The market was flattish for most of the day until the last hour as some of the fears about Europe abated in the morning thanks to their banking system remaining open for at least another three months (so long enough for depositors to carve out space in their mattresses and pull their funds before the next bank run). The big news is that european banks didn't seek as much capital from the ECB as people feared they would with the ECB's 442B Euro line about to expire like the late great Diaperman. Banks only needed an additional 131B Euro 3 month loan which was below the 210B Euro estimate and only 131B Euro above being healthy. In other international news, German unemployment was down for the 12th straight month as German workers have to put in overtime to make sure their Spanish counterparts can take their proper siestas. Ahhh, to be young and in the Euro.
In US macro news, private employers added 13k jobs in the US in June according to ADP which makes a huge dent in the 20MM unemployed/underemployed/already given up people in the US (and by huge dent, Money McBags means the opposite of that). Really, 13k out of 20MM is as significant as a null hypothesis with a p-value of 1 trillion or as likely to change the current atmosphere as a stink bug crawling in to Lady Gaga's underwear changes her cuntosis. Analysts had guessed that 60k jobs would be added in June so they were only ~250% too high which for them is good enough to win Institutional Investor's golden shovel as analysts of the year which can then be used clear out all the crap they have been spewing. One has to remember that analysts have confidence intervals wider than the divergent opinions on global warming or Taylor Rain's rectum. The report should quell hopes of Friday's Labor Department jobs number release being positive so the government may need to hire Melissa Archer to deliver the release in order to keep investors from paying attention to the actual numbers. In other US news, the FCIC is beginning their two day hearings on AIG and Goldman's relationship to understand how those firms exacerbated the financial meltdown through their selling of derivatives and then how Goldman profited when AIG was bailed out as AIG used the bail out money to repay their mortgage partners of which Goldman was one (Goldman was repaid to the tune of $12B and Money McBags is told that tune is a mash up of Flight of the Bumblebees and Don't Worry Be Happy). While Money McBags doesn't believe anything will come from this inquiry, if it just puts the FCIC's Heather Murren in the spotlight for a few minutes, he will at least be moderately titillated (and yes, that is Heather on the left).
In market news, S&P is cutting their ratings of Moody's which is a bit like Jeffrey Skilling calling Dennis Kozlowski a fraud, Attila the Hun calling Ivan the Terrible a bit mean-spirited, or Lindsay Lohan calling Paris Hilton a whore. S&P cited that with new financial regulation investors now may be able to sue (and rightfully so Money McBags will vociferously add) rating agencies for sucking at their jobs (and as a reminder, their only job is to recognize when bad debt exists, and they missed the entire subprime/Alt-A fiasco like an anorexic misses dinner), there could be reduced demand for ratings if regulation removes the need for companies to be rated by nationally recognized organizations (here here), and Moody's sucks at their job. It is only a matter of time before Moody's lowers their ratings of S&P on the same concerns and we get a tit-for-tat ratings agency cock-off. In other news, Playboy announced a restructuring where they will become even thinner by eliminating low level workers but will keep senior executives to remain properly top heavy and Ford was rising after paying down $4B of debt and telling people they changed their name to Tesla.
In small cap news, ISLE continues to get shellacked and was doing so even when the market was slightly up today. Two day ago Money McBags told you all shorting ISLE would be a good trade and now you should be up 8% to 15% on it depending at what price you were able to short. A healthy company with a ton of debt doesn't just dilute shareholders by ~23% unless bad shit is happening. That said, this was purely a trade so if you want to lock in your profits and go home, Money McBags would applaud that move like he applauds charitable donations, rags to riches stories, and rainbow parties. Also, old friend COOL has dropped below $.70 and remember Money McBags broke them down after their last Q and said the $1 they were trading at was much too high and he would be short if the stock were more liquid. Well if you were able to short it, congratulations but you might want to start covering because the easy money has been made. The point is, Money McBags has been hitting some good names for you all and providing you with enough dick jokes to make even Bob Saget shudder so tell a friend, tell an enemy, and follow WGP on twitter and facebook because the revolution has begun.
