The market is higher today on the strength of a banking sector rally, positive economic news from China, and a likely date tonight with Izabel Goulart (because why else would it be this excited?). The macro news today has been slightly positive with wholesale inventories down only .2% sequentially in January after being down 1% in December. While this is the 13th consecutive month of wholesale inventory declines, the second derivative continues to sink like John Meriwether's hedge fund career and a continued decline in the rate of inventory cuts is certinaly a positive sign. The Commerce Department, led by esteemed Secretary Gary Faye "Reagan" Locke also said that sales were up 1.3% and that dropped the ratio of inventories to sales to a record low of 1.10. This is an interesting metric as company inventories are now leaner than James Polk's credentials in 1844 or Adam Sandler's Oscar trophy shelf. If the economy can somehow forget about the 10% unemployment rate, the mounds of money printed by the US government, and Hillary Swank's Academy Awards dress (and really, where did those come from?), and just start to gradually build back some inventories there could be some real recovery, despite what the great Roubini is out saying today about the increasing odds of a double dip recession (ugh). New unemployment data is also out at the state level with the unemployment rate increasing in 30 states (though more if one includes the states of panic, fear, and pants shitting) and decreasing in 9. One of the states to see declining unemployment was Michigan where the rate dropped from a national high of 14.5% to a still "you're fucked" rate of 14.3%. But those three extra people who got hired to man the Burger King drive-through line in Kalamazoo could be a signal (unfortunately that signal is "we need some fucking jobs").
In international news, Greece's economic crisis is more over than Corey Haim (what, too soon?) according to Romano Prodi who is a former Italian Prime Minister, now teaching at a college in Shanghai. Money McBags has always said if you can't trust an Italian Prime Minister, especially one who has been out of office for years and has had absolutley no real role in anything having to do with the Greek crisis, then you can't trust anyone. Prodi will continue his "speaking out of my ass" tour by taking part in a roundtable on how global warming has finally ended before chairing a conference on the demise of the internet. Also fueling the market today is that China's exports rose 46%. This likely signals increased consumer demand for products that cause nervous system and kidney damage to infants, or as they are more commonly known as: toys. Infant nephrologists across the nation are excited by this uptick in China and are anxiously awaiting orders of their new CT scan machines to be delivered.
In market news, the always delightful Dick "Don't call me Richard" Bove (with the last syllable of Bove pronounced like the last syllable of oy-vey), was on CNBC talking up the financial sector. Mr. Bove (Money McBags refuses to call anyone Dick), said he thinks bank dividends will go back up to their previous levels in the next two years and he gave a vote of confidence to Citi. And let Money McBags tell you, getting a vote of confidence from an analyst who missed the symptoms of the ride down is as valuable as being dong-less in Vietnam (though to be fair, they all missed the ride down except perhaps the lovely Meredith Whitney whom Money McBags has such a crush on that he would body slam Mr. Whitney and put him in the Camel Clutch were he ever to meet him).
In small cap news, WILC had their quarter last week and Money McBags promised he would break it down for all of you this week. Unfortunately, Money McBags needed a fucking talmudic scholar to decipher WILC's press release as it was more confusing than a plague of frogs (no really, you're doling out 10 plagues and frogs is the best you can do for one of them? Really? You ever hear of small pox, syphilis, or grizzly bears?). Money McBags wonders if he should have read the release from right to left to better understand exactly which numbers were real numbers and what went in to them. Unsurprisingly, WILC's conference call contained enough jibberish and was hard enough to hear that it made the press release look like a fucking Dr. Seuss book. Between COO Zwi Williger's accent and the fact that they refused to take questions, WILC's conference call was as helpful as giving a band aid to a hemophiliac or an all expense paid trip to the Mustang Ranch to a eunuch. Seriously guys, you're running a fucking public company, can you at least, you know, present the information in a user friendly manner to your shareholders (and Money McBags is a shareholder). Anyway, on the surface, their Q was pretty good. They grew sales 12% in NIS (New Israel Shekels) and increased their gross margins which they said was the result of continuing to introduce new higher margin products. They said they earned $.20 per share in US which puts them at $.80 for the year. They have $26MM of cash on the balance sheet which is roughly 1/3 of their market cap. That said, their selling expense was up as a % of sales from 11% to 15% which they attribute to promotions, and their G&A was up as a % of sales as a result of management bonuses. On the call they also talked about product launches to a big box US/Canadian retailer but ZWI's accent was thicker than the always lovely Carmella Bing so Money McBags could not make out to whom or to what he was referring. Now look, Money McBags is also a Jew and while his hebrew language skills are more non-existent than Satyrs, weapons of mass destruction in Iraq, or money shots in lesbian porn, he honestly feels he would have got more out of the call had ZWI just spoken in his native language. The most confounding part was that he did not take any questions, citing their pending share offering of $20MM. Come on Zwi let's sit down and talk about this yid to yid. We can kibbitz a bit about the old days and all of the shiksas we'd like to have boned, but just be fucking honest with me so we can avoid any Jew on Jew crime. If you're not going to take questions on the call, then perhaps you'll answer them here for your shareholders. Below are things investors need to know:
1. Why is there no quarterly income statement or cash flow statement? Why only give the annual summary? For fucksake, even in your share registration statement you filed with the SEC the day of the earnings release, you only include Q3 numbers. WTF? Can you give your shareholders a break and just give us the information without making us break out excel and remember how to run a fucking vlookup table?
2. Along those lines, you quote a $.20 eps and a net income of $2.12MM. Yet in the same paragraph you say income before taxes was $1.84MM. Now look, I'm no Harry Markopolos, but how the fuck is your net income higher than income before taxes seeing as how you are a tax payer? Honestly, this is more confusing than a Thomas Pynchon novel or trying to figure out exactly of what Captain Crunch is the captain (and don't say crunch). Money McBags broke out his proverbial magnifying glass and it looks like $.04 of your $.20 eps this Q was from discontinued operations. And that extra $.04 is almost enough to meet the discrepancy. Even if that is not the discrepancy, why the fuck are you quoting earnings of $.20 when only $.16 of it was from continuing operations?? As of 9/30/09 you had earned $.59 per share with $0 from discontinued operations and for the year you earned $.79 with $.04 coming from discontinued operations. So that sounds like a $.16 Q4 to me. So why would you quote the $.20 number? Work with me here.
3. How much of your increased gross margin was due to currency effects? It's great that margins are rising but you have talked about the advantage you get through currency differences between your costs and revenues, so would it kill you to break that out for us? You said some of the margin increase was due to selling higher margin products, but how much? Could you do shareholders a mitzvah here and let us know how the actual business is tracking ex. currency effects?
4. Why did your cash balance go down in the quarter if you were profitable? Since there was no cash flow statement, Money McBags had to copy/paste the last two balance sheets into his outdated excel and use the delicious text-to-columns feature just to figure out what was going on and let me tell you, when Money McBags has to start breaking out old school excel functions, he is less happy than Mark Sanford's wife on a family trip to Argentina. You earned $2.1MM from continued and discontinued operations and yet your cash balance was down by about $2MM. With your PP&E remaining about the same (and in Money McBags younger club days, he would often see people pee-peeing some E) it looks like the cash outflow was from a $4.5MM increase in inventory and $2.5MM increase in trade receivables. Hmmmmmmmm. Care to answer WTF caused this cash decline?
5. As related to what we found in question 4, why did inventories go up by more than 50%? Seriously, can you help me on this one? Is this a normal seasonal inventory tick-up of matzo, gefilte fish, and grape juice for the upcoming Passover seders or is something else going on here? You said you are launching more products so is this the ramp up of that?
6. Why are you raising $20MM? Is this really related to expansion or does this have to do with the declining cash balance in the quarter? You have $26MM of cash on your balance sheet and are a $75MM market cap company, why do you need to dilute share holders by 20%ish to bring in $20MM? You have stated that you are looking to buy a distribution center in the US or form a JV, but do you really need to an additional $20MM for that kind of acquisition?
So ZWI, if you're reading this, and I know you are, can you help a fellow semite out a bit? I mean it's not like I am asking you where the afikoman is (don't tell me, it's in the bookcase?), just help me analyze your actual business. Money McBags wants to be a longterm shareholder but he is thinking about selling despite the ridiculously cheap valuation because he is not clear what the actual earnings power is. You said you will answer questions after the share offering which will likely include or be followed shortly thereafter by some "important announcement" (hopefully that announcement isn't that you have run off with the cash), but can you tickle Money McBags' balls just a bit here and give some real information? And let Money McBags be brutally honest with you, if you ever quote your eps/net income number again and include discontinued operations, Money McBags will go to the Wailing Wall and pray for someone else to take over the company. The whole press release/call/equity raise is just so fucking meshugganah that shareholders need to know you are not boozing on Manischewitz and can actually run a public company.
The dreidle is in your court Zwi. You know where to reach me. MoneyMcbags@gmail.com or www.twitter.com/moneymcbags. I'll be here all day.
