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Anthony Grossi  

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  • WD-40: It Could Happen To Anyone [View article]
    +GF+

    important point to note. An explosion like with your GFS or at Union Carbine (my personal disaster stock was UNH and the subsequent back dating options scandal) is a permanent impairment and you should dump the stock when such news arrives. On the other hand an earnings miss at an otherwise sound company (WD40 possibly) can often be an opportunity to add to a position. Risk management is the name of the game. Of course the obvious counter example is Marlboro Friday; what looked like a permanent impairment was actually a brilliant, daring competitive move.
    Jan 12, 2012. 04:07 AM | 1 Like Like |Link to Comment
  • Dividend Giant Exelon Is A Cheap Buy Now [View article]
    actually EXC and other IPP's (independent power producers) have been trading down this year over concerns of excess nat gas supply (low energy prices) and forecasts for rate hike starting mid-2013 (interest rates eat into earned returns).

    But yes, markets do go up and down
    Jan 12, 2012. 12:05 AM | Likes Like |Link to Comment
  • Dividend Giant Exelon Is A Cheap Buy Now [View article]
    To be fair I also like EXC and think it has a good mix of regulated and unregulated power production.

    That out of the way the article has a few short comings

    1) no mention of the pension liabilities that have held the stock down for the last 3+ years (can't meet unfunded pension needs without issuing stock)

    2) no mention of the effect of interest rates on earned returns

    3) no clear opinion on the path of power prices, which greatly effect an independent power producer like EXC
    a) you mention that nat gas prices won't stay low, but the management at EXC clearly disagrees with you or they wouldn't have hedged their portfolio by acquiring a regulated utility (effectively trading away any benefit they would have received from an increase in power prices).
    Jan 11, 2012. 12:06 AM | 2 Likes Like |Link to Comment
  • How Social Networks Are Helping Coca Cola Win The Soda War With Pepsi In Former Soviet Countries [View article]
    Really nice article and accurate regarding drinks, but lets not forget that Russians love beer snacks and Frito Lay products are quickly replacing the local beerka as the preferred choice among young people. Plenty of opportunity for both KO and PEP here in Russia
    Dec 31, 2011. 10:27 PM | Likes Like |Link to Comment
  • Dr. Pepper Snapple: How Fast Can Dividends Grow? [View article]
    here's the good things I know about DPS

    net sales are up 5% (that's in line with guidance of 3-5%)

    number one product in 4 beverage categories: Teas (Snapple), alcoholic mixers (mr & mrs T) and "gourmet" CSD's (IBC, Stewart's) and of course flavored CSD's (Dr. Pepper)

    Products are well received in central and south america with strong growth prospects (around 8%)

    Here's the bad

    You have to adjust for normalized earnings as the large settlements received from PEP and KO buying back their bottlers are one time events, thus you need to revise down FCF, etc. This means those great share buybacks and dividend growth rate come back down to earth too

    nationwide decline in sale of colas (2% in 2010) expected to continue as consumers are offered more choices and increasingly show a preference for healthy alternatives (or perceived healthy)

    gross profit flat in spite of sales growth due to commodity input cost pressure

    SunDrop is a bust (mountain dew imitator)

    Venom is a joke (energy drink)

    The best thing I can say about DPS is that

    #1, its flagship brand Dr. Pepper has achieved actual, meaningfully differentiation in the coke/pepsi cola world.

    #2, its almost complete lack of exposure to global markets is also its greatest opportunity and hope for the future.
    Dec 3, 2011. 01:02 AM | Likes Like |Link to Comment
  • Pepsi Has More Profit Potential Than Coca-Cola [View article]
    So I won't venture to give a time frame, but when the game is over it seems likely that the market share of KO vs PEP in the rest of the world will eventually very closely resemble the market share of KO vs PEP in America, for very much the same reasons: Brand equity, scale of distributions, ability to attract exclusive partnerships (PEP + YUM). And one should be able to model earnings and margins growth based on this assumption and not be too far off the mark.