Showing posts with label ISLE. Show all posts
Showing posts with label ISLE. Show all posts
Wednesday, June 30, 2010
Tuesday, June 29, 2010
6/29/10 Midevening Report: Market searches for a bottom, hopefully it's Brooklyn Decker's
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Monday, June 28, 2010
6/28/10 Midevening Report: Finance ministers come together as G-20 hits the spot
Stocks were bouncing around today as macro data came out, courts made some rulings, and the Unicorn meat industry took a hit. Consumer spending numbers were reported and shockingly, income grew faster than spending which means that either the numbers are going to be adjusted later, consumers had their credit card lines lowered significantly, or common sense has crept back in to the US consumer after a 30 year Dionysian spending orgy (and Money McBags will vote for 1 or 2 before he votes for 3). Spending was up .2% which beat the median guess, while incomes were up .4%, pushing the savings rate to its highest level in 8 months since back when people were snowed in and couldn't overconsume.
The bigger news on the day though was a couple of court rulings which brought slightly positive news to the markets. First of all, the Supreme Court decided not to listen to the federal racketeering case against the tobacco industry because it would have interferred with their daily viewing of Judge Judy (and Money McBags is told Justice John Paul Stevens would like to drop his case load onto Judy Sheindlin's thin docket). The decision is a positive for both the tobacco industry and the health care industry as tobacco companies are now unlikely to face large industry crippling fines and instead will be free to continue bringing cancer to people everywhere while also helping the top line growth of health care companies.
The other big news of the day of which Money McBags could give a fuck about (right up there with the World Cup, General McChrystal's dismissal, and anything having to do with Miley Cyrus), the Supreme Court upheld the Sarbanes-Oxley law except it allowed the SEC to now fire members of the Public Company Accounting Oversight Board (known better as the acronymly challenged PCAOB). So now the SEC, an institution that was so fuck awful that they promoted the person who ignored Bernie Madoff's machinations despite evidence gift wrapped for them, and an institution so incompetent that they spent their days investigating tranny porn instead of securities fraud (when we all know the night time is for tranny porn, the day time is for NSFW guessing muffs which thankfully is back up and running and its return has truly made Money McBags understand how Pamela Smart's family felt when they found her alive), has the ability to fire the members of some board that supposedly does something to track public auditors. Well thank you for that Supreme fucking Court, really. Money McBags is glad you are wasting your time on shit like this instead of abortion, gun control laws, and banning Ray Romano from network TV. But hey, it's great that the SEC can now fire any of the five board members of PCAOB for any reason and not just incompetence, especially as THERE ARE ONLY 4 CURRENT MEMBERS of the PCOAB board. So hoo-fucking-ray that a board which does absolutely nothing based on the fact that no one has ever heard of them and is not even at a fully staffed level, can now be better regulated. Perhaps if we got our panties out of a bunch and stopped regulating regulators (especially ones as irrelevant as PCOAB) and instead tried to stop fraudulent activity, the economy would be a wee bit less fucked.
Internationally, world leaders are still coming down from the G-20 summit which likely featured as much excitement as a summer theatre production of Pride and Prejudice. Finance leaders seem to have come to an agreement to cut deficits by 2013 yet made it clear the deficit reduction is an "expectation" and not a firm or binding deadline. In a similar vein, Money McBags has agreed to marry Brooke D Williams by 2012 but that is also just an "expectation" and not a firm deadline (he'll give her until 2095 if she really wants). So basically, all that happened at the G-20 summit is that no one fucked anything new up and everyone agreed to keep the staus quo until the the status quo causes the next major downturn, whew. Not only were fiscal policies less changed than Michael Vick after a prison sentence and rehab, but banks avoided new regulations as policy makers said any regulations won't be finished until the next G-20 summit in November, will take longer than two years to institute, and will be just as bad as current regulation but in a different way. So now we wait until Basel III for new regulation which will likely be the worst performing sequel since Karate Kid III: The Puberty Years or Speed III: Runaway Segway.
In stock news, tobacco companies were up due to the previously mentioned supreme court ruling and BA dropped 44% before the markets opened in trades that were cancelled and were either the result of a fat finger (as always, known on WGP as the Portia De Rossi) or the fact that the market structure is more broken than John Edwards' wedding vows. The market continues to ponder circuit breakers to avoid manipulated fluctuations like BA had before hours (even though only 1k shares were traded). The fact that 50% of volume is made by non-fundamental investors should make fixing the market structure a priority for all 1,800 regulatory groups looking in to Wall Street, including the now can be fired board of the PCAOB where four out of five members exist.