Showing posts with label Midafternoon report. Show all posts
Showing posts with label Midafternoon report. Show all posts
Wednesday, March 10, 2010
Tuesday, March 9, 2010
3/9/10 Midafternoon Report: Happy birthday bear market low, now go fuck yourself
Today marks the one year anniversary of the bear market's devilish low of 666. To celebrate the nearly 70% rise since then, unemployed workers throughout the country are taking a day off from job hunting to resole their well worn and tattered shoes while Wall Street bankers are wiping their delicate behinds with their beluga caviar scented toilet paper made from the eyelashes of the Dalai Lama as a symbol of their spoils. That said, macro news is more non-existent today than John Edwards' ethics. The only slight news comes from Federal Reserve Bank of Chicago President Charles Evans saying that weakness in the job market will cause the Fed to keep rates low for some time and they will continue to be more accommodative than Mr. Roarke was to Heather Locklear when she visited Fantasy Island (and one can only imagine the fantasies Tattoo had about her islands). Mr. Evans also said that as a result of the deep recession, policy makers may need to shift their view of full employment to correspond to a 5.25% unemployment rate as opposed to the 4.75% they currently use as a base line. So good on you Charles. Way to lower the bar instead of trying to find proactive solutions. It's like if Perfect 10 magazine(NSFW) all of a sudden started putting 9s in their photo spreads or if Einstein rejiggered his theory of general relativity by adding some fictitious comological constant (umm, ok, maybe scratch that last one). At least we now know why Charles Evans is considered to be one of the Fed's fluff girls as he is a Federal Reserve Bank President and yet not a voting member of the FOMC.
In international news Greek Prime Minister George Papadopolis is supposed to meet with President Obama, though there is no word as to whether Mr. Papadopolis will be bringing Webster along with him. In the meeting, the Greek Prime Minister will walk through his detailed plans of economic recovery with President Obama which will include vilifying hedge funds who bet against Greece and their faltering economy while placing the rest of the blame on a faulty johnson rod Greece had installed last year.
In stock news, Burger King had disappointing same store sales numbers for the first two months of the year posting 8% declines across the US and Canada. They blamed 3% of the decline on bad weather and the other 5% on shitty food. This comes a day after McDonalds posted slightly up US same store sales. Burger King's CFO Ben Wells said "For us weather is a big deal because you don't stroll to a Burger King restaurant, you have to be in an automobile." Now look, Money McBags is no Le Corbusier so he is not an authority on how cities are laid out, but if the weather is bad, wouldn't more people be getting in to their fucking cars and driving places than walking? Yeah, I get that if you're snowed in you're not going anywhere, but that should have hit McDonalds too. Consider Money McBags skeptical of that excuse.
In small cap news MLNK came out with their earnings last night and to call their earnings crappy would be an insult to crap everywhere. Now Money McBags is an owner of MLNK and has been touting them on When Genius Prevailed from time to time, so this just shows that nobody is perfect (except for maybe Jayde Nicole). This was Money McBags' break down of MLNK last Q, the key part being management said this Q (their fiscal Q2) would be flat with fiscal Q1 and the end of the year would see an uptick. So they earned $18MM of EBITDA in fiscal Q1 and taking their guidance that put them at a $72MM run rate or an EV/EBITDA so ridonkuously cheap that even Matthew Lesko couldn't believe it. That said, they fell short of their guidance this Q and earned only $13MM of EBITDA and then took down guidance for next Q (fiscal Q3) saying it will be flat to lower than fiscal Q2, with fiscal Q4 then being up sequentially from fiscal Q3 (though unclear if it will be up from this Q). Oy, fucking vey. So let's use $13MM as the new EBITDA run rate assuming it drops next Q but picks up to this level again in 2Qs, with anything after that being unknown (though it should be up). So a $52MM annual EBITDA run rate with $163MM in cash on the balance sheet and no debt yields an EV/EBITDA of still only 5.5x after today's drop. So it is still cheap and Money McBags has no intention of selling, but the fact that they were down when ther biggest customer HP had revenue up 8% this Q (and HP is 28% of revenue) is a bit head scratching (though if it were Money McBags' head and Destiny Dixon were doing the scratching, everything would be ok). MLNK revenues in the Q were down 9% Y/Y and 4.5% sequentially, but those numbers include $4.8MM of revenue from their acquisition of Tech For Less, so comparable revenues were actually down about 2% more than that (though they said this is usually a sequentially down Q). The good news is that gross margins were up 100bps and they generated about $30MM of FCF and guided to positive FCF for the year. Europe was a main driver of weakness, down 16%, as were getting new engagements which were down 62% from last year's fiscal Q2 which probably isn't a great sign unless you hate making money. They said this was "a direct result of our clients delayed decision-making due to the economic headwinds in the spring and summer of 2009" but then later they say that the six month lead times they get should put them at the front of the cycle. Hmm, Money McBags is now more confused about their business cycle than Larry Craig is about his sexuality (or at least publicly about his sexuality, because he knows in private he loves burgling turds). Luckily, Money McBags is not the only astute one out there as some guy from Harvest Capital Strategies spoke up on the conference call and asked: "you initially had expected Q2 to be flattish with Q1 and then a gradual uptick in Q3 and Q4 to now a down Q2 versus Q1 and the subsequent down Q3 versus Q2 before we see a resumption of sequential growth. Maybe if you can can just provide a little more color around what changed in the last three months?” Management said there were three reasons for the change: 1. Volumes were simply less than they expected in their base business. 2. Start-up activity is taking longer to get up and running so new business that was supposed to be in Q2 will now be in late Q3 and early Q4. 3. A little something called "Shut the fuck up" (ok, maybe they didn't say this one). Anyway, to sum this all up Money McBags can't be right all of the time. With consumer technology spending bottoming out, he though MLNK would see the benefits (as did their management) and they didn't. That said, the company remains cheap (thanks to the 10% drop today) but their growth may now take longer to come back than John Travolta's career after Staying Alive or Tiger Woods' dignity (ok, hopefully not that long). Money McBags is not selling here, but he's not buying either. This company simply should have done better.
Also, WILC is up almost 10% today on big volume after their Q last week. Money McBags will break that Q down in the next couple of days, but he has let you know many times that this company isn't just chopped liver.
In international news Greek Prime Minister George Papadopolis is supposed to meet with President Obama, though there is no word as to whether Mr. Papadopolis will be bringing Webster along with him. In the meeting, the Greek Prime Minister will walk through his detailed plans of economic recovery with President Obama which will include vilifying hedge funds who bet against Greece and their faltering economy while placing the rest of the blame on a faulty johnson rod Greece had installed last year.
In stock news, Burger King had disappointing same store sales numbers for the first two months of the year posting 8% declines across the US and Canada. They blamed 3% of the decline on bad weather and the other 5% on shitty food. This comes a day after McDonalds posted slightly up US same store sales. Burger King's CFO Ben Wells said "For us weather is a big deal because you don't stroll to a Burger King restaurant, you have to be in an automobile." Now look, Money McBags is no Le Corbusier so he is not an authority on how cities are laid out, but if the weather is bad, wouldn't more people be getting in to their fucking cars and driving places than walking? Yeah, I get that if you're snowed in you're not going anywhere, but that should have hit McDonalds too. Consider Money McBags skeptical of that excuse.
In small cap news MLNK came out with their earnings last night and to call their earnings crappy would be an insult to crap everywhere. Now Money McBags is an owner of MLNK and has been touting them on When Genius Prevailed from time to time, so this just shows that nobody is perfect (except for maybe Jayde Nicole). This was Money McBags' break down of MLNK last Q, the key part being management said this Q (their fiscal Q2) would be flat with fiscal Q1 and the end of the year would see an uptick. So they earned $18MM of EBITDA in fiscal Q1 and taking their guidance that put them at a $72MM run rate or an EV/EBITDA so ridonkuously cheap that even Matthew Lesko couldn't believe it. That said, they fell short of their guidance this Q and earned only $13MM of EBITDA and then took down guidance for next Q (fiscal Q3) saying it will be flat to lower than fiscal Q2, with fiscal Q4 then being up sequentially from fiscal Q3 (though unclear if it will be up from this Q). Oy, fucking vey. So let's use $13MM as the new EBITDA run rate assuming it drops next Q but picks up to this level again in 2Qs, with anything after that being unknown (though it should be up). So a $52MM annual EBITDA run rate with $163MM in cash on the balance sheet and no debt yields an EV/EBITDA of still only 5.5x after today's drop. So it is still cheap and Money McBags has no intention of selling, but the fact that they were down when ther biggest customer HP had revenue up 8% this Q (and HP is 28% of revenue) is a bit head scratching (though if it were Money McBags' head and Destiny Dixon were doing the scratching, everything would be ok). MLNK revenues in the Q were down 9% Y/Y and 4.5% sequentially, but those numbers include $4.8MM of revenue from their acquisition of Tech For Less, so comparable revenues were actually down about 2% more than that (though they said this is usually a sequentially down Q). The good news is that gross margins were up 100bps and they generated about $30MM of FCF and guided to positive FCF for the year. Europe was a main driver of weakness, down 16%, as were getting new engagements which were down 62% from last year's fiscal Q2 which probably isn't a great sign unless you hate making money. They said this was "a direct result of our clients delayed decision-making due to the economic headwinds in the spring and summer of 2009" but then later they say that the six month lead times they get should put them at the front of the cycle. Hmm, Money McBags is now more confused about their business cycle than Larry Craig is about his sexuality (or at least publicly about his sexuality, because he knows in private he loves burgling turds). Luckily, Money McBags is not the only astute one out there as some guy from Harvest Capital Strategies spoke up on the conference call and asked: "you initially had expected Q2 to be flattish with Q1 and then a gradual uptick in Q3 and Q4 to now a down Q2 versus Q1 and the subsequent down Q3 versus Q2 before we see a resumption of sequential growth. Maybe if you can can just provide a little more color around what changed in the last three months?” Management said there were three reasons for the change: 1. Volumes were simply less than they expected in their base business. 2. Start-up activity is taking longer to get up and running so new business that was supposed to be in Q2 will now be in late Q3 and early Q4. 3. A little something called "Shut the fuck up" (ok, maybe they didn't say this one). Anyway, to sum this all up Money McBags can't be right all of the time. With consumer technology spending bottoming out, he though MLNK would see the benefits (as did their management) and they didn't. That said, the company remains cheap (thanks to the 10% drop today) but their growth may now take longer to come back than John Travolta's career after Staying Alive or Tiger Woods' dignity (ok, hopefully not that long). Money McBags is not selling here, but he's not buying either. This company simply should have done better.