    Dave Crosetti (formerly Just Sayin'), you seem to understate the ability of PEP to leverage the value of Frito Lay brands to promote distribution PEP drink products and create product tie ins (chips and a drink at the ball park type of deals).

    KO is the better drinks company (just look at ROE or ROIC) but out of the three I would invest in Frito Lay as a stand alone company if I had that choice.

    KO operates in a highly saturated, competitive business market with no consumer switching costs, very low barriers to entry and a constantly changing market of consumer trends. In spite of this, few would argue that any brand has ever enjoyed the global recognition and goodwill attained by this simple concoction of sugar and bubbles. If you go to a restaurant and ask for Diet Coke and they say they only have Diet Pepsi, who cares. Does that mean the impact of Coca-Cola's advertising has gone out the window?
    Dec 3, 2011. 12:24 AM | Likes Like |Link to Comment
  • Aerospace and Defense Stocks: Beaten Down, With Healthy Free Cash Flow, 3%-Plus Dividends [View article]
    You'll get no objections from me on that point, just trying to point the man in the direction his comment indicated.

    I happen to like SAI, HRS and GD in this space (disclaimer I work for HRS), I think its really hard for someone else to take contracts from them. NOC is a top notch firm, though I don't know enough to comment on valuation, I just happen to think its harder for someone else to provide the contracts that GD does whereas it seems to me that a lot of new companies can compete to provide these IT services that are all the rage (C4ISR and cyber security). The slow down in spending (if there is one) affects GD much more than NOC.

    For what it's worth, http://bit.ly/sFRMF9
    Nov 30, 2011. 11:17 PM | Likes Like |Link to Comment
  • Aerospace and Defense Stocks: Beaten Down, With Healthy Free Cash Flow, 3%-Plus Dividends [View article]
    AVAV is the drones pure play, if that's what you're shopping for.
    Nov 30, 2011. 06:13 AM | Likes Like |Link to Comment
  • The Coming Decade Of Stocks [View article]
    while i happen to agree with you on GE, those normalized 10 year earnings include a big chunk of earnings from a highly leveraged GE Capital division that will no longer be making the same contribution to forward earnings. I like the prospects of GE with regard to power infrastructure. Even if you discount the 25-30% of earnings that comes from financial services GE can still earn $1.50 per share and double from here.

    I know you still have 9 stocks to come, but if you're looking at a return to normal I'd love to hear your thoughts on how to invest for interest rates above 0%. In theory, rising rates are bad for companies like GE that require huge capital investments to fund new infrastructure projects.
    Nov 29, 2011. 11:07 PM | 3 Likes Like |Link to Comment
  • Schwab: An Island of Sanity [View article]
    Interest rates.

    If (when) interest rates return to 1.25%, then SCHW will realize a revenue increase of approx. $500M to $600M annually from fee waivers on money market accts. Also, since 35% of rev. is from interest, this portion of income will rise. Third, since higher rates reward savings, AUM should also benefit from rising rates. Finally, rising rates implies economic stability if not growth and SCHW benefits from consumer base with money to invest.

    Details in the link from original post.
    Nov 29, 2011. 10:52 PM | 2 Likes Like |Link to Comment
  • In A Coke And Pepsi World, Don't Forget About Dr. Pepper [View article]
    DPS had a huge spike in FCF due to KO and PEP buying back their respective bottlers (shows on balance sheet as working capital). So the buy backs are not sustainable at current rate, nor will dividend growth continue at double digit rate.

    Net cash from operating activities should drop back down to the 850 M range and FCF should drop back down to the $550 M neighboorhood. So the dividend policy will be based on that more reasonable FCF range.

    However, it was nice of mgmt to return this bonus pool of money to shareholders rather then paying themselves a bonus or trying to make unnecessary acquisitions or launch another disastrous energy drink.