In small cap news, ISLE dropped 14% today as they announced their intention of issuing 9MM shares to raise $100MM (or at this rate, $75MM by the time of actual issuance). The shares should lead to ~22% dilution and Money McBags broke the company down after their last Q in which they put together a marginal quarter and yet were still burning cash. The problem with this company is that their balance sheet makes Greece look like a fucking miser and they have run down casinos that need to be upgraded because even though gambling is essentially inelastic, it's not inelastic in shitty casinos with 1970s carpeting that smell of old men and despair. So ISLE needs more cash to modernize their real estate and yet is already almost as highly levered as a Bernie Madoff fund (and his leverage was $50B to $1). So there is room for this company to fall even more since the drop today didn't equal the dilution (32MM shares going to 41MM shares so owners now own ~22% less) and thus if you want a short term short trade, what better way to do it than jumping in on a shitty company with bad things happening?
The bigger news on the day though was a couple of court rulings which brought slightly positive news to the markets. First of all, the Supreme Court decided not to listen to the federal racketeering case against the tobacco industry because it would have interferred with their daily viewing of Judge Judy (and Money McBags is told Justice John Paul Stevens would like to drop his case load onto Judy Sheindlin's thin docket). The decision is a positive for both the tobacco industry and the health care industry as tobacco companies are now unlikely to face large industry crippling fines and instead will be free to continue bringing cancer to people everywhere while also helping the top line growth of health care companies.
The other big news of the day of which Money McBags could give a fuck about (right up there with the World Cup, General McChrystal's dismissal, and anything having to do with Miley Cyrus), the Supreme Court upheld the Sarbanes-Oxley law except it allowed the SEC to now fire members of the Public Company Accounting Oversight Board (known better as the acronymly challenged PCAOB). So now the SEC, an institution that was so fuck awful that they promoted the person who ignored Bernie Madoff's machinations despite evidence gift wrapped for them, and an institution so incompetent that they spent their days investigating tranny porn instead of securities fraud (when we all know the night time is for tranny porn, the day time is for NSFW guessing muffs which thankfully is back up and running and its return has truly made Money McBags understand how Pamela Smart's family felt when they found her alive), has the ability to fire the members of some board that supposedly does something to track public auditors. Well thank you for that Supreme fucking Court, really. Money McBags is glad you are wasting your time on shit like this instead of abortion, gun control laws, and banning Ray Romano from network TV. But hey, it's great that the SEC can now fire any of the five board members of PCAOB for any reason and not just incompetence, especially as THERE ARE ONLY 4 CURRENT MEMBERS of the PCOAB board. So hoo-fucking-ray that a board which does absolutely nothing based on the fact that no one has ever heard of them and is not even at a fully staffed level, can now be better regulated. Perhaps if we got our panties out of a bunch and stopped regulating regulators (especially ones as irrelevant as PCOAB) and instead tried to stop fraudulent activity, the economy would be a wee bit less fucked.
Internationally, world leaders are still coming down from the G-20 summit which likely featured as much excitement as a summer theatre production of Pride and Prejudice. Finance leaders seem to have come to an agreement to cut deficits by 2013 yet made it clear the deficit reduction is an "expectation" and not a firm or binding deadline. In a similar vein, Money McBags has agreed to marry Brooke D Williams by 2012 but that is also just an "expectation" and not a firm deadline (he'll give her until 2095 if she really wants). So basically, all that happened at the G-20 summit is that no one fucked anything new up and everyone agreed to keep the staus quo until the the status quo causes the next major downturn, whew. Not only were fiscal policies less changed than Michael Vick after a prison sentence and rehab, but banks avoided new regulations as policy makers said any regulations won't be finished until the next G-20 summit in November, will take longer than two years to institute, and will be just as bad as current regulation but in a different way. So now we wait until Basel III for new regulation which will likely be the worst performing sequel since Karate Kid III: The Puberty Years or Speed III: Runaway Segway.
In stock news, tobacco companies were up due to the previously mentioned supreme court ruling and BA dropped 44% before the markets opened in trades that were cancelled and were either the result of a fat finger (as always, known on WGP as the Portia De Rossi) or the fact that the market structure is more broken than John Edwards' wedding vows. The market continues to ponder circuit breakers to avoid manipulated fluctuations like BA had before hours (even though only 1k shares were traded). The fact that 50% of volume is made by non-fundamental investors should make fixing the market structure a priority for all 1,800 regulatory groups looking in to Wall Street, including the now can be fired board of the PCAOB where four out of five members exist.