Also, WILC is up almost 10% today on big volume after their Q last week. Money McBags will break that Q down in the next couple of days, but he has let you know many times that this company isn't just chopped liver.
Monday, March 8, 2010
3/8/10 Midafternoon Report: Market more mixed than reviews of Oscar telecast (and for the record, Money McBags gave it two thumbs in the ears)
The market is quiet today, likely still in bed after staying up all night to watch something called The Hurt Locker win so many Oscars that that the people who couldn't get tickets to Avatar may now go see it (that is if Alice in Wonderland is also sold out and they hate fun). The biggest news in the markets today is that AIG sold the second of its crown jewels, their foreign life insurance business Alico, to Met Life for $15B and with both of the AIG family jewels gone, they now qualify for a spot in the 2010 Eunuch Olympics. A business hasn't sold off two profitable units like this since Pam Anderson downsized her boobs (of course she had them re-inserted faster than Warren Buffett talks up his own book because you always have to keep the things that make you money). This sale gives AIG enough cash to pay some of their debt back to Uncle Sam and thus keeps their proverbial kneecaps intact for at least another couple of months because Uncle Sam doesn't play when you have his money, just ask Wesley Snipes. Unfortunately, AIG still owes the US government another $50B and seeing as how they have now sold off two of their biggest profit centers and their business won't generate $50B in profits until sometime around the year "two thousand and go fuck yourself," it is unclear what tricks they will do next to appease Uncle Sam (Perhaps Uncle Sam will "lend out" some of AIG's CDS expertise to China to try to smooth over relations and yield a happy ending for the two super powers). You just don't take daddy's money and get away with it.
In stock news MCD same store sales were up 4.8% in February driven by overseas sales and the $1 menu in the US. Money McBags is an owner of MCD as he believes in their affordability and brand equity in the fast growing developing nations. So even if Money McBags won't get high off his own supply by refusing to eat the swill that they serve at McDonald's (he would rather eat a Gabourey Sidibe burger out of the bun than whatever it is they serve at MCD's), Money McBags believes in the company. In other large cap names, RIMM got an upgrade from the Bank of Montreal today which has driven the stock up almost 5%. The BMO analyst raised his price target to $88 citing expected strong Q4 sales, a potential guidance raise, and Apple aboot (BMO and RIMM are Canadian after all, eh?) to go out of business because iPhones are for sissies (ok, that last one may have been made up). Now look, Money McBags is never a fan of owning the second best competitor in a space (he'll go Bang Bus any day over Backseat Bangers), but he will admit that he owns some RIMM simply because it is as cheap as a homless man's balls for it's growth as it is trading at less than 20x 2010 EPS estimates and less than 15x 2011 eps estimates despite continuing to dominate the business handset market like Nipsey Russell dominated the 1970s game show circuit (where he did more than just fill in Brett Somers' blanks). RIMM is getting 20% topline growth and 30%+ bottomline growth and you're only paying 15x for that. The stock is still a reasonable buy but it is unlikely to be a longterm holding for Money McBags as their end game is becoming more challenging than playing herpes roulette with Paris Hilton.
In small cap news, apparently a fuckload of people dropped some acid this weekend and went down to the local IMAX to see Alice in Wonderland (and Money McBags would march his hairs to the IMAX if it were Alice Eve's wonderland they were showing. He'd definitely let young Ms. Eve mock his turtle while he chesired her cat.). IMAX theatres pulled in nearly $12MM this weekend as this 3D spectacle eclipsed even Avatar's opening run and led IMAX to sell out every seat they had for the entire weekend. This has sent IMAX stock up 9% but Money McBags is still not buying as the stock is expensive and the movement today is likely retail money on the announced headlines. IMAX could run some more as its momentum coming out of Oscar weekend could be so great that it attempts to defy the laws of physics and create a coefficient of restitution greater than 1, but this story is longer in the tooth than Kirsten Dunst. In other small cap news, EBIX annonuced their quarter and is trading down despite a 55% increase in revenue, a 53% increase in net income (operating leverage be damned), a 99.5% customer retention rate for the year, $12MM in cash flow for the Q, and a forward p/e less than 15x. Money McBags has written about EBIX many times as nothing about the company makes sense and their financials and business are more opaquely complex than the Weiner process of Brownian motion (and I can assure you that is nowhere as dirty as it sounds). The stock is ridiculously cheap based on the fundamentals of the business but shorts have been all over it due to aggressive acquisition accounting, receivables growth outpacing revenue, the CEO having a bigger ego than Joe Francis has, and a proclivity to switch auditors at the drop of a questionable debit. Short activity was addressed on the call as a caller brought up that short exposure has climbed from 200k shares to 10MM in six months and the fact that EBIX has changed their auditors more times than Heidi Montag changed her face. CEO Robin Raina addressed this with some kind of Jedi mind trick ping pong analogy (no really he did) and a quote from some Latin American intellect whose name yields zero google hits (the transcript from the call has Robin "Making it" Raina quoting some guy named Joe Moppi which is either spelled wrong or more fictitious than EBIX's growth rate, can we get an auditor on this?). Kidding aside, Money McBags still has no idea what to do with this company. He has a hard time believing it is total fraud but there is enough smoke to just keep him away from it. That said, if you can get comfortable with their numbers, the stock is ridonkuously cheap. Money McBags wouldn't short it, but as always, there are easier ways to make money (like KITD, MLNK, or CRUS).
In stock news MCD same store sales were up 4.8% in February driven by overseas sales and the $1 menu in the US. Money McBags is an owner of MCD as he believes in their affordability and brand equity in the fast growing developing nations. So even if Money McBags won't get high off his own supply by refusing to eat the swill that they serve at McDonald's (he would rather eat a Gabourey Sidibe burger out of the bun than whatever it is they serve at MCD's), Money McBags believes in the company. In other large cap names, RIMM got an upgrade from the Bank of Montreal today which has driven the stock up almost 5%. The BMO analyst raised his price target to $88 citing expected strong Q4 sales, a potential guidance raise, and Apple aboot (BMO and RIMM are Canadian after all, eh?) to go out of business because iPhones are for sissies (ok, that last one may have been made up). Now look, Money McBags is never a fan of owning the second best competitor in a space (he'll go Bang Bus any day over Backseat Bangers), but he will admit that he owns some RIMM simply because it is as cheap as a homless man's balls for it's growth as it is trading at less than 20x 2010 EPS estimates and less than 15x 2011 eps estimates despite continuing to dominate the business handset market like Nipsey Russell dominated the 1970s game show circuit (where he did more than just fill in Brett Somers' blanks). RIMM is getting 20% topline growth and 30%+ bottomline growth and you're only paying 15x for that. The stock is still a reasonable buy but it is unlikely to be a longterm holding for Money McBags as their end game is becoming more challenging than playing herpes roulette with Paris Hilton.
In small cap news, apparently a fuckload of people dropped some acid this weekend and went down to the local IMAX to see Alice in Wonderland (and Money McBags would march his hairs to the IMAX if it were Alice Eve's wonderland they were showing. He'd definitely let young Ms. Eve mock his turtle while he chesired her cat.). IMAX theatres pulled in nearly $12MM this weekend as this 3D spectacle eclipsed even Avatar's opening run and led IMAX to sell out every seat they had for the entire weekend. This has sent IMAX stock up 9% but Money McBags is still not buying as the stock is expensive and the movement today is likely retail money on the announced headlines. IMAX could run some more as its momentum coming out of Oscar weekend could be so great that it attempts to defy the laws of physics and create a coefficient of restitution greater than 1, but this story is longer in the tooth than Kirsten Dunst. In other small cap news, EBIX annonuced their quarter and is trading down despite a 55% increase in revenue, a 53% increase in net income (operating leverage be damned), a 99.5% customer retention rate for the year, $12MM in cash flow for the Q, and a forward p/e less than 15x. Money McBags has written about EBIX many times as nothing about the company makes sense and their financials and business are more opaquely complex than the Weiner process of Brownian motion (and I can assure you that is nowhere as dirty as it sounds). The stock is ridiculously cheap based on the fundamentals of the business but shorts have been all over it due to aggressive acquisition accounting, receivables growth outpacing revenue, the CEO having a bigger ego than Joe Francis has, and a proclivity to switch auditors at the drop of a questionable debit. Short activity was addressed on the call as a caller brought up that short exposure has climbed from 200k shares to 10MM in six months and the fact that EBIX has changed their auditors more times than Heidi Montag changed her face. CEO Robin Raina addressed this with some kind of Jedi mind trick ping pong analogy (no really he did) and a quote from some Latin American intellect whose name yields zero google hits (the transcript from the call has Robin "Making it" Raina quoting some guy named Joe Moppi which is either spelled wrong or more fictitious than EBIX's growth rate, can we get an auditor on this?). Kidding aside, Money McBags still has no idea what to do with this company. He has a hard time believing it is total fraud but there is enough smoke to just keep him away from it. That said, if you can get comfortable with their numbers, the stock is ridonkuously cheap. Money McBags wouldn't short it, but as always, there are easier ways to make money (like KITD, MLNK, or CRUS).
