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Chad Brand

 
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  • The Basic Fallacy Regarding Altisource [View article]
    They would not publicly announce that the $250M financing will be used for share buybacks and then not follow through on it. Also, a buyback would not be used to cash out insiders. You can bet that the buy side investors who gobbled up the convertible offering know very well that their $1250 strike price becomes even easier to attain if the share count shrinks. If you wanted a reason to believe the stock was a buy, not a short, this press release should be all you need. The idea that Erbey would repurchase an overvalued stock flies in the face of everything he has said on conference calls for years. There will be a delay of at least 6 months before houses become ready to rent out, and then another 1-2 months before they find a renter, so you will see the number of homes rented accelerate going forward as their NPL purchases age a bit more. There is a lag that the bears tend to ignore. FD: Long AAMC.
    Mar 18 09:32 AM | Likes Like |Link to Comment
  • J.C. Penney: Ability To Manage Dilution Will Drive Value [View article]
    Free cash flow breakeven at $14B is very reasonable. Assumptions: 37% GM, SG&A 31.5%, $500M interest, $250M capex.
    Feb 19 06:04 PM | Likes Like |Link to Comment
  • J.C. Penney: Ability To Manage Dilution Will Drive Value [View article]
    It's about $14B...
    Feb 14 12:51 PM | Likes Like |Link to Comment
  • J.C. Penney: Ability To Manage Dilution Will Drive Value [View article]
    "So assuming the numbers represent a reasonable estimate, it doesn't take much effort to determine the number of shares outstanding of a little more than 304.5 million times the estimated quarterly losses to calculate an accumulated cash flow deficit of over $1.7 billion before projected profitability is reached."

    So you are claiming that reported earnings per share equal cash flow? I stopped reading there and suggest you reassess that assertion. Reported earnings are in no way comparable to cash flow.
    Feb 13 08:31 AM | Likes Like |Link to Comment
  • J.C. Penney Liquidation Value Far Lower Than Bulls Thought [View article]
    Well, I don't know if an equity value of $1.5B is pricing in BK (seems high to me in that case), but yes, they should avoid BK given the levers they have to pull (more store closures and lots of owned stores they could sell, etc). The question is, can they get sales to 14B or 15B by 2016? Can they get gross margins from 30% up to 37% by 2016? If they don't, and I think it will be very difficult given the competitive environment, it's hard to see the stock being $10-15 (assuming you value it on EV/EBITDA). Now, the 2015 bonds have a yield to maturity of 16%... that seems like a great play if you think JCP survives...
    Feb 5 01:23 PM | Likes Like |Link to Comment
  • J.C. Penney Liquidation Value Far Lower Than Bulls Thought [View article]
    If you want to put a fair value on a stock, you have to put a value on the company first. To arrive at an enterprise value you have to factor in their debt. Maturity dates don't matter in that exercise. If you are arguing that the debt maturities are staggered well and therefore JCP is not filing BK anytime soon, I would agree with you. But comparing the net asset value of JCP to the equity value and not the enterprise value doesn't make very much sense to me.
    Feb 5 12:55 PM | Likes Like |Link to Comment
  • J.C. Penney Liquidation Value Far Lower Than Bulls Thought [View article]
    Why are you ignoring the enormous debt load? Net debt is now $4.8B instead of $2.6B last year. You can't just ignore the debt because those holders get first crack at JCP's assets and therefore the real estate. In order for the market cap to be worth $1.5B the entire company needs to be worth $6.3B. That does not value the rest of the business at zero... not even close. And is it clear that JCP can get back to making solid profits? They are going to lose a ton of money in 2014. They could reach breakeven in 2015 if they cut enough costs and close more stores...
    Feb 5 09:25 AM | Likes Like |Link to Comment
  • Altisource Residential Corporation Is Worth 35% Less Than You Thought [View article]
    Let's come back in 6 months or a year and see if RESI is trading at a 10% discount to book value, as you suggest it should. Good luck on your shorts.
    Jan 24 07:18 PM | Likes Like |Link to Comment
  • Altisource Residential Corporation Is Worth 35% Less Than You Thought [View article]
    Well, those who do follow me are pretty happy. SHLD is down 30 points in 2 months (my last article). And the bullish article on NFLX at $55 in August 2012 has turned out pretty well so far. Most of my readers subscribe to my blog, since I don't write for SA very much anymore. Good luck with those shorts.
    Jan 24 07:01 PM | 1 Like Like |Link to Comment
  • Altisource Residential Corporation Is Worth 35% Less Than You Thought [View article]
    Yet another "short RESI" article on SA... how original.

