Seeking Alpha

Clumsy Rick, CFA

 
View as an RSS Feed
View Clumsy Rick, CFA's Comments BY TICKER:
Latest  |  Highest rated
  • 5 Dividend Stocks for Uncertain Times [View article]
    On the 3% vs. 6%, I guess I am simplifying my discussion by not including how sustainable the dividend is and what are the prospects for increasing it. Those are obviously important parts of the valuation process. But if two companies are paying out dividends and have the similar growth and risk profiles, it would seem logical to want the stock that pays the 6% over 3%. Either you are going to earn a lot more over time with the higher yielding stock or, more likely, the yields will converge as the higher yielding stock rises in price (or vice versa).

    Of course, I agree the dividend is insignificant in the near term if you think a stock is going to drop 20%. But the idea is you are buying it for the long term and, I would hope, aren't expecting a major drop on the horizon. Also, dividend yields are good valuation measurements, similar to P/E or EBITDA. The valuation is all relative, both to other stocks and to historical yields. But I would feel much more comfortable buying, for example, a utility yielding 6% versus the same stock when its only yielding 3%.

    As for people ignoring a 20% drop in their stock because they are getting a dividend, if I understand that correctly it sounds pretty foolish to me too. I agree its total return that matters. I just think having some solid dividend stocks with low betas and strong cash flow is good diversification and can be a great return over a long time frame.
    Aug 9 09:55 PM | Likes Like |Link to Comment
  • 5 Dividend Stocks for Uncertain Times [View article]
    Humm. Well, I wouldn't say I focus only on dividends. I also have written a lot on REX (no dividend), BBY(most yield up until a few months ago!) and various apparel retailers I am following. But I like to have some dividend stocks in my portfolio, that is true. The benefit of a dividend paying stock is that you have certain cash flows over time, which allows for more concrete valuations. This is especially true when the company has a strong record of paying and raising the dividend. It is piece of mind, despite market gyrations, although it requires a long term outlook like it does for many stocks. Often, high dividend yield stocks that have secure cash flows are more stable over time as well, with low betas. Certainly something I appreciate in times like these. As for a company reinvesting the money instead, that's great if the company actually finds investments with a ROIC that is higher than what I can find myself with the cash. But that is not always the case. Even the best of companies can do an ill-fated acquisition or accelerated stock buybacks at inflated prices. Again, I don't advocate only dividend stocks, but I absolutely believe they have a place in a balanced portfolio.
    Aug 9 06:22 PM | Likes Like |Link to Comment
  • 5 Dividend Stocks for Uncertain Times [View article]
    Its an excellent question. I am not an expert on REITs and I am not sure anyone knows for sure what the ultimate outcome will be. However, I have read more "no impact expected" this weekend than anything else.