Friday, March 5, 2010
3/5/10 Midafternoon Report: With Oscars approaching, the market is "Up" as economists "Blind Side"d by fewer job losses while strength of recovery remains "Up in the Air"
The market is running again as a result of the jobs report and inertia. According to the (No)Labor Department, the economy lost 36k jobs in February while the unemployment rate stayed steady (and for those cunning linuists or Nabokov fans, that is back to back anagrams) at 9.7%. This was better than the estimates of 68k job losses but is not a definitive enough number (like 42) to give investors a real read on the direction of the economy. However, beating estimates is all that matters even though we know estimates are inherrently flawed like a supermodel with a hairy ass. Some economists partially blamed snowstorms for the job losses, while others blamed companies for wanting to be profitable. The (No)Labor Department chimed in and said job losses from snowstorms were unquantifiable like the square root of a negative number (imaginary numbers be damned), the number of one night stands by Paris Hilton, or how many licks it takes to get to the center of a tootsie pop.
In international markets, the Greeks are still protesting their loss of free lunches (and if those lunches were chicken gyros with a dollop of tzatzki sauce, who can blame them?) but now they are rioting in the street causing police to employ Greek helmets for protection. German Chancellor Angela Merkel pulled herself away from the daily German scat film break to say she feels Greece has done enough to cut their deficit which has made the market guess as to whether the EU will continue to provide support. This was not helped by Germany's economic minister Rainer Bruederle who tried to "rainer" on Greece's parade (and since it has been sunny in Greece today, it was quite a golden shower) by saying Germany "does not intend to give a cent" to Greece. Of course Money McBags isn't falling for that sleight of language, knowing that Greece wants euros and not cents, so it was only an idle threat by Herr Bruederle. Also, some guy named Jean-Claude Juncker (and one can only hope he isn't a bond sales man because Juncker bonds would be a name almost as unfortunate as if Mary Turdy sold bottled water, hence Turdy Water) who heads a group of euro-area finance ministers is soothing the market by saying “We’re telling financial markets: Look out, we’re not abandoning Greece." Money McBags has been saying all along that Greece isn't going anywhere (well unless the Anatolian plate keeps moving westward) and the EU will be there to bail them out regardless. This Greek default hysteria has been a more overblown news story than Tiger Wood's love of filth or anything having to do with tea baggers that doesn't involve Kim Kardashian.
In stock news, Apple has announced that April 3rd will be the launch of their unfortunately named iPad (no word on when their super powered iPad, to be known as the Max-iPad, will come out to sop up sales) while financials continue to shoot up like Robert Downey Jr. in the 1990s. The market is in full blast off mode as the economy is not getting worse today, just getting sideways.
In small stock news, everything is fucking up so good on you for owning anything that is publicly traded. Money McBags promised to take a look at NTRI the other day after their craptastic guidance and he has finally had a chance to go through their call. The stock is down 50% in the past 3 months after a massive rally on expected sales improvement. Unfortunately, performance has not accelerated as hoped as investors remember that fat people are fucking lazy and thus are not apt to sign up for dieting even if they feel that the economy is getting better (though to be fair, NTRI costs less than actually buying groceries, but the up front costs are prohibitive for some). NTRI's Q was actually not too bad. Without one time charges they earned $.18 on a shrinking sales decline of only 7%. These numbers were better than estimates with the company also earning $14.5MM of EBITDA in the Q and a delicious $69MM of EBITDA for the year. The stock traded down though as their guidance for Q1 was so far below estimates that estimates needed an electron microscope to see it. The company said that ad rates in Q1 have gone up by 50% to 100% in some cases as companies come back into the advertising market and drive up prices for everyone. They guided to $.10 to $.13 for Q1 eps and analysts were estimating $.54 eps. That is a bigger let down than for a gold digger who married into the Madoff family. Not only is that guidance bad, but they said earnings will be negatively impacted by around $.17 in the Q with 60% of it coming from the marketing spend uptick and 40% coming from sunk costs to build out their retail channel. So even if we add back those one time charges, guidance would have been around $.30 or still way fucking below estimates. Revenue guidance is for around $155MM which is only 10% below expectations but the company said their retail sales partnerships other than Costco (Walmart, Walgreens, Old Country Buffet) posted disappointing and immaterial results. While Nutri System D (geared towards diabetics) performed well and they saw new customers sign-ups flat and not down for the first time in over two years, their profitability crumbled like a Taco Bell Chalupa in the hands of one of their target customers. Look, I'm no Norman Einstein but if you want to sell shit to fat people, why not sell some fucking Oreos instead of diets? Really. It's like trying to sell an agoraphobic Super Bowl tickets instead of indoor furniture. Either way, the company is back down to where it was in October before the anticipation of better things to come. That said, if we step back for a second and look at the company, it's actually not a terrible buy right now. Earnings guidance is basically flat with the midpoint being $1.07 for the year, so it is trading at 15x that. NTRI has a 4.5% dividend yield and spits out a ton of cash. The company is trading at an EV/EBITDA of around 6x last year's EBITDA and with guidance for 2010 in the same range, the multiple should be the same. Sure they have not grown in a while (while pseudo competitors like MED are growing like weeds on anabolic steroids), and sure they are facing huge headwinds and uncertainties with more expensive marketing costs and their retail sales programs belly flopping from the high dive, but the time to buy companies with decent track records, good returns, and solid balance sheets, is when every one fucking hates them. NTRI has fixed some of their operations and still has solid brand equity and remains profitable. It may be too early to get in to this, but it is worth keeping on your radar as this country will remain chock full o' fat people and thus there will always be potential customers (though if I were NTRI, I would partner like fuck with insurance providers and businesses as a way to get employees to lose weight and thus get premiums and high risk patients down). Anyway, do your own research here but more than anything, enjoy the weekend.
In international markets, the Greeks are still protesting their loss of free lunches (and if those lunches were chicken gyros with a dollop of tzatzki sauce, who can blame them?) but now they are rioting in the street causing police to employ Greek helmets for protection. German Chancellor Angela Merkel pulled herself away from the daily German scat film break to say she feels Greece has done enough to cut their deficit which has made the market guess as to whether the EU will continue to provide support. This was not helped by Germany's economic minister Rainer Bruederle who tried to "rainer" on Greece's parade (and since it has been sunny in Greece today, it was quite a golden shower) by saying Germany "does not intend to give a cent" to Greece. Of course Money McBags isn't falling for that sleight of language, knowing that Greece wants euros and not cents, so it was only an idle threat by Herr Bruederle. Also, some guy named Jean-Claude Juncker (and one can only hope he isn't a bond sales man because Juncker bonds would be a name almost as unfortunate as if Mary Turdy sold bottled water, hence Turdy Water) who heads a group of euro-area finance ministers is soothing the market by saying “We’re telling financial markets: Look out, we’re not abandoning Greece." Money McBags has been saying all along that Greece isn't going anywhere (well unless the Anatolian plate keeps moving westward) and the EU will be there to bail them out regardless. This Greek default hysteria has been a more overblown news story than Tiger Wood's love of filth or anything having to do with tea baggers that doesn't involve Kim Kardashian.
In stock news, Apple has announced that April 3rd will be the launch of their unfortunately named iPad (no word on when their super powered iPad, to be known as the Max-iPad, will come out to sop up sales) while financials continue to shoot up like Robert Downey Jr. in the 1990s. The market is in full blast off mode as the economy is not getting worse today, just getting sideways.
