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  • Builders FirstSource - Transformational ProBuild Acquisition Could Drive A Double In The Stock Price [View article]
    The company has interest expense to cover also. You can't value the equity just on EBITDA minus cap-ex, and ignore the debt costs.
    Apr 15, 2015. 08:23 AM | 2 Likes Like |Link to Comment
  • A Net Net Stock With Potential To Become Profitable In The Near Future: STR Holdings [View article]
    I should also add that management is quite shareholder friendly here. In theory, when they were considering the liquidation and were flush with cash, they could have just let the cash sit on the balance sheet and paid themselves enormous salaries, like most other companies in their position do. Instead they executed a buyback and paid out a large one-time dividend post the Zhenfa transaction. So at this point considering their past actions, I'm willing to give management the benefit of the doubt here as to the potential of the new business in China. Though, of course, the stock remains very risky given the many uncertainties of the business.
    Apr 12, 2015. 04:54 PM | Likes Like |Link to Comment
  • A Net Net Stock With Potential To Become Profitable In The Near Future: STR Holdings [View article]
    STRI is quite risky, but the upside in this stock is enormous, especially since very few investors are even aware of the situation or understand what has transpired here over the last few years. You can't look at the current historical financials from the last year and draw any conclusions. I wouldn't necessarily analyze this stock as a balance sheet story, except insofar as their balance sheet assets provide them with enough capital to execute on their business plan and get to profitability. The key is to understand the potential of the encapsulant business in China as well as the value that Zhenfa brings to the table, as well as the history of STRI and their valuable knowledge as it pertains to encapsulants. In terms of the financial potential here, reading the proxy for the Zhenfa transaction is the best investors have right now, a long with the latest conference call. The proxy is available here: http://1.usa.gov/1NvlRdT - My guess is that if they meet their projections over the next 2 years, this stock will be worth a minimum of $5, which is only around $100 million, still a tiny market cap relative to the encapsulant opportunity (as wlel as other solar opportunities that Zhenfa will surely push into STRI as they have already indicated as their intention).

    Anyway, the key here is to ignore the historical financials here from the last year or so, as they are bound to mislead as to the future potential, and just keep track of the progress over the next two quarters.
    Apr 12, 2015. 04:29 PM | Likes Like |Link to Comment
  • A Net Net Stock With Potential To Become Profitable In The Near Future: STR Holdings [View article]
    the gross margin will improve dramatically as sales recover and the excess manufacturing capacity is used.
    Apr 12, 2015. 03:38 PM | 1 Like Like |Link to Comment
  • JAKKS Pacific Shareholders Feeling 'Frozen' After Q4 Results Are Actually Missing A Really Good Story [View article]
    The notion that a buyback has any long-term positive impact on a stock price is one of the great myths in the stock market. The myth continues to exist because it's quite profitable for many people to sustain the myth, and quite easy to marshall spurious arguments in its defense that engage an army of ardent believers.

    However, in the vast majority of cases, buying back public stock creates no value in a business long term because the money essentially disappears and it is not invested in the actual business. It should be noted also that buying stock is the secondary market, excluding IPO's and other direct offerings, is not an investment, as you are not investing in anything. You are merely engaging in a money transfer with some other entity. The company gets no money. To suggest that a company "invest" in it's own stock is, as such, a totally nonsensical proposition. If they want to invest, they can hire more people, engage in R&D, spend money on marketing etc. If instead, they buy stock, the company is in reality losing money and just gives it to whoever they are buying the stock from (usually some hedge fund or management itself). The end result is that shareholders are poorer and they have no real investments to speak of in the business, so growth is curtailed.

    I think it's axiomatic, that the way to grow a business is to invest in the business, not in the paper shuffle that stock market represents. There are of course exceptions to this rule, when buybacks are good, but these case are quite rare nowadays, and JAKK is certainly not one of them by any means.