    Todd Johnson's instablog had some interesting comments from CEO of Annaly, Michael Farrell, on this that I think are worth checking out: seekingalpha.com/autho...
    Aug 7 07:09 PM | Likes Like |Link to Comment
  • 5 Reasons to Buy Best Buy Now [View article]
    Cash flow will continue to be strong, with an extra boost as the company continues to shrink its store size (reduced working capital and capex needs). Right now, BBY is trading at 2.8x EBITDA. This is an unheard of valuation, implying that the market expect earnings to fall a lot lower. Not to long ago, a retailer that had "going concern" issues would trade around 3.5x-4x and a stable company with no growth could get 5x-6x. All BBY has to do is MISS EPS forecasts by a modest amount and the stock will go higher from here in the medium term, let alone if BBY meets analyst expectations as I think they will. I truly believe this is a once in a lifetime type of opportunity and a year (at worst) from now investors on the fence will look back and wonder why they didn't buy.
    Aug 5 08:02 AM | Likes Like |Link to Comment
  • Battle Between Apple and Microsoft Has a Surprising Loser [View article]
    I respectfully disagree that this matters to BBY near term. MSFT is opening 75 stores? There were 50,886 stores selling CE products in the US last year. Yes, lots are smallish stores, but so are MSFTs. Or look simply look at RSH....RSH closes more than 75 stores/year right now. Other retailers closed stores recently, like Ultimate Electronics and lots of independents. Near term, 75 MSFT stores mean nothing overall. If your argument were that it matters over the long term, I would still disagree but that would be a better argument anyway. Disclosure: yes, I am long BBY. And RSH and HGG for that matter, as I think 7x-8x EPS is disgustingly cheap if you have view going out more than a quarter or two.
    Jul 22 08:06 AM | Likes Like |Link to Comment
  • Battle Between Apple and Microsoft Has a Surprising Loser [View article]
    Opening your own store base is a bad idea. Its expensive, even if MSFT has cash to burn, and what does it accomplish? If MSFT products are so great, retailers would be carrying and promoting them more. MSFT gives them every financial incentive to do so- much more incentive than Apple- but yet retailers are clamoring for more Apple product, not MSFT releases. Apple has been successful with its stores, but they are the exception, not the norm for manufacturers trying to open more than just a few showrooms. Look at Gateway, Dell, Sony, HP.....And Apple has been successful because they have great products first, and edgy stores a distant second. Put a Zune in an Apple store and its still a clunky product that consumers won't buy. I think this just shows how desperate MSFT has become as they fall further behind Apple. Fix your products, not your distribution.
    Jul 21 07:16 AM | Likes Like |Link to Comment
  • Zhongpin: Where Are the Pigs? [View article]
    The company SEEMS to have decent clarity (for a Chinese company) in that they have frequent contact with the investment community, including analyst days, conference calls (including one that refuted this article with their own data) and, importantly, tours of their facilities to show they are not some shell. The clearly painted an unsavory picture of CER on their call. However, I agree with you the reverse merger taints HOGS. This is one case where I would welcome SEC investigation in a stock I held. If they are as clean as they say they are with their reporting, perhaps an investigation that ends without action by the SEC would be enough to satisfy investors? Such a shame when you can't even rely on the auditors!
    Jul 20 08:26 AM | 1 Like Like |Link to Comment
  • Why Rex American Resources Could Be Worth 70% More [View article]
    Apologies. One correction to the above....current BV/share is approximately $25.35 ($244.93 mm/approx 9.65 mm diluted shs), not the $23.30 as stated above. Based on my model, this could grow to $28 by the end of the current fiscal year. This does not impact the above analysis, other than give some modest incremental support to the $28 price target I have.
    Apr 23 10:32 AM | Likes Like |Link to Comment
  • Best Buy: Multi-Channel Growth Set to Accelerate [View article]
    I agree they are behind. They admitted it themselves at the recent analyst day. I see this as an opportunity. Because they were not doing enough with on online initiatives, their sales in that channel are much smaller than they should be and it showed up alarmingly in 2010. Now, when they start focusing on growing this channel via all the things I listed above, they should see a nice boost to sales. No reason I can think of that BBY can't be a major force online if they choose to be and I think the analyst day made it abundantly clear they are going to do just that.
    Apr 18 06:30 AM | Likes Like |Link to Comment
  • Best Buy: Multi-Channel Growth Set to Accelerate [View article]
    Becoming a commodity....the industry fear since I began coverage in 2000 and probably before then. The reason it never comes to fruition is that its a cycle. New products and upgrade cycles always bring higher margin products that start falling immediately, but are eventually replaced by the next new product. Net/net, margins can go up somewhat or down somewhat depending on where we are in the cycle and what a retailers mix is, but ultimately margins not decaying. In fact, they have been increasing for BBY.

    And, yes, they want to attach accessories, connections, content and services to hardware (HACCS, as they refer to it). Part of the online push is to expand these offerings to the web where they can. Some (e.g., content, services) have potential while others will be more difficult and certainly come no where near the attachment rate the company has in its stores. But its incremental high-margin dollars.

