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Dylan Byrd  

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  • This Undervalued Nano-Cap Company Deserves A Second Look Due To Heavy Insider Buying [View instapost]
    No problem for the wait. There are a few things that scale provides as far as a moat (which is what you allude to if Boren bought a majority), but I'm not sure if all of them apply here. Cross-selling, centralized distribution, and obviously the savings from having a single CEO/CFO/board. I'd look at it like a bank from that sense (if you could nail down average Net Inc, then work from there) - you have assets, they make X% return, if I buy at 1.3XBV and cut these costs then my investment makes X+Y% return.

    Other than that (although I haven't dug in to verify this) I'd assume no one buys particular brands with any discernible pricing advantage. Sure you'd hope to become a John Deere type company of baling equipment which has some mind-share, but what that takes and how IBAL is factored into that equation - I'd forget until it trades at a lower P/BV (or P/Replacement Value).
    Aug 5, 2015. 01:05 PM | Likes Like |Link to Comment
  • This Undervalued Nano-Cap Company Deserves A Second Look Due To Heavy Insider Buying [View instapost]
    Pretty good article, and it got me to dig into the company, however this is a no moat business, and it's hard for me to come to terms that it's worth much more than what it is currently selling for (I know I am cheating a bit saying this after an 18% jump today, but even before that I had the same reservations).

    Lumpy revenues with no apparent signs of increased sales other than order backlogs which have declined from last year (which provided the upper bound of what I believe the profits would be). As a no-moat business this seems more like a book-value stock, and anything within about 1.2 BV or 0.8BV seems in a fair price range. Your idea of a take over seems reasonable, but the accumulation has been slow. I know more shares were recently bought in April, but since then price has dropped with no buying.

    There may end up being an acquisition, but if I was Boren, this is a competitor which I control the direction of, and when I feel like it I can accumulate more shares, so why pay premium? And at these prices a 30% premium gives you the company at around 1.5Xs book, with best of times ROE at 15%'ish (adjusting for legal expense this past year) but I'd normalize earnings closer to 10% ROE, which makes 1.5X's BV look like a bad buy. Even if there were a few changes made (remove board, consolidate certain positions) I could double net margin, the picture becomes more interesting, but running at around $17-$18M (which I think you'll see is much more reasonable than 23M- this last year was the golden example but avg seems lower) and NP margin of 8.8% or $1.4M which is around 18% ROE. MAYBE worth the 1.5X's Book, but nothing where Boren would make a great deal.

    I'd love to hear your thoughts! I know you don't have a position, but I'm curious if you'd put any more effort past the article into deciphering whether or not you would establish one?
    Jul 23, 2015. 06:14 PM | Likes Like |Link to Comment
  • LeapFrog: A Balance Sheet Analysis Shows Strong Downside Protection [View article]
    Insider-Alerts,

    I'll be the first to admit that I cut this one too close, and was wrong to invest as quickly as I did. Obviously for companies like this, discounts to a conservative valuation need to be much greater than 20-25%. I had heard of falling knives before, but experienced it first hand with this stock. Although the values on the balance sheet were mostly realized after steep discounting, the trajectory means that an even greater discount should be utilized, and I learned that lesson. There are certain items that demanded greater discounts such as those pointed out regarding management and separate classes of stock, and at the $2.38 (a mere 12% discount to the value I attached), the upside did not compensate for risks.
    Jun 14, 2015. 07:56 AM | Likes Like |Link to Comment
  • LeapFrog: A Balance Sheet Analysis Shows Strong Downside Protection [View article]
    I'll be straightforward in saying that I am frustrated at the last-minute delay, and moments like this illustrate how a public company can deserve a discount in the valuation of their assets when those assets are mishandled. However, even if they halve PPE, the upside case should still be similar to what has already been outlined, and at a lower price investors are able to realize larger returns. I'd honestly welcome a write-down if it brought the price to $1.50.
    May 18, 2015. 01:53 PM | 2 Likes Like |Link to Comment
  • LeapFrog: A Balance Sheet Analysis Shows Strong Downside Protection [View article]
    lisa_hldy,

    I am not an expert in the area, but my understanding pushes me to say they can take an approach similar to Apple (a premium product at a premium price). An inherent association most people come to acquire (sometimes good, sometimes bad for us) is that a higher price means higher quality. It's been brought up that LF can't compete with cheaper tablets (some even given out for free), and I think that's where they faltered. In my opinion, too much focus was placed on the sturdiness of the platform or other qualities that could be matched by competitors who competed on price, as opposed to the actual value delivered by the platform. Anyone can make a sturdy break resistant tablet, but the value I think LF followers see in the company is their differentiation in educational value.