In small stock news, everything is fucking up so good on you for owning anything that is publicly traded. Money McBags promised to take a look at NTRI the other day after their craptastic guidance and he has finally had a chance to go through their call. The stock is down 50% in the past 3 months after a massive rally on expected sales improvement. Unfortunately, performance has not accelerated as hoped as investors remember that fat people are fucking lazy and thus are not apt to sign up for dieting even if they feel that the economy is getting better (though to be fair, NTRI costs less than actually buying groceries, but the up front costs are prohibitive for some). NTRI's Q was actually not too bad. Without one time charges they earned $.18 on a shrinking sales decline of only 7%. These numbers were better than estimates with the company also earning $14.5MM of EBITDA in the Q and a delicious $69MM of EBITDA for the year. The stock traded down though as their guidance for Q1 was so far below estimates that estimates needed an electron microscope to see it. The company said that ad rates in Q1 have gone up by 50% to 100% in some cases as companies come back into the advertising market and drive up prices for everyone. They guided to $.10 to $.13 for Q1 eps and analysts were estimating $.54 eps. That is a bigger let down than for a gold digger who married into the Madoff family. Not only is that guidance bad, but they said earnings will be negatively impacted by around $.17 in the Q with 60% of it coming from the marketing spend uptick and 40% coming from sunk costs to build out their retail channel. So even if we add back those one time charges, guidance would have been around $.30 or still way fucking below estimates. Revenue guidance is for around $155MM which is only 10% below expectations but the company said their retail sales partnerships other than Costco (Walmart, Walgreens, Old Country Buffet) posted disappointing and immaterial results. While Nutri System D (geared towards diabetics) performed well and they saw new customers sign-ups flat and not down for the first time in over two years, their profitability crumbled like a Taco Bell Chalupa in the hands of one of their target customers. Look, I'm no Norman Einstein but if you want to sell shit to fat people, why not sell some fucking Oreos instead of diets? Really. It's like trying to sell an agoraphobic Super Bowl tickets instead of indoor furniture. Either way, the company is back down to where it was in October before the anticipation of better things to come. That said, if we step back for a second and look at the company, it's actually not a terrible buy right now. Earnings guidance is basically flat with the midpoint being $1.07 for the year, so it is trading at 15x that. NTRI has a 4.5% dividend yield and spits out a ton of cash. The company is trading at an EV/EBITDA of around 6x last year's EBITDA and with guidance for 2010 in the same range, the multiple should be the same. Sure they have not grown in a while (while pseudo competitors like MED are growing like weeds on anabolic steroids), and sure they are facing huge headwinds and uncertainties with more expensive marketing costs and their retail sales programs belly flopping from the high dive, but the time to buy companies with decent track records, good returns, and solid balance sheets, is when every one fucking hates them. NTRI has fixed some of their operations and still has solid brand equity and remains profitable. It may be too early to get in to this, but it is worth keeping on your radar as this country will remain chock full o' fat people and thus there will always be potential customers (though if I were NTRI, I would partner like fuck with insurance providers and businesses as a way to get employees to lose weight and thus get premiums and high risk patients down). Anyway, do your own research here but more than anything, enjoy the weekend.
Friday, February 26, 2010
2/26/10 Midafternoon Report: AIG loses more in Q4 than entire GDP of Malta, warns Botswana they're up next
The market is a bit mixed today like the drug cocktail found in Brittany Murphy's stomach. Sales of existing homes dropped for the second consecutive month, this time by 7.2% which is the second largest decline ever and is creating more of a buyers market than the internet did for newspapers. The decline was caused by the government tax credit winding down, the high unemployment rate, and the disappearance of the barter system. Economists actually expected existing home sales to rise so it's good to see they are once again about as good at their predictions as Stevie Wonder is at being the seeker in a game of hide and seek (or as he calls it "life"). An interesting data point is that 38% of all homes sold were distressed sales. That is a remarkable number. So homeowners, look to the house on your left and look to the house on your right, because on average one of those houses is being foreclosed upon and your new neighbors may be a few tax brackets below you. In more positive macro news, business activity grew more than anticipated and its most since 2005 according to the Chicago Purchasing Managers Index, or as its now more commonly known as: "Fiction." Unless the index was measuring coffee sold while waiting in line at the unemployment office or tickets sold for the proposed Julia Mancuso/Lindsey Vonn catfight (and Money McBags would love to ski down Julia Mancuso's hills), the data is perplexing to say the least. Also, GDP was revised up to 5.9% growth from 5.7% in the last Q. However, most of that growth was a result of inventory restocking. Looking at GDP without the change in private inventories, growth was a He Ping Ping-esque 1.9% and consumer spending was revised down from 2.0% to 1.7%. The point of all of this is that the economy is about as healthy as Mark Sanford's marriage or Money McBags' new found love of Alice Eve so until jobs can be created, we are going to have more and more marginal to disappointing economic news.
European markets were off to a better start today as the British Statistics Office revised up their estimate of UK economic growth in the fourth quarter to 0.3% from 0.1% citing the long awaited introduction of dental floss, while Asian markets advanced after figures showed that Japanese factory output, rose by 2.5% in anticipation of Nintendo's new game console, tentatively called "Wii're Fucked."
The big stock news today is that investors are not down with AIG and their craptastic quarter. AIG posted an $8.57B loss or to make it seem smaller, $65 per share (and remember, shares are currently trading at $25, so that is a neat fucking trick). At least analysts were close as operating loss per share was estimated to be $3.94 and it just missed that number by coming in at whopping $53.23 a share. So estimates were only off by a factor of 14ish or as they say in the forecasting business, a nut hair (that is if it were one of Lexington Steele's nut hairs, and not a regular Lexington Steele, but one who had grown to be 30 feet tall as a result of radiation poisoning from his last scene with Gianna Michaels). Shareholders should have faith though as CEO Robert Benmosche said in a pre-recorded (in order to duck questions) call: "While we are not out of the woods by any stretch, these numbers represent a substantial improvement from just one year ago...we believe we are on our way to regaining our stature as one of the world’s largest and most successful property-casualty insurance operations." He then stated that he thinks Roman Polanksi is also on his way to regaining his stature as a successful babysitter and Bernie Madoff is on his way to regaining his stature as a first class investor. While $6.2B of losses can be chalked up to paying back the government, the addition of $1.8B to their property-casualty reserves can be chalked up to being bad at the insurance business, whch would be fine, if insurance weren't their main fucking business. Money McBags knows it's easy to kick someone when they are down, unless you're Oscar Pistorius (and in that case you just knee them), but AIG's situation is more convolutedly complex than the 11 dimensions needed in M-Theory or trying to figure out where the pictures come from for the still deliciously not safe for work Guesshermuff (and all my guesses remain "fantastic"). Trying to analyze AIG is a lot like taking your car to a mechanic, it's always something and you have no way to prove the guy wrong. Money McBags is eagerly waiting AIG to come out and just blame their losses on a faulty johnson rod. There are easier ways to make money so pay attention to AIG only for any market risk insight you may get. In other stock news, C is replacing 3 of its directors as apparently Colombia Pictures has hired them back to shoot a remake of their long running hit Monkey Business.
In small cap news today RICK continues to show the market its tits by climbing another 3%. CEO Eric Langan announced yesterday that he expects the VCGH deal to add $50MM of revenue by 2011 to bring RICK's revenues to $150MM. He also said they would be consolidating brands in an attempt to streamline their image so they can better promote it through television commercials on such channels as ESPN. Now look, Money McBags loves everything RICK is about, really he does, he loves the business, he loves the growth, and most of all he loves every coked-out part of their inventory. That said, the idea of turning it into some Hooters-esque national chain is the worst thing they can do. Strip clubs were not meant to be Walmarts or McDonalds and advertising them on prime TV channels is the wrong place and the wrong audience. Anyone who wants to go to a strip club knows exactly where they are and which ones are best, they don't need a fucking TV commercial with some likely dopey jingle (Rick's Cabaret: Plop, plop, jizz, jizz, oh what a relief it is) reminding them that they love vagina. So a TV ad campaign worries Money McBags like a parent learning their daughter will be going to Cancun for spring break. This company should stick to what it knows and put marketing dollars into the girls, airport billboards, and hotel concierges' pockets. Money McBags is still awaiting more detail on VCGH's financials, but the stock is nearing his price target. In other small cap news, PMFG, a company that provides separation and filtration products mainly for natural gas and which Money McBags has followed off and on for the past couple of years announced a secondary offering today at a price a measly 30%ish below their close on Thursday causing investors to collectively utter a befuddled "What the fuck?" They are selling 1.3MM shares for about 10% dilution at $11.50 and net proceeds from the offering will go towards repaying a portion of their outstanding borrowings in connection with their poorly timed acquisition of Nitram Energy, towards working capital, and also towards general corporate purposes such as settling the likely shareholder lawsuit to be filed against them for such a diltuive and poorly priced secondary. Wow. Money McBags is glad he doesn't currently own PMFG and can only scratch his well-coiffed head and wonder what is going on in their Dallas headquarters.
As always, enjoy the weekend and don't forget Money McBags is now on twitter.
European markets were off to a better start today as the British Statistics Office revised up their estimate of UK economic growth in the fourth quarter to 0.3% from 0.1% citing the long awaited introduction of dental floss, while Asian markets advanced after figures showed that Japanese factory output, rose by 2.5% in anticipation of Nintendo's new game console, tentatively called "Wii're Fucked."
