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  • In Defense Of Apple: Battling The Mounting Hysteria [View article]
    AAPL closed today with a market capitalization of around $423 billion, and is still holds the world's largest market cap. Will it be $4 trillion in 10 years? Probably not, that would imply an almost 10-fold increase over a decade. But Apple will likely be worth much more than $450 per share in 10 years.
    Jan 24, 2013. 07:10 PM | 7 Likes Like |Link to Comment
  • In Defense Of Herbalife: Arguments Against Ackman's Short Thesis [View article]
    Enron's financial statements (10-Q's and 10-K's) were extremely difficult to read because the company made every effort to hide the fraud that was going on. Enron was an accounting fraud, and as such, a very close reading of its financial statements could have discovered that something was wrong. Herbalife is not being accused of running an accounting fraud, which can, with enough time, be uncovered via a company's financials.
    Dec 22, 2012. 03:24 PM | 6 Likes Like |Link to Comment
  • DTS Inc.: A Mundane Business, With Exciting Profits [View article]
    The patents within DTS' patent portfolio have a range of expiration dates through 2030. While some do expire in 2015, DTS consistently files new patents on its newest generation technologies to ensure that any one patent expiration does not drive down the company's revenues.
    Aug 23, 2014. 04:46 PM | 5 Likes Like |Link to Comment
  • In Defense Of Apple: Battling The Mounting Hysteria [View article]
    At $700, Apple traded at around 15-16x earnings, hardly hysterical levels. Microsoft trades at 15x, Cisco trades at under 14, and IBM trades at around 14 as well. Google trades at over 23x, so even at $700, Apple was not that expensive relative to other Tier 1 tech companies.
    Jan 25, 2013. 06:08 PM | 5 Likes Like |Link to Comment
  • In Defense Of Herbalife: Arguments Against Ackman's Short Thesis [View article]
    While Ackman has a good track record, he is not infallible (no investor is). Ackman has also been long JC Penney, and at least for the time being, his thesis on JCP has been incorrect. Will he be right years from now? Perhaps. But there is no way to know for sure. A thesis isn't right or wrong based simply on who is delivering it. Warren Buffet has never bought a single share of Apple. Does that mean Apple should be avoided, even if arguably the greatest investor in the world doesn't own it?
    Dec 22, 2012. 03:31 PM | 5 Likes Like |Link to Comment
  • In Defense Of Herbalife: Arguments Against Ackman's Short Thesis [View article]
    The ruling in Belgium applies only to Belgium. Different countries have different consumer laws, and what is acceptable in one country may not be acceptable in another. The Belgian court system is making a ruling regarding Herbalife's business in Belgium, not its business in other countries. Here in the US, the SEC has already looked into Herbalife twice, and both times closes its investigation without filing any charges or enforcement actions.
    Dec 22, 2012. 03:26 PM | 5 Likes Like |Link to Comment
  • In Defense Of Herbalife: Arguments Against Ackman's Short Thesis [View article]
    Short-sellers do play a valid role in the market. That being said, what may irk some people is that Ackman's thesis has already achieved its desired effect, even before Herbalife has had a chance to respond properly to his allegations. Some may see it as Bill Ackman's being proven right by virtue of being Bill Ackman, and not by virtue of being Bill Ackman. This article is not about attacking Bill Ackman, because attacking the messenger does little to blunt the message.
    Dec 22, 2012. 03:12 PM | 5 Likes Like |Link to Comment
  • Why Apple's Cash Hoard Is Not A Problem [View article]
    as an Apple shareholder, we have no problems with the stocks performance year to date, and over a 1 year period. over the past year, AAPL has climbed 18.51% while the NASDAQ has lost 3.04%
    Nov 25, 2011. 02:01 PM | 5 Likes Like |Link to Comment
  • Why Apple's Cash Hoard Is Not A Problem [View article]
    AAPL's recent stock slide is due to the overall market, not a problem with Apple specifically, in our opinion. do you think the stock is falling due to fundamental weakness?
    Nov 25, 2011. 01:54 PM | 5 Likes Like |Link to Comment
  • Herbalife: Examining FTC Data And Potential Action [View article]
    This article's focus was on FTC complaint data, and the possibility of FTC action, not HLF's core business. It was a response to a specific event (the New York Post's article about the data it received from the FTC), and Herbalife's scope to buy back stock.

    That being said, there are other factors to consider. On retention, HLF is steadily working to improve that, and recorded a retention rate of 52% for its sales leaders in Q3 2012 versus 48.9% in Q3 2011 (total active sales leaders rose by 22.1% on a global basis, including 15.2% growth in North America) ( As we've noted in prior articles on HLF, the SEC has already investigated the company twice, and both times closed its investigation without filing any complaints or charges against the company. As for the FTC, we have steadily maintained that it should not take 3 decades for the agency to uncover a pyramid scheme of this size. And if all it has is 192 complaints over 7 years, that is a solid track record for a company of HLF's size.

    Regarding new markets, Ackman himself has argued that HLF is simply entering new markets to cover up the collapse of business in mature markets. But then how can US sales be growing at almost 16% last quarter ( As we noted in a prior piece on HLF, sales have been growing in the US by an average of around 15% over the last 8 year. In addition, volume points in North America, HLF's oldest division, grew by 13.6% in Q3 2012. The company is entering new markets so that it can continue to grow its revenues and profits, not to cover up a collapse in the United States or other mature markets.

