Oh shit. While most people have been spending their time worrying about the Fed printing up some inflation, Fed Bank of St. Louis President James "Jimmie B" Bullard got his academic on today and dropped some deflation all up in this bitch.
And Jimmie B aint be one of those lame ass non-voting members of the FOMC like Fed Bank of Minnesota President Narayana Kocherlakota whose last name sounds like a hella nasty venereal disease one would catch from a night with Paris Hilton (and for the record, being a Fed Bank President and yet not getting to vote as part of the FOMC is like being the fat cheerleader on the bottom of a pyramid or a bachelor party designated driver). The point is Jimmie B knows the secret handshake, he drinks the juice, and his opinion matters so when he axes everyone if they know anything about some deflation and shit, people better start listening.
The deflationary concerns stem from a "provocative" paper Jimmie B wrote (provocative in the sense that it took a full three pages to put readers to sleep instead of the usual two, though to be fair, page one was a full picture of Katie Cleary dressed as a regression model, so whatever) in which he argued that the Fed needs to stop all of this extended period low interest rate bullshit and get their quantitative ease on by buying some debt instruments longer dated than Velveeta cheese or Betty White's vulva. Not only that, but Jimmie B warned that if we continue this low rate poilicy, we're going to end up like Japan and be stuck in a long term no growth economy while living in constant fear of attacks from large fire breathing monsters like godzilla or Roseanne Barr. So goodbye inflation (for now), hello deflation. Money McBags is sure you'll both lead to hyperinflation eventually but until then, enjoy the soup.
In other US macro news, new claims for unemployment fell by 11k to 457k, or by 7k if you use the non upwardly adjusted initial number released last week of 464k (Money McBags guessed that it would be upwardly revised to 470k, but it was only revised up 468k so good for the (No) Labor Department to only mildly be fudging the numbers). Analyst guesses were for initital claims to come in at 459k, so in theory the data was slightly better than guesses until a week from today when initial claims are revised upward to 460k+. The point is, the data isn't just hard to believe, but there is absolutley no way economists/analysts/The Great Gazoo can make any kind of relevant guess as to what the numbers will be since their regression models are all calibrated with data from the past 70 years or whatever, when the world wasn't as connected, volatile, and fat tailed. All one can say is that people keep losing jobs which is more challenging for a recovery than geography is for Caitlin Upton or a high five is from Verne Troyer.
Internationally, the IMF got its panties all up in a bunch about China's trade surplus which may balloon as big as LeBron James' ego or Sheyla Hershey's shirt if China doesn't try to support domestic comsumption by letting its currency float The report would not have been published had the IMF not removed a footnote saying how they calculated the undervaluation of China's currency and of course if the report had not been published, no one would have cared, not even the IMF's mom.
In the market, earnings were more mixed than the reviews for Kelly Brook's new movie Piranha 3-D (with reviews ranging from awful to boobalicious). Sony had a strong quarter and swung back to a profit thanks to operational efficiencies, strength in emerging markets, and sales of flat screen TVs, Playstation 3, and a bunch of other shit which people can surprisingly still afford. The stock was up 7% on the day as analysts had guessed Sony would report an operating loss which shows that even Japanese analysts suck at their jobs. Other companies putting up good Qs included Radio Shack, thanks to sales of the iPhone and the four people who remembered the company was still in business, and Visa, though Visa sold off on the day as analysts were quick to cut forecasts when V's CEO warned of new government regulation likely causing the debit market to "undergo changes" not unlike a pre-vagina'd Jamie Lee-Curtis.
That said, there were many companies that shit the proverbial bed today (and not any kind of shit, but an indian food, Jack Daniels, and Slim Jim shit). Both Nvidia and Symantec fell ~10% after they cut guidance for Q2 citing weak consumer demand which turned their semis flaccid. Kellogs was not great as they missed analyst guesses and cut their full year projections as apparently too many people were leggo-ing their eggos with waffle sales hurting the company's margins. Kelloggs was also hurt by a $.10 per share charge as they had to recall a fuckton of cereal boxes last month after customer complained of the boxes smelling too much like wax and end of the night stripper, but even exlcuding that charge, eps of $.89 still missed analyst guesses of $.94 eps. Finally Colgate dropped nearly 7% despite beating guesses and maintaining guidance as they warned currency devaluation in Venezuela will have a bigger impact than they initially estimated. Venezuelan currency continues to struggle after home grown Stefania Fernandez won the Miss Universe pageant and decided to leave the country to travel the world.
In small cap news, a Money McBags favorite QCOR put up a good Q and shot up 23 fucking percent on the day. Holy fuck did that thing rise and Money McBags was expecting a lackluster quarter at best, so fuck him. Money McBags has broken QCOR down numerous times on WGP so if you want to understand it better, put it in the search box (and if you want to understand divnity better, put it in Alice Eve's box).
As for the Q, net revenue was up12% from last year to $28.3MM and eps came in at $.14. Money McBags' revenue estimate was pretty much right on but he had assumed $1MM higher operating costs and thus he was expecting $.13 in eps. That said, the key driver of revenue was once again MS sales of Achtar which grew 145% y/y and 32% sequentially. This drug is such a fucking hit with a demand curve more inelastic than the demand for Lucy Pinder's curves, that QCOR should raise the price of achtar again (and that is funny because they already raised to around 1 bazillion percent to ~$23k a vial). The company now has ~$100MM cash which they are going to continue to deploy for buybacks and most importantly they announced they are going to double the size of their sales force to better attack the nephrology market where they have just started making headway.
So here is the deal, the nephrology market could be bigger than both the IS and the MS market for QCOR becuase patients need 9 to 10 vials of achtar over the course of six months to treat NS. Anyway, these are some interesting tidbits from the call:
1. With only the equivalent of 1 rep selling to the nephrology market last Q, QCOR manged to get 4 new prescriptions. With 9 to 10 vials needed for NS patients, that is equivalent to ~$200k in net revenue for each nephrology prescription so those 4 new cases sold by effectively one full time person, should net $800k in revenue for the company. As they say in France, "not fucking bad at all."
2. They are now going to go from 38 reps to 77 reps to be able to call on more nephrology doctors and to be able to increase the chances of someone getting drunk at the company holiday party and taking their shirt off.
3. Within the next couple of quarters, several papers on the effectiveness of Achtar will be coming out in medical journals with titles like "An Achtar a day will keep the pissing of blood away," "Achtar: Fucking focal segmental glomerulosclerosis in the ass," and simply, "Nephrotic Syndrome This!"
4. Out of the 8k nephrologists, fewer than 400 have written prescriptions for Achtar as QCOR hasn't had the sales force or the published medical data to reach the rest of the doctors. Both of those are coming soon.
5. MS is now 50% of their revenue with IS at ~40%, NS ~5%, and everything else 5%.
6. Olivia Munn is still hot.
7. They are no longer going to waste their time trying to use their $100MM in cash on acquiring another drug and will just focus all of their time on Achtar. Money McBags brought this up before as a curious strategy by the management team as he didn't understand why they would be fucking around trying to buy some do shit other drug if their growth opportunity was as good as they said it was. Now he is pleasantly pleased that they have decided to forego an acquisition and instead use their cash for buybacks, building a sales force, and one hell of a night out at their local Rick's Cabaret.
8. The PDUFA date for IS being put on label for achtar is 9/11 which if approved, will finally allow QCOR to market to IS doctors.
Anyway, the news of a doubling of the sales force caused the stock to rocket today but Money McBags guesses a bunch of that was short covering because small stocks don't move that quickly without some shorts puking out shares faster than an Olsen twin pukes out last night's dinner. That said, how do we value this company going forward? They said costs will be up by ~$2MM in Q3 and $3MM in Q4 as they double the sales force and Money McBags doesn't think that sales force will really be affective until Q1 of next year. So if Money McBags leaves IS flat for the rest of the year, grows MS by 20% in each of the next 2Qs sequentially, leaves NS as nothing, and adds the extra costs, he gets another $.32 in eps for the second half of the year or $.56 eps total in 2010.
But of course, who gives a shit about 2010 because it is 2011 where this company could start seeing even stronger growth. So if Money McBags takes 2010, grows IS by 10% (if Money McBags interpreted the CEO correctly, that business could grow 20% to 30% if the FDA allows them to put IS on label in September, so 10% growth seems like a decent enough way to discount that happening) and then grows the non-IS business by 30% (MS has been growing by 100% + y/y, but the law of large numbers and the ramp from nothing is going to have to catch up with them soon enough and NS is still so small that we'll ignore it for now even with the ramped sales force), then he gets ~$.78 eps for next year.
Of course that completely discounts NS doing anything even with an expanded sales force which seems way too harsh as in ~6 to 8 quarters MS has gone from nothing to 1/2 of the business, but Money McBags is trying not to get too excited as they only sold 11 vials for NS 2 Qs ago and 4 this last Q. So we'll take ~$.80 as a reasonable low end base line for 2011 and the stock is trading for ~13x that plus the ~$1.50 in cash.
That said, if NS takes off, this company easily earns more than $1 in 2012 and you can buy that kind of growth right now for 10x plus the cash which is almost as cheap as a an autographed Dick Pole. So look to buy on a pull back, and yes, this is the 1000x time Money McBags has said that and this stock has yet to pull back so time the trade as you please. Just remember, Money McBags first started writing about this stock in December when it was ~$5, so hopefully you all did your work and bought in and are now enjoying the fruits of your labor.
And don't forget, When Genius Prevailed is on Facebook and Twitter and only a few hundred thousand readers short (give or take 1MM) of Money McBags' goal of 1MM readers by the end of 2010.
Showing posts with label QCOR. Show all posts
Showing posts with label QCOR. Show all posts
Thursday, July 29, 2010
Friday, June 25, 2010
6/25/10 Midafternoon Report: New finance legislation may cause banks to find different ways to screw customers
The market is up today after congress reached an agreement on legislation to better regulate the financial services industry after only two short years of debate and an economy that people have less faith in than Scientology. The legislation, being called the Dodd-Frank bill (and Money McBags only laments that Senator Tim Johnson did not sponsor the bill instead of Senator Dodd and thus we could have had the Johnson-Frank bill), was watered down though as politicians were worried it might actually accomplish something so they unanimously decided take out anything that might cause someone to change anything meaningful that they do. If passed, the new laws will include the creation of a Consumer Financial Protection Bureau (whose first rule of action will be to tell people to stop borrowing so much fucking money), a requirement for banks to segregate their derivatives portfolios by doing more than just creating separate water fountains for them on the trading floor (though banks are still allowed to use derivatives to hedge, still allowed to trade currency and interest rate swaps, and still allowed have a few years to move their CDS into capitalized subsidiaries, so suck on that Blanche Lincoln), and a monthly reminder to be delivered by Timothy Geithner to stop fucking so much shit up. What the legislation doesn't do is restrict the size of banks and thus banks still have ability to grow too big to fail (which is the only way banks won't fail). The most controversial act though was the Volcker Rule which was supposed to limit banks from proprietary trading through bank owned investment vehicles for the near future until banks could find loopholes around it. Luckily, they won't have to waste their valuable time finding loopholes as the rule now merely limits banks' ability to invest in these kind of investment funds to no more than 3% of a bank's tangible equity or 3% of a fund's capital, so bankers can go back to spending their time dreaming of AnnaLynne Mccord and new products to be used for predatory lending.