    I think parents are willing to spend an extra bit if they feel like their kids can succeed among their peers through the development provided by the LF product. The company can create a great product, and in consumer goods it's all about spreading the word once you've made it. It's also about spreading the "right" word, the message that actually communicates the most value you present to your customers. Value from LF perspective is their educational system, the results that provides for the child, and the success that comes after that for the child (and the pride a parent feels in seeing their investment generate the fruits of their child's full potential). If I could put an ad campaign for LF, it'd be a simple picture of a kid, a plus sign, LF product, an equals sign, and then a college acceptance letter, or something to that extent.

    Bottom line, it's about connecting the dots for the customer, and they have faltered as of late by focusing on the wrong dots.
    Apr 16, 2015. 10:32 AM | 1 Like Like |Link to Comment
  • LeapFrog: A Balance Sheet Analysis Shows Strong Downside Protection [View article]
    Insider-Alerts,

    You are right for at least one of the premises of the article. I view the stock as a mispriced option where I get upside to assets (the share's current discount from my calculated value), which is inherently a margin of safety if I wanted to wait for a turnaround. Put another way, this not only presents a margin of safety for the longer term, but a potential re-pricing as the stock swings back to a more justifiable price based on the assets. I think my forecasts will do a pretty good job of taking care of the loss for the next quarter (mainly the writing down of AR and the removal of $25M in cash from the B/S as it was held in foreign subsidiaries, and the discount applied to the current inventory). I for one am not as optimistic as some that the company will be able to sell its inventory as well, but even in the darkest reasonable forecast I still see value in the stock.

    As far as holding off until Q1 earnings, I think investors will see a larger cash position which will create a floor for the value of the company higher than it is today.

    Lastly, as you suggest there is a potential for going after management. I think the main reason an activist hasn't done this is the calculation of risk. At this point if I had $150M to throw around, the calculation goes something like this to me:
    I can accumulate at most 60% of the vote due to not being able to buy Class B shares (each B counts as 10 votes to A's 1 vote). This leaves a margin for error of about 16% of the entire Class A share, and while it is possible, it is certainly not probable, especially given that between the directors they also control about 5% of the A share too. Going at MGT's jugular just doesn't make sense, as not only is the chance for success not guaranteed, the whole thing gets messy and you distract those in-charge from even attempting to right the ship, quite possibly for a long time.

    I bought because I saw the worst pass with all the write-downs in Goodwill and taxes, and the currently declining picture of sales was more than offset by the company's strong balance sheet when compared with the current stock price.
    Apr 16, 2015. 10:16 AM | Likes Like |Link to Comment
  • LeapFrog: A Balance Sheet Analysis Shows Strong Downside Protection [View article]
    lisa_hldy,

    I can say with a strong bit of confidence that the current share price is too low given the points I've laid out above, but I can also nearly guarantee the price won't return to its previous levels unless the cash generating performance of the business returns to those previously seen levels as well. My thesis for holding the stock is that investors have immediate upside from the asset value of the company. This of course also means that there is a level of safety in holding the stock if you anticipate the company turning itself around. Either way I think there is still reasonable short-term upside much closer to the value I stated in the article.
    Apr 15, 2015. 07:05 PM | Likes Like |Link to Comment
  • LeapFrog: A Balance Sheet Analysis Shows Strong Downside Protection [View article]
    21040141243,

    First off interesting name, and second, I am glad you liked it.
    Apr 15, 2015. 06:33 PM | Likes Like |Link to Comment
  • LeapFrog: A Balance Sheet Analysis Shows Strong Downside Protection [View article]
    Blue Pacific Partners,

    Thank you for your insightful comment adding to the full picture. Although I never addressed it in the article, I was also aware of what you mention pertaining to the company's cash generation potential. It may be a rough time getting back to that stage, but in the meantime there are plenty of resources available to the company, and the share price luckily gives investors a head start while waiting for that situation.
    Apr 15, 2015. 06:30 PM | Likes Like |Link to Comment
  • A Net Net Stock With Potential To Become Profitable In The Near Future: STR Holdings [View article]
    There are a few flaws in your analysis, and I'll be honest I wouldn't have read the article if I hadn't been looking through the company's financials myself just now. I'll start by stating upfront that the conclusion I came to was very different than yours, and I think investors should avoid the stock entirely as the Margin of Safety you refer to is not as strong as you first make it seem.

