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Derek Pilecki, CFA  

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  • The Case for Best Buy, Part III: The Amazon Threat [View article]
    This is a great series of articles. It is also an excellent way to market yourself to potential employers. Please continue writing.

    I agree that the current FCF yield and stock repurchase program make Best Buy an interesting stock and worthy of analysis.

    However, I disagree with your view that consumer electronics are less conducive to online commerce than books. I would say the opposite:
    1) the average purchaser of consumer electronics is more comfortable with online purchasing than the average purchaser of books (average age is lower, average computer literacy is higher),
    2) the ability to offer an unlimited number of skus online is more attractive for consumers to purchase electronics online because Amazon can carry every model offered by every manufacturer,
    3) the convenience of Amazon Prime, two day shipping, and price comparison overwhelm looking at a product in the store,
    4) there is considerable evidence that consumers will purchase high-ticket electronics sight unseen (e.g., Dell's direct-selling model and the long history of PCs sold through mail order publications like Computer Shopper,)
    5) Amazon's customer reviews are much more helpful than Best Buy's salespeople in choosing between products,
    6) Amazon does have cheaper prices especially taking into account the lack of sales tax.

    Your arguments seem to be your personal preference, rather than, a systematic survey of consumer preferences. Maybe you could survey consumer preferences to double check your thesis.

    The other part of the Best Buy vs. Amazon story that hurts Best Buy is the amount of its gross profit that comes from accessories such as cables. Amazon's prices on a basic HDMI cable is $7.99 vs. $19.99 at Best Buy. Maybe the average consumer is going to balk at having a TV or DVD player delivered to their front step, but they aren't going to care if an $8 cable sits on their front step for a few hours. Losing these sales at Best Buy is going to hurt gross profit much more than revenue. Amazon will lower the overall profitability of the consumer electronics segment.

    Best Buy may still be a great stock, but I think you should revisit the part of your thesis that says online sales of won't be higher than 30% of the market.
    Aug 14, 2011. 11:51 PM | 2 Likes Like |Link to Comment
  • Who Owns Annaly Capital? [View article]
    Think you're missing a digit in the value of the institutional owners stakes. The largest holders own ~$400MM not ~$40MM.
    Jul 23, 2011. 03:56 PM | Likes Like |Link to Comment
  • Merger Arbitrage Mondays: August 30, 2010 [View article]
    I believe the consideration for the NAL/FNFG deal is incorrect. It is a fixed exchange of 1.1 shares of FNFG for NAL. Based on FNFG closing price prior to the deal announcement that would have been $14.09. In your table, you have a cash purchase of $14.09.
    Aug 30, 2010. 04:28 PM | Likes Like |Link to Comment
  • Calamos Asset Management: Undervalued [View article]
    You may have missed a zero in typing their dividend. I think they pay $0.055 per quarter not $0.55.
    Nov 13, 2009. 08:17 AM | 1 Like Like |Link to Comment
  • Starz Entertainment: Profitable, Growing, Unlevered Business [View article]

    Great idea and write-up. One issue is there is at least one sell-side firm speculating that DTV will attempt to buy-in some of its outstanding shares prior to the merger. This could make DTV hard to borrow or move the LMDIA/DTV spread in the wrong direction. Do you think a large share repurchase is on the agenda for DTV prior to the LMDIA merger close?


    May 17, 2009. 07:57 AM | Likes Like |Link to Comment