While agreement on legislation that may or may not turn in to law and may or may not be affective (and Money McBags will bet on the "may not" if anyone wants to take the other side) dominated the news today like the winner of a NSFW Ultimate Surrender match dominates her conquered foe (though the news domination involved many fewer dildos), the government managed to sneak in a downward revision of GDP. Due to consumers spending less than the Commerce Department previously guessed, GDP for Q1 was lowered from 3% growth to 2.7% growth which wouldn't be a terrible number if the economy weren't coming back from nearly going to 0. Finally, consumer sentiment rose according to the University of Michigan's survey thanks to the one employed person in the state of Michigan the University found to answer their questions.
Internationally, not a lot was going on today as world financial leaders spent their day trying to get through customs in Toronto and exchange their currency for singles to prepare for this weekend's G-20 summitt and group outing to the NSFW Brass Rail. Chinese currency hit a new high as China's central bank set its key daily reference rate for the renminbi at 6.7896 per dollar meaning you now need ~350 renminbi to be loved for a very long time in Shanghai.
As for the market, with the Dodd-Frank bill more toothless than the perfect hummer, financial stocks are getting a short term boost. Investors were expecting worse so there is a bit of a short squeeze going on today since capital raises for derivatives books will be lower than previously thought and banks will still be allowed to partially invest in hedge funds, private equity funds, and any other type of SPE, SPV, or BBW to which they desire. While the market is mostly up, Ontario based RIMM is taking it in their arse ("arse" of course being Canadian for "badonkadonk") as they once again missed analyst guesses of revenues which is becoming more of a trend than twitter, bros icing bros, and condoms. For those of you who don't know RIMM, they are the company that produces the blackberry, you know, the thing people used to use for communicating before the iPhone came out. The company reported revenue of $4.24B which was up 24% but below analyst guesses of $4.36B while EPS was also up 24% to $1.38 and bested analyst guesses of $1.34 and yet featured no earnings leverage. The average blackberry price fell as did new subscribers but guidance was basically inline. RIMM maintains that their new product releases at the end of the year will help boost revenue growth but this company needs to start beating estimates as competition is only going to get more difficult.
In small cap news, QCOR is up 6% for no reason and even noted piece of shit MLNK is up 4% which means today's rally is likely on light volume and just short term trading. Money McBags broke down MLNK after their last Q (just use the search box if you're so inclined) and concluded that the company is cheap as balls in the Castro, yet is that way for a reason. Their performance has been worse than a Rich Little stand-up routine without the impressions and nothing about their business should turn around in the short term. Long term it could be a great value if you're willing to stick with it, but there are probably better ways to not make money between now and a couple of years from now (like keeping your money under your mattress or joining the Peace Corp). Money McBags mentioned SPRT as a potential trade earlier this week but he hasn't been able to get to a full break down yet but he will try to next week. That said, you should also keep your eyes on EPAY as they have traded down, yet have an interesting little niche business where they are building a payments network for banks as well as continuing to help automate bank cash management and business payment functions. The stock is trading at ~11x guidance with ~$2 of cash on the balance sheet and should continue to grow revenue at 20%+ while also having nice recurring revenue streams. So while you're lounging around tomorrow trying to shake off your hangover, check out EPAY and do some due dilligence. Money McBags will try to get to it and SPRT next week, but until then, enjoy the weekend.
Oh yeah, Money McBags is trying to figure out this facebook thing so feel free to be his friend (just don't ask him to hold hands, unless your hand hand is well manicured and is attached to this body).
While agreement on legislation that may or may not turn in to law and may or may not be affective (and Money McBags will bet on the "may not" if anyone wants to take the other side) dominated the news today like the winner of a NSFW Ultimate Surrender match dominates her conquered foe (though the news domination involved many fewer dildos), the government managed to sneak in a downward revision of GDP. Due to consumers spending less than the Commerce Department previously guessed, GDP for Q1 was lowered from 3% growth to 2.7% growth which wouldn't be a terrible number if the economy weren't coming back from nearly going to 0. Finally, consumer sentiment rose according to the University of Michigan's survey thanks to the one employed person in the state of Michigan the University found to answer their questions.
Internationally, not a lot was going on today as world financial leaders spent their day trying to get through customs in Toronto and exchange their currency for singles to prepare for this weekend's G-20 summitt and group outing to the NSFW Brass Rail. Chinese currency hit a new high as China's central bank set its key daily reference rate for the renminbi at 6.7896 per dollar meaning you now need ~350 renminbi to be loved for a very long time in Shanghai.
As for the market, with the Dodd-Frank bill more toothless than the perfect hummer, financial stocks are getting a short term boost. Investors were expecting worse so there is a bit of a short squeeze going on today since capital raises for derivatives books will be lower than previously thought and banks will still be allowed to partially invest in hedge funds, private equity funds, and any other type of SPE, SPV, or BBW to which they desire. While the market is mostly up, Ontario based RIMM is taking it in their arse ("arse" of course being Canadian for "badonkadonk") as they once again missed analyst guesses of revenues which is becoming more of a trend than twitter, bros icing bros, and condoms. For those of you who don't know RIMM, they are the company that produces the blackberry, you know, the thing people used to use for communicating before the iPhone came out. The company reported revenue of $4.24B which was up 24% but below analyst guesses of $4.36B while EPS was also up 24% to $1.38 and bested analyst guesses of $1.34 and yet featured no earnings leverage. The average blackberry price fell as did new subscribers but guidance was basically inline. RIMM maintains that their new product releases at the end of the year will help boost revenue growth but this company needs to start beating estimates as competition is only going to get more difficult.
In small cap news, QCOR is up 6% for no reason and even noted piece of shit MLNK is up 4% which means today's rally is likely on light volume and just short term trading. Money McBags broke down MLNK after their last Q (just use the search box if you're so inclined) and concluded that the company is cheap as balls in the Castro, yet is that way for a reason. Their performance has been worse than a Rich Little stand-up routine without the impressions and nothing about their business should turn around in the short term. Long term it could be a great value if you're willing to stick with it, but there are probably better ways to not make money between now and a couple of years from now (like keeping your money under your mattress or joining the Peace Corp). Money McBags mentioned SPRT as a potential trade earlier this week but he hasn't been able to get to a full break down yet but he will try to next week. That said, you should also keep your eyes on EPAY as they have traded down, yet have an interesting little niche business where they are building a payments network for banks as well as continuing to help automate bank cash management and business payment functions. The stock is trading at ~11x guidance with ~$2 of cash on the balance sheet and should continue to grow revenue at 20%+ while also having nice recurring revenue streams. So while you're lounging around tomorrow trying to shake off your hangover, check out EPAY and do some due dilligence. Money McBags will try to get to it and SPRT next week, but until then, enjoy the weekend.
Oh yeah, Money McBags is trying to figure out this facebook thing so feel free to be his friend (just don't ask him to hold hands, unless your hand hand is well manicured and is attached to this body).
Wednesday, June 16, 2010
6/16/10 Midday Report: BP sets aside $20B to be used on an oily day
First of all, Money McBags would like to thank all of you for your feedback yesterday. His inbox is currently overflowing like Whitezilla's urethra after downing three cases of Mountain Dew in ten minutes (and feel free to google "Whitezilla" on your own time, Money McBags refuses to link to it due to good taste) but he promises to try to get back to each and everyone of you. The feedback was helpful as Money McBags learned that he does both too much analysis and not enough, the posts are both too long and too short, and the jokes both add to the analysis and detract from it. The only thing that was universal was that his readers love the pics so Money McBags is thinking of dropping all subject matter, words, and rational thought and turning WGP into another NSFW photo site. Anyway, Money McBags is still just short of his goal of 1MM visitors so if you all could spread the word, he will be able to continue to provide you with what you like best.
In macro news today, US housing starts declined by 10% to their lowest level since December (driven by a 17% drop in single family home building ) as the government tax credit finally disappeared like poor old Yorick did from the Danish royal court back in the day or America's global domination. Not only did housing starts drop but they were way below analyst guesses as data and common sense apparently don't figure in to analysts' regression models (and Money McBags is anxiously awaiting the day analyst guesses regress to some fucking mean where the mean isn't "dead wrong" or "not even fucking close"). Analysts guessed housing starts would come in at 650k, which would have been down 22k from last month's 672k or down only 9k from the Commerce department's newly manipulated number from last month of 659k (though the Commerce department uses the less pointed word: "readjusted"). In actuality, new housing starts were 593k, which is the 10% drop that is being reported, but since analysts used the 672k number released last month in their models (and not the newly made up 659k number), the drop was really 13% which shows that analyst models work as well as a union member in Greece or a Rush Limbaugh marriage (but hey, maybe the 4th time will be the charm). So by "readjusting" last month's number, the market got the bump from a better than expected number in April and now doesn't feel as bad about the drop since it's being reported as 10% and not 13%. That is mind fucking boggling. Money McBags has less faith in any of these numbers than Elin Nordegren has faith that Tiger Woods wasn't "sinking his putts" in only grassy holes.
But the most mind numbing thing about it all is that analysts were expecting only a 3% fucking drop. Really? I guess the government PUBLICLY announcing that the first time home buyers' tax credit was going away didn't make it up to the top of the ivory fucking towers on Wall Street where analysts dance their fat tails around pictures of Carl Freidrich Gauss while discussing their homoskedasticity and ignoring common fucking sense. Look, last month was a record month for new home starts and featured a 6% increase which was the most since October 2008, so the rational person would probably start with saying this month will probably feature a 6% decline, you know, the amount of the ARTIFICIALLY INFLATED (as opposed to artificially fellated) increase last month. And since the economy has improved by at most a Herve Vellachaize nut hair since then, why don't we start by knocking some shit off the 6%, I don't know lets call the baseline a fucking 8% decrease and then based on which way the wind is blowing, we'll move it a couple % from there. Is that so fucking hard? While it's an out of the ordinary least squares regression and the coefficient of determination may be less determinable than Caster Semenya's gender, it makes a fuck load more sense than whatever analysts are doing. So here's the deal. Money McBags isn't going to open up his excel, he isn't going to look at any data or any trends, and he's going to spend fewer than 10 seconds on this guess but he'll say next month's new housing starts will come in a 585k, a slight downtick from this month as the economy remains stagnant and those people who rushed to get the tax break the other month will still have a negative effect on the absolute number of housing starts. Anyone want to bet if that guess is better than the econometrically arrived at bullshit spewed by the economists on the street whose PhDs are less practical than a bridge to Gravina Island? Rant fucking over, but Wall Street analysts, it's on like Donkey Kong and this fucking Mario is going to save the princess.
