Brian Griffin

Armstrong World Industries: A Housing Related Stock with Upside?

I am still long. I'm sorry this stock has fallen 50%. Despite the environment, AWI has outperformed all year long every quarter. It has far more defensive characteristics than USG or other building products companies. Unfortunately, multiples have compressed far more than I thought they would which is great for short positions but not for longs. AWI is still the leader and will be able to manage through a recession/depression and will be stronger when it comes out on the other side. It is one of the few stocks that I still own in this environment because of its margin of safety. Other commenters have different opinions than I, do your own homework! Good luck!

Garmin: Navigating to Nowhere

A poor allocation of capital is buying hundreds of millions of dollars of stock at prices above 30 and 40 dollars while the business is slowing and margins are weakening. Put another way if they had waited to buy stock now, they could buy twice as many shares. Shareholders would be best served by a return of capital in the form of dividends instead of this waste. GRMN is not alone in this practice - many companies have bought back stock with their cash so they could pump up eps by a couple pennies instead of giving it back to their shareholders to make a better investment decision. I hope that helps you understand what's going on.

Novatel, Sierra Wireless: Game Over

I have taken profits as both of these companies now trade very close to their cash balances. Good luck to all.

Garmin: Navigating to Nowhere

Thanks for all your comments. I think many commenters would be served well by remembering that no matter how cool a product is or how useful (Garmin is both of these) -- the value of a company is derived from future cash flows. Garmin to me seems to fail miserably on this count for the reasons I've outlined - declining ASP, declining margins, increasing competition, and poor allocation of capital. Good luck to all.

Steak N Shake - Another 'Friendly' Deal?

How does the math change now that the company has posted terrible sss for months? Do franchisees still show interest in the chain? It seems to me that the restructuring process becomes much more difficult in a bad consumer environment for a few reasons - 1. Sales per unit are dropping precipitously 2. real estate values are dropping 3. credit available to franchisees will be more restrictive 4. unit operating metrics continue to worsen -- Would love to hear your thoughts. Thanks for the nice writeup.

Armstrong World Industries: A Housing Related Stock with Upside?

@bubblebuster - that was quite the comment. unfortunately, i have no response and continue to own AWI

Novatel, Sierra Wireless: Game Over

@yankeestation: there is no shortage of examples where analysts are wrong on the prospects for a company -- take a look at most financial stocks in 2007 - in the end, they have no more information than you and I.
Further, analysts and human nature are eternally optimistic. Only a few weeks ago, everyone believed that we would avoid a recession and now economists are debating how bad it will be.

Novatel, Sierra Wireless: Game Over

A company will never signal its own demise. I am led to believe that either they do not know that they are going to be priced out of the market or that they think they can compete at much lower price points.

I do agree that this may take some time to play out fully but the market tends to discount information 6-9 months in advance. Consumers will go for what works at a lower price any day. The lack of other best of breed competitors has been a function of the fact that this has been a very small market until now.

For an example of another best of breed company that was ruined when competitors entered their markets look no further than CSR LN and their bluetooth business. As soon as a market grows to a size where a BRCM or a QCOM feels that it is worth competing in, they will join in and compete on price.

SWIR and NVTL MUST diversify if they are to remain in business. They have purchased new businesses in the past and pursued new lines of revenue. These transactions are rarely reasons for stock prices to go up because a premium is usually paid and the uncertainties are many.

As for, SWIR's M2M business is close to 10% of their sales. This is hardly enough to help the company in the near term. Remember, if they quit this "low margin business" that means they are quitting on approx 25% of their revenues. That's a large hole to fill.

I have heard their conference calls and I am simply short because I believe that they represent overvalued companies with a catalyst on the horizon. I am far from infallible and if your research has led you to conclude that these stocks are good values then by all means purchase them. That is why the disclaimer appears on the site to do your own research.

Thanks for your comments and helping me to think about my positions differently.