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Christopher Pavese, CFA  

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  • Hospira: A Case Study For Strategic Valuation [View article]
    Thanks. I need to correct a misstatement in the above analysis. Apparently, Reinhart And Rogoff are not the only ones capable of Excel errors. The EV and EPV noted above should read $8.9 and $8.0 billion, respectively, rather than the $10.9 and $9.9 billion stated. These numbers were inadvertently pulled from the wrong tab of our model, but the bottom line is not affected and our per share value estimate remains the same.

    With that said, let me clarify our work here. The $600 million is our estimate of normalized adjusted income. We get here by taxing our $750 million EBIT estimate at 30% and adding back roughly 25% of D&A. As discussed, we think normalized earnings are better approximated by excluding growth capex from the equation.

    Finally, we capitalized the $600 million of adjusted income at the company's WACC, to derive our $8.9 billion EV estimate. I think the confusion was probably in our initial error, as noted above.

    Hope this helps! C
    Jun 14, 2013. 02:44 PM | Likes Like |Link to Comment
  • Too Much Optimism, But Long Term Value Abroad [View article]
    Absolutely after a correction. I tried to make that clear in the first portion of the article. We are not suggesting adding to equities here, but we do believe international equities (both in Europe and in Emerging Markets) represent better long term value. Thanks for the feedback. Cheers! C
    Feb 28, 2013. 05:02 PM | Likes Like |Link to Comment
  • Lexmark: The Falling Knife Worth Catching [View article]
    Ditto DELL!!
    May 4, 2011. 05:24 PM | Likes Like |Link to Comment
  • Why I'm Still Bullish on hhgregg [View article]
    Hasn't someone already tried the commissioned sales approach in electronic retailing? It's ironic to me that the company is modeling itself after a failed competitor. Not to mention seeking out some of the same locations.

    I'd be interested in hearing everyone's feedback on Gregg's stores. Here in NC, they are somewhat hidden behind a major retailing center that includes Target, Best Buy, Marshals, etc. Gregg is tucked off to the side with a parking lot, best described as empty any time I've seen it. The only people I've ever seen in the store are the folks working there. Granted, there are plenty of them.
    Oct 15, 2010. 07:37 AM | Likes Like |Link to Comment
  • Buy When There's Oil in the Water [View article]
    Thanks for the feedback David. Revenue declined dramatically in 2007-2009 as the company slowed land sales. We don't see this as a negative, as there is no need for the company to unload land at current depressed prices. JOE's balance sheet gives them the ability to sit and wait.

    Book value is almost irrelevant since most of JOE's land was acquired around the Depression (the last one, not the current one), and carried at cost. We think it's safe to say that even in light of the current housing downturn (and likely double dip), that prices are a tad higher today.

    The stock will certainly be volatile as the news flow out of the Gulf changes from week to week, but volatility creates opportunity.
    Jun 30, 2010. 12:26 PM | Likes Like |Link to Comment
  • Goldman Sachs: The Long and Short of Opaque [View article]
    Well said, Michael. Goldman's behavior has always walked a fine line between unethical and criminal. That said, why would an investor choose either!! We'll take a pass on both unethical and criminal, and stick with those folks that have our interests at heart.
    Apr 23, 2010. 04:56 PM | 5 Likes Like |Link to Comment
  • Overlooked Education Sector: K-12 Poised to Prosper [View article]
    Curious as to what percentage of revenues comes directly from state and local governments?

    The secular growth opportunity here looks compelling, but some of the headlines I've come across concern me. Have you looked at the federal investigation into Agora - K12s largest school in PA? Apparently, the state claimed that Agora misused millions in taxpayer money.
    Mar 24, 2010. 12:43 PM | Likes Like |Link to Comment
  • High Lumber Prices Due to Temporary Supply Problems, Not Demand [View article]
    Greg - our work in the field confirms your thesis. Many of the mills we have visited in the southeast are "bear bones" in terms of inventory. In our last visit to a GP mill in Georgia, we were told that if it conditions didn't try up, workers would be staying home.

    The spike in lumber prices is certainly not demand driven. We wouldn't bet on strength being sustainable.
    Feb 10, 2010. 09:21 AM | Likes Like |Link to Comment
  • Lessons Learned from Mother Merrill [View article]
    Good call! Spot on.
    Jan 7, 2010. 08:11 AM | Likes Like |Link to Comment
  • The Short Case on Pitney Bowes, Chris Pavese's Highest Conviction Position [View article]
    Unfortunately, all of the company's challenges we refer to are global in nature. Electronic communication and the adoption of the internet is not a U.S. centric view. It is a secular change permeating businesses across the world.

    Buying a stock simply because it has fallen, or because it pays a healthy dividend is not a prudent investment process. Investors need to understand what factors are contributing to the decline. In PBIs case, these factors are secular in nature and challenges are ongoing. Investors also need to understand if the decline has brought the stock to a level where valuation is now attractive. Just because a stock falls in price, does not necessarily translate into an attractive valuation. Again, in PBIs case, there is more room to the downside.

    Analysts that are expecting “a minimum” of 3% growth in 2010" are the same group that has consistently overestimated the company’s organic growth in the past. We see no reason to believe that the new year has improved their forecasting abilities. We are expecting another year over year decline in 2010.
    Jan 1, 2010. 06:24 PM | 7 Likes Like |Link to Comment