In other macro news, manufacturing expanded by 1.2%, building on its .7% gain last month, and setting everyone up for a bigger drop when no one buys rebuilt inventories because they don't have fucking jobs. Capacity utilization at manufacturing plants was up slightly and companies like Deere are seeing improvement as they said sales of utility tractors rose in the “double digits” last month, largely due to the need to shovel all of the shit economists have been spewing about the economy. Also, Producer prices fell .3%, or rose .2% if one uses the ridiculously derived core PPI that excludes food, energy, and intelligence. These low prices give the Fed a longer time frame to hold rates flat and reinflate the bubble (I mean economy).
Internationally, France and Spain are increasing their austerity plans. France has pledged to raise the retirement age by 2 years from 60 to 62 (though since they use the metric system, Money McBags believes that really translates to 29 years old), wants to raise income taxes on the rich, and will start charging fees based on the amount of armpit hair their women are sporting. Leaks of the proposed actions have somehow caused the French to once again surrender to the Germans while praying to the great Jerry Lewis that he'll dump the MDA and adopt them as the new enfants de Jerry. C'est dommage bitches! Spain is also getting frisky with their workers again (though if those workers include Helen Lindes, who can blame them?). The Spanish prime minister Jose Luis Rodriguez Zapata, who never saw a spanish name he couldn't add to his own, is seeking to spur full time hiring by employers while easing their layoff burden in order to get unemployment to drop from 20% to Spain's historic unemployment rate of 19%. Money McBags isn't sayng the people of Spain don't work, well, actually, that's exactly what he is saying.
In stock news, Fannie Mae and Freddie Mac have been told to delist from the stock exchange though the FHFA's acting director Edward J. DeMarco (and the J apparently stands for "just kidding") said that the action "does not constitute any reflection on either enterprise’s current performance or future direction, nor does delisting imply any other findings or determination on the part of F.H.F.A. as regulator or conservator.” Really? The performance of those two shitawful enterprises which has led their stock prices to drop below $1 because no one wants to fucking own them is not a "reflection of current or future performance?" Fuck, if that's the case then markets are terribly inefficient (which they are thanks to high frequency traders) and Mr. DeMarco should sink his entire life savings into those shitrags (and Money McBags says shitrags with all due respect). In other company news, BP's credit default swaps are now showing a 40% chance of default which means the market is only mispricing them by 60% so if you can, there is money to be made here despite BP agreeing to put $20B in escrow to pay claims from the oil spill while somehow also creating enough new water to drain the entire Gulf and refill the whole fucking thing since they've basically ruined that natural habitat like Robin Williams ruined comedy or Simona Halep ruined her post tennis marketability (and ask Soleil Moon-Frye what losing one's Punky Brewsters can do to one's career). In other stock news, Fed Ex is down despite a good Q thanks to a disappointing outlook casued by growing pension liabilites and increased maintenace spend needed for their aircrafts. Now Money Mcbags doesn't want to sound overly morbid here, but why not just not fix the planes and have the older workers fly them and thus kill two birds with one stone (figuratively and literally).
In small cap news, QCOR is up another 10% despite getting the Heisman from the FDA on Friday, pushing back the decision on approving Achtar for IS for the 9 billionth time. Money McBags has talked about this ad nauseum (though not as nauseum as Lady Gaga's face, or her music) and he likes the company, especially with the potential for the NS market, but the stock is starting to get overvalued here. Money McBags only has them earning $.60 next year and their gross sales were actually a bit disappointing this last Q. Net sales had been running at ~68% of gross sales and this last Q they were 78% and Money McBags still hasn't heard why that was other than perhaps their reimbursement issues with Tricare were fixed. The point is, Money McBags thinks this Q coming up will disappoint and you will get a better opportunity to buy this in a couple of months. That said, the CEO has done a nice job turning this company around and pointing them in the right direction. Finally, keep your eyes open for WGO's earnings report tomorrow to see if their core business can break even and how much cash from operations they burn. They might have one more decent manipulatedly good quarter, but this stock is looking at a bigger uphill climb than Stedman Graham has to take on "couples night."
In macro news today, US housing starts declined by 10% to their lowest level since December (driven by a 17% drop in single family home building ) as the government tax credit finally disappeared like poor old Yorick did from the Danish royal court back in the day or America's global domination. Not only did housing starts drop but they were way below analyst guesses as data and common sense apparently don't figure in to analysts' regression models (and Money McBags is anxiously awaiting the day analyst guesses regress to some fucking mean where the mean isn't "dead wrong" or "not even fucking close"). Analysts guessed housing starts would come in at 650k, which would have been down 22k from last month's 672k or down only 9k from the Commerce department's newly manipulated number from last month of 659k (though the Commerce department uses the less pointed word: "readjusted"). In actuality, new housing starts were 593k, which is the 10% drop that is being reported, but since analysts used the 672k number released last month in their models (and not the newly made up 659k number), the drop was really 13% which shows that analyst models work as well as a union member in Greece or a Rush Limbaugh marriage (but hey, maybe the 4th time will be the charm). So by "readjusting" last month's number, the market got the bump from a better than expected number in April and now doesn't feel as bad about the drop since it's being reported as 10% and not 13%. That is mind fucking boggling. Money McBags has less faith in any of these numbers than Elin Nordegren has faith that Tiger Woods wasn't "sinking his putts" in only grassy holes.
But the most mind numbing thing about it all is that analysts were expecting only a 3% fucking drop. Really? I guess the government PUBLICLY announcing that the first time home buyers' tax credit was going away didn't make it up to the top of the ivory fucking towers on Wall Street where analysts dance their fat tails around pictures of Carl Freidrich Gauss while discussing their homoskedasticity and ignoring common fucking sense. Look, last month was a record month for new home starts and featured a 6% increase which was the most since October 2008, so the rational person would probably start with saying this month will probably feature a 6% decline, you know, the amount of the ARTIFICIALLY INFLATED (as opposed to artificially fellated) increase last month. And since the economy has improved by at most a Herve Vellachaize nut hair since then, why don't we start by knocking some shit off the 6%, I don't know lets call the baseline a fucking 8% decrease and then based on which way the wind is blowing, we'll move it a couple % from there. Is that so fucking hard? While it's an out of the ordinary least squares regression and the coefficient of determination may be less determinable than Caster Semenya's gender, it makes a fuck load more sense than whatever analysts are doing. So here's the deal. Money McBags isn't going to open up his excel, he isn't going to look at any data or any trends, and he's going to spend fewer than 10 seconds on this guess but he'll say next month's new housing starts will come in a 585k, a slight downtick from this month as the economy remains stagnant and those people who rushed to get the tax break the other month will still have a negative effect on the absolute number of housing starts. Anyone want to bet if that guess is better than the econometrically arrived at bullshit spewed by the economists on the street whose PhDs are less practical than a bridge to Gravina Island? Rant fucking over, but Wall Street analysts, it's on like Donkey Kong and this fucking Mario is going to save the princess.
In other macro news, manufacturing expanded by 1.2%, building on its .7% gain last month, and setting everyone up for a bigger drop when no one buys rebuilt inventories because they don't have fucking jobs. Capacity utilization at manufacturing plants was up slightly and companies like Deere are seeing improvement as they said sales of utility tractors rose in the “double digits” last month, largely due to the need to shovel all of the shit economists have been spewing about the economy. Also, Producer prices fell .3%, or rose .2% if one uses the ridiculously derived core PPI that excludes food, energy, and intelligence. These low prices give the Fed a longer time frame to hold rates flat and reinflate the bubble (I mean economy).
Internationally, France and Spain are increasing their austerity plans. France has pledged to raise the retirement age by 2 years from 60 to 62 (though since they use the metric system, Money McBags believes that really translates to 29 years old), wants to raise income taxes on the rich, and will start charging fees based on the amount of armpit hair their women are sporting. Leaks of the proposed actions have somehow caused the French to once again surrender to the Germans while praying to the great Jerry Lewis that he'll dump the MDA and adopt them as the new enfants de Jerry. C'est dommage bitches! Spain is also getting frisky with their workers again (though if those workers include Helen Lindes, who can blame them?). The Spanish prime minister Jose Luis Rodriguez Zapata, who never saw a spanish name he couldn't add to his own, is seeking to spur full time hiring by employers while easing their layoff burden in order to get unemployment to drop from 20% to Spain's historic unemployment rate of 19%. Money McBags isn't sayng the people of Spain don't work, well, actually, that's exactly what he is saying.
In stock news, Fannie Mae and Freddie Mac have been told to delist from the stock exchange though the FHFA's acting director Edward J. DeMarco (and the J apparently stands for "just kidding") said that the action "does not constitute any reflection on either enterprise’s current performance or future direction, nor does delisting imply any other findings or determination on the part of F.H.F.A. as regulator or conservator.” Really? The performance of those two shitawful enterprises which has led their stock prices to drop below $1 because no one wants to fucking own them is not a "reflection of current or future performance?" Fuck, if that's the case then markets are terribly inefficient (which they are thanks to high frequency traders) and Mr. DeMarco should sink his entire life savings into those shitrags (and Money McBags says shitrags with all due respect). In other company news, BP's credit default swaps are now showing a 40% chance of default which means the market is only mispricing them by 60% so if you can, there is money to be made here despite BP agreeing to put $20B in escrow to pay claims from the oil spill while somehow also creating enough new water to drain the entire Gulf and refill the whole fucking thing since they've basically ruined that natural habitat like Robin Williams ruined comedy or Simona Halep ruined her post tennis marketability (and ask Soleil Moon-Frye what losing one's Punky Brewsters can do to one's career). In other stock news, Fed Ex is down despite a good Q thanks to a disappointing outlook casued by growing pension liabilites and increased maintenace spend needed for their aircrafts. Now Money Mcbags doesn't want to sound overly morbid here, but why not just not fix the planes and have the older workers fly them and thus kill two birds with one stone (figuratively and literally).
In small cap news, QCOR is up another 10% despite getting the Heisman from the FDA on Friday, pushing back the decision on approving Achtar for IS for the 9 billionth time. Money McBags has talked about this ad nauseum (though not as nauseum as Lady Gaga's face, or her music) and he likes the company, especially with the potential for the NS market, but the stock is starting to get overvalued here. Money McBags only has them earning $.60 next year and their gross sales were actually a bit disappointing this last Q. Net sales had been running at ~68% of gross sales and this last Q they were 78% and Money McBags still hasn't heard why that was other than perhaps their reimbursement issues with Tricare were fixed. The point is, Money McBags thinks this Q coming up will disappoint and you will get a better opportunity to buy this in a couple of months. That said, the CEO has done a nice job turning this company around and pointing them in the right direction. Finally, keep your eyes open for WGO's earnings report tomorrow to see if their core business can break even and how much cash from operations they burn. They might have one more decent manipulatedly good quarter, but this stock is looking at a bigger uphill climb than Stedman Graham has to take on "couples night."
