Daniel Wahl

Daniel Wahl
Contributor since: 2007

By the way, the above was written because this is the sort of stuff that matters, right or wrong.
Put another way: whether your conspiracy theory about Greenberg is correct or not doesn't matter. The truth or not of what he writes is.
Whether shorts have an interest in seeing shares they've sold go lower is not primarily important. Why they've gone short, and the correctness or not of that reason, is.
Talk about secret dealings between hedge funds and journalists is not just stupid--it's a waste of time.

Has Greenberg's analysis on companies been right--or wrong? Is his analysis on HanesBrands good--or bad?
Tilson correctly highlights Greenberg's past and recent work because it has consistently been right on the mark, and that's a very good thing (whether you don't want to lose money in a bad stock or want to make money going short the same).
I read Greenberg's analysis and thought it was good. I've also read the street's analysis and consider it too optimistic.
*They downplay the low quality of earnings that Greenberg & Meritz pointed out as well as the inroads that their competitors are making.
*They don't think earnings will suffer--either due to lower customer spending or increased cotton prices--as they see the company being able to offset this through the paydown of debt.
*They don't place enough weight on risk factors--particularly here of bringing new production capacity online without problems and the company's huge debt position. The effect of problems in the first should be obvious, especially as they ripple throughout the system. The effects of the latter should too, and here they would be magnified should the Fed start raising rates at some point over the next year to deal with inflation.
*Finally, I don't see why anyone would want to pay 14-17x earnings for an overly-indebted company which suffers from a higher RMB, higher cotton prices, higher rates on US debt, and lower consumer spending--particularly with the risks on the production side.
Based partly on the Greenberg & Meritz report I too went short this company. Haven't shorted a lot, especially relative to my portfolio, as I'm waiting to see what management will do with this next earnings release.
"There is no reason to believe that Photochannel can outcompete [its competitors]."
...except for the fact that they've been outcompeting them and that their business model doesn't put them in direct competition with the retailers.
PhotoChannel's business model is the reason they've been able to outcompete the others and can be expected to continue to.
But it is also the reason it will post excellent gross margins--no money needs to be spent on marketing, as the above commentator noted, nor on the latest, up-to-date machines. What you see in the rear-view mirror is a lot different than what you will see out of the front window. Now and for many quarters to come.
At least that's my best guess. Though I can't wish you well in your short, as I'm long, I hope you do very well in other areas of the market, i.e., no hard feelings. If PhotoChannel does win the Wal-Mart contract, you may need those winnings to help you cover...

One of the cheapest and best ways to invest in water--or energy--is, I believe, to invest in cotton.

Amazing that HEM wasn't mentioned here. It's currently selling for ~15 times 2008 earnings, in an agriculture industry where there is a lack of stocks to match the lack of inventories and which should do well even if global growth slows somewhat.
MOO is a great index of agriculture names but it has yet to include HEM--and the only reason I can see is that until recently it's market cap was to low. (The requirement is at least 150 million, a mark that HEM passed not to long ago.) Without a doubt, HEM is more of a pure play on the booming ag economy than many others included in that fund.
Many others, from indexes and funds to individuals, don't own this one simply because (I think) they don't know about it. But it is, in my opinion, one of the best deals in the ag sector--an opinion that is backed up by lower forward multiples (despite just as good and probably much better growth potential).
The obvious conclusion is that, when the buying starts in earnest (from the sources mentioned above), HEM shares are going much higher. Although it's selling for 3.60 now, 6 dollars seems a reasonable target for 2008. That would be roughly 25x earnings, and also in-line with recent acquisitions in the space.

I own Hemisphere GPS. If you like TRMB, definitely check out HEM (on the Toronto exchange)--one of the last few value plays left in the ag sector...
I'd be very interested to see your work on this one but am hesitant about leaving email details in a public forum. I just started a blog though--which is rarely visited! Could you post it there in the comments section on one of my NFG posts? The address is easy, just type my name then add .blogspot.com (my creativity knows bounds).
We do agree on much about NFG. While you can definitely tell that management is getting annoyed with the correspondence--a telling point in my opinion--the recent letter by New Mountain shows that their patience is wearing thin too.
One of the recommendations, to drop the poison pill, is important because New Mountain is basically limited from buying more--given their ownership of close to 10% of the shares (the point at which the "pill" is triggered).
From recent filings it appears that NFG has sold off some of their position, though they still own roughly 9% of the company. I'm looking forward to the next quarterly disclosure reports to see if Citadel increased their stake substantially again--and whether or not all of the recent drama has brought in any activist funds with significant shareholdings.
Enter your comment hereEOG is expected to drill 10 wells over 2007, and 250 in 2008 (in order to keep the joint venture active). Management said in the latest CC that this # can be revised up or down depending on results, and prices.
The value of the near-million acres NFG owns--approximately $50 per share if you use comps given to peers in the same play--ought to get priced in more and more as this data becomes available for market participants.
Personally, I'm not expecting a big move on the reserve report but there's no telling what the market chooses to do. Either way, NFG seems to have both good downside support and upside potential--with shareholders urging management to take a series of steps that would allow the value to be realized quickly.
Conclusion: there are worse companies to own. Thanks for posting this. I was going to right something on the news but you beat me to it. The only thing I'd add is that management's response to the letter by New Mountain and CalPERS was truly pathetic--if you can call it a response it all (as opposed to side-stepping nearly every issue raised).