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David Trainer

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  • 3 Warnings For Those Seeking Demand Growth Stories [View article]
    Great article. Too often investors focus on the growth and demand for a product without analyzing the competitive landscape on the supply side. A great example currently is the SaaS space, where investors are discounting the risks that CRM, N, and WDAY face both from smaller companies and larger companies like SAP and ORCL moving in on their turf.

    It's economics 101 that any industry experiencing above average profits without significant barriers to entry will face an influx of new firms. I called Ventas as a short here on Seeking Alpha last March for just that reason.

    What's your thesis behind holding VTR long now?
    Jun 17 05:38 PM | Likes Like |Link to Comment
  • PetSmart: Your Portfolio's Best Friend [View article]
    Lobo74: Great comment. Veterinary services is another big value added service that enhances PetSmart's moat. As far as online goes, this has been an area where PETM has struggled in the past. They're making the right noises about improving their online presence now, but it remains to be seen how effective they can be on that front.

    I hadn't considered the possibility of an acquisition to bolster their online presence. Assuming it would cost roughly $300 million to acquire PETS, PETM would earn about a 6% ROIC on that deal based on current NOPAT. Given the opportunity for PETM to leverage its brand and exclusive products on the acquired sites, as well as the increased scale, there would probably be some significant synergies, which would push the ROIC on the deal higher.

    That being said, I think PETM has the capability to develop their own successful online presence without resorting to an acquisition, but if that fails PETS could be an interesting option.
    Jun 17 04:08 PM | Likes Like |Link to Comment
  • PetSmart: Your Portfolio's Best Friend [View article]
    farhan0179: The company's pet grooming services should continue to grow roughly in line with the overall pet care market. Pet grooming is an important service for PETM because it's something online vendors can't replicate and it gets customers into the stores.
    Jun 17 03:52 PM | 1 Like Like |Link to Comment
  • ROIC: Definition And Formulae For Return On Invested Capital [View instapost]
    rhorn az: It depends on what the company does with this retained earnings. If they are held as cash or cash equivalents then we exclude them from invested capital as the company is not actively using that money to generate revenue. Retained earnings would only be factored into our invested capital calculation once the company actually invests them into its business.
    Jun 17 12:36 PM | Likes Like |Link to Comment
  • PetSmart: Your Portfolio's Best Friend [View article]
    Zenzile: I'm glad you found it informative. Thanks for reading and commenting.
    Jun 17 11:17 AM | Likes Like |Link to Comment
  • PetSmart: Your Portfolio's Best Friend [View article]
    Mitch Zeitz: I'm not necessarily putting an $88 price target on PETM. In general I don't like specific price targets as they imply a degree of precision that's really not possible. $88/share is just what PETM is worth if it can achieve that 5.5% growth rate. PETM could grow significantly slower than that, in which case the fair value would be lower, but I used 5.5% as my example since that's the expected growth rate of the industry.
    Jun 17 10:13 AM | 1 Like Like |Link to Comment
  • Danger Zone: MercadoLibre [View article]
    Long-Short Value:

    That does present a risk, but if eBay was planning to buy Mercadolibre, why would it be rolling out its own sites to target the Latin American market. An eBay acquisition of MELI does make some sense, but the rollout of these sites makes me think eBay is more likely to compete with MELI rather than buy it.
    Jun 10 10:52 AM | Likes Like |Link to Comment
  • The Bidding War For Hillshire Is Bad For Investors [View article]
    It's good to see some rationality from the market here. I'm not sure how one could realistically make the case that Hillshire is worth $63/share. Hopefully this reaction will make executives think twice about overpaying this significantly for a company in the future.
    Jun 9 05:11 PM | Likes Like |Link to Comment
  • Amazon's New Smartphone Spells Trouble For Apple [View article]
    appl believer:

    I'm actually bearish on Amazon as well due to the company's razor thin margins, which is part of why I think an Amazon smartphone could be dangerous to Apple. Amazon can spend as much on production as Apple and sell for much cheaper because it's willing to accept lower margins.
    Jun 9 12:22 PM | 4 Likes Like |Link to Comment
  • Amazon's New Smartphone Spells Trouble For Apple [View article]

    Apple's triple digit ROIC is exactly why I'm bearish on the company. Such a high ROIC is unsustainable in the long-term. Apple has delivered great innovation and incredible products, but the market is catching up, and Apple can't continue to earn such a high ROIC in the future unless it delivers up new products as innovative as the iPhone and iPad, which I'm not confident they will do.
    Jun 9 12:18 PM | 1 Like Like |Link to Comment
  • The Bidding War For Hillshire Is Bad For Investors [View article]
    In order for Tyson to create shareholder value from this deal, i.e. earn an ROIC greater than its WACC, HSH would need to earn $600 million in NOPAT going forward, compared to its $250 million last year. I have a tough time believing the synergies from this deal will be enough to more than double the profitability of HSH.
    Jun 9 09:35 AM | Likes Like |Link to Comment
  • Danger Zone: Olin Corporation [View article]

    From OLN's Q1 conference call:

    "In the Winchester business, we continue to see strong commercial demand but second quarter 2014 earnings are expected to decline compared to second quarter 2013 levels due to a more historical level of seasonal demand for shotshell ammunition and reduced levels of pistol, rifle and rimfire inventory in our system, which will reduce total ammunition sales and earnings compared to both the second quarter 2013 and first quarter 2014 levels."

    Like I say in the article, the Winchester business is not necessarily in trouble, but expecting significant growth from this already elevated level is unreasonable. Declining sales over the next couple quarters looks increasingly likely, even to executives within the company.
    Jun 3 10:59 AM | Likes Like |Link to Comment
  • Danger Zone: Olin Corporation [View article]
    Good point. Any industry that experiences a sharp increases in prices and demand is going to see new competitors enter the market, and ammunitions has been no exception. Now demand is returning back to normal, and OLN may find itself worse off than it was before with all these new competitors.
    Jun 3 10:26 AM | Likes Like |Link to Comment
  • How To Avoid The Worst Sector ETFs [View article]
    User 567689:

    My ratings don't take into account past performance. ITB has performed very well in the past, but what that means for the ETF now is that its holdings are significantly overvalued.
    Jun 2 11:05 AM | Likes Like |Link to Comment
  • Why Europe Is No Magic Bullet For Netflix [View article]
    U.K. is English speaking. While most people in the countries Netflix is expanding to speak English as a second or third language, the question is whether they'll prefer a catalog with more titles from their own country in their own language than Netflix. Local competitors have had more time to establish themselves in these countries than they did in the U.K. before Netflix came in. Additionally, the U.K. doesn't have some of the restrictive laws for streaming like France does.
    May 30 12:11 PM | 2 Likes Like |Link to Comment