The big stock news today is that investors are not down with AIG and their craptastic quarter. AIG posted an $8.57B loss or to make it seem smaller, $65 per share (and remember, shares are currently trading at $25, so that is a neat fucking trick). At least analysts were close as operating loss per share was estimated to be $3.94 and it just missed that number by coming in at whopping $53.23 a share. So estimates were only off by a factor of 14ish or as they say in the forecasting business, a nut hair (that is if it were one of Lexington Steele's nut hairs, and not a regular Lexington Steele, but one who had grown to be 30 feet tall as a result of radiation poisoning from his last scene with Gianna Michaels). Shareholders should have faith though as CEO Robert Benmosche said in a pre-recorded (in order to duck questions) call: "While we are not out of the woods by any stretch, these numbers represent a substantial improvement from just one year ago...we believe we are on our way to regaining our stature as one of the world’s largest and most successful property-casualty insurance operations." He then stated that he thinks Roman Polanksi is also on his way to regaining his stature as a successful babysitter and Bernie Madoff is on his way to regaining his stature as a first class investor. While $6.2B of losses can be chalked up to paying back the government, the addition of $1.8B to their property-casualty reserves can be chalked up to being bad at the insurance business, whch would be fine, if insurance weren't their main fucking business. Money McBags knows it's easy to kick someone when they are down, unless you're Oscar Pistorius (and in that case you just knee them), but AIG's situation is more convolutedly complex than the 11 dimensions needed in M-Theory or trying to figure out where the pictures come from for the still deliciously not safe for work Guesshermuff (and all my guesses remain "fantastic"). Trying to analyze AIG is a lot like taking your car to a mechanic, it's always something and you have no way to prove the guy wrong. Money McBags is eagerly waiting AIG to come out and just blame their losses on a faulty johnson rod. There are easier ways to make money so pay attention to AIG only for any market risk insight you may get. In other stock news, C is replacing 3 of its directors as apparently Colombia Pictures has hired them back to shoot a remake of their long running hit Monkey Business.
In small cap news today RICK continues to show the market its tits by climbing another 3%. CEO Eric Langan announced yesterday that he expects the VCGH deal to add $50MM of revenue by 2011 to bring RICK's revenues to $150MM. He also said they would be consolidating brands in an attempt to streamline their image so they can better promote it through television commercials on such channels as ESPN. Now look, Money McBags loves everything RICK is about, really he does, he loves the business, he loves the growth, and most of all he loves every coked-out part of their inventory. That said, the idea of turning it into some Hooters-esque national chain is the worst thing they can do. Strip clubs were not meant to be Walmarts or McDonalds and advertising them on prime TV channels is the wrong place and the wrong audience. Anyone who wants to go to a strip club knows exactly where they are and which ones are best, they don't need a fucking TV commercial with some likely dopey jingle (Rick's Cabaret: Plop, plop, jizz, jizz, oh what a relief it is) reminding them that they love vagina. So a TV ad campaign worries Money McBags like a parent learning their daughter will be going to Cancun for spring break. This company should stick to what it knows and put marketing dollars into the girls, airport billboards, and hotel concierges' pockets. Money McBags is still awaiting more detail on VCGH's financials, but the stock is nearing his price target. In other small cap news, PMFG, a company that provides separation and filtration products mainly for natural gas and which Money McBags has followed off and on for the past couple of years announced a secondary offering today at a price a measly 30%ish below their close on Thursday causing investors to collectively utter a befuddled "What the fuck?" They are selling 1.3MM shares for about 10% dilution at $11.50 and net proceeds from the offering will go towards repaying a portion of their outstanding borrowings in connection with their poorly timed acquisition of Nitram Energy, towards working capital, and also towards general corporate purposes such as settling the likely shareholder lawsuit to be filed against them for such a diltuive and poorly priced secondary. Wow. Money McBags is glad he doesn't currently own PMFG and can only scratch his well-coiffed head and wonder what is going on in their Dallas headquarters.
As always, enjoy the weekend and don't forget Money McBags is now on twitter.
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.
Wednesday, February 24, 2010
2/24/10 Midafternoon Report: Bernanke channels his inner Greenspan and promises to keep rates low until the next bubble
Dizzam, Benny B went in front of the House Financial Services Commitee today and let everyone know that rates will be kept low for a more "extended period" than a menometrorrhagia sufferer. Despite last week's back and forth between Bernanke and his henchman Thomas "T-Ho" Hoenig about the language used by the Fed in their minutes (and Money McBags would vote for Esperanto just to switch things up), Benny B held to his guns and let congress know he isn't going to raise rates until he sees the whites of the recovery's eyes (or the P in their GDP). Bernanke also said he believes the recent uptick in business growth was just an inventory restocking which is exactly what Money McBags has been yelling through the gold-plated window of his ivory tower for the past several months.
Bernanke stated: “As the impetus provided by the inventory cycle is temporary, and as the fiscal support for economic growth likely will diminish later this year, a sustained recovery will depend on continued growth in private-sector final demand for goods and services." (Bolding is from Money McBags, multisyllabic, excessive, and painfully boring verbiage is from Bernanke as apparently he gets paid by the snore).
Bernanke cited the diminishing skills of workers who have been forced into long term unemployment, the current deficit, and Hannah Hilton's apparent cinematic retirement as concerns potentially inhibiting a full recovery. He did say he expected the unemployment rate to drop to 7% by 2012, but he didn't say that it was likely going to be as a result of a massive numerator shift caused by those currently longterm unemployed workers starving to death in the new Dust Bowl, or aptly named for our times, The Capital One Mortgage Bowl: What Used to Be in Your Wallet? Bernanke also said that inflation would be "subdued" for some time as the US printed so much money that investors are still trying to count it to figure out exactly how much there is, so until that time, the market will remain blissfully ignorant. Call it the "Too Big To Count" theory.
In other macro news, prices of new homes fell surprising everyone except for the 15MM to 20MM unemployed Americans. Despite the government extending the tax credit for first time home buyers, purchases still declined by 11% and fell to their all-time low as any first time home buyers had likely already taken advantage of the tax credit last year by rushing in to buy before the previous deadline. Therefore extending the tax credit was like offering lunch to the Nathan's Hot Dog Eating Contest contestants immediately after the final gag sounded. There is currently a 9 month inventory of houses on the market and 3MM more houses are forecast to be foreclosed upon this year which is great for vermin, but not so great for the economy.
In stock news, Dollar Tree destroyed their analyst estimates as if those estimates were Joanie's rectum and they were Chachi after a blue-balled night of doing body shots off of Pinky Tuscadero. DLTR beat estimates of $1.44 eps by $.08 thanks to better gross margins and gave guidance well above analyst estimates for Q1 and the full year with EPS slated to be $3.96 to $4.23 for 2010. They also generate a ton of cash and for those who have been on the planet Melmac for the past few years living off of toasted feline (and to be honest, if it were Jayde Nicole's "cat" being served on Melmac, Money McBags would immediately build a spaceship) and aren't familiar with the company, they sell incredibly cheap shit in a recessionary environment. They are now trading at around 14x 2010 guidance but this environment for them should be as profitable as the guy operating the lifeboat booth on the Titanic or whoever was selling bullets at the Alamo. Money McBags has not followed DLTR as closely as he should have, but the story makes sense and the valuation isn't horrible. They'll probably trade down tomorrow after today's jump, but this stock is worth investigating further.
As for small caps, CTGX reported their quarter last night and it was inline but their guidance was better than Money McBags was expecting. Money McBags previewed ther quarter the other day and was perfectly content with their release last night as he was just expecting more of the same for now in their core business and that is what he got. Their revenue for the Q was down 19% with equal declines in their solutions and staffing business. Honestly, Money McBags can't do anything but yawn about this as it is completly irrelevant to the story as he previously outlined. As long as the core business doesn't blow up (and there is really no reason it should), the EMR business CTGX is in should provide the real growth for this company over the next 3 to 5 years. This was Money McBags favorite quote from their press release (he'd quote their call, but it was fantastically bland, like a primetime sitcom or anything written by that Michael Crichton guy):
"Looking further out, with the billions of dollars in federal stimulus money for EMRs from ARRA, Medicare, and Medicaid still unspent, we expect demand for EMR implementation support will steadily accelerate as these funds become available and access to the credit markets opens up for providers. Based on our deep EMR experience for large providers and communitywide health information exchanges, we are confident in our ability to secure significant new EMR work over the next three years, particularly as the 2014 deadline for having systems meeting meaningful use criteria in place draws closer." (Bolding again from Money McBags).
That is pretty much all you need to know. Now guidance for 2010 is for eps of $.46-$.56 on 11% revenue growth. So they are trading at around 15.5x the midpoint of guidance and they actually see their staffing business picking up into the year and have begun hiring. Also, their balance sheet is cleaner than the grout on germaphobe's tiled bathroom floor and they are buying back shares. There is not much reason for the company to take off right now, but EMR is coming so this stock is the definition of buy and hold, especially as it isn't horribly priced (it isn't all that cheap though).
Bernanke stated: “As the impetus provided by the inventory cycle is temporary, and as the fiscal support for economic growth likely will diminish later this year, a sustained recovery will depend on continued growth in private-sector final demand for goods and services." (Bolding is from Money McBags, multisyllabic, excessive, and painfully boring verbiage is from Bernanke as apparently he gets paid by the snore).
Bernanke cited the diminishing skills of workers who have been forced into long term unemployment, the current deficit, and Hannah Hilton's apparent cinematic retirement as concerns potentially inhibiting a full recovery. He did say he expected the unemployment rate to drop to 7% by 2012, but he didn't say that it was likely going to be as a result of a massive numerator shift caused by those currently longterm unemployed workers starving to death in the new Dust Bowl, or aptly named for our times, The Capital One Mortgage Bowl: What Used to Be in Your Wallet? Bernanke also said that inflation would be "subdued" for some time as the US printed so much money that investors are still trying to count it to figure out exactly how much there is, so until that time, the market will remain blissfully ignorant. Call it the "Too Big To Count" theory.