In small cap news, ISLE dropped 14% today as they announced their intention of issuing 9MM shares to raise $100MM (or at this rate, $75MM by the time of actual issuance). The shares should lead to ~22% dilution and Money McBags broke the company down after their last Q in which they put together a marginal quarter and yet were still burning cash. The problem with this company is that their balance sheet makes Greece look like a fucking miser and they have run down casinos that need to be upgraded because even though gambling is essentially inelastic, it's not inelastic in shitty casinos with 1970s carpeting that smell of old men and despair. So ISLE needs more cash to modernize their real estate and yet is already almost as highly levered as a Bernie Madoff fund (and his leverage was $50B to $1). So there is room for this company to fall even more since the drop today didn't equal the dilution (32MM shares going to 41MM shares so owners now own ~22% less) and thus if you want a short term short trade, what better way to do it than jumping in on a shitty company with bad things happening?
Monday, June 7, 2010
6/7/10 Midafternoon Report: Hold on to your shorts as market continues on wild ride down
The market was chugging along today, taking a brief respite to lick its wounds after Friday's jobs report gave even the most virulent Bull a bad case of Foot in the Mouth disease, until it dropped precipitously in the last half hour like Helen Thomas' reputation at a B'nai B'rith fundraiser. With Europe's ongoing debt problems and the US' stagnant at best job growth, investing long in the market remains more perilous than fighting a land war in Russia in the deepest of winters (though not as deep as Money McBags would go in Ophelie Winter) or challenging Anamika Veeramani to a spelling bee (or just challening Anamika Veeramani to spell her name). The US news that had the most effect on the markets early today was that Goldman Sachs was issued a subpoena from the FCIC, also known as the "too little, too late" commission. Money McBags eagerly awaits the FCIC's findings in several years, after no doubt much excrutiatingly toilsome research and much tax payer money has been spent, where they will 100% determine that we are fucked (of course we could save the time and money and just look for the reset button, but that would be too easy). Seriously, that we need a 10 member commisson to figure this out makes as much sense as firing an employee because she is too hot (reason #989 why C is going to $0. And as an aside, if Money McBags owned a bank, he would hire Ms. Lorenzana to manage his branch deposits anyday). Anyway, the subpeona was issued as Goldman refused to submit documents the commission requested and when reached for comment, a Goldman spokesman said they just wanted to see if FCIC Commissioner Heather H. Murren would deliver the subpoena in person. All along, Goldman Sachs has maintained that the suit is “unfounded in law and fact” and if one can't believe what a company that has manipulated the market while bringing in absorbitant profits and destroying value for average citizens thanks to their buddy-buddy taint tickling relationship with the federal government says, then whom can one trust? As Money McBags has maintained all along, Goldman and every other Wall Street bank were complicit in the destruction of the US financial system and it would be easier to find incriminating evidence on them than it is to find rolls of back fat on a topless, sunbathing Kathy Bates, you just need to find someone with the stomach to do that dirty job. So it's good that the FCIC is trying to grow a sac and go after them, but until they actually make some charges, this is all still lip service (though if the lip service is coming from the aforementioned Heather Murren, perhaps it's not all that bad).
Internationally, German factory orders apparently grew faster than the cells of Henrietta Lacks as they surged due to the weaker Euro, increased private sector investment, and the uptick in demand for industrial strength floor buffers to help clean up the sets of Germany's growing scat film industry. Orders were up 2.9% in April from the 5% they were up in March which for the first time ever makes Germany Europe's shining example. Also, Hungary is still in the news as investors continue to try to find it on a map and wonder if to solve their financial crisis they should just gobble up Turkey. Hungary's financial crisis is the biggest turd to hit the country since the famous Diet of Turda in 1558 which established the freedom to practice Catholicism, Lutheranism, or by the name, apparently coprophagia. Finally, fears are starting up again that China is increasing prices which will cause world wide inflation as they raise the minimum wage by 20%, though it will still leave workers wanting more half an hour after they receive their paychecks. However, if China unpegs their difficult to spell renminbi from the dollar and allows their currency to appreciate while the their own product prices increase, foreign exports could become more competitve than Alan Greenspan at a bubble blowing contest.