    First, your NCAV calculation is only right after you "take this formula even further," your initial calculation of around $50M represents the Book value of the company, not the NCAV. And at the rate they sell their property and equipment (most recent year shows loss of about $450K for net-sales of $6.8M) I'd venture to say that their Book value is likely to be overstated. This point is reinforced by the fact that the company can't sell inventory at a GROSS PROFIT (also a substantial portion of your BV and NCAV), so the inventory in my mind is not even worth the dollar amount it cost them to make it. Lastly, and I'm sorry to throw this all out at once, you're calculation about break-even is wrong as well. The company shows an operating loss of about $20M for $40M in total revenue. This means they have to cut costs by about 1/3 across the board (costs total $60M, have to cut 1/3 of that to meet the $40M in revenue) to finally reach a break even point not counting cost of capital.

    You may have meant it in the way that the company breaks even on selling inventory, but there is no way a business can sustain itself at the break-even you describe in the article.
    Apr 10, 2015. 11:04 AM | 5 Likes Like |Link to Comment
  • VeriSign: A Value Creating Company Trading At Low Multiples [View article]
    Thank you for the question! Although I'm sure many companies have opportunity in the internet of things (as it is such a broad topic), as it currently stands, I don't see VRSN reaching out to develop infrastructure supporting the applications. At its core, the company deals with the infrastructure surrounding websites themselves ensure 100% up time/availability and able to churn through billions of requests a day.

    While I could be wrong in this, from the 10-K and their website I am not able to decipher projects tackling this market.
    Jan 31, 2015. 07:48 AM | Likes Like |Link to Comment
  • VeriSign: A Value Creating Company Trading At Low Multiples [View article]
    Excellent comment, and while I can understand your concern that regulators control the competitive advantage that VRSN reaps the benefits from, I don't believe the situation would be as clear cut. Take the current situation with ICANN (one of the regulators you mention): the idea was to roll-out hundreds of gTLDs (instead of .com think of .trusted or .money) which would be controlled by the originator of the gTLD - they control who registers/how much it costs/security etc. This is the competition you speak of, and with over 400+ of these coming out, the gTLD seems to become commoditized. However, the competition does not directly cut out VRSN's .com/.net. While the competition may weaken growth, I feel that the current "brand" of .com alone has such a huge advantage ahead of other domains that the competition's effect on VRSN's margins will be minimal. Another author in the same camp as me is Early Retiree who I haven't consulted on this, but their thoughts can be seen in the link below. Also, the second link goes to ICANN's description of operating a gTLD outlining the competition described above. Of course my assertions are limited on opinion supported by limited data, and you are free to your own opinion as well, but I see regulators allowing for competition in alternative ways than the dooms-day situation of taking VRSN's .com business and breaking it up for others to participate in. They are simply letting VRSN maintain its current book, but opening up the flood-gates to more options for the consumer.

    http://seekingalpha.co...

    http://bit.ly/1xJbkCs
    Jan 8, 2015. 11:18 AM | 1 Like Like |Link to Comment
  • AIG: A Recap, And Refocus For Even More Outperformance [View article]
    Kamil,

    Thanks for the compliment! My BV calculation did include AOCI, but in a funny way my adjustment for the value of the deferred tax asset basically brought BV back to ex. AOCI. If I had calculated the book value ex. AOCI and kept my DTA discount, the BV would have come out to $88.3B, which is about 11% higher from today's price.

    My assumption was that BV would grow 10% annually as investments reap their benefits and the tail of the business moves past the "old" AIG book. This 10% growth in BV annually equates to a 12.5% return annually for investors because of the current discount, and assuming the P/B ratio does not change, which I believe it will in a positive way over the next year leading to possible annual returns in the 20% range (my article says the returns can be nearly 40%, but this assumes an instantaneous arrival at 10% ROE and the market's normalization to a 1 P/B ratio within the year). I hope this helps.
    -Byrd
    Jun 25, 2014. 10:10 PM | 1 Like Like |Link to Comment
  • AIG: A Recap, And Refocus For Even More Outperformance [View article]
    jgrever621,

    Thank you for reading, and thank you for your insight! From how the company discusses results and direction for operations, I believe you are right and the price today is not compensating shareholders for this development. It will only be a matter of time before the old insurance business has passed and honestly the longer it takes, the more time there will be for buying back shares below book. Good luck to you and your portfolio.

    -Byrd
    May 16, 2014. 11:38 AM | Likes Like |Link to Comment
  • AIG: A Recap, And Refocus For Even More Outperformance [View article]
    ahouseoforange,

    Good to hear from you! It has been a while, but I realize the reason for that is more due to my hiatus from writing than anything else. At the current run rate I believe it is reasonable to assume the company would up the authorization by the end of the quarter, and this obviously adds to the book-value per share making the possible return even greater. As ILFC had about $22B or so in debt (going from memory) I think it is reasonable to assume the credit of AIG would not be negatively impacted, and quite possibly could be positively impacted which I know was one of the focuses for the company before buybacks/dividends.

    -Byrd
    May 15, 2014. 09:50 AM | Likes Like |Link to Comment
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