Tuesday, June 1, 2010
6/1/10 Midafternoon Report: Market adopts new tagline "Sell the rumor, sell the news"
Stocks bounced around today like BP's excuses for the Gulf oil spill or like Kelly Brook's "oil domes" while she jumps on a trampoline. Solid US economic data pushed the market in to positive territory in the morning, giving investors a slight glimmer of hope before that hope was flushed away like a 3 story building in a Guatelamian sink hole or the Sears Tower in Paris Hilton's pants. Leading off the slew of economic reports was that manufacturing in the US grew at a faster pace than analysts guessed with the ISM index coming in at 59.7, a whopping .7 above expectations. The rounding error was driven by increased demand for exports which will clearly be short lived as the dollar strengthens against the Euro. That said, the ISM's employment gauge climbed to its highest level since May 2004 when the subprime boom was still just a twinkle in Alan Greenspan's eye. Factories did add 101k workers through the first four months of the year which is likely a huge relief for the 20MM americans still unemployed, and yes, that was sarcasm. Construction spend in the US also rose by 2.7% which was the most since April of 2000 but it was likely spurred by the ending of the first time home buyers tax credit so it is more likely an outlier (like the straight Wiggle) than a sign of real recovery.
While US economic reports were as positive as a Pam Anderson hepatitis test, international macro data was as negative as an antithalian at a county fair. Leading the way was data on unemployment in Europe where the 16 countries who use the Euro saw unemployment rise from 10% to 10.1% with Spain coming in at a robust 19.7%. Making matter worse was that the Euro fell to a four year low against the dollar, though it claims it is just low because it is practicing its limbo technique for its 18th birthday bash also honoring the Treaty of Maastricht and Kaya Scodelario. The Euro remains on shakier ground than Al Gore's marriage as it drops towards $1.20. In other international developments, China's manufacturing grew at a slower pace than guessed as the government tries to curb its bubblicious growth. China's Purchasing Manager's Index fell to 53.9 which was lower than the 54.5 estimates even though it included an ample dose of MSG. The government is said to be introducing taxes on property holdings, cutting back loans provided by state owned banks, and only allowing one chopstick to be used at all meals. China has simply grown too fast as the government unleashed huge spending programs last year so efforts to reign in the economy now are better than trying to do it later when it's too late, you hear that Bernanke? Finally, the Bank of Canada raised the country's interest rate by 25 bps to 50bps causing the loonie to weaken a bit against the US dollar. It was the first rate hike by Canada in three years and Canada now becomes the first G7 country to raise rates as inflation begins to rear its ugly head.
In stock news, HP is set to cut 9k jobs due to automation and CEO Mark Hurd's cold heart while AAPL is rising on reports that it has sold 2MM iPads and those are just the ones purchased by Steve Jobs' ego. GOOG is also up today and they announced that they will only allow employees to use Linux operating systems blaming the overall crappiness of MSFT Windows for their Chinese operations being hacked. The dumping of MSFT has made Bill Gates feel like he was back in high school. Finally, BP is getting shit canned again, as they should be, with their "top kill" attempt to stop the oil leak failing worse than Gary Coleman's liver (what, still too soon?). Money McBags has avoided writing about this catastrophe because thinking about it makes him wonder if he has been incorrectly using the word "clusterfuck" for all of his years.
In small cap news, QCOR continues to rally with investors awaiting FDA approval for QCOR to be able to market their Acthar drug to the infantile spasm market. You know, the market in which they already have the leading fucking market share. Money McBags has broken down this stock many times (just put QCOR into the fancy search box up top) and is excited for their nascent NS market but he is still confused as to why their Net Sales were such a high % of their Gross Sales last Q. Also, a small crappy company Money McBags follows yet has been embarrassed to bring up before, NTZ, put up a decent quarter on Friday but is now continuing its slide to $0. NTZ produces high end upholstered furniture like sofas, love seats, and bondage benches (ok, maybe not the last one but the definition of "love seat" can be so nebulous). But here's the kicker, NTZ is an Italian company with ~50% of their sales coming from Europe. So it sells a high end, highly discretionary consumer product targeted to european clients with Europe in the midst of bail outs, a crumbling Euro, and record unemployment. Wow. Investing in this company is like those old SNL Bad Idea Jeans commercials. Honestly, buying shares of NTZ is dumber than jumping in to a Hot Tub Time Machine set for the 1980s and then going Lucky Pierre between Magic Johnson and Rock Hudson. You might as well have bought shares of Amercian Home Mortgage right as the subprime mortgage market was melting down, invested in Daguerreotypes in the mid 19th century, or hired Bernie Madoff to manage your assets. So why is Money McBags following/writing about this company seeing as how it is apparently more fucked than Taylor Rain in a Monsters of Cock video? Simple, because it is cheaper than balls in the Castro. The company just put up a quarter where they actually had revenue growth, but to be fair, revenue had fallen more than Eliot Spitzer's dignity after emptying his "mini-bar" at the Hotel Mayflower so the comps were easier than winning a spelling bee on a short bus. Their net sales grew 14% to 126 Euro and their margin was up y/y from 25.5% to 38.5% which was inline with last Q. This was enough to give them a .5MM euro operating income which is still piss awful (and not regular piss, but burning gonorrhea piss), but at least it is positive. Of course, after taxes they lost 1.3 euro but tax rates in Italy are about as predictable as Lindsay Lohan's behavior after taking a powder break and as far as Money McBags can tell more spuriously correlated to profits than the market currently is to company fundamentals. So lets throw out the taxes and look at EBITDA. NTZ had ~8MM euro of EBITDA this Q and translating that to dollars is about $.99 or enough to buy a pack of M&Ms. Actually, with the Euro now settling in around $1.20, that would be ~$9.6MM in EBITDA and the company has a $196MM market cap and $66MM of net cash (55MM euro) so ~$130MM enterprise value. So if you annualize their EBITDA, it's trading at ~3.5 EV/EBITDA and less than .5 sales. Sure they burned through a little cash this quarter, sure annualizing that EBITDA is giving them credit they may not deserve, sure they have one year of profitability in the last five, and sure they are selling one of the stupidest fucking items in one of the worst possible markets in the last 100 years, but how much worse can things get? They cut selling expenses by ~15% for the year last year and are running at about that same rate so they have seen nice operating improvement and if sales can level off, there is no reason this company shouldn't trade at more than 3.5x EBITDA. The point is, despite their CEO dropping another turd in the punchbowl by saying on the quarterly call that "the economic crisis and the worsening market conditions are not yet over and the Group order flows for the first months of 2010 with respect to the last months of 2009 confirm a slow down as compared to the previous positive trend," this company is trading as if its business is going to zero, which may well be the case, but they still have $66MM net cash and decent brand equity. Even if Europe crumbles like Alan Greenspan's reputation, rich people are still going to spend on shit they don't need and as long as this company can stay afloat and keep their cash burn to a minimum, there should be long term upside. Money McBags is not saying you should buy today, or even ever, but this is a stock that will shoot up faster than a heroin addict going through the DTs if and when the global economy stabilizes. So put this on your watch list, be glad you haven't owned it, but be ready to pounce if shit starts gettting better.
While US economic reports were as positive as a Pam Anderson hepatitis test, international macro data was as negative as an antithalian at a county fair. Leading the way was data on unemployment in Europe where the 16 countries who use the Euro saw unemployment rise from 10% to 10.1% with Spain coming in at a robust 19.7%. Making matter worse was that the Euro fell to a four year low against the dollar, though it claims it is just low because it is practicing its limbo technique for its 18th birthday bash also honoring the Treaty of Maastricht and Kaya Scodelario. The Euro remains on shakier ground than Al Gore's marriage as it drops towards $1.20. In other international developments, China's manufacturing grew at a slower pace than guessed as the government tries to curb its bubblicious growth. China's Purchasing Manager's Index fell to 53.9 which was lower than the 54.5 estimates even though it included an ample dose of MSG. The government is said to be introducing taxes on property holdings, cutting back loans provided by state owned banks, and only allowing one chopstick to be used at all meals. China has simply grown too fast as the government unleashed huge spending programs last year so efforts to reign in the economy now are better than trying to do it later when it's too late, you hear that Bernanke? Finally, the Bank of Canada raised the country's interest rate by 25 bps to 50bps causing the loonie to weaken a bit against the US dollar. It was the first rate hike by Canada in three years and Canada now becomes the first G7 country to raise rates as inflation begins to rear its ugly head.
In stock news, HP is set to cut 9k jobs due to automation and CEO Mark Hurd's cold heart while AAPL is rising on reports that it has sold 2MM iPads and those are just the ones purchased by Steve Jobs' ego. GOOG is also up today and they announced that they will only allow employees to use Linux operating systems blaming the overall crappiness of MSFT Windows for their Chinese operations being hacked. The dumping of MSFT has made Bill Gates feel like he was back in high school. Finally, BP is getting shit canned again, as they should be, with their "top kill" attempt to stop the oil leak failing worse than Gary Coleman's liver (what, still too soon?). Money McBags has avoided writing about this catastrophe because thinking about it makes him wonder if he has been incorrectly using the word "clusterfuck" for all of his years.
In small cap news, QCOR continues to rally with investors awaiting FDA approval for QCOR to be able to market their Acthar drug to the infantile spasm market. You know, the market in which they already have the leading fucking market share. Money McBags has broken down this stock many times (just put QCOR into the fancy search box up top) and is excited for their nascent NS market but he is still confused as to why their Net Sales were such a high % of their Gross Sales last Q. Also, a small crappy company Money McBags follows yet has been embarrassed to bring up before, NTZ, put up a decent quarter on Friday but is now continuing its slide to $0. NTZ produces high end upholstered furniture like sofas, love seats, and bondage benches (ok, maybe not the last one but the definition of "love seat" can be so nebulous). But here's the kicker, NTZ is an Italian company with ~50% of their sales coming from Europe. So it sells a high end, highly discretionary consumer product targeted to european clients with Europe in the midst of bail outs, a crumbling Euro, and record unemployment. Wow. Investing in this company is like those old SNL Bad Idea Jeans commercials. Honestly, buying shares of NTZ is dumber than jumping in to a Hot Tub Time Machine set for the 1980s and then going Lucky Pierre between Magic Johnson and Rock Hudson. You might as well have bought shares of Amercian Home Mortgage right as the subprime mortgage market was melting down, invested in Daguerreotypes in the mid 19th century, or hired Bernie Madoff to manage your assets. So why is Money McBags following/writing about this company seeing as how it is apparently more fucked than Taylor Rain in a Monsters of Cock video? Simple, because it is cheaper than balls in the Castro. The company just put up a quarter where they actually had revenue growth, but to be fair, revenue had fallen more than Eliot Spitzer's dignity after emptying his "mini-bar" at the Hotel Mayflower so the comps were easier than winning a spelling bee on a short bus. Their net sales grew 14% to 126 Euro and their margin was up y/y from 25.5% to 38.5% which was inline with last Q. This was enough to give them a .5MM euro operating income which is still piss awful (and not regular piss, but burning gonorrhea piss), but at least it is positive. Of course, after taxes they lost 1.3 euro but tax rates in Italy are about as predictable as Lindsay Lohan's behavior after taking a powder break and as far as Money McBags can tell more spuriously correlated to profits than the market currently is to company fundamentals. So lets throw out the taxes and look at EBITDA. NTZ had ~8MM euro of EBITDA this Q and translating that to dollars is about $.99 or enough to buy a pack of M&Ms. Actually, with the Euro now settling in around $1.20, that would be ~$9.6MM in EBITDA and the company has a $196MM market cap and $66MM of net cash (55MM euro) so ~$130MM enterprise value. So if you annualize their EBITDA, it's trading at ~3.5 EV/EBITDA and less than .5 sales. Sure they burned through a little cash this quarter, sure annualizing that EBITDA is giving them credit they may not deserve, sure they have one year of profitability in the last five, and sure they are selling one of the stupidest fucking items in one of the worst possible markets in the last 100 years, but how much worse can things get? They cut selling expenses by ~15% for the year last year and are running at about that same rate so they have seen nice operating improvement and if sales can level off, there is no reason this company shouldn't trade at more than 3.5x EBITDA. The point is, despite their CEO dropping another turd in the punchbowl by saying on the quarterly call that "the economic crisis and the worsening market conditions are not yet over and the Group order flows for the first months of 2010 with respect to the last months of 2009 confirm a slow down as compared to the previous positive trend," this company is trading as if its business is going to zero, which may well be the case, but they still have $66MM net cash and decent brand equity. Even if Europe crumbles like Alan Greenspan's reputation, rich people are still going to spend on shit they don't need and as long as this company can stay afloat and keep their cash burn to a minimum, there should be long term upside. Money McBags is not saying you should buy today, or even ever, but this is a stock that will shoot up faster than a heroin addict going through the DTs if and when the global economy stabilizes. So put this on your watch list, be glad you haven't owned it, but be ready to pounce if shit starts gettting better.
