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Afam Edozie

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  • Yandex Post The Crimea Crisis [View article]
    I have no expectations about the whether the price will go to $20 or not. The future is not only unknown, it is unknowable.

    I would agree that there is support at the $25 to $26 level. But also the market does not like uncertainty, and the spectre of war, sanctions and energy embargoes tend to create more emotional selling than rationale buying. In addition, unless this week marks a turning point, the general market is in decline, if the correction continues then those (stocks) that are most uncertain will get hit the most.

    If it comes down to $20 I will be happy (emotional) and try to pick a bottom with a tight stop. If it doesn't then I will buy on the way up (because the probability of a rising market continuing to rise is higher than the probability of a falling market turning around to start rising. I won't get the bottom, but I'm all right with that, that is not my aim, my aim is to buy when the odds of it going up are very high and the amount that I will lose before I realise that I am wrong is very low.
    Apr 16 09:07 AM | Likes Like |Link to Comment
  • Yandex Post The Crimea Crisis [View article]
    The market can stay irrational for longer than I can stay solvent. But if you have a good position sizing strategy, such that you will be around for the time the stock bounces back, you will do OK.

    I was stopped out with a 4.5% loss on my position. I may try again when the stock hits $20 (if it does), or given that the stock is worth over $40, buy up on the way from $27 to $32.

    You can never tell how low a great company can go.
    Apr 15 10:54 AM | 1 Like Like |Link to Comment
  • Yandex Post The Crimea Crisis [View article]
    I hear you.

    The future is not only unknown, it is unknowable.

    Yandex derives a majority of its revenue from Russia. Significant currency depreciation, exchange controls or financial sanctions or any number of other risks could impair the value of Yandex common stock.

    Facts are that Yandex is a high quality company, it is growing fast, likely to continue to grow fast and is now undervalued.

    Yandex has been experiencing significant distribution since 20th February. However, it has been under accumulation since wed 26 March. Though only 3 days, I think this throws the odds considerably in favour of buyers.

    However, failure to hold $28 price would be indicative of further weakness and the next level of support is $25 (i.e. another 11% drop). I wouldn't want to participate in this (particularly given that YNDX is now 20% of my equity). Prefer to take my 6% loss and watch to see what the big holders do next.

    Every investment is in reality a bet. The odds of it moving up from here, outweigh the odds of it moving down, but it is certainly no slam dunk.
    Mar 29 12:53 PM | Likes Like |Link to Comment
  • Yandex Post The Crimea Crisis [View article]
    Just put an all in bet (well 20% of portfolio) in Yandex.

    Bar the currency risk (it is a US dollar denominated stock whose revenue and earnings are in Rubles), I like it (that said I have set a stop loss).
    Mar 28 10:23 AM | Likes Like |Link to Comment
  • iRobot: A One-Product Consumer Electronics Company Misperceived As Riding A Robotics Trend [View article]
    Facts, figures and opinions.

    Facts
    iRobot is the leader in household cleaning robots.
    The market continues to grow at a double digit rate
    iRobot has strong patent protection in the largest market (USA)

    Figures
    iRobot grew revenues 25% in its last reported quarter, this is the biggest increase in both percentage and actual revenues over the past 8 quarters.
    Gross margin also increased for the quarter

    Opinions
    iRobots poor strategy of raising prices rather than following a two pronged strategy of creating a mass market (i.e. lower cost models) whilst maintaining a premium market (i.e. higher cost, higher feature models),
    a. leaves the company vulnerable to competition (like Apple who adopted this strategy first on Mac and then on iPhone/iPad and in both cases lost market leadership, which eventually impacted margins - at least on Mac, iPhone is still playing out. And
    b. will cause the market to peak earlier and at a lower market penetration

    Does this make iRobot a short opportunity? At 25 times forward earnings, I doubt it very much, unless you are a short term technical trader looking to exploit a 5% to 10% pull-back (in which case you will have little interest in the fundamentals which will take several quarters to play out).
    Mar 12 03:47 AM | 4 Likes Like |Link to Comment
  • Questcor - The Deal Of A Lifetime [View article]
    Thanks for the article.

    From a fundamental point of view, I don't buy the theory that the patients, doctors and institutions that are using, prescribing and recommending are Acthar are all wrong and they are either the beneficiaries of bribes from Questcor, the victims of aggressive Questcor marketing or just desperate and blinded by their medical conditions. And in addition Questcor is so evil (or has such poor quality control) that they haven't even put the $1 of actives that they promised in the aggressive marketing.

    However, I'm prepared to be wrong. I'm also aware that I can lose as much money being right about the fundamentals, as I can being wrong about it.

    I'm long QCOR from $52. And sold half my position on the close wed and half of what was left on thurs, purely on the unfavourable technical action. I prefer to reduce position size on stocks that are falling big (relative to their average trading range) on big volume. Hoping to get an opportunity to buy back around $50.
    Mar 3 06:01 AM | 3 Likes Like |Link to Comment
  • Qihoo Resignations: Trouble Brewing? [View article]
    Outsiders know very little about any company, particularly when a majority of the outside investors are from a different country and are not in the social and business network of the company.

    I would agree with the author's comments that the resignation of two directors is an event worthy of caution and closer scrutiny. Particularly given that it was the independent directors.
    Feb 16 10:51 AM | Likes Like |Link to Comment
  • Buy The Rip: Valeant Pharmaceuticals [View article]
    You may be right. I confess that I haven't spent much more time than was required to go through its last annual and quarterly reports before moving on.

