thus shutting down airports, hospitals, and schools, in their attempt to become Camden, New Jersey. The EU's bailout will force the country to freeze salaries, raise the retirement age, and require citizens to purchase deodorant. But it's nice to see the workers protesting these cuts becuase I am sure they didn't receive any benefits from the enormous amount of debt taken on by the Greek government (and yes that was sarcasm).
In stock news, The New York Times had a quarter that beat expectations but the company continues to run a declining and outdated business. Their newspaper advertising revenue was down 17%, slightly better than the 30% decline from the first three quarters of the year, but still about as good as Emo Phillips hosting a Def Comedy Jam remake or Jennifer Love Hewitt's ass. New director of strategy, Phil Von Werescrewed, said "we expect the newspaper advertising revenue to level out any quarter now, unfortunately that level is going to be zero, so we're actively looking at new ways to be profitable, like shutting down, or restarting out dauggerotype business." In comparison to the Times' 1940's business, BIDU announced first quarter revenues to be above estimates as they gained advertising dollars from Google's potential pull out of China (which would make GOOG the most famous thing to pull out of Chyna since Triple H).
In small cap news, DFZ continues to rise after their huge Q which Money McBags broke down for you yesterday. Money McBags did have a chance to go through their call last night and it all sounded pretty good. They did say they expect to be unprofitable for the next six months which is consistent with previous years as the first six months of the calendar year is mostly replacement and replenishment business (hence their desire to make an acquisition to counter the seasonality of the slipper business). However, they did guide for slight revenue growth, though to be somewhat offset by an increase in marketing, but gross margins should be over 40% for the year, operating margins between 10% and 12%, and they are having no input pricing issues in China. The company has earned $.95 so far this year, so let's just call it $.90 in total for the fiscal year assuming a loss of $.05 in the next two quarters (though Money McBags thinks they might actually earn a profit with international sales increasing and the Dearfoam brand getting increased marketing, but whatever). They are now trading at 11x this number which is for the fiscal year ending in June (so not even really forward earnings). That is a ridiculously low multiple for a cheap growing company with a solid balance sheet. Money McBags thinks this is at a minimum at $12 stock but could easily see $15 if they continue to execute.
Tuesday, February 9, 2010
2/9/10 Midday Report: Greece once again open for business, no longer a Euro school dropout
The market is up strongly this morning after EU Bank president Jean-Claude Trichet decided to leave Australia where he was attending the Reserve Bank of Australia’s 50th Anniversary Symposium which was a party likely as raucous as a staring contest between Bea Arthur and JD Salinger (mainly because they're both dead). Even so, we are told things got a little out of control when the bankers let their toupees down and played a little game of "name your favorite currency" with Vietnam's Dong easily winning out even if it is not as big as the other currencies. Trichet flew back to Europe where he was invited to a summit of European leaders called by the deligthfully named Herman Van Rompuy (and Money McBags is calling bullshit on this whole thing because no one is named Herman Van Rompuy). This is leading to speculation that the EU has a plan to bail out Greece, and Portugal, and Spain, and maybe Italy, and then maybe even Freedonia (where time flies like an arrow and fruit flies like a banana). As one analyst said: “The markets are smelling a deal for Greece, and for that reason, we’re seeing some stabilization." Of course, that smell could actually be Greece and not a deal for Greece but Money McBags remains optimistic because as he has been saying all along, the Euro is not going away, it's just not. Now it's unclear how the EU plans to deal with the struggling countries, whether it's a good old fasion bail out, some kind of debt guarantee, or a lifetime ban on Nia Vardalos movies, but help is on the way.
In US macro news, there's not a whole lot of new information. Wholesale inventories unexpectedly dropped by .8% in December while sales rose .8%. Both numbers were marginally below estimates yet close enough that the market let out a collective yawn. Inventories bear watching though as we've made it through the obvious restocking and now we're at the point where they need to at least maintain their new level in order to signal new steady state or some real growth.
In stock news, KO had a blow out quarter as earnings rose 55% thanks to India and China who love them some sugary water. Overall revenues were up by 5.4% even though they were down 4.5% in the US thanks to some people apparently giving a shit about not being fat. Luckily, developing countries haven't yet reached the point where they have large middle classes whose teenage girls read People magaine and stress about weight from the caloric intake of soft drinks and thus KO benefitted from 19% growth in Latin America, 29% in China, and 20% in India. Coke also annonuced they bought back $1.5B (known colloquially as a "shitload") of their own stock last year which was $500MM more than they committed. Money McBags is an owner of KO for the simple reason that it has ginormous brand equity in developing countries and is a relatively cheap product that people can buy to feel like they are part of American/pop culture (kind of like Paris Hilton's vagina). MCD, another longtime holding of Money McBags came out with their monthly sales numbers which featured a 2.9% rise in same store sales driven by a 4.3% increase overseas. Sure, people were disappointed that US same store sales were down .7% but people were also disappointed that the Kim Kardashian sex tape was a bit grainy. So as always, you can't please everyone (unless you are Blake Lively and are manning the free blumpkin and waffles booth at the local greeting center), but you can be happy with MCD's numbers and Money McBags owns them for the exact reason he owns KO. They sell cheap shit with huge brand equity that developing countries love the fuck out of (and this will be the first sentence in When Genius Prevails' short and illustrious history that will end in a preposition). Also, ERTS put up a terrible quarter as their attempt to take on the Grand Theft Auto franchise with Moral Theft: Vatican City failed to generate sales while damning them all to hell (or as it is more commonly known, the guest audience of The View).
