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Adam Ballantyne  

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  • Undervalued Stock Of The Week: Valmont Industries [View article]
    For starters, you're using EPS in a cash flow model...
    Sep 6, 2013. 07:08 AM | Likes Like |Link to Comment
  • Why You Should Short Amazon This Fall [View article]
    relayer, thanks for your comment. Had I written this article again, I would have included my timing thesis--which I now realize is an absolutely critical component to my overall thesis. Let me explain it briefly in a nutshell. I've chosen this Fall to make (and tentatively build on) a short position in Amazon because it is approaching its first catalyst, which I believe to be either (a) a negative quarterly earnings report this holiday season, (b) a relatively large earnings miss, or (c) both. My bet is on (b), since my argument is that its (mediocre) new products will not make the cut this Fall and will fall short of expectations. Amazon will likely continue to raise marketing expenditures as a % of revenue and the cost of sales margins should remain flat (as they have for the past 6 years) around 77%, as will both fulfillment and tech costs (these may even increase will more infrastructure to control)--so my outlook on earnings is a very pessimistic one. All of those investors who were screaming short 1-2 years ago were fundamentally correct, but their timing was off because AMZN's quarterly profit margins were still 3-4%, more than enough to impress Wall Street. Now they are barely under 0.5%. Additionally, the argument that fulfillment center expansion and AWS investment are dragging earnings is a poor one (made by others) because these are capital expenditures, not costs of sales. Also, the high reported free cash flow is masked behind solid bill-paying techniques--just look at the A/P and A/R difference. This difference accounts for a large % of the free cash flow calculations that the 10-K is so obsessed with. I'm not buying it. I may write a follow up article so as to reply to these comments en masse--they have been insightful.
    Aug 18, 2012. 12:12 AM | 1 Like Like |Link to Comment
  • Housing's Recovery, Dip, Recovery, Dip: The Case Against Homebuilders [View article]
    Great article. Do you have a specific reference for the vacant housing data from the Census Bureau? I have seen a lot of debate on this fact, including allegations that banks have been holding swaths of foreclosed homes in order to sell later when prices rise. This doesn't make as much as sense home because the value of a home can really deteriorate if you just let it sit there rotting for a few years.
    Jun 27, 2012. 11:07 AM | Likes Like |Link to Comment
  • Pick Up Cooper Tire & Rubber This Winter [View article]
    I didn't ever mean to imply that a change in one input will cause a change in stock price. There are many forces at work for the stock's price, not all of them rational. Generally speaking, though, rising input prices (like NR) will lower profit levels due to higher costs. Higher corresponding prices (to maintain margins) will raise the nominal value of revenues but will hurt demand in a weak environment and add to the squeezed margins. This is more of an empirical fact, though there are always exceptions.

    For CTB et al, vehicle sales were projected to rise substantially for 2010-2011, creating a strong demand environment for tire sales. This was shown to be true from 2009-2011 where revenues grew 19% YoY. The rise in NR, then, was less important given the strong demand for tires. When sales slowed during early 2011 and NR prices were still at an all-time high (and CTB was facing difficult labor issues), the $25 price was not justified.