In stock news, BP is showing their first signs of progress in stopping the oil leak which is destroying the Gulf and causing the slogan "drill baby drill" to be returned to Peter North where it rightfully belongs. At this rate, the oil leak will be stopped and cleaned up somewhere around the time Paris Hilton finds some dignity. Also, Money McBags favorite Dick "don't call me Richard, or Rich, or Rick, or Rightaboutanything" Bove (and again, Bove rhymes with "Oy vey") lowered his price target on BAC yet maintained his buy rating, mimicking his brilliant market call of Lehman right before they collpased. Bove cited increased regulation, foreign exposure, and his lack of understanding of the financial markets for the price target cut. Finally, BMY shares are taking off today as they announced that their experimental drug for skin cancer was found to extend the lives of patients with incurable melanoma by 4 months. Patients were ecstatic, until they were told that four months that were being extended were Winter.
In small cap news today ISLE is falling back to where it was pre-earnings and after earnings Money McBags said the jump up was likely a quick short squeeze as the stock wasn't cheap and the company is debt-ridden, and features bleaker properties than the Detroit version of Monopoly. Not only is ISLE falling but WGO is finally ticking down under $11 on its way to $7.50. The price of this stock makes less sense than the 11 dimensions of M theory or any song by the Black Eyed Peas. And look out tomorrow for MLNK earnings. Money McBags has written about this company many times as it is cheaper than a kissing booth being manned by Gabourey Sidibe after she downed a gallon of extra spicy garlic fries and 2 liter of Dr. Pepper. It is trading at 3x a run rate EV/EBITDA with 50% of their market cap in cash. They key to tomorrow's release will be their cash flow statement to see if they were able to avoid burning cash as their business will likely have another sluggish quarter (according to them, though Money McBags doesn't quite understand why, since their biggest customer HP had a good Q, but perhaps tomorrow they'll make it more clear). So look for the release because when the markets get better (which is sometime between 2015 and the next Galactic Empire), this stock should have some nice upside with its current limited downside (again, barring a huge cash burn this quarter).
Internationally, German factory orders apparently grew faster than the cells of Henrietta Lacks as they surged due to the weaker Euro, increased private sector investment, and the uptick in demand for industrial strength floor buffers to help clean up the sets of Germany's growing scat film industry. Orders were up 2.9% in April from the 5% they were up in March which for the first time ever makes Germany Europe's shining example. Also, Hungary is still in the news as investors continue to try to find it on a map and wonder if to solve their financial crisis they should just gobble up Turkey. Hungary's financial crisis is the biggest turd to hit the country since the famous Diet of Turda in 1558 which established the freedom to practice Catholicism, Lutheranism, or by the name, apparently coprophagia. Finally, fears are starting up again that China is increasing prices which will cause world wide inflation as they raise the minimum wage by 20%, though it will still leave workers wanting more half an hour after they receive their paychecks. However, if China unpegs their difficult to spell renminbi from the dollar and allows their currency to appreciate while the their own product prices increase, foreign exports could become more competitve than Alan Greenspan at a bubble blowing contest.
In stock news, BP is showing their first signs of progress in stopping the oil leak which is destroying the Gulf and causing the slogan "drill baby drill" to be returned to Peter North where it rightfully belongs. At this rate, the oil leak will be stopped and cleaned up somewhere around the time Paris Hilton finds some dignity. Also, Money McBags favorite Dick "don't call me Richard, or Rich, or Rick, or Rightaboutanything" Bove (and again, Bove rhymes with "Oy vey") lowered his price target on BAC yet maintained his buy rating, mimicking his brilliant market call of Lehman right before they collpased. Bove cited increased regulation, foreign exposure, and his lack of understanding of the financial markets for the price target cut. Finally, BMY shares are taking off today as they announced that their experimental drug for skin cancer was found to extend the lives of patients with incurable melanoma by 4 months. Patients were ecstatic, until they were told that four months that were being extended were Winter.
In small cap news today ISLE is falling back to where it was pre-earnings and after earnings Money McBags said the jump up was likely a quick short squeeze as the stock wasn't cheap and the company is debt-ridden, and features bleaker properties than the Detroit version of Monopoly. Not only is ISLE falling but WGO is finally ticking down under $11 on its way to $7.50. The price of this stock makes less sense than the 11 dimensions of M theory or any song by the Black Eyed Peas. And look out tomorrow for MLNK earnings. Money McBags has written about this company many times as it is cheaper than a kissing booth being manned by Gabourey Sidibe after she downed a gallon of extra spicy garlic fries and 2 liter of Dr. Pepper. It is trading at 3x a run rate EV/EBITDA with 50% of their market cap in cash. They key to tomorrow's release will be their cash flow statement to see if they were able to avoid burning cash as their business will likely have another sluggish quarter (according to them, though Money McBags doesn't quite understand why, since their biggest customer HP had a good Q, but perhaps tomorrow they'll make it more clear). So look for the release because when the markets get better (which is sometime between 2015 and the next Galactic Empire), this stock should have some nice upside with its current limited downside (again, barring a huge cash burn this quarter).