In small cap news, two companies Money McBags follows reported today with TMRK putting up a marginal quarter with lackadaisical guidance and DFZ slipping it's quarter some ruphies and having their way with it like a young Charlie Sheen at the Viper Room. DFZ has been a small holding of Money McBags for a few quarters because it has been cheaper than Valtrex at Lindsay Lohan's house in addition to being a well run company with growth prospects completely under the radar of investors because their business is more boring than a Jane Austen novel or watching two pieces of lint hump (and now that I think about it, watching lint hump may not be so boring afterall, so scratch that). They are the market leader in slippers, yeah, you know, the things your significant other bought you that you never wear. The point is that even though the market is small (about $300MM), they dominate it like Nipsey Russell dominated the 1970s Hollywood game show circuit. They have 35% of the market and are the sole owner (pun intended) of the slipper business for a little company called Walmart. DFZ continues to win business from smaller players as their supply chain and logistics management give them an advantage in winning business by giving buyers confidence in their ability to easily handle a relatively unimportant vertical. Since turning the business around, they have had yearly EBITDA no worse than $12MM and had been trading at 6x that trough EBITDA even though prior to their announcement last night, they guided for slight growth. In the quarter released last night, they earned $.74 per share, which was around 30% growth on sales growth of nearly 15% ($56MM compared to $49MM) thanks to margins moving from 39% to 43%. Cash on hand was up to $37.5MM and they have no debt so they are now trading at around 4x to 5x EV/EBITDA depending on how much credit you want to give them for growth in the second half of the year (Money McBags has not had a chance to listen to their conference call yet). Before this huge Q, Money McBags was pegging them to earn $.80 per share this fiscal year by maintaining a 41% margin but they almost beat that $.80 number just this quarter. Now it's likely they'll earn closer to $1 (again, Money McBags has not listened to their call yet to know if there was any guidance) so they are trading at less than 10x fiscal year 2010 earnings and they have a June Q so they are probaly closer to 8x full year 2010 earnings. The company is so cheap it makes my balls hurt, or in the case of DFZ, it makes the balls of my feet hurt which can be soothed by slipping on my DFZ made Dearfoams. Not only are they cheap, but they have been rumored to be in talks with WMT's international business to expand there and were actively looking to get into Payless/DSW/other shoe stores and to be honest, Money McBags is shocked they are not already in those stores. The other rumor is that they are looking at acquisitions, potentially of a sandal or flip flop company to help smooth out the seasonality of the slipper business. They also recently launched a Levis brand and earlier last year turned down a take out offer of $7.50 per share for the company, so we have some good downside protection in cash and in potential buyers if this company were to shit the bed. There is no reason this company shouldn't trade for at least 12x earnings which would yield at a minimum a $12 stock price and it is currently trading for $9.50 (and this is not even to mention the now stupid multiple of EBITDA for which it currently trades). The downside is that it is a tiny company with little institutional ownership and almost no coverage, but that is more of an opportunity than a concern. Money McBags is happy with his current position and may buy more should it dip down tomorrow or after he goes through their call.
As for TMRK, they gave guidance for $95MM to $100MM 2011 EBITDA so despite a decent quarter, they are already trading at around 8x 2011 EBITDA. While that is cheaper than competitors, and while TMRK is in a terrific growth market as Money McBags believes more in the growth of cloud computing and colocation than he does in the existence of Hanna Hilton (and as he watched about 22 hours of her terrific performances yesterday, he is 99.87% sure she is real), they do carry around a large amount of debt and have significant cap ex. This was Money McBags analysis of TMRK from last month and he stands by it (especially as TMRK was trading at around where it fell back to today). The growth targets announced this Q are a bit below expectations but if the stock continues to drop, Money McBags will likely start a position. No need to get involved today as the momentum buyers fly out, but worth watching.
In US macro news, there's not a whole lot of new information. Wholesale inventories unexpectedly dropped by .8% in December while sales rose .8%. Both numbers were marginally below estimates yet close enough that the market let out a collective yawn. Inventories bear watching though as we've made it through the obvious restocking and now we're at the point where they need to at least maintain their new level in order to signal new steady state or some real growth.