Friday, April 30, 2010
4/30/10 Midday Report: Biggest swinging dick on the Street may land in aptly named penal colony as criminal investigation launches on Goldman
The markets are down today due to mostly inline GDP, more shenanigans in Greece, further investigation in to Goldman Sachs, and gravity. GDP for Q1 was released and the economy expanded by 3.2% thanks to consumer spending which was up 3.6% and interestingly enough coincided with the release of KFC's Double Down thereby spiking sales of Pepto Bismal and artificial hearts. Guesses were for 3.3% GDP expansion so the economy pretty much performed inline but following a 5.6% expansion in Q4, the economy has now had it's best two quarters since the end of 2003 when the great mortgage fraud frenzy was peaking and anyone who currrently or previously had a heartbeat could get approved for a loan (Money McBags isn't saying it was easy to get a mortgage, but Abe Vigoda owned 6 mansions and one apartment complex during that time and he died in the 1980s. What? he's still alive? Nevermind). Also, the Fed's inflation target was only up .6% which is the lowest level since records started being kept in 1959 but that target ignores food and fuel prices since why measure the things people actually need to spend their money on when measuring the value of money? It's a bit like judging a movie based on the font of the opening credits (and Money McBags loves him some Garamond) or a wet t-shirt contest based on the flip-flops the contestants are wearing, but whatever. Business spend also keeps inproving as it was up 13% thanks to the fact that it is bouncing back from historical lows and an increase in the sale of cardboard boxes to help pack up laid off employees. While the consumer appears strong in GDP numbers, consumer sentiment dropped in April, though it still beat analyst guesses and was essentially the same as last month. Consumers are at least flat lining as the average US citizen gives a fuck about whatever is happening in Europe and as job losses have begun to stagnate, they are happily oblivious to any potential impending financial doom. Money McBags is pretty sure Europe will get their shit together so perhaps ignorance is bliss (though probably not as blissful as Elisabetta Canalis).
There is more he said/she said/finger pointing/tail wagging/pillow biting in Greece today. Moody's downgraded 9 Greek banks which is a bit like downgrading hydrogen as a fuel for zeppelins after the Hindenburg crash or Heidi Montag's singing career after her second album was released. Greek prime minister George Papandreou is back crying for help saying "what is at stake is the survival of the nation.” But if he were really concerned about the survival of the nation, perhaps he wouldn't have let the debt grow out of control or claimed the comedian Ant as one of Greece's own. Tomorrow's Labor Day festivities in Greece will likely be subdued as greater austerity measures threaten the ability of Greek workers to continue to produce no valuable output. Seriously, what does Greece produce besides baklava for tourists and Julia Alexandratou sex tapes? Perhaps union leaders should focus on that by figuratively solving the problem of what to do with all of the underwear they stole.
In the market, Goldman is getting sacked as US federal prosecutors may open a criminal case against them for crimes against humanity, or securities fraud, potato-puhtaato. It's not clear what exactly the charges would be since every single investment bank does something criminal every day, but that is how the markets stay efficient. Money McBags does wonder what will happen to CEO Lloyd Blankfein if GS is found guilty and whether his cellmate will try to put his underlying assets into Blankfein's special purpose entity.
Finally in small cap stocks, Money McBags favorite QCOR put up an ok quarter and yet are off to the races again. After last Q, Money McBags highlighted this company and mentioned one should buy on any pull back, unfortunately that pull back never occured as QCOR is now up 50%+ since then. This quarter revenue was up ~13% to $26.2MM and eps came in at $.11. Both of these numbers were short of Money McBags' estimates (he had $27.5MM in revenue and $.15 eps) and yet the stock is absolutely ripping up like it is on a Red Bull and meth binge. There are five reasons for this as far as Money McBags can tell.
1. Operating expenses were higher than normal as they try to build out their sales and marketing efforts. Money McBags is 100% behind this as he'd like to be 100% behind Jessica Biel. Anyway, with costs up to help grow future revenue, a bit of a hit to the bottom line is unconcerning.
2. They announced that a panel of experts is going to rule on their FDA submission to get Acthar on label for IS on May 6th and QCOR will host a conference call about it on May 10th. This isn't the final hurdle as the panel merely gives a recommendation to the FDA who then has the final ruling on June 11th, but a positive opinion will be a better sign for QCOR than marrying in to the Kennedy family was a positive sign for Arnold Schwarzenegger's political career. Getting IS on label would finally allow QCOR to market to doctors in their historically biggest segment.
3. Kelly Brook is hot. Ok, this might have nothing to do with QCOR being up, but Money McBags had to investigate to make sure. It is likely just spurious correlation but it was necessary for Money McBags to test his lurking variable to make sure.
4. NS is coming. Holy fucking shit could it be on. The QCOR cake just got a little more icing on it as NS could be bigger than both their IS and MS segments combined according to management. They filled 11 NS prescriptions this last Q which is still smaller than one of the late great He Ping Ping's turds but it is encouraging enough that management is going to launch a pilot sales program in April to try to reach nephrology doctors. Patients with NS need to use Acthar for 3 to 6 months to be cured so the recurring revenue potential is huge for QCOR.
5. MS continues to grow, ticking up 187% and overtaking IS as their biggest segment. Remember, just two years ago this segment was about the same size as NS currently is but management dedicated resources to blowing it out, so it does bode well for their ability to execute a NS strategy.
So while all of that was good, numbers were still below what Money McBags thought and he is taking his full year estimate down to ~$.60 from ~$.70. The big question for Money McBags has to do with why their reimbursement rate as a % of gross sales which had been running at 30%+ was down to ~22% this quarter? The reimbursement rate takes gross sales to net sales by removing medicare/medicade/etc. expenses. So with only a 22% remibursment rate, it means gross sales were way below Money McBags estimates and the question is why and what is the rate going to be going forward? Sure they seemingly cleaned up a bunch of the tricare reimbursment issues, but is this 22% rate the rate to use going forward? If so, that would be huge for eps and if not, investors may be in for a negative surprise next Q. That said, with his current $.60 eps estimate (based on a 25% reimbursement rate, 20% sequential quarterly MS growth, no growth in IS, and no growth in NS) the stock is trading at 16x that, even after this run up so it's still not hella expensive especially with the NS potential. Remember, they said NS could be bigger than their current business so in the ultimate best case scenario (and Money McBags is not saying this will happen, just their big upside possibility), they could more than double their earnings in 2012 (say it takes them 2 years to get NS up and running like it did for MS and they get operating leverage and continued growth in MS) which makes this a ridonkulous buy. However, Money McBags would like to get a better understanding of reimbursement, a better understanding of what they are going to do with their cash (last Q they said they were going to look to buy another drug but there was no mention of it this Q), and a better understanding of Kate Bosworth.
There is more he said/she said/finger pointing/tail wagging/pillow biting in Greece today. Moody's downgraded 9 Greek banks which is a bit like downgrading hydrogen as a fuel for zeppelins after the Hindenburg crash or Heidi Montag's singing career after her second album was released. Greek prime minister George Papandreou is back crying for help saying "what is at stake is the survival of the nation.” But if he were really concerned about the survival of the nation, perhaps he wouldn't have let the debt grow out of control or claimed the comedian Ant as one of Greece's own. Tomorrow's Labor Day festivities in Greece will likely be subdued as greater austerity measures threaten the ability of Greek workers to continue to produce no valuable output. Seriously, what does Greece produce besides baklava for tourists and Julia Alexandratou sex tapes? Perhaps union leaders should focus on that by figuratively solving the problem of what to do with all of the underwear they stole.
In the market, Goldman is getting sacked as US federal prosecutors may open a criminal case against them for crimes against humanity, or securities fraud, potato-puhtaato. It's not clear what exactly the charges would be since every single investment bank does something criminal every day, but that is how the markets stay efficient. Money McBags does wonder what will happen to CEO Lloyd Blankfein if GS is found guilty and whether his cellmate will try to put his underlying assets into Blankfein's special purpose entity.
Finally in small cap stocks, Money McBags favorite QCOR put up an ok quarter and yet are off to the races again. After last Q, Money McBags highlighted this company and mentioned one should buy on any pull back, unfortunately that pull back never occured as QCOR is now up 50%+ since then. This quarter revenue was up ~13% to $26.2MM and eps came in at $.11. Both of these numbers were short of Money McBags' estimates (he had $27.5MM in revenue and $.15 eps) and yet the stock is absolutely ripping up like it is on a Red Bull and meth binge. There are five reasons for this as far as Money McBags can tell.
1. Operating expenses were higher than normal as they try to build out their sales and marketing efforts. Money McBags is 100% behind this as he'd like to be 100% behind Jessica Biel. Anyway, with costs up to help grow future revenue, a bit of a hit to the bottom line is unconcerning.
2. They announced that a panel of experts is going to rule on their FDA submission to get Acthar on label for IS on May 6th and QCOR will host a conference call about it on May 10th. This isn't the final hurdle as the panel merely gives a recommendation to the FDA who then has the final ruling on June 11th, but a positive opinion will be a better sign for QCOR than marrying in to the Kennedy family was a positive sign for Arnold Schwarzenegger's political career. Getting IS on label would finally allow QCOR to market to doctors in their historically biggest segment.
3. Kelly Brook is hot. Ok, this might have nothing to do with QCOR being up, but Money McBags had to investigate to make sure. It is likely just spurious correlation but it was necessary for Money McBags to test his lurking variable to make sure.