    My mind goes back to Hanson Trust and other acquisition related vehicles that achieve high growth through acquisition, the market mistakes the high growth and gives it a higher multiple, which enables it to continue acquiring with its over valued paper.

    The problem is that in order to keep the growth and multiple, it needs to make bigger and bigger acquisitions (to be meaningful to the enlarging P&L), of course this tends to petter out after 7 to 10 years, because there are no bigger fish to catch (along with a +60% drop in the share price or even bankruptcy in the case of excessive leverage).

    In the 80s and 90s Hanson was also a darling of both growth and value investors and Lord Hanson (well depicted in the movie Wall Street) was perceived to be a genius (who knows he probably was).

    The bottom line is that every serial acquirer needs to have a higher multiple in order to keep growing, and their PR is always out to spin something to say that this time its different and that when our company A trading at a multiple of 16 acquires company B at a multiple of 12, the combined entity should have a multiple of 16 or more. Because of the value being created by our brilliant management (in this case side stepping R&D expenditure).

    And because it is so difficult and time consuming to properly analyse serial acquirers (if at all possible) most investors accept the story once they are sufficiently titillated by the growth.
    Feb 14 09:25 AM | 1 Like Like |Link to Comment
  • Buy The Rip: Valeant Pharmaceuticals [View article]
    1. Great top line growth (though almost all acquisition related)
    2. Declining gross margins
    3. High Debt: $17 billion of debt on best case $2.1 bn of proforma earnings (actual earnings is negative).
    4. Weak balance sheet: $28bn total assets of which $23 billion is intangible or goodwill.
    5. High valuation: 16.5 times proforma earnings (actual earnings are negative); 9.5 times book (and a book that is very leveraged and very dependent on goodwill and intangibles who's value is very difficult to know, at that), 9.5 times revenue

    His strategy is brilliant: Focus on acquiring? Please! I'm not saying it can't work for awhile, but I would hardly call it brilliant.

    I'm not saying that Valeant won't go higher, I am saying that its current pricing totally ignores the balance sheet risk and deteriorating competitive position.
    Feb 14 08:26 AM | 1 Like Like |Link to Comment
  • Google Missed: Where's The Outrage? [View article]
    I would agree that creating a further class of shares without voting rights smacks of bad corporate governance and increases the cultural risk around the company.

    In addition it very much exposes the mentality of the owners - this is our company because we founded it and even though we want to cash out (eat it) we still want to have it.

    That said Berkshire shareholders have not done badly in a similar type of structure - though in all fairness Buffet set up the structure for different reasons.
    Feb 5 02:59 AM | Likes Like |Link to Comment
  • Google Missed: Where's The Outrage? [View article]
    The problem is not that Google is not trading on its fundamentals. The problem is that many investors don't understand the fundamentals. An earnings miss or beat is not the fundamentals.

    The fundamentals are that Google is the leader in Internet search, it is also the leader in smartphone operating systems. Both markets are still growing fast, and Google itself is growing with those markets at over 30% per annum and has many more years of double digit growth to look ahead to. And at least for now it is retaining its leadership position.

    The fundamentals are also that it is delivering 13% return on assets, whereas over half of those assets are idle cash.

    In summary it is posed to double its business within 3 years with no additional capital required from its owners or lenders.

    What is that worth? 30 times current earnings / 20 times forward earnings? I think the valuation is very reasonable.

    Where is the outrage? Give me a break!
    Feb 3 09:15 AM | 2 Likes Like |Link to Comment
  • YY: Future Growth Underestimated [View article]
    Good article, YY has been acting great since it broke out in the new year. I also think it is still undervalued.

    It does remain very volatile (as today's action demonstrates) and is still a target of short and distort artists.
    Jan 21 12:17 PM | Likes Like |Link to Comment
  • Kenya, Ivory Coast, Nigeria, And Ghana: The African KINGs [View article]
    You would struggle to avoid companies doing business in Africa. P&G, Unilever, Coca Cola, ExxonMobil, Citibank, Samsung, HP, etc., etc.,

    There are countries with high levels of HIV in Africa and also countries with low levels (though on average HIV levels have been dropping over the past 10 years), there are countries with famine and countries with plenty (though on average African agricultural output is up more than 60% over the past decade), as for hate, stealing, and unfair people you might as well migrate to the moon.

    Poor governance remains a real problem, but the investment thesis for Africa is the improvements in governance achieved over the past 10 years and the expectation that the trend will not reverse. And certainly that is one of the contributors to strong growth over the decade.

    Jim O'Neil (Retiring Chair of Goldman Sachs Asset Management), who was one of the first people to point out the emergence of China and India (and invent the acronym BRICs), has recently pointed to Nigeria as a likely power house economy by the 2020s (along with the other MINTs he has coined - Mexico, Indonesia, Nigeria, Turkey), given the direction of policy reform, GDP growth and population growth. In investing you win by going to where the puck is going to be.
    Jan 21 11:16 AM | 3 Likes Like |Link to Comment
  • Kenya, Ivory Coast, Nigeria, And Ghana: The African KINGs [View article]
    Stock market data table. Top 5 stocks table under Nigeria. NB is described as a bank. Anyway small point in a great article.

    Hope to read more from you in the future.
    Jan 20 04:33 PM | Likes Like |Link to Comment
  • ModernGraham Valuation Of Electronic Arts Inc. [View article]
    Zacks uses number of earnings surprises to rate stocks. It is only for the wise;-)
    Jan 20 04:01 PM | Likes Like |Link to Comment
COMMENTS STATS
240 Comments
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