In other macro news, prices of new homes fell surprising everyone except for the 15MM to 20MM unemployed Americans. Despite the government extending the tax credit for first time home buyers, purchases still declined by 11% and fell to their all-time low as any first time home buyers had likely already taken advantage of the tax credit last year by rushing in to buy before the previous deadline. Therefore extending the tax credit was like offering lunch to the Nathan's Hot Dog Eating Contest contestants immediately after the final gag sounded. There is currently a 9 month inventory of houses on the market and 3MM more houses are forecast to be foreclosed upon this year which is great for vermin, but not so great for the economy.
In stock news, Dollar Tree destroyed their analyst estimates as if those estimates were Joanie's rectum and they were Chachi after a blue-balled night of doing body shots off of Pinky Tuscadero. DLTR beat estimates of $1.44 eps by $.08 thanks to better gross margins and gave guidance well above analyst estimates for Q1 and the full year with EPS slated to be $3.96 to $4.23 for 2010. They also generate a ton of cash and for those who have been on the planet Melmac for the past few years living off of toasted feline (and to be honest, if it were Jayde Nicole's "cat" being served on Melmac, Money McBags would immediately build a spaceship) and aren't familiar with the company, they sell incredibly cheap shit in a recessionary environment. They are now trading at around 14x 2010 guidance but this environment for them should be as profitable as the guy operating the lifeboat booth on the Titanic or whoever was selling bullets at the Alamo. Money McBags has not followed DLTR as closely as he should have, but the story makes sense and the valuation isn't horrible. They'll probably trade down tomorrow after today's jump, but this stock is worth investigating further.
As for small caps, CTGX reported their quarter last night and it was inline but their guidance was better than Money McBags was expecting. Money McBags previewed ther quarter the other day and was perfectly content with their release last night as he was just expecting more of the same for now in their core business and that is what he got. Their revenue for the Q was down 19% with equal declines in their solutions and staffing business. Honestly, Money McBags can't do anything but yawn about this as it is completly irrelevant to the story as he previously outlined. As long as the core business doesn't blow up (and there is really no reason it should), the EMR business CTGX is in should provide the real growth for this company over the next 3 to 5 years. This was Money McBags favorite quote from their press release (he'd quote their call, but it was fantastically bland, like a primetime sitcom or anything written by that Michael Crichton guy):
"Looking further out, with the billions of dollars in federal stimulus money for EMRs from ARRA, Medicare, and Medicaid still unspent, we expect demand for EMR implementation support will steadily accelerate as these funds become available and access to the credit markets opens up for providers. Based on our deep EMR experience for large providers and communitywide health information exchanges, we are confident in our ability to secure significant new EMR work over the next three years, particularly as the 2014 deadline for having systems meeting meaningful use criteria in place draws closer." (Bolding again from Money McBags).
That is pretty much all you need to know. Now guidance for 2010 is for eps of $.46-$.56 on 11% revenue growth. So they are trading at around 15.5x the midpoint of guidance and they actually see their staffing business picking up into the year and have begun hiring. Also, their balance sheet is cleaner than the grout on germaphobe's tiled bathroom floor and they are buying back shares. There is not much reason for the company to take off right now, but EMR is coming so this stock is the definition of buy and hold, especially as it isn't horribly priced (it isn't all that cheap though).
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.
Friday, February 19, 2010
2/19/10 Midafternoon Report: Core inflation tame, good news for those who don't eat or use energy
The market hung in there today despite Ben Bernanke's surprising discount rate raise after the market closed yesterday. Bernanke continues to think outside of the box in managing the economy (and as long as it isn't Hannah Hilton's box, then Money McBags is fully on board because one should only think inside her box, never outside of it). There is no telling what Bernanke will do next as a Federal Reserve Chairman hasn't done anything as radical as he has since Marriner S. Eccles wore black shoes with a brown belt on day back in 1937. Money McBags is all in favor of the proactivity of the Fed and anxiously awaits their next move, whether it be reducing their balance sheet, paying interest on bank loans, or having the head of the Cleveland branch of the Fed, Sandra Pianalto, man the kissing booth at the Fed's next holiday party (what, you'd prefer Janet Yellen?).
The Dollar is now at its nine month high against the Euro, reaching $1.35 to the Euro, thanks to the Fed actions which means that all of the unemployed people who couldn't afford to book vacations to see the leaning tower of Pisa this winter can now hypothetically be able to at least afford to check a bag. CPI data also came out today and showed inflation to be less than expected except for a couple of small things called energy and food. Excluding food and fuel costs, prices fell .1% which was the first decline in over 25 years. So as long as you don't eat or go anywhere in the fucking car which you probably have to sell anyway to make the mortgage payments on the house you couldn't afford but were able to get a loan for so the endowment fund at the University of My Left Nut (go fighting Ballhawks!) could get a little extra yield on their fixed income portfolio by having bankers slice up pools of those mortgages which enabled those same bankers to buy even more coke and purchase hookers with fewer diseases, everything should be ok. For fucksake, we're not hunter-gatherers anymore (though if we were, I would hunt and gather me some Amanda Seyfried) and thus excluding food and fuel costs from the CPI is like excluding money shots from bukakke films or excluding General Winfield Scott from a list of greatest guys with the first name Winfield (and a big shout out to Old Fuss and Feathers, all the Whigs in the house give me a "hell yeah!").
In stock news today, DELL apparently has been spending way too much time trying to find the Erin Andrews peephole video and apparently downloaded a virus in the process as they are down 6% on last night's disappointing quarter. Revenue grew 11% while profit dropped 4.8%. We have a word for that on When Genius Prevailed, it's called "bad fucking business" (and yes Money McBags knows that is actually three words but like DELL, he is giving you 200% more for the same price). Dell's continued reliance on discounting is good for consumers (assuming they wanted a shitty Dell computer with customer service so bad that it that makes Britney Spears teaching you bernouilli distributions seem helpful), but not good for shareholders. Granted all PCs not starting with an "i" are essentially commodities so price competition is inherrent to the market, but negative operating leverage for a business is like a female with a hairy ass, it's uninteresting, unbecoming, and frankly unnatural. In other large cap news FSLR reported a decent quarter, beating analyst estimates but then guided to increased margin pressure in the second half of the year as apparently their main source of energy, the sun, is free. Solar stocks are being eclipsed by the market today as a result.
In small cap news, JOEZ continues to rally (and Money McBags broke down JOEZ quarter a couple of weeks ago) while for some reason HIL continues to crumble like poorly installed dry wall (and that is punny because HIL oversees commercial construction). Money McBags has been a fan of HIL as they are diversified globally, have had solid performance, and don't take on any building risk. They are hired to litigate and to manage the building process. The company is now trading at 10x estimates, around 1.5x book value, and close to 8.5x EV/EBITDA. They have been acquiring companies in geographies they are not in and think their claims business should start coming back. The stock is down by close to 1/3 in he past four months and now it seems to be fairly cheap. Money McBags is unsure why it has been hit so badly as it offers a nice way to diversify into real estate without taking the building balance sheet risk. So your homework for the weekend, other than taking out the trash, is to figure out what is going on with HIL. Money McBags will dig into it a bit more next week and see if he can't find a reason for the four month sell off because if there is nothing nefarious going on (like a Goldman Sachs Greek bond placement and currency swap or a Heidi Montag record promotion) then this could be a good entry point.
So enjoy the weekend and Money McBags will be back on Monday.
The Dollar is now at its nine month high against the Euro, reaching $1.35 to the Euro, thanks to the Fed actions which means that all of the unemployed people who couldn't afford to book vacations to see the leaning tower of Pisa this winter can now hypothetically be able to at least afford to check a bag. CPI data also came out today and showed inflation to be less than expected except for a couple of small things called energy and food. Excluding food and fuel costs, prices fell .1% which was the first decline in over 25 years. So as long as you don't eat or go anywhere in the fucking car which you probably have to sell anyway to make the mortgage payments on the house you couldn't afford but were able to get a loan for so the endowment fund at the University of My Left Nut (go fighting Ballhawks!) could get a little extra yield on their fixed income portfolio by having bankers slice up pools of those mortgages which enabled those same bankers to buy even more coke and purchase hookers with fewer diseases, everything should be ok. For fucksake, we're not hunter-gatherers anymore (though if we were, I would hunt and gather me some Amanda Seyfried) and thus excluding food and fuel costs from the CPI is like excluding money shots from bukakke films or excluding General Winfield Scott from a list of greatest guys with the first name Winfield (and a big shout out to Old Fuss and Feathers, all the Whigs in the house give me a "hell yeah!").