4. NS is coming. Holy fucking shit could it be on. The QCOR cake just got a little more icing on it as NS could be bigger than both their IS and MS segments combined according to management. They filled 11 NS prescriptions this last Q which is still smaller than one of the late great He Ping Ping's turds but it is encouraging enough that management is going to launch a pilot sales program in April to try to reach nephrology doctors. Patients with NS need to use Acthar for 3 to 6 months to be cured so the recurring revenue potential is huge for QCOR.
5. MS continues to grow, ticking up 187% and overtaking IS as their biggest segment. Remember, just two years ago this segment was about the same size as NS currently is but management dedicated resources to blowing it out, so it does bode well for their ability to execute a NS strategy.
So while all of that was good, numbers were still below what Money McBags thought and he is taking his full year estimate down to ~$.60 from ~$.70. The big question for Money McBags has to do with why their reimbursement rate as a % of gross sales which had been running at 30%+ was down to ~22% this quarter? The reimbursement rate takes gross sales to net sales by removing medicare/medicade/etc. expenses. So with only a 22% remibursment rate, it means gross sales were way below Money McBags estimates and the question is why and what is the rate going to be going forward? Sure they seemingly cleaned up a bunch of the tricare reimbursment issues, but is this 22% rate the rate to use going forward? If so, that would be huge for eps and if not, investors may be in for a negative surprise next Q. That said, with his current $.60 eps estimate (based on a 25% reimbursement rate, 20% sequential quarterly MS growth, no growth in IS, and no growth in NS) the stock is trading at 16x that, even after this run up so it's still not hella expensive especially with the NS potential. Remember, they said NS could be bigger than their current business so in the ultimate best case scenario (and Money McBags is not saying this will happen, just their big upside possibility), they could more than double their earnings in 2012 (say it takes them 2 years to get NS up and running like it did for MS and they get operating leverage and continued growth in MS) which makes this a ridonkulous buy. However, Money McBags would like to get a better understanding of reimbursement, a better understanding of what they are going to do with their cash (last Q they said they were going to look to buy another drug but there was no mention of it this Q), and a better understanding of Kate Bosworth.
Monday, March 29, 2010
3/29/10 Midday Report: Who needs yeast as market rises on Passover
Break out the menorahs as it's Passover and thus time to light the candles, forgo yeast, and drink Manischewitz until the market makes sense and Mayim Bialik becomes atttractive. The market is up today as economists ponder their own four questions: 1. "Why is this market different than any other market?" 2. "Why in this economy does the market not dip when in all other recessions it dips twice?" 3. "Why does the market continue to go upright, instead of reclining for a bit as news has been only marginally not bad?" 4. "What does a Jew have to do to get a table dance (And in honor of passover, Money McBags would only take table dances from fellow yids Nikki Reed, Bar Refaeli, Emmanuelle Chriqui, and Joan Rivers)? That said, in macro news today consumer spending was up modestly by .3% which was a bit less than the .4% from January and a whole lot less than that of you know, a healthy fucking economy. It could have been worse though with February snowstorms but luckily most people were still able to consume by staying inside and ordering shit they didn't need from QVC with money they don't really have. Excluding food and fuel as the Fed likes to do when looking at consumer spend (which is a bit like excluding Enron when talking about financial fraud, excluding Fischer Black when talking about Myron Scholes, or exculding rhyming couplets when analyzing Dr. Seuss), spending was equal to last month's spending and up 1.8% from last year. Salaries for the month were flatter than a Steve Forbes tax rate and household savings fell once again to 3.1% of disposable income or the lowest it has been in over 2 years. It's good that people didn't learn anything in this downturn and continue to run their personal finances like the US government runs their Keynesian budget. The difference of course being the government can't max out on their AMEX black card while consumers can only run up so much debt before getting BAC to renegotiate their mortgages.
In international news, Greece is selling 5B euros of 7 year bonds to try to pay for all of the shit it bought after having one ouzo too many and winding up face down on the floor of a Greek massage parlor in a puddle of it's own debenture. This is the first bond offering since the EU and IMF said they would bail Greece out of their fiscal calamity and will likely to be the most expensive bond offering since the Quantum of Solace (and Jay Leno, feel free to steal that one when your Jaywalking bit becomes stale. Oh wait, we're already five years late for that). The good news is that the Greek government just needs to raise another 48B euros by the end of the year, the bad news is that the Greek government needs to raise 48B euros by the end of the year. So I guess Greece's financial position depends on whether you see the glass as half full, half empty, or as cracked as Alexis Texas' backside. The seven year offering should help extend the average maturity of Greece's debt and thus divert this crisis until the next remake of Clash of the Titans (and Money McBags eagerly awaits the parody to come out titled "Ass of the Titans" starring Kim Kardashian's better half).
In stock news, the US Treasury announced that they are going to sell all 7.7B common shares of C they own sometime in 2010, as soon as they find a big enough sucker, I mean buyer. The Treasury assures investors though that C is in good standing, at least that is what Money McBags thinks they said in between coughs that sounded like "bullshit." In other stock news, Ford sold Volvo before it crashed (though if Volvo had crashed, at least no one would have been harmed). Ford is getting $1.8B for Volvo from a Chinese conglomerate called Zhejiang Geely Holding Group and seeing as how Ford only paid $6B for Volvo 11 years ago, their -70% return makes it Ford's best business decision since cancelling the Edsel. So good on you Ford. Money McBags really likes this acquisition for China because if ever anybody needed a safe car (other than maybe Mary Jo Kopechne), it is asian drivers.
In small cap news QCOR continues to rise and Money McBags broke QCOR down for all of you after their earnings in the first week of March. The company is up ~40% since then and there is still value there as they could earn $.70 this year and thus are trading at less than 12x that number and still at only ~.3 EV/sales. They have a drug which people need (its demand is as inelasitic as the demand for medical care, an Olivia Munn nude scene, or chocolate Necco wafers) and are finding new markets for it to grow (multiple sclerosis spasms, nephrology spasms). Money McBags is still waiting for a sell off to buy. More importantly, KITD is having their earnings call tomorrow and Money McBags is anticipating this more eagerly than he is anticipating the movie Chloe which features Amanda Seyfried in all her sapphic glory. Money McBags has broken KITD down on When Genius Prevailed more times than an Olsen twin has binged and purged and more times than Michael Lewis has inserted himself into his books. This was the last detailed post on KITD but in a nut shell (and it's not clear why anyone would be in a nut shell, but whatever), the company has 99% recurring revenue, 99% retention rates, and this year is going to grow more than 99% (though almost half through acquisitions). Of course there was a glaring error in Money McBags break down of KITD in the blog post to which he alluded, and for that he is more ashamed and embarrassed than Kathy Hilton on take your daughter to work day. Money McBags took Google Finance's market cap as fact when in fact Google's calculation uses KITD's sharecount from the end of the previous quarter. Since then, KITD has raised a number of shares for acquisitions and to pay off warrants so their actual share count is now 17.7MM which puts their actual market cap at $223MM, not the $125MM implied by Google Finance. Therefore, KITD is trading at 11x their upside EBITDA for the year and isn't quite as cheap as an Albanian hooker, yet is still cheaper than 2010 Kansas Final Four t-shirts. The company is going to book $85MM to $100MM of revenue this year and next year it is not inconceivable that they can grow by $50MM (or the same absolute amount they will grow this year). They are in a market (IP video) which is 4% of the overall online video market and is cheaper than competing technologies such as digital video or simply hiring the people from online videos to perform live at your house. Not only that, but even if they don't gain share from more expensive alternatives, the online video market is growing at a 38% CAGR (which isn't quite as exciting as a sorority kegger, but still pretty good) so just by inertia or as they say in business school "being in the fucking market" they should be able to grow. So if they just grow at the market rate, that is $138MM in revenue next year and if they just gain a bit of share from the current 4% IP video market share increasing, they can get to that $150MM number. Their EBITDA margins are 17.5%+ so let's say they get those to their 20% target , then the upside is $30MM of EBITDA next year, so they are trading at 6x to 7x EV/2011 EBITDA. Not only that, they should become EPS positive. With 48% gross margins at $150M in revenue they could earn $72M in gross profits. SG&A has been running at $32-$35MM a year, but let's say they somehow have to increase their cost structure (even though they really don't in order to grow) and have $40MM in SG&A in 2011, that gets them to $32MM in operating earnings and since they have more NOLs than the Pythagorean theorem has proofs, that $32MM should all flow to the bottom line. With 17.7MM shares, that is an upside of $1.80 eps which puts the stock at 7x 2011 earnings. And honestly, that number is so fucktasticly low that surely Money McBags' maff must be wrong so feel free to run your own numbers. As for downside, let's say they come in at a low $85MM in revenue this year and grow 20% off that to reach $100MM next year (as opposed to the $150MM upside). Using the same cost structure, they would earn $.45 per share next year and be trading at ~25x that right now which would be a bit expensive for a 20% top line grower, but not outrageous. So downside seems pretty limited if you trust the management of a company run out of Prague by guys who are in the business of building companies quickly and flipping them (and yes that last sentence made Money McBags want to throw up on his socks). Tomorrow's earnings will be very interesting and if there is a guidance raise, Money McBags will likely be buying even more. That said, if they disappoint, this stock could easily trade down 20% because they have to execute given their current business stage.
In international news, Greece is selling 5B euros of 7 year bonds to try to pay for all of the shit it bought after having one ouzo too many and winding up face down on the floor of a Greek massage parlor in a puddle of it's own debenture. This is the first bond offering since the EU and IMF said they would bail Greece out of their fiscal calamity and will likely to be the most expensive bond offering since the Quantum of Solace (and Jay Leno, feel free to steal that one when your Jaywalking bit becomes stale. Oh wait, we're already five years late for that). The good news is that the Greek government just needs to raise another 48B euros by the end of the year, the bad news is that the Greek government needs to raise 48B euros by the end of the year. So I guess Greece's financial position depends on whether you see the glass as half full, half empty, or as cracked as Alexis Texas' backside. The seven year offering should help extend the average maturity of Greece's debt and thus divert this crisis until the next remake of Clash of the Titans (and Money McBags eagerly awaits the parody to come out titled "Ass of the Titans" starring Kim Kardashian's better half).
In stock news, the US Treasury announced that they are going to sell all 7.7B common shares of C they own sometime in 2010, as soon as they find a big enough sucker, I mean buyer. The Treasury assures investors though that C is in good standing, at least that is what Money McBags thinks they said in between coughs that sounded like "bullshit." In other stock news, Ford sold Volvo before it crashed (though if Volvo had crashed, at least no one would have been harmed). Ford is getting $1.8B for Volvo from a Chinese conglomerate called Zhejiang Geely Holding Group and seeing as how Ford only paid $6B for Volvo 11 years ago, their -70% return makes it Ford's best business decision since cancelling the Edsel. So good on you Ford. Money McBags really likes this acquisition for China because if ever anybody needed a safe car (other than maybe Mary Jo Kopechne), it is asian drivers.