    Anyhow, I'm sure I'll never convince anyone here that buybacks are generally a stupid idea, but in case you are interested, a good article addressing the fallacy of buybacks, for most cases, can be found here:
    http://bit.ly/1A6b6Ue
    Mar 26, 2015. 07:55 PM | Likes Like |Link to Comment
  • The Future Of Seeking Alpha, From One Contributor's Perspective [View article]
    Here is an example of a link that showed up for PERI in my "News and PR" tab for my portfolio (http://bit.ly/1NkkYPS) - this silly type of article is typical of the garbage Zacks publishes and it should not be in the "News and PR" tab, where at least someone like myself is looking for real news from companies themselves - not some nonsensical analysis.
    Mar 26, 2015. 06:36 PM | Likes Like |Link to Comment
  • The Future Of Seeking Alpha, From One Contributor's Perspective [View article]
    Well lately, I've seen a huge amount of releases in my News section of my portfolios from from Zacks, MarketRealist.com, 4-traders.com, to name a view of the resources. These publications are not news whatsoever and most of the articles are just regurgitated nonsense and useless. I understand you need to make revenue and these companies probably pay you per click to direct readers to their websites, but News should be news, and you should only put established News organizations, like BusinessWire, Reuters, and PR Newswire, in the news in the News and PR Section for Portfolios. The other stuff as mentioned above, can be put in another section.
    Mar 26, 2015. 06:34 PM | Likes Like |Link to Comment
  • This Stock Market Bubble Will Burst Like An Overinflated Balloon [View article]
    I should also mention that this article doesn't take the opposing view to try to understand why the stock market has had a multi-year run, and if those conditions will continue to hold. Simply looking at macro indicators and valuations to paint a negative picture, is too one-sided, and bound to mislead, as valuation arguments always do.

    That said, one of the primary reasons for the continued bull run, other than obvious low interest rates, is that the US market is relatively in better shape than any other market worldwide. So money keeps pouring into the US from a multitude of places, because the US is seen as relatively safer. A significant amount of this money flows into the stock market directly and in a circuitous fashion. I honestly don't see how this money flow trend will change any time soon, given how many problems there are in virtually every other economy in the world, e.g. Euro area issues, Russia, Brazil, China etc.
    Mar 26, 2015. 06:27 PM | 3 Likes Like |Link to Comment
  • This Stock Market Bubble Will Burst Like An Overinflated Balloon [View article]
    Yes, in 2007, they appeared safe, but it was a good 18 months or or so, until the real financial crisis hit (late 2008 into March 2009), so there were plenty of warning signs, e.g. Bear Stearns, credit market weakness etc., to lighten up before equities took a massive drop. So if your prediction is that in 2017, the banks will be in trouble again, then I guess you could be right. Anything can happen in the next 2 years. But, as in the past, there will be plenty of warnings signs if banks are in trouble and plenty of time to lighten up. At this point, the banks are fine, and the high yield market is still relatively strong, so realistically there is no reason to worry too much (unless you are in massively overvalued sectors).
    Mar 26, 2015. 06:21 PM | 1 Like Like |Link to Comment
  • This Stock Market Bubble Will Burst Like An Overinflated Balloon [View article]
    There is certainly a massive bubble in certain sectors, like biotech and Internet, but based on the stocks I follow outside of the tech sector, there doesn't seem to be much of a bubble at all. Valuations for many companies, outside of tech, are quite reasonable, and in certain instances quite cheap. Also, crash scenarios generally only happen when some large bank (s) are in trouble (e.g. a huge "AIG type" margin call), and currently the US banks, at least, are quite safe from any trouble, as far as I can tell.
    Mar 26, 2015. 05:30 PM | Likes Like |Link to Comment
  • The Future Of Seeking Alpha, From One Contributor's Perspective [View article]
    The problem with SA is that they've turned their news feed into an advertising pitch for all sorts of nonsense from other news services. Presumably, this generates advertising revenue for SA. It used to be that you just saw news released from the company itself in the news feed, and setting up a portfolio on SA was worthwhile as you could quickly check news on your stocks and read some analysis. Now I have to wade thru garbage press releases from third-party websites to find the real stuff. Considering that I moved my portfolios from Yahoo to SA to escape garbage, it now seems like SA wants to become like Yahoo Finance.
    Mar 26, 2015. 07:53 AM | 3 Likes Like |Link to Comment
  • Zulily: Reset Expectations On This Growth Story Create Substantial Opportunity [View article]
    Working capital adjustments, i.e. changes in operating assets and liabilities, are not relevant for determining for a base free cash flow figure for a company. In fact, they are highly misleading. The proper way to do figure the free cash flow here, as for most companies, is to simply use their adjusted EBITDA and subtract interest (which they don't have) and maintenance cap-ex. From what I can tell, their adjusted EBITDA last year was around $40 million. Even if you assume $80 million in adjusted EBITDA this year, the valuation seems very high, on the assumption that they do have some maintenance cap-ex, though it's not clear what it is.