In stock news today, DELL apparently has been spending way too much time trying to find the Erin Andrews peephole video and apparently downloaded a virus in the process as they are down 6% on last night's disappointing quarter. Revenue grew 11% while profit dropped 4.8%. We have a word for that on When Genius Prevailed, it's called "bad fucking business" (and yes Money McBags knows that is actually three words but like DELL, he is giving you 200% more for the same price). Dell's continued reliance on discounting is good for consumers (assuming they wanted a shitty Dell computer with customer service so bad that it that makes Britney Spears teaching you bernouilli distributions seem helpful), but not good for shareholders. Granted all PCs not starting with an "i" are essentially commodities so price competition is inherrent to the market, but negative operating leverage for a business is like a female with a hairy ass, it's uninteresting, unbecoming, and frankly unnatural. In other large cap news FSLR reported a decent quarter, beating analyst estimates but then guided to increased margin pressure in the second half of the year as apparently their main source of energy, the sun, is free. Solar stocks are being eclipsed by the market today as a result.
In small cap news, JOEZ continues to rally (and Money McBags broke down JOEZ quarter a couple of weeks ago) while for some reason HIL continues to crumble like poorly installed dry wall (and that is punny because HIL oversees commercial construction). Money McBags has been a fan of HIL as they are diversified globally, have had solid performance, and don't take on any building risk. They are hired to litigate and to manage the building process. The company is now trading at 10x estimates, around 1.5x book value, and close to 8.5x EV/EBITDA. They have been acquiring companies in geographies they are not in and think their claims business should start coming back. The stock is down by close to 1/3 in he past four months and now it seems to be fairly cheap. Money McBags is unsure why it has been hit so badly as it offers a nice way to diversify into real estate without taking the building balance sheet risk. So your homework for the weekend, other than taking out the trash, is to figure out what is going on with HIL. Money McBags will dig into it a bit more next week and see if he can't find a reason for the four month sell off because if there is nothing nefarious going on (like a Goldman Sachs Greek bond placement and currency swap or a Heidi Montag record promotion) then this could be a good entry point.
So enjoy the weekend and Money McBags will be back on Monday.
Wednesday, February 3, 2010
2/3/10 Midafternoon Report: Market seeking direction like troubled teen in ABC afterschool special, though with less crying and less Meredith Baxter Birney
The market is mostly lower today despite some moderately postive macro reports (moderately positive in the way that learning you have syphilis is moderately more positive than learning you have nut cancer). The ISM said the service industry expanded in January for the first time in three months, which may be one reason RICK is bouncing back today since they provide the type of service into which all industries should be expanding. While the ISM's index for the service industry rose to a whopping 50.5 (and again, for those of you playing at home, anything above 50 signals growth, so 50.5 signals about as much growth as Ben Bernanke's cranium follicles), it was slightly below analyst estimates. Also, ADP came out with their job data for January showing only 22k jobs had been cut which was inline with forecasts and the smallest drop in two years which is good news for everyone but those 22k people who lost their jobs or the 15MM or 20MM (what's 5MM among friends) people who remain unemployed.
In world news, the EU is getting all up in Greece's souvlaki telling Greece that they are ok with the deficit reduction plan but will be watching them closer than a 25 year old virgin watches the lovely Amanda Seyfried at a movie premier (and as an aside, Money McBags had never heard of the delightful Ms. Seyfried until yesterday but he will now be investigating her full body of work which we can all assume is spanktacular. Unexpectedly finding this charming young lass is like finding that that undervalued small cap stock with no analyst coverage, growing at 40%, and trading at less than 4x cash flow). The EU commissioner for economic and monetary affairs called the Greek government’s objectives and targets "ambitious" but"“achievable." He added, "every time we observe slippages we will ask the Greek authorities to adopt additional measures such as putting less tzatzki sauce on their gyros, conserving water by showering only twice a month instead of their usual three times, and allowing Maria Menounos to man the Athens welcome center kissing booth."
In stock news, investors are getting less confident in the market with the expectations that the market will fall 10% or more at its highest level since 1984 according to a survey of investment writers. Of course those investment writers also thought 2008 would be a banner year for the S&P, Dewey would defeat Truman, and Fermat's last thereom would go unsolved (hey guys, all you had to do was carry the 1). Money McBags was happily not one of the writers polled because he refuses to be associated with other financial writers and their groupthink (plus there was that incident last year at the Financial Writers of America Conference involving a punch bowl and a Money McBags' turd, so it's not clear he is welcome anyway). Also, Time Warner and AOL both put up good quarters, just not together, as they proved that two heads are often better than one (unless the head in question is Bar Refaeli's, and then one is perfectly acceptable). Time Warner not only beat estimates, but they raised their dividend thanks to strength in their film and cable business which was able to provide a boost for continuing publishing declines (why buy an investment magazine when you can read Money McBags for free?). AOL's earnings were $.01 per share, though their revenue shrunk by 17% because people don't use fucking dial-up internet service anymore. Jeesh. To diversify out of the dial-up business, AOL is said to be working on an updated abacus (featuring different colored beads), tins for dageurreotypes, and a re-invention of the wheel (they are apparently making it square).
In small cap news, HDIX (aptly named H sucks a DIX by Money McBags who owned them for a while last year) is up 89% on a buyout proposal from a Japanese company named Nipro (or as it's pronounced in the US, Nipple). HDIX makes cheap over the counter diabetes blood test readers that sell for less than half the price of competitor's products and work just as well. It was that thesis that led Money McBags to buy the stock last year as the recession should have caused people to trade down, of course it was HDIX's shitty performance that caused Money McBags to sell well before today's payoff. In other news, CKSW is down after their inline Q though guidance was for slighly above street revenue estimates for 2010. Money McBags has yet to fully go through their quarter but the sell-off is likely because license revenue did not grow. That said, their book to bill was greater than 1 (and book to bill is a strong leading indicator of future performance, like packs of unopened condoms at the beginning of a gang bang), they are forecasting near 20% growth, and are trading at 16x or so 2010 earnings or 3x revenues. The company isn't terribly cheap, but they are growing, their fleet optimization software is supposed to be the best in the business, and they have a burgeoning partnership with SAP to deliver this software. Money McBags will look in to their Q a bit more tonight, but this is another watch list stock for all of you out there because they have a market leading technology in a growing market and a huge partner (SAP). This smells more of an acquisition candidate than Paris Hilton smells of AIDS.
In world news, the EU is getting all up in Greece's souvlaki telling Greece that they are ok with the deficit reduction plan but will be watching them closer than a 25 year old virgin watches the lovely Amanda Seyfried at a movie premier (and as an aside, Money McBags had never heard of the delightful Ms. Seyfried until yesterday but he will now be investigating her full body of work which we can all assume is spanktacular. Unexpectedly finding this charming young lass is like finding that that undervalued small cap stock with no analyst coverage, growing at 40%, and trading at less than 4x cash flow). The EU commissioner for economic and monetary affairs called the Greek government’s objectives and targets "ambitious" but"“achievable." He added, "every time we observe slippages we will ask the Greek authorities to adopt additional measures such as putting less tzatzki sauce on their gyros, conserving water by showering only twice a month instead of their usual three times, and allowing Maria Menounos to man the Athens welcome center kissing booth."
In stock news, investors are getting less confident in the market with the expectations that the market will fall 10% or more at its highest level since 1984 according to a survey of investment writers. Of course those investment writers also thought 2008 would be a banner year for the S&P, Dewey would defeat Truman, and Fermat's last thereom would go unsolved (hey guys, all you had to do was carry the 1). Money McBags was happily not one of the writers polled because he refuses to be associated with other financial writers and their groupthink (plus there was that incident last year at the Financial Writers of America Conference involving a punch bowl and a Money McBags' turd, so it's not clear he is welcome anyway). Also, Time Warner and AOL both put up good quarters, just not together, as they proved that two heads are often better than one (unless the head in question is Bar Refaeli's, and then one is perfectly acceptable). Time Warner not only beat estimates, but they raised their dividend thanks to strength in their film and cable business which was able to provide a boost for continuing publishing declines (why buy an investment magazine when you can read Money McBags for free?). AOL's earnings were $.01 per share, though their revenue shrunk by 17% because people don't use fucking dial-up internet service anymore. Jeesh. To diversify out of the dial-up business, AOL is said to be working on an updated abacus (featuring different colored beads), tins for dageurreotypes, and a re-invention of the wheel (they are apparently making it square).
In small cap news, HDIX (aptly named H sucks a DIX by Money McBags who owned them for a while last year) is up 89% on a buyout proposal from a Japanese company named Nipro (or as it's pronounced in the US, Nipple). HDIX makes cheap over the counter diabetes blood test readers that sell for less than half the price of competitor's products and work just as well. It was that thesis that led Money McBags to buy the stock last year as the recession should have caused people to trade down, of course it was HDIX's shitty performance that caused Money McBags to sell well before today's payoff. In other news, CKSW is down after their inline Q though guidance was for slighly above street revenue estimates for 2010. Money McBags has yet to fully go through their quarter but the sell-off is likely because license revenue did not grow. That said, their book to bill was greater than 1 (and book to bill is a strong leading indicator of future performance, like packs of unopened condoms at the beginning of a gang bang), they are forecasting near 20% growth, and are trading at 16x or so 2010 earnings or 3x revenues. The company isn't terribly cheap, but they are growing, their fleet optimization software is supposed to be the best in the business, and they have a burgeoning partnership with SAP to deliver this software. Money McBags will look in to their Q a bit more tonight, but this is another watch list stock for all of you out there because they have a market leading technology in a growing market and a huge partner (SAP). This smells more of an acquisition candidate than Paris Hilton smells of AIDS.
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