    Ceteris paribus, you should correlate rising (lower) input prices with lower (higher) profit margins--just be sure to weigh the many other factors into the equation as well when deciding whether or not to invest. Also, given that the stock price plummeted back down to ~10/share just a few months after hitting 25/share, perhaps that's not the best way to judge a company's valuation.
    Apr 3, 2012. 01:17 PM | Likes Like |Link to Comment
  • Can These 5 High Yield Stocks Keep Paying Massive Dividends? [View article]
    Vatalyst, the question for MFA is: will marginally higher cash flows support the increase in poorly rated MBS? I think a more prudent analysis would be cash flows relative to the MBS risk those cash flows carry with them.
    Feb 1, 2012. 10:27 AM | Likes Like |Link to Comment
  • Amtech Systems - An Absolute Steal [View article]
    Good point, let me rephrase. Most of the Wall Street reports on solar have priced these companies so low because they expect revenue growth to be next to nil for the next 1-1.5 years. About the solar downturn, Morningstar has said the aggressive price declines and subdued profitability for the industry as a whole will continue well into 2012. S&P has also said solar revenues will decline this year due to cuts in subsidies and inventory buildup for modules. All of these warnings are now 3-4 months old and have been heavily priced in to companies like FSLR, JKS, STP, and their suppliers like ASYS. It's the forecast of negative revenues that has lowered prices, but when the poor performance results come in and the upside is revealed for 2013-2014, then solar prices will rebound. By then the weaker companies will have gone out of business or more likely, taken over, because Morningstar and S&P at least agree that this industry isn't going anywhere.
    Jan 5, 2012. 12:27 PM | Likes Like |Link to Comment
  • MFA Financial: Short Candidate On The Rise [View article]
    Thanks for your comment. I don't think I'll make a short position until we either see that 15% dividend start going down or we see another 100% increase in shares out, like we did in 2010. There are only so many junk MBS to be acquired with the equity infusion.
    Dec 3, 2011. 07:37 PM | Likes Like |Link to Comment
  • Amtech Systems - An Absolute Steal [View article]
    Thanks, anrosen, I should have mentioned ASYS lacks any real debt, and I should have further explained my intention to value the company from a "reproduction" valuation of its assets rather than a liquidation. My assumption here is that ASYS will not only remain intact during the current (or arguably soon-to-be) bottom of the solar industry, but also that it will grow and remain profitable thereafter. I'll begin using a DCF approach and include the NCAV for future articles.
    Nov 23, 2011. 07:01 PM | 1 Like Like |Link to Comment
  • Amtech Systems - An Absolute Steal [View article]
    Thanks Vince. I have a feeling much of the downside has already been priced in, for exactly the reasons you mentioned. Because of this, and in line with everyone's expectations that solar is hitting rock bottom, I began a position in the company. If solar's problems persist for another year, then we'll see that reflected in the market value over the next 12 months, and I think it will represent an even greater buying opportunity.
    Nov 20, 2011. 12:02 PM | 1 Like Like |Link to Comment
  • Why The Consumer Will Suffer This Fall And What You Should Short [View article]
    You will probably see a short term rise in ANF, mostly in response to the large drop, but a longer term downward trend, especially once the next two earnings reports come out. Most of the earnings drop was in response to low international sales, but I think the domestic drop in sales will take longer to matriculate and it may be 4-12 months before we see that priced in.
    Nov 12, 2011. 12:41 PM | Likes Like |Link to Comment
  • For-Profit Colleges: Don't Stop Shorting Them [View article]
    Kelly's upgrade is (according to her) based primarily on firm-specific criteria--that no bad news apparently means good news for a company that's at its 5 year low. I have two problems with this: first, it ignores the larger issues involved in the for-profit education industry, some of which has been pointed out in my article; second, investing in a company simply because it's lost value isn't a very profitable technique in the long term. I wouldn't be surprised if 4-5 months of near term gains are wiped out in the course of the next year or so, as soon as the debt issues are exposed and the government tightens its reins on these companies to exacerbate problems. This may be a profitable short term investment but I'd say be careful.
    Oct 12, 2011. 08:22 PM | Likes Like |Link to Comment
  • Why The Consumer Will Suffer This Fall And What You Should Short [View article]
    It's an interesting point, Aryeh. Here's a good article from the NYT to draw from for this:

    They distinguish between "affordable" luxury, which is arguably more prone to business cycle fluctuations and "true" luxury, which has a higher status and less affected. I think Tiffanys falls in the former category. They have expanded a lot into the middle class-upper middle class region and I think they will see more separation from those who can afford their product and those who want a true luxury product (such as Hermes or Louis Vuitton). Despite only a ~12% fall in sales during the recession, most of my article is explaining that we haven't seen cuts in spending on a lot of goods--and I think this is one particular type of that good--the affordable luxury good.
    Oct 11, 2011. 01:57 PM | Likes Like |Link to Comment
  • Why The Consumer Will Suffer This Fall And What You Should Short [View article]
    Thanks wadeyr, I actually think FOSL is a good company--they have a great balance sheet. I still feel they are overvalued right now since a lot of their price seems to be predicated on growth. Given the substance of my article, I don't see growth happening, so I would suspect a drop. Likewise, I think NFLX is still selling too high--I don't see how they can continue to grow to generate the future earnings needed to sustain a high price. I don't doubt that there are many more consumer-driven companies to short if you accept my thesis.
    Oct 8, 2011. 02:47 PM | 1 Like Like |Link to Comment
  • Why The Consumer Will Suffer This Fall And What You Should Short [View article]
    It's funny you mention that. I had Best Buy in here on my first draft, but ended up removing it because it's P/E was just too low (~8X). I figured the 50% fall from its post-recession high of $48 to $25 was a good enough sign that much of this was already priced in. However, I agree with you that this stock will likely continue to fall before it makes a comeback.
    Oct 8, 2011. 01:24 AM | 2 Likes Like |Link to Comment
  • Suntech Power Vs. First Solar [View article]
    Thanks, Jim--I used FSLR's cell efficiencies in comparison with STP's modular efficiencies. This should give less weight to FSLR's ability to takeover the PV companies in the near term, especially if they expect to achieve 13.5-14.5% by 2014, by which time price changes and new technology/innovations will have had a greater toll that a 2-3% change in efficiency. Overall this would make me (slightly) more bullish for PV (and thus for STP).
    Oct 6, 2011. 01:41 PM | Likes Like |Link to Comment