    Incidentally, enterprise value to sales is a terrible metric to value ZU, since like many Internet companies nowadays, they like to inflate their revenues by reporting gross merchandise sales, even if their whole business model revolves around not taking any inventory. The true revenue here is the gross profit line.
    Mar 23, 2015. 07:45 AM | 1 Like Like |Link to Comment
  • JAKKS Pacific Shareholders Feeling 'Frozen' After Q4 Results Are Actually Missing A Really Good Story [View article]
    Had to chime in here. Contrary to the many opinions expressed above a stock buyback is a terrible capital allocation decision for any serious growth company, and JAKK would be foolish to use cash for a buyback now. The reason to be succint is that other than providing a very short-term lift to the stock price, a stock buyback is a diversion of cash from the business to financial securities. The way to grow a business is to invest in the business, not waste money speculating in the stock market, which is not an investment but a transfer of cash. The fact of the matter is that the vast majority of companies lose money in their stock buybacks for various reasons and then they wonder where all the cash went to support and grow the business. The only companies that should buy back stock, are those that have no more growth opportunities in the business itself, and even then a dividend is arguably a better option for shareholders than a stock buy back. I'm willing to bet you can make a ton of money shorting wannabe growth companies that announce stock buybacks in attempt to provide a short-term lift to the stock price. Incidentally, most buybacks nowadays are simply a ruse by greedy management to use shareholder cash to buy back stock due to massive stock option dilution (i.e. issue options to management at low prices, and then use company cash to allow management to sell the stock from the options back to the company, which simply makes management richer and shareholders poorer).

    As for JAKK, the best of use of capital right now, in my opinion, other than to expand its proprietary brands, like Max Tow Truck (a huge hit, by the way, that everyone ignores) is to use it to scoop up exclusive or master rights to long-term licenses. Success in the toy business nowadays is all about finding, maintaining, and executing on the best licenses. This takes alot of capital because of minimum royalties etc, and those with alot of cash, like JAKK, are in a prime position to dominate. Yes, some licenses will prove to be duds, but others will provide long-term income. And that's where capital comes in, it allows you to diversify across many licenses. Incidentally, broadening the license base, appears to be JAKK's exact strategy now, so I think criticism of management is unwarranted, even if their financing strategy last year ala convertibles was emphatically stupid. But what's done is done and they need to move on. Bottom line, the company did over $800 million in sales last year, so I think they kind of know what they are doing. How many people here have ever run an $800 million business?
    Mar 3, 2015. 06:34 AM | Likes Like |Link to Comment
  • JAKKS Pacific Shareholders Feeling 'Frozen' After Q4 Results Are Actually Missing A Really Good Story [View article]
    Very good article. My FCF assumptions are similar. Quick question: In your enterprise value are you including the convertibles in your debt part of the equation? It teems like you include assume conversion of the convertibles for fully diluted shares of the equity, and then also count the convertible as debt. This would be double counting. Either the converts convert and they are part of equity as fully diluted, or they don't and they are debt. You can't count them twice as part of the EV.
    Feb 27, 2015. 04:19 PM | Likes Like |Link to Comment
  • TowerJazz: Q4 Margins Higher Than Expected; Raising Estimate [View article]
    If you assume conversion and count converts as equity, then the debt will go down. You can't count converts as debt and also as equity.
    Feb 27, 2015. 06:57 AM | 3 Likes Like |Link to Comment
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