Wednesday, June 2, 2010
6/2/10 Midafternoon Report: Market runs in the late afternoon as it attempts to get home in time for Oprah
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Tuesday, February 23, 2010
2/23/10 Midafternoon Report: Consumers are very confident in the economy getting shittier
The market has hit a speed bump today as consumer confidence fell to its lowest level in 10 months. Consumers are now less confident than a slightly overweight 16 year old girl with bad acne and a spastic colon on her first day in a new school. The confidence index dropped to 46, which is below the 56 economists were expecting, and Money McBags has no idea what 46 means but he is confident it is not good in the same way he is confident having one's ladyfriend say "we need to talk" is also not good. While the consumer confidence index is a forward looking metric (and if you really want to look forward, just tape a picture of Kate Bosworth to your glasses), the measure of present conditions came in at its lowest level in 27 years. Wow. That is not an exaggeration. People are not only finding jobs harder to get, but growth in the job market seems to be more stagnant than Bobby Jindal's political career (and as an aside, Money McBags doesn't give a fuck about politics because they are all the same person, just a different suit, but has any politician ever had a faster and bigger fall than this Bobby Jindal guy has had without mismanaging a war, getting caught in a crack house, or banging Peggy Eaton? Jeesh, that guy has disappeared so fast he was on the back of my milk carton this morning). Anyway, the point here is that investors are now worried that retail spending will be weaker than expectations with the drop in consumer confidence providing a swift kick to the nuts. In slightly positive macro news, home prices declined but the annual pace of decline slowed from "holy shit" to "is it hot in here?" The decline was .2% and was worse than the flat expectations, but only by a rounding error. Interestingly, 15 of the 20 metro areas saw price declines and that sound you just heard was Money McBags throwing up in his mouth. Ugh. The market is now teetering after such a nice totter last week, but that is why this is called an inflection point.
In stock news, Home Depot followed competitor Lowe's strong quarter yesterday with solid results of their own including their first increase in same store sales since 2006. Of course the comps for same store sales were much easier due to the fact that the only people buying anything at Home Depot in Q4 last year were repo men and the guys who strip empty houses of their copper wire, but still, a 1.4% increase is positive. Home Depot also gave fairly rosy guidance and said they gained 100bps of market share which was likely a result of their November promotion "buy two shower heads, and we'll throw in a golden one for free." In other stock news Barnes and Noble is down after posting an inline-ish quarter after they announced same store sales were down 5% and then blamed it on something called the fucking internet. Sorry guys, but the classic brick and mortar book selling business is about to go the way of video rental stores, address books, and civility. Sure Barnes and Noble had strong growth in their online business, but that is a fraction of their sales.
In small cap news, EBIX is getting a case of the dropsies again while ISLE crapped out on another quarter as people don't like gambling in run down casinos. And yesterday, long time Money McBags reader and ninja assassin (and Money McBags loves any word with two "ass"es in it) Matty McSacks put up some solid thoughts on LOV in the comments section. Matty treated the comments section like he was two girls and it was one cup with his mancrush on LOV. Apparently he loves LOV so much that he is lobbying for them to start intrinsicvaluedate.com, where investors can go to WACC off while getting their shorts squeezed. Anyway, Money McBags knew nothing of LOV until yesterday but he spent some time last night reading their 10Q, playing around on their site, and watching some Tori Black videos on Spankwire (and you may be asking what the Tori Black videos have to do with LOV, and the answer is absolutely nothing). LOV apparently runs about 30 online dating sites with their crown jewel being JDate which accounts for 50% of the company's subscribers. Now Money McBags lights the menorah but he never understood the appeal of JDate as he prefers his ladies to be over 5 foot 2 and without what I believe is referred to in medical circles as the "nag you to fucking death" gene. Other sites LOV runs are Blackchristiansingles.com, Singleparentsmingle.com, and Canadwarfgetatabledance.com (ok, one of those is made up). They also run a delicious dating site aimed at weight challenged people called Moretolove.com which Matty claims is their fastest growing site and Money McBags only hopes that the pun was completely intended. And while Money McBags loves this concept, he would have named it either Cushionforthepushin.com