In small cap news QCOR continues to rise and Money McBags broke QCOR down for all of you after their earnings in the first week of March. The company is up ~40% since then and there is still value there as they could earn $.70 this year and thus are trading at less than 12x that number and still at only ~.3 EV/sales. They have a drug which people need (its demand is as inelasitic as the demand for medical care, an Olivia Munn nude scene, or chocolate Necco wafers) and are finding new markets for it to grow (multiple sclerosis spasms, nephrology spasms). Money McBags is still waiting for a sell off to buy. More importantly, KITD is having their earnings call tomorrow and Money McBags is anticipating this more eagerly than he is anticipating the movie Chloe which features Amanda Seyfried in all her sapphic glory. Money McBags has broken KITD down on When Genius Prevailed more times than an Olsen twin has binged and purged and more times than Michael Lewis has inserted himself into his books. This was the last detailed post on KITD but in a nut shell (and it's not clear why anyone would be in a nut shell, but whatever), the company has 99% recurring revenue, 99% retention rates, and this year is going to grow more than 99% (though almost half through acquisitions). Of course there was a glaring error in Money McBags break down of KITD in the blog post to which he alluded, and for that he is more ashamed and embarrassed than Kathy Hilton on take your daughter to work day. Money McBags took Google Finance's market cap as fact when in fact Google's calculation uses KITD's sharecount from the end of the previous quarter. Since then, KITD has raised a number of shares for acquisitions and to pay off warrants so their actual share count is now 17.7MM which puts their actual market cap at $223MM, not the $125MM implied by Google Finance. Therefore, KITD is trading at 11x their upside EBITDA for the year and isn't quite as cheap as an Albanian hooker, yet is still cheaper than 2010 Kansas Final Four t-shirts. The company is going to book $85MM to $100MM of revenue this year and next year it is not inconceivable that they can grow by $50MM (or the same absolute amount they will grow this year). They are in a market (IP video) which is 4% of the overall online video market and is cheaper than competing technologies such as digital video or simply hiring the people from online videos to perform live at your house. Not only that, but even if they don't gain share from more expensive alternatives, the online video market is growing at a 38% CAGR (which isn't quite as exciting as a sorority kegger, but still pretty good) so just by inertia or as they say in business school "being in the fucking market" they should be able to grow. So if they just grow at the market rate, that is $138MM in revenue next year and if they just gain a bit of share from the current 4% IP video market share increasing, they can get to that $150MM number. Their EBITDA margins are 17.5%+ so let's say they get those to their 20% target , then the upside is $30MM of EBITDA next year, so they are trading at 6x to 7x EV/2011 EBITDA. Not only that, they should become EPS positive. With 48% gross margins at $150M in revenue they could earn $72M in gross profits. SG&A has been running at $32-$35MM a year, but let's say they somehow have to increase their cost structure (even though they really don't in order to grow) and have $40MM in SG&A in 2011, that gets them to $32MM in operating earnings and since they have more NOLs than the Pythagorean theorem has proofs, that $32MM should all flow to the bottom line. With 17.7MM shares, that is an upside of $1.80 eps which puts the stock at 7x 2011 earnings. And honestly, that number is so fucktasticly low that surely Money McBags' maff must be wrong so feel free to run your own numbers. As for downside, let's say they come in at a low $85MM in revenue this year and grow 20% off that to reach $100MM next year (as opposed to the $150MM upside). Using the same cost structure, they would earn $.45 per share next year and be trading at ~25x that right now which would be a bit expensive for a 20% top line grower, but not outrageous. So downside seems pretty limited if you trust the management of a company run out of Prague by guys who are in the business of building companies quickly and flipping them (and yes that last sentence made Money McBags want to throw up on his socks). Tomorrow's earnings will be very interesting and if there is a guidance raise, Money McBags will likely be buying even more. That said, if they disappoint, this stock could easily trade down 20% because they have to execute given their current business stage.
Wednesday, March 3, 2010
3/3/10 Midday Report: Service sector expands thus providing most valuable service: A rising market
The market is up again as the service industry grew more than forecast last month thanks to more people stopping off at McDonalds on their way to the unemployment office and then washing their sorrows away by watching touching interpretative dances at their local Rick's Cabaret in order to warm the cockles of their jobless hearts. The ISM's index of non-manufacturing businesses was up to 53 from 50.5 and in theory measures 90% of the legal economy (it doesn't take the lovely Ashlee Dupre to let us know there are many illegal services performed in this country). That was higher than the 51 estimate and we are all acutely aware that a number above 50 signals growth (while a number above 36DD usually signals growth for Money McBags). Also ADP was out with a report estimating companies cut 20k jobs in February which would be the smallest drop in 2 years were that number not likely to be revised next month. Economic data gets revised more often than a politician's stance on issues (cough Harold Ford cough Mitt Romney cough), modern history, or the background of an old rich guy's wife (she was a student, she worked with kids, they were my kids and she was in high school, but....). The good news is that there is the whiff of real recovery in some of these numbers, though that could also just be the smell of Ben Bernanke's taint after an all-nighter spent trying to right this economy.
In international news, Greece has approved an economic plan which will save $5.5B through a 30% cut in holiday bonuses, a 2% increase in value added sales tax, and a promise to cut down their spending on noise pollution by simply having Nia Vardalos shut the fuck up. Money McBags is anxiously looking forward to the day Greece's fiscal problems are solved and not because it will help shore up the market but because he has fewer Greek jokes left in his arsenal than a eunuch has balls. Seriously, if Money McBags knew he was going to have to write so many one-liners about hellenic culture he would have majored in Greek history, Epic poetry, or Maria Menounos while in college. For fucksake Money McBags may have to stress his long syllable and start writing this blog in dactylic hexameter if the Greeks don't get their shit together (and if he is going to stress his long syllable, he can assure you that Alice Eve will be very involved). Of course the Greeks were less than thrilled with the cuts, including taxi drivers who apparently stayed home for a second day because according to the NY Times (so it could be totally fictional), they were "protesting tax reforms which would oblige them to issue receipts, keep account books and pay tax according to their income." While that would make Charles Rangel proud since he loves finding ways around the means of paying taxes, protesting the loss of the ability to cook one's books is as preposterous as Heidi Montag's singing career or anyone finding Jay Leno funny.
In stock news today Ethan Allen is running (though this time not from the British) as they said their orders for the first two months of 2010 were up 25% as apparently it was time to buy new furniture for Fort Ticonderoga. Dine Equity announced their quarterly results and decimated estimates thanks to increased traffic at Applebees and only a moderate downtick in IHOP business. Adjusted earnings came in at $.76 cents easily beating analyst estimates of $.15 as the company was able to create significant operating leverage, pay down debt, and somehow disguise the taste of their food to make people actually want to eat it. Money McBags is not saying that Applebees is bad, but not even chronic ageusia sufferers will go there. So it is understandable that analysts would have underestimated earnings, that said, being off by a factor of 5 is as bad as trying to forecast the length of Lindsey Vonn's celebrity and using any metric loner than days. Finally, BJ's Wholesale club reported earnings up 4.6% but guidance was below estimates sending BJs down on the day. Money McBags is a bit confused as he doesn't find anything disappointing with BJs, but should they continue to gag or see a lenghty decrease, they may be forced to change their name to Blumpkin's Wholesale Club.
In small stock news, LOV received a take out offer for $3.10 per share and "other possible business combination transactions" from big shareholder Great Hill Partners. The stock has shot up to $3.30 so those "other possible business combination transactions" either mean "another $.20" or merger-arb traders are betting the company put themselves on buyashittycompany.com and are expecting a counter offer. Money McBags broke LOV down last week and came up with a $2 valuation so either Great Hill Partners has more of a Jewish fetish than anyone who has dated Barbara Streisand (because why else would anyone want to date that?) and thus needs to own JDate or "Great Hills" is yiddish for "Sucker." Yesterday Money McBags briefly mentioned QCOR but he finally had time to go over their Q last night and he loves what he sees. Money McBags has followed this stock for almost a year and a half and has watched the issues they have had with their FDA filing for IS marketing approval, their asstastic sales into the IS market last Q, their sales force ramp up in MS, and their out of nowhere medicade reimbursement and reserving issues from last quarter. Honestly, their last Q finally got Money McBags out of the stock as it wasn't clear what was going on with their sales as a potential competitor had emerged and the reserving issue they reported was more confusing than a post-op lesbian tranny (I mean if you like chicks, why cut the thing off?). Money McBags still liked the company though as their management team had generally done a good job on strategy (with their execution being a bit concerning because how many times does it really take to file a fucking sNDA? One? Maybe two? But having to refile more than twice creates more red flags than a Beijing pennant maker.). That said, this quarter easily beat Money McBags' top line estimates and their phone call was chock full of goodness. Money McBags had an estimate of $23MM in net sales for QCOR based on IS sales remaining flat (it was down big last Q in what looks like an anomaly) and 15% Q/Q growth in MS sales. Well IS sales rebounded to the mean of their historical range and MS sales grew 50% Q/Q. While the reimbursement rate was about 1.5% higher than Money McBags estimated, their net sales still came in about $2.5MM above his estimates. Sales were strong enough to give shareholders spasmodic seizures (which of course should be good for QCOR since that what their drug aims to stop). Anyway, there were many other positives such as the potential emergence of a market for Achtar (the drug QCOR sells) into the nephrotic market. QCOR sold 14 vials to this market and estimates that there are 50k people their drug could treat and those people on average would use 2x the doses of an IS patient and 4x to 5x the doses of a MS patient. The company estimates this as a potential $1B market for them and will start allocating a bit of their sales force's time to contacting nephrologists. Now look, it is way too early to get too excited about this as the data is very sparse but it does mimic the MS market for them just two years ago so there is some real potential here. Additionally QCOR has straightened out their Tricare reimbursement issue which may now contribute to 10% growth and said the FDA will get back to them on their ability to market to IS doctors by June 11, 2010. Oh yeah, the CEO addressed the potential competitive drug Sibril and said in the six months it has been on the market, they have not seen it make a dent in their sales. The only way this quarter could have been bette for QCOR was if they found out Achtar also acts as a pheremone for Brooklyn Decker's mouth. In terms of forecasting a baseline, just assume they get nothing from the nephrotic market, IS remains at its historical mean (so flat from here), and MS grows 20% per Q (which is aggressive, but whatever). Additionally assume a modest uptick in operating costs, no more reimbursement issues (they claim they are fully reserved for past medicare claims), and a 500k per q share buyback (they bought back 2MM shares last Q and have 5MM left on their buyback so it could be more), and you get to around $.76 eps for 2010. So on those baseline earnings, the company is still trading at less than 10x earnings even after being up almost 30% in two days. Plus they are only trading at 2.5x or so EV/sales and companies like this trade at 3x to 4x. Of course that $.76 eps number could be too low if the nephrotic market can get traction, the FDA approves them to market IS to doctors, and MS continues to run. The concerns still remain that the drug is hella expensive and the quarters can be lumpier than Alexis Texas' backside, especially as they have little control on IS sales, so there is a reason for it to trade at a bit of a discount. Also, QCOR's hiring of a Chief Medical Officer to investigate buying other assets with all of their cash is a bit worrisome because a company with their supposed growth opportunities in MS and NS shouldn't need to be wasting time on non-core products. That said, there could still be a ton of value here. Plus with borrowing rates only to go up, M&A is getting hotter than Olivia Munn on the planet Mercury, so this could be a nice little take out candidate. Money McBags will likely buy on a pull back and is kicking himself for not having owned this, but their last Q was so bad it made it Lady Gaga look fuckable.