    Why exactly do you think SFR rental reits should trade at NAV (ignore the discount you assign due to AAMC's incentive fee)? Why would SFR reits trade at such large discounts to multi-family reits over the long term? One of the bullish arguments for SFR reits is that if multi-family reits trade for 2x book and SFR reits trade at 1x book, then there is an arbitrage opportunity there if the SFR sector can show investors that their long-term returns are going to be strong (many people doubt it right now).
    Jan 24 05:16 PM | 2 Likes Like |Link to Comment
  • The Basic Fallacy Regarding Altisource [View article]
    I think most people buying into the RESI equity offerings have done enough research to know that AAMC collects an incentive fee, so that is factored into their valuations and purchase decisions.

    RESI's equity offerings are not dilutive, they are accretive, so what helps AAMC's owners does not have to hurt RESI's owners. RESI's book value was $13/share at the time of the spin-off. Today it is $23/share. Nobody has been diluted. Both sets of investors can win. If RESI trades below book, then AAMC will have a problem.
    Jan 23 03:02 PM | Likes Like |Link to Comment
  • The Basic Fallacy Regarding Altisource [View article]
    Please stop saying that you need to add up the two market caps because RESI pays a fee to AAMC out of its own capital base. That's like saying the owner of a McDonalds franchise has to pay McDonalds a royalty fee, so in order to value a franchised restaurant you need to add in the market cap of MCD since the income from the restaurant has to be split among both entities.

    It is much easier to simply factor AAMC's incentive fee into RESI's estimated returns. That way you can determine how much profit will be attributable to RESI's shareholders and thus you can value RESI stock on its own.
    Jan 23 02:52 PM | Likes Like |Link to Comment
  • The Basic Fallacy Regarding Altisource [View article]
    So you think once the company starts reporting positive free cash flow, that the market is still going to focus on mark-to-model earnings? If the actual cash flow falls far short of the returns the company is targeting, then the stock price will drop to reflect that. But if the cash flow backs up the return assumptions, then your thesis will be wrong. You're essentially betting that the can't earn the returns they say they can. In that case, your bearish articles should articulate why they won't earn said returns, rather than just saying the returns are based on the company's modeling and therefore "aren't real." This company has raised over $1.3 billion of equity and at $31/share is valued at about 1.3x that amount. Their actual returns will have to fall far short of their targets for this stock to be a great short. Good luck.
    Jan 23 02:36 PM | Likes Like |Link to Comment
  • The Basic Fallacy Regarding Altisource [View article]
    Paulo - How can you say that RESI's "future" financials will be based on a model and therefore somehow "not real?" Do you honestly believe that RESI's business model will not be able to generate enough future cash flow to justify a valuation anywhere near the current level?

    Obviously they don't have cash flow today to justify the current market cap, but if you really believe that this is mark-to-model in perpetuity and we will never be able to determine how accurate their models are (by comparing them to the actual cash returns they earn in the future) or eventually actually value the stock based on cash flow and not a model, then I think you may misunderstand RESI's business model.
    Jan 23 02:18 PM | Likes Like |Link to Comment
  • A Sale Is Going On At Sears Hometown And Outlet Stores [View article]
    Here is a link to the cash flow statement for the 1st 9 months of 2013. FCF is negative $60M.

    http://bit.ly/1hMqyQ4
    Jan 12 04:22 PM | 1 Like Like |Link to Comment
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