or Dinnerfor3.com. Anyway, Matty values this stock at at least $5 based on $8MM-$10MM free cash flow per year and some brand value for JDate. Hmmmmm. Let's see. They earned $.05 per share last Q and while there may have been a sequential lift in subscribers (unclear if that was seasonality), JDate still had a 6% decline on a year over year basis in lonely Jews and those who are looking for some gifelte fish on the side. But here's the weird part, revenue declined by 16% in that segment which is more than subscribers declined which means they are either discounting more or are losing their premium clients (and it's unclear what their premium clients get, perhaps a chance to date the one Jewish girl who swallows, and again, Money McBags is a yid, so he can make those jokes). Not only is their revenue dropping faster than they are losing subs, but their marketing cost went up as a % of income by 300bps. And here is another red flag, industry sources have the online dating industry growing 10% to 15% a year (though that industry source is Piper Jaffray, so buyer beware as one should never trust anything from a person who chooses to live in Minnesota). But let's assume that the number is directionally correct. So the market is a moderate double digit grower and yet this great affinity site JDate is losing subscribers. Something doesn't smell kosher. The company claims to have had $8MM of adjusted EBITDA in the first 9 months but there was also $1.7MM of income from a legal judgment which I believe they included in that number. So really closer to $6MM of EBITDA or an $8MM annual run rate. That puts the company with it's very marginal balance sheet at a run rate of around 7.5x EV/EBITDA to go along with their 15x run rate p/e. So the multiples aren't too high, but the investment in this company really has to come down to whether or not you think it can actually grow, especially with increasing competition from Facebook, Twiter, and the completely NSFW Guesshermuff. JDate has been around for several years already and given that it has grown through word of mouth and the Jewish population is closer knit than a purl stitched willy warmer, there probably isn't much more free growth left. The point being, 99.95% of Jews already know about JDate and if they haven't yet signed up, they are not going to do so. As for the Jews just reaching dating age, they are simply using twitter and the like and not dropping $40 a month or whatever in order to have a mitzvah. So I am very skeptical that the drop in JDate subscribers is just the economy and also very skeptical that they will be able to keep their spanktastic margins in that business because marketing costs simply have to go up. You can only rely on word of mouth for so long, unless that mouth belongs to Faye Reagan and the word is "enter." Anyway, having the stock 45% owned by a PE shop certainly doesn't hurt because we know PE funds rarely make mistakes (just ask Warburg Pincus about their MBIA investment), but the fundamentals of the business still remain weak. Matty did a nice job on NLS last time so he does get mad props here for his calls on companies who are sucking and have yet to show things are getting better, but LOV just doesn't have the margin of safety to make Money McBags comfortable and he fears their business is going to continue to face headwinds. If the company were to show some growth and get to an industry growth rate, then sure, Money McBags could see it trade up to $4 or $4.50 but until then, a $.20 eps annual run rate company with no growth and few barriers to entry should probably trade closer to 10x which would make this a $2 stock and thus leave us with 33% downside. If you really want to invest in a shitty internet affinity play, why not just buy INET who at least has exhibited solid business growth? Money McBags will monitor LOV, but he'd rather own a company like KITD right now that is trading at like 7x EV/EBITDA and growing 60% a year with 17% EBITDA margins.
In stock news, Home Depot followed competitor Lowe's strong quarter yesterday with solid results of their own including their first increase in same store sales since 2006. Of course the comps for same store sales were much easier due to the fact that the only people buying anything at Home Depot in Q4 last year were repo men and the guys who strip empty houses of their copper wire, but still, a 1.4% increase is positive. Home Depot also gave fairly rosy guidance and said they gained 100bps of market share which was likely a result of their November promotion "buy two shower heads, and we'll throw in a golden one for free." In other stock news Barnes and Noble is down after posting an inline-ish quarter after they announced same store sales were down 5% and then blamed it on something called the fucking internet. Sorry guys, but the classic brick and mortar book selling business is about to go the way of video rental stores, address books, and civility. Sure Barnes and Noble had strong growth in their online business, but that is a fraction of their sales.