    I love DPS brands (specifically IBC root beer). However, if you adjust for the very foreseeable drop in FCF and value the shares based on net income, the company is basically fairly valued and earns lower returns than KO or PEP so will likely trade at a discount to its larger peers. Still a quality name, but not a bargain.
    Nov 27, 2011. 09:45 AM | Likes Like |Link to Comment
  • What Is Amazon Stock Worth? [View article]
    So your intention is to short the stock at 200 and close at 205 for a $5 loss. Then turn around and buy at 205 and sell at 195 for a $10 loss. You've now lost $15 per share in trading without any thesis regarding the underlying business fundamentals.

    If a stock is a short at 200 why would you suddenly change your mind and like it at 205? In other words, if you were right to short at 200, then by definition you will lose money we you cover and go long at 205. Your trading strategy contradicts your convictions.

    Pure retail is a tough business. No pricing power. No customer switching costs.

    Costco sales everything in store basically at cost and only makes a profit off membership fees. They did this to undercut the price advantage of the previous low cost provider WMT. Do you really want to compete in a market where the winner is the one who is willing to make the least amount of profit?
    Nov 26, 2011. 02:08 AM | Likes Like |Link to Comment
  • Microsoft: A Strong Buy [View article]
    I disagree with both the author and Jakeman that MSFT's public perception is holding back the stock. IT pro's and consumers alike trust Office products everyday and the scale of "everyone else uses it so we have to, too" is a fantastic business advantage. Also, I don't think the float is a real issue.

    I think the real problem holding back MSFT is the threat of margin compression. The margins in the Office business are around 70%. That's better than the margins at monopolies like Fico. If MSFT's margins contracted to the level of FICO's (60%) that's almost $4 B in lost revenue and the company would still be posting results consistent with a monopoly type business.

    Do MSFT product get commodified when everyone moves to web based OS? I am not enough of a techie to answer that but its a real threat. If MSFT has to drop prices to retain customers that's enough to crush the stock and this big unknown has kept the stock price down for at least the last 2 or 3 years.

    Competitors are willing to spend big money, and lose almost all of it, trying to take business away from MSFT. Don't believe me? Look at how much money MSFT has fiddled away trying to take business away from GOOG.

    Tech companies pursue disruptive and destructive innovations whenever they can — regardless of whether there’s money in it for them. As long as there’s hope, they’ll keep hoping. A well financed irrational competitor is never a good thing (GOOG free Android OS).

    At the end of the day I just don't understand the threats facing MSFT today, and neither does anyone else. And its killing the stock.

    The underlying business looks fantastic and stock looks cheap.
    It's just a question of do you want to play this game or would you rather own something you can forecast earnings?
    Nov 25, 2011. 10:08 AM | 7 Likes Like |Link to Comment
  • 3 Reasons To Avoid Waste Management [View article]
    to anyone still concerned:

    Waste haulers are basically like regulated utilities without the interest rate sensitivity, but higher correlation to economic cycles. Good for income minded investors, not really a growth story. Nice compliment to a utility holding.

    WCN's growth is driven by acquisitions and its business model targets smaller secondary markets, so basically there is a cap on the firms growth prospects. Rising rates would put a dent in margins on any new acquisitions.

    WM's advantage lies in landfill ownership and heavy invest in EfW and recycling (the evolving ton of trash). So the core business has no growth in a stale economy, but that's effecting everyone. The recycling businesses are heavily tied to the price of commodities, which could go either way. The EfW business is scalable as the leading position in landfills and collections drives volumes to its energy plants.

    WM provides necessary services and owns essential infrastructure assets. Not that it guarantees good returns.
    Nov 25, 2011. 05:57 AM | 2 Likes Like |Link to Comment
  • Best Waste Management Stocks [View article]
    your comparisons are a bit misleading as CVA is an EfW company and WM and RSG are integrated waste services providers and SCRL is a medical waste niche operator.

    DAR is an interesting comp tho not specifically in the same business. A comparison to other EfW operators like AT would have been more apt (even tho its not a pure play).

    A company like CVA won't have any (almost any) revenue growth unless the open new facilities so earnings growth is a less important metric than free cash flow (my opinion).
    Nov 25, 2011. 05:09 AM | Likes Like |Link to Comment
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