    More importantly, the online strategy is not replacing stores, its allowing BBY to compete head on with online only retailers on price in many areas. When BBY sells something online only, it has the same low cost structure that other online retailers have. BBY is by far the largest CE retailer. They have better buying power than anyone and source their own products where they can, further enhancing margins. They have a huge mindshare advantage in CE that is a natural draw for consumers to their website. If other retailers can make money selling on line, I'm highly confident that BBY can as well. In fact, I think they have better margin than anyone else out there besides AMZN and given a few years maybe them too.
    Apr 16 03:58 PM | Likes Like |Link to Comment
  • Best Buy: Multi-Channel Growth Set to Accelerate [View article]
    Interesting thoughts. I would point out, though, that the issues for Gateway and Sears were related to expanding their physical footprints, something BBY does not need to do nor is a part of their strategy (outside of BB mobile stores for wireless, offset by closures and stores shrinking elsewhere). As for CC's problems with execution, BBY does not seem to have the same issue as evidenced by the increasing number of customers that buy on line and pick up in store. In fact, they have expanded the program to make it easier for customers (buy on line, have someone else pick it up) and other retailers are now trying to respond in kind with their own programs.

    In my opinion, where BBY has failed is in pure online selling. Why are only 5% of sales done on line? Other retailers do double that rate and are growing rapidly. Why, when customer think of your brand for CE over anyone else's by a wide margin, should you settle for lower market share on line?

    I think the answer is that BBY has never focused on it like they should have. I think part of this has been the pricing issue- how do you effectively price one way on line and another in stores? The answer is you can't- perhaps you could have before, but not with today's pricing transparency. But that is the beauty of the expanded SKU selection on line. BBY can be hyper-aggressive in pricing with on line only items and stop giving away business. The other initiatives should certainly help as well. But in the end, if BBY is willing to make the investments, I see no reason they can't significantly increase their web sales and web market share.
    Apr 16 11:48 AM | 1 Like Like |Link to Comment
  • Best Buy Is a Good Buy for Dell, Hewlett Packard or Microsoft [View article]
    I am a big believer in buying BBY at the current price (seekingalpha.com/artic...) and I think an argument could made for a private equity buyout for BBY. However, I have to agree with some of the criticism already shared. If these companies are truly interested in expanding vertically, there are far better options than BBY. RSH comes to mind immediately. However, even here you have to wonder how much business RSH would lose if they no longer carried a competitive mix of products, including iphones.
    Apr 7 03:00 PM | Likes Like |Link to Comment
  • Nintendo 3DS Should Be a Winner for Best Buy, GameStop [View article]
    Update: Per Forbes article, quoting Nintendo:

    “U.S. day-one sales numbers for Nintendo 3DS were the highest of any Nintendo hand-held system in our history. More details about U.S. sales numbers will be made public on April 14, when first-week U.S. sales figures will be tallied by the independent NPD Group. Nintendo worked hard to get as much product as possible to retailers on day one to meet demand, and we will continue with these efforts moving forward.”

    For Best Buy, this could mean an additional 1%-2% in domestic same store sales growth. BBY guided 1Q SSS similar to 4Q's 4% decline, but I suspect they were not building in this kind of strength. SSS could come in down 2%, which could mean EPS flat to up slightly. This would be better than expected
    Apr 2 09:39 AM | Likes Like |Link to Comment
  • Zumiez: Fishy Accounting, Dangerous Valuation [View article]
    Thanks for the clarification. The second link doesn't seem to work though. Maybe its just my browser. Was curious b/c the DCF valuation method mentions revenue growth. I assume you are increasing the margin assumptions as well? That's a big part of the ZUMZ bull case. EBIT margin was 8.7% last year, is forecasted to go to 9.5%-9.7% this year and, per the company, could reach low double digits. Based on other teen retailers, I dont see any reason the EBIT margin couldn't hit mid-teens over long term.
    I personally prefer value stocks, but I can appreciate why a growth or momentum investor would be interested
    Mar 30 10:16 AM | 2 Likes Like |Link to Comment
  • Tablets Should Provide a Powerful Sales Boost for RadioShack [View article]
    RSH has historically limited new, hot selling, somewhat higher priced items to 500 stores. I assume these are the busiest stores, in areas that have a history of strong sales for these types of products. I can't confirm this for iPad, but, again, history suggests it will eventually be sold through a wider number of stores, just like they did with the original ipod, iphone and some other items.
    Mar 30 09:46 AM | Likes Like |Link to Comment
COMMENTS STATS
69 Comments
28 Likes