In small cap news, EBIX is getting a case of the dropsies again while ISLE crapped out on another quarter as people don't like gambling in run down casinos. And yesterday, long time Money McBags reader and ninja assassin (and Money McBags loves any word with two "ass"es in it) Matty McSacks put up some solid thoughts on LOV in the comments section. Matty treated the comments section like he was two girls and it was one cup with his mancrush on LOV. Apparently he loves LOV so much that he is lobbying for them to start intrinsicvaluedate.com, where investors can go to WACC off while getting their shorts squeezed. Anyway, Money McBags knew nothing of LOV until yesterday but he spent some time last night reading their 10Q, playing around on their site, and watching some Tori Black videos on Spankwire (and you may be asking what the Tori Black videos have to do with LOV, and the answer is absolutely nothing). LOV apparently runs about 30 online dating sites with their crown jewel being JDate which accounts for 50% of the company's subscribers. Now Money McBags lights the menorah but he never understood the appeal of JDate as he prefers his ladies to be over 5 foot 2 and without what I believe is referred to in medical circles as the "nag you to fucking death" gene. Other sites LOV runs are Blackchristiansingles.com, Singleparentsmingle.com, and Canadwarfgetatabledance.com (ok, one of those is made up). They also run a delicious dating site aimed at weight challenged people called Moretolove.com which Matty claims is their fastest growing site and Money McBags only hopes that the pun was completely intended. And while Money McBags loves this concept, he would have named it either Cushionforthepushin.com or Dinnerfor3.com. Anyway, Matty values this stock at at least $5 based on $8MM-$10MM free cash flow per year and some brand value for JDate. Hmmmmm. Let's see. They earned $.05 per share last Q and while there may have been a sequential lift in subscribers (unclear if that was seasonality), JDate still had a 6% decline on a year over year basis in lonely Jews and those who are looking for some gifelte fish on the side. But here's the weird part, revenue declined by 16% in that segment which is more than subscribers declined which means they are either discounting more or are losing their premium clients (and it's unclear what their premium clients get, perhaps a chance to date the one Jewish girl who swallows, and again, Money McBags is a yid, so he can make those jokes). Not only is their revenue dropping faster than they are losing subs, but their marketing cost went up as a % of income by 300bps. And here is another red flag, industry sources have the online dating industry growing 10% to 15% a year (though that industry source is Piper Jaffray, so buyer beware as one should never trust anything from a person who chooses to live in Minnesota). But let's assume that the number is directionally correct. So the market is a moderate double digit grower and yet this great affinity site JDate is losing subscribers. Something doesn't smell kosher. The company claims to have had $8MM of adjusted EBITDA in the first 9 months but there was also $1.7MM of income from a legal judgment which I believe they included in that number. So really closer to $6MM of EBITDA or an $8MM annual run rate. That puts the company with it's very marginal balance sheet at a run rate of around 7.5x EV/EBITDA to go along with their 15x run rate p/e. So the multiples aren't too high, but the investment in this company really has to come down to whether or not you think it can actually grow, especially with increasing competition from Facebook, Twiter, and the completely NSFW Guesshermuff. JDate has been around for several years already and given that it has grown through word of mouth and the Jewish population is closer knit than a purl stitched willy warmer, there probably isn't much more free growth left. The point being, 99.95% of Jews already know about JDate and if they haven't yet signed up, they are not going to do so. As for the Jews just reaching dating age, they are simply using twitter and the like and not dropping $40 a month or whatever in order to have a mitzvah. So I am very skeptical that the drop in JDate subscribers is just the economy and also very skeptical that they will be able to keep their spanktastic margins in that business because marketing costs simply have to go up. You can only rely on word of mouth for so long, unless that mouth belongs to Faye Reagan and the word is "enter." Anyway, having the stock 45% owned by a PE shop certainly doesn't hurt because we know PE funds rarely make mistakes (just ask Warburg Pincus about their MBIA investment), but the fundamentals of the business still remain weak. Matty did a nice job on NLS last time so he does get mad props here for his calls on companies who are sucking and have yet to show things are getting better, but LOV just doesn't have the margin of safety to make Money McBags comfortable and he fears their business is going to continue to face headwinds. If the company were to show some growth and get to an industry growth rate, then sure, Money McBags could see it trade up to $4 or $4.50 but until then, a $.20 eps annual run rate company with no growth and few barriers to entry should probably trade closer to 10x which would make this a $2 stock and thus leave us with 33% downside. If you really want to invest in a shitty internet affinity play, why not just buy INET who at least has exhibited solid business growth? Money McBags will monitor LOV, but he'd rather own a company like KITD right now that is trading at like 7x EV/EBITDA and growing 60% a year with 17% EBITDA margins.
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