Oh yeah, Money McBags picked up some KITD yesterday at around $10.
In international news, Greece has approved an economic plan which will save $5.5B through a 30% cut in holiday bonuses, a 2% increase in value added sales tax, and a promise to cut down their spending on noise pollution by simply having Nia Vardalos shut the fuck up. Money McBags is anxiously looking forward to the day Greece's fiscal problems are solved and not because it will help shore up the market but because he has fewer Greek jokes left in his arsenal than a eunuch has balls. Seriously, if Money McBags knew he was going to have to write so many one-liners about hellenic culture he would have majored in Greek history, Epic poetry, or Maria Menounos while in college. For fucksake Money McBags may have to stress his long syllable and start writing this blog in dactylic hexameter if the Greeks don't get their shit together (and if he is going to stress his long syllable, he can assure you that Alice Eve will be very involved). Of course the Greeks were less than thrilled with the cuts, including taxi drivers who apparently stayed home for a second day because according to the NY Times (so it could be totally fictional), they were "protesting tax reforms which would oblige them to issue receipts, keep account books and pay tax according to their income." While that would make Charles Rangel proud since he loves finding ways around the means of paying taxes, protesting the loss of the ability to cook one's books is as preposterous as Heidi Montag's singing career or anyone finding Jay Leno funny.
In stock news today Ethan Allen is running (though this time not from the British) as they said their orders for the first two months of 2010 were up 25% as apparently it was time to buy new furniture for Fort Ticonderoga. Dine Equity announced their quarterly results and decimated estimates thanks to increased traffic at Applebees and only a moderate downtick in IHOP business. Adjusted earnings came in at $.76 cents easily beating analyst estimates of $.15 as the company was able to create significant operating leverage, pay down debt, and somehow disguise the taste of their food to make people actually want to eat it. Money McBags is not saying that Applebees is bad, but not even chronic ageusia sufferers will go there. So it is understandable that analysts would have underestimated earnings, that said, being off by a factor of 5 is as bad as trying to forecast the length of Lindsey Vonn's celebrity and using any metric loner than days. Finally, BJ's Wholesale club reported earnings up 4.6% but guidance was below estimates sending BJs down on the day. Money McBags is a bit confused as he doesn't find anything disappointing with BJs, but should they continue to gag or see a lenghty decrease, they may be forced to change their name to Blumpkin's Wholesale Club.
In small stock news, LOV received a take out offer for $3.10 per share and "other possible business combination transactions" from big shareholder Great Hill Partners. The stock has shot up to $3.30 so those "other possible business combination transactions" either mean "another $.20" or merger-arb traders are betting the company put themselves on buyashittycompany.com and are expecting a counter offer. Money McBags broke LOV down last week and came up with a $2 valuation so either Great Hill Partners has more of a Jewish fetish than anyone who has dated Barbara Streisand (because why else would anyone want to date that?) and thus needs to own JDate or "Great Hills" is yiddish for "Sucker." Yesterday Money McBags briefly mentioned QCOR but he finally had time to go over their Q last night and he loves what he sees. Money McBags has followed this stock for almost a year and a half and has watched the issues they have had with their FDA filing for IS marketing approval, their asstastic sales into the IS market last Q, their sales force ramp up in MS, and their out of nowhere medicade reimbursement and reserving issues from last quarter. Honestly, their last Q finally got Money McBags out of the stock as it wasn't clear what was going on with their sales as a potential competitor had emerged and the reserving issue they reported was more confusing than a post-op lesbian tranny (I mean if you like chicks, why cut the thing off?). Money McBags still liked the company though as their management team had generally done a good job on strategy (with their execution being a bit concerning because how many times does it really take to file a fucking sNDA? One? Maybe two? But having to refile more than twice creates more red flags than a Beijing pennant maker.). That said, this quarter easily beat Money McBags' top line estimates and their phone call was chock full of goodness. Money McBags had an estimate of $23MM in net sales for QCOR based on IS sales remaining flat (it was down big last Q in what looks like an anomaly) and 15% Q/Q growth in MS sales. Well IS sales rebounded to the mean of their historical range and MS sales grew 50% Q/Q. While the reimbursement rate was about 1.5% higher than Money McBags estimated, their net sales still came in about $2.5MM above his estimates. Sales were strong enough to give shareholders spasmodic seizures (which of course should be good for QCOR since that what their drug aims to stop). Anyway, there were many other positives such as the potential emergence of a market for Achtar (the drug QCOR sells) into the nephrotic market. QCOR sold 14 vials to this market and estimates that there are 50k people their drug could treat and those people on average would use 2x the doses of an IS patient and 4x to 5x the doses of a MS patient. The company estimates this as a potential $1B market for them and will start allocating a bit of their sales force's time to contacting nephrologists. Now look, it is way too early to get too excited about this as the data is very sparse but it does mimic the MS market for them just two years ago so there is some real potential here. Additionally QCOR has straightened out their Tricare reimbursement issue which may now contribute to 10% growth and said the FDA will get back to them on their ability to market to IS doctors by June 11, 2010. Oh yeah, the CEO addressed the potential competitive drug Sibril and said in the six months it has been on the market, they have not seen it make a dent in their sales. The only way this quarter could have been bette for QCOR was if they found out Achtar also acts as a pheremone for Brooklyn Decker's mouth. In terms of forecasting a baseline, just assume they get nothing from the nephrotic market, IS remains at its historical mean (so flat from here), and MS grows 20% per Q (which is aggressive, but whatever). Additionally assume a modest uptick in operating costs, no more reimbursement issues (they claim they are fully reserved for past medicare claims), and a 500k per q share buyback (they bought back 2MM shares last Q and have 5MM left on their buyback so it could be more), and you get to around $.76 eps for 2010. So on those baseline earnings, the company is still trading at less than 10x earnings even after being up almost 30% in two days. Plus they are only trading at 2.5x or so EV/sales and companies like this trade at 3x to 4x. Of course that $.76 eps number could be too low if the nephrotic market can get traction, the FDA approves them to market IS to doctors, and MS continues to run. The concerns still remain that the drug is hella expensive and the quarters can be lumpier than Alexis Texas' backside, especially as they have little control on IS sales, so there is a reason for it to trade at a bit of a discount. Also, QCOR's hiring of a Chief Medical Officer to investigate buying other assets with all of their cash is a bit worrisome because a company with their supposed growth opportunities in MS and NS shouldn't need to be wasting time on non-core products. That said, there could still be a ton of value here. Plus with borrowing rates only to go up, M&A is getting hotter than Olivia Munn on the planet Mercury, so this could be a nice little take out candidate. Money McBags will likely buy on a pull back and is kicking himself for not having owned this, but their last Q was so bad it made it Lady Gaga look fuckable.
Oh yeah, Money McBags picked up some KITD yesterday at around $10.
Thursday, December 24, 2009
12/24/09 Mid-Morning Report: It's Christmas Eve, can a jew get a table dance?
Yes Money McBags lights the menorah and it looks like the market wants him to get those table dances tonight as it is up again on positively mixed news. Durable goods orders rose, though missed expectations with weakness in autos and airplanes which is not suurprising since "Cash for Clunkers" went away like Tom DeLay's dignity. Taking out transportation, durable goods demand demolished estimates like Kirstie Alley demolishes her Christmas ham (and it is reasons like this that NTRI has been absolutely killing it lately). Orders were up 2% ex-transportation, led by demand for machinery, metals, computers, and stripper poles. The question remains whether this is real demand or just inventory build back, so we're trying to temper our excitement and make it last longer by just thinking about baseball.
In other positive market news today, initial jobless claims fell to their lowest level since September 2008 as eventually you run out of people to fire. So if you made it through and stayed employed this long, you might be ok, but if you're looking for a job, you may be fucked worse than the lovely Houston at her 620 man gangbang.
In stock news, Money McBags' long time favorite QCOR is up 20% on news that the FDA will give a ruling on Achtar for IS by June (and hopefully the ruling is more than just finding it delicious). Seeing as how it took QCOR about 3 years and several "do-overs" to get this filing accepted (and you'd think they were trying to prove P=NP with how long it took them to simply get a filing complete), this is positive news, but the FDA still has to approve this drug which is used by the majority of doctors anyway (so one would think it would be approved, but then again, one also thought Lindsay Lohan would have had a long and profitable career and Evolution would not have been contested in the 21st Century). Money McBags wouldn't be buying into this rally though. It seems more like short covering than anything because the company is still going through growing pains and there is some uncertainty to their medicare reimbursement as they currently have to pay more than they get from medicare and didn't reserve enough for late/non-payments last Q. The company is probably at a ~$.08-$.10 quarterly run rate right now, but they have cash and give back to shareholders through buybacks. They could have real upside if they continue to penetrate the MS market and can get on-label IS approval while overcoming the sticker shock from doctors/patients/insurance companies on the price of a vial of Achtar which currently runs at $23k a pop (and that is enough to cure spasms from MS/IS but create spasms from having to pay that price).
In other positive market news today, initial jobless claims fell to their lowest level since September 2008 as eventually you run out of people to fire. So if you made it through and stayed employed this long, you might be ok, but if you're looking for a job, you may be fucked worse than the lovely Houston at her 620 man gangbang.
In stock news, Money McBags' long time favorite QCOR is up 20% on news that the FDA will give a ruling on Achtar for IS by June (and hopefully the ruling is more than just finding it delicious). Seeing as how it took QCOR about 3 years and several "do-overs" to get this filing accepted (and you'd think they were trying to prove P=NP with how long it took them to simply get a filing complete), this is positive news, but the FDA still has to approve this drug which is used by the majority of doctors anyway (so one would think it would be approved, but then again, one also thought Lindsay Lohan would have had a long and profitable career and Evolution would not have been contested in the 21st Century). Money McBags wouldn't be buying into this rally though. It seems more like short covering than anything because the company is still going through growing pains and there is some uncertainty to their medicare reimbursement as they currently have to pay more than they get from medicare and didn't reserve enough for late/non-payments last Q. The company is probably at a ~$.08-$.10 quarterly run rate right now, but they have cash and give back to shareholders through buybacks. They could have real upside if they continue to penetrate the MS market and can get on-label IS approval while overcoming the sticker shock from doctors/patients/insurance companies on the price of a vial of Achtar which currently runs at $23k a pop (and that is enough to cure spasms from MS/IS but create spasms from having to pay that price).
Subscribe to:
Posts (Atom)