In stock news, KO had a blow out quarter as earnings rose 55% thanks to India and China who love them some sugary water. Overall revenues were up by 5.4% even though they were down 4.5% in the US thanks to some people apparently giving a shit about not being fat. Luckily, developing countries haven't yet reached the point where they have large middle classes whose teenage girls read People magaine and stress about weight from the caloric intake of soft drinks and thus KO benefitted from 19% growth in Latin America, 29% in China, and 20% in India. Coke also annonuced they bought back $1.5B (known colloquially as a "shitload") of their own stock last year which was $500MM more than they committed. Money McBags is an owner of KO for the simple reason that it has ginormous brand equity in developing countries and is a relatively cheap product that people can buy to feel like they are part of American/pop culture (kind of like Paris Hilton's vagina). MCD, another longtime holding of Money McBags came out with their monthly sales numbers which featured a 2.9% rise in same store sales driven by a 4.3% increase overseas. Sure, people were disappointed that US same store sales were down .7% but people were also disappointed that the Kim Kardashian sex tape was a bit grainy. So as always, you can't please everyone (unless you are Blake Lively and are manning the free blumpkin and waffles booth at the local greeting center), but you can be happy with MCD's numbers and Money McBags owns them for the exact reason he owns KO. They sell cheap shit with huge brand equity that developing countries love the fuck out of (and this will be the first sentence in When Genius Prevails' short and illustrious history that will end in a preposition). Also, ERTS put up a terrible quarter as their attempt to take on the Grand Theft Auto franchise with Moral Theft: Vatican City failed to generate sales while damning them all to hell (or as it is more commonly known, the guest audience of The View).
In small cap news, two companies Money McBags follows reported today with TMRK putting up a marginal quarter with lackadaisical guidance and DFZ slipping it's quarter some ruphies and having their way with it like a young Charlie Sheen at the Viper Room. DFZ has been a small holding of Money McBags for a few quarters because it has been cheaper than Valtrex at Lindsay Lohan's house in addition to being a well run company with growth prospects completely under the radar of investors because their business is more boring than a Jane Austen novel or watching two pieces of lint hump (and now that I think about it, watching lint hump may not be so boring afterall, so scratch that). They are the market leader in slippers, yeah, you know, the things your significant other bought you that you never wear. The point is that even though the market is small (about $300MM), they dominate it like Nipsey Russell dominated the 1970s Hollywood game show circuit. They have 35% of the market and are the sole owner (pun intended) of the slipper business for a little company called Walmart. DFZ continues to win business from smaller players as their supply chain and logistics management give them an advantage in winning business by giving buyers confidence in their ability to easily handle a relatively unimportant vertical. Since turning the business around, they have had yearly EBITDA no worse than $12MM and had been trading at 6x that trough EBITDA even though prior to their announcement last night, they guided for slight growth. In the quarter released last night, they earned $.74 per share, which was around 30% growth on sales growth of nearly 15% ($56MM compared to $49MM) thanks to margins moving from 39% to 43%. Cash on hand was up to $37.5MM and they have no debt so they are now trading at around 4x to 5x EV/EBITDA depending on how much credit you want to give them for growth in the second half of the year (Money McBags has not had a chance to listen to their conference call yet). Before this huge Q, Money McBags was pegging them to earn $.80 per share this fiscal year by maintaining a 41% margin but they almost beat that $.80 number just this quarter. Now it's likely they'll earn closer to $1 (again, Money McBags has not listened to their call yet to know if there was any guidance) so they are trading at less than 10x fiscal year 2010 earnings and they have a June Q so they are probaly closer to 8x full year 2010 earnings. The company is so cheap it makes my balls hurt, or in the case of DFZ, it makes the balls of my feet hurt which can be soothed by slipping on my DFZ made Dearfoams. Not only are they cheap, but they have been rumored to be in talks with WMT's international business to expand there and were actively looking to get into Payless/DSW/other shoe stores and to be honest, Money McBags is shocked they are not already in those stores. The other rumor is that they are looking at acquisitions, potentially of a sandal or flip flop company to help smooth out the seasonality of the slipper business. They also recently launched a Levis brand and earlier last year turned down a take out offer of $7.50 per share for the company, so we have some good downside protection in cash and in potential buyers if this company were to shit the bed. There is no reason this company shouldn't trade for at least 12x earnings which would yield at a minimum a $12 stock price and it is currently trading for $9.50 (and this is not even to mention the now stupid multiple of EBITDA for which it currently trades). The downside is that it is a tiny company with little institutional ownership and almost no coverage, but that is more of an opportunity than a concern. Money McBags is happy with his current position and may buy more should it dip down tomorrow or after he goes through their call.
As for TMRK, they gave guidance for $95MM to $100MM 2011 EBITDA so despite a decent quarter, they are already trading at around 8x 2011 EBITDA. While that is cheaper than competitors, and while TMRK is in a terrific growth market as Money McBags believes more in the growth of cloud computing and colocation than he does in the existence of Hanna Hilton (and as he watched about 22 hours of her terrific performances yesterday, he is 99.87% sure she is real), they do carry around a large amount of debt and have significant cap ex. This was Money McBags analysis of TMRK from last month and he stands by it (especially as TMRK was trading at around where it fell back to today). The growth targets announced this Q are a bit below expectations but if the stock continues to drop, Money McBags will likely start a position. No need to get involved today as the momentum buyers fly out, but worth watching.
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