    HLF's margins, which reflect the pricing of its goods and the cost of doing business, are not out of line with its MLM peers. In Q3, its operating margin was 15.82%. NuSkin's was 15.65%, Avon's was 4.16% (reflecting the internal issues Avon is facing), Usana's was 13.08%, and Tupperware's was 15.75% (they've already posted Q4 earnings). HLF's margins are not outrageously higher than those of its peers. As for the company's financials, the assessment of $2 billion in debt as manageable was provided by B. Riley & Co. The company's existing debt is not due until 2016, and as operating cash flow and EBITDA continue to grow, the company will have more room to take on new debt to fund any potential buybacks.
    Feb 5, 2013. 12:41 PM | 4 Likes Like |Link to Comment
  • In Defense Of Herbalife: Arguments Against Ackman's Short Thesis [View article]
    Several analysts took issue with that framing of the argument as well. At his conference presentation, Ackman asked how many of the people in the audience have ever bought an Herbalife product, and almost no one raised their hands ( But that is the expected response. The audience at his HLF presentation was likely other fund managers, analysts, and Wall Street professionals. It is highly unlikely that any of them would ever actually buy Herbalife products in the first place.
    Dec 22, 2012. 03:17 PM | 4 Likes Like |Link to Comment
  • In Defense Of Herbalife: Arguments Against Ackman's Short Thesis [View article]
    There is a difference between Bernie Madoff and Herbalife. Madoff's scheme targeted a small subsection of the population, and few, if anyone outside of the finance world and his investors knew who he was. Madoff's Ponzi scheme was not something that was right in front of regulators. Herbalife is different. This is a public company that has a wide reach, and surely regulators (outside the SEC) know what the company is.
    Dec 22, 2012. 03:05 PM | 4 Likes Like |Link to Comment
  • Why Apple's Cash Hoard Is Not A Problem [View article]
    thank you for the compliment. Apple has gotten where it is not only with the magic of Steve Jobs, but the ruthless execution of Tim Cook as COO. now that he is CEO, execution will remain just as strong as ever. lets hope the magic remains too.
    Nov 25, 2011. 01:57 PM | 4 Likes Like |Link to Comment
  • Bed Bath & Beyond: Gains To Come Beyond 2014 [View article]
    Several good points raised here, so we will attempt to address them in the order listed above:

    1. Let us then examine BBBY on the basis of free cash flow. Based on the figures above, BBBY free cash flow accounted for 9.42% of TTM sales, a number that is still well above its peer group. TTM FCF at Pier 1 equals just 1% of sales, and at Williams-Sonoma the figure is 4.86%, and neither Restoration Hardware or The Container store posted positive free cash flow over the last 12 months.

    2. For investors, what matters is the deployment of free cash flow, which already takes into account the dollars that the company has spent on improving its operations, either through increased technology investments that show up in its income statement, or on capital expenditures that lower free cash flow. Free cash flow itself is just that, cash that the company is free to use on activities that go beyond operating or improving its business. For BBBY, its free cash flow can be used in one of several ways: buybacks, dividends, acquisitions, or debt reduction. Given that the market does not appear to be pressing for an acquisition or debt reduction, that leaves the company with dividends and buybacks as a means of deploying its free cash flow. We do not believe that BBBY is deliberately slowing down its pace of investments to prop of FCF; in the first half of the year, total capital expenditures rose almost 20% year-over-year to over $156 million.

    3. The goals of a share buyback program are to reduce the number of shares outstanding, which serves to both increase the company's share price as a buyer (the company) actively acquires shares, and boost EPS as the number of outstanding shares is reduced. A debt-funded buyback program would inherently lead to lower cash flows, but usually increases EPS, as is the case here. For BBBY, its buyback program has been augmented by debt to boost EPS, which is also an important metric for investors. And furthermore, there does not appear to be much concern in the markets with BBBY's balance sheet; net debt stands at ~$120 million, and the company's free cash flows could be diverted to debt reduction should the need to do so arise.

    4. Our price target for BBBY was calculated based on defining a target price-to-cash flow multiple for the company, as outlined in the peer comparison section.

    5. Our argument that BBBY has a solid track record was based on the company's 20-year returns, naturally there are periods of time in which shares have underperformed the S&P 500, just as there are times that shares have outperformed. We could point to the fact that over the past 3 months shares have materially outperformed the S&P 500 by almost 1,500 basis points, but that single metric reveals little about BBBY's long-term performance. The question is, what is an acceptable length of time to gauge a company's long-term track record? In our view, 20 years is an acceptable length of time, but different methodologies will yield different conclusions.
    Sep 29, 2014. 11:36 PM | 3 Likes Like |Link to Comment
  • DTS Inc.: A Mundane Business, With Exciting Profits [View article]
    Our comment that DTS' business is mundane is not meant to be a sign that it is a reason for the stock's historical underperformance of that specific time frame. The key driver for DTS' fall is that the company's historical financial performance was not supportive of such a high stock price. When shares of DTS peaked at $50 in January 2011, that represented a multiple of ~34x 2011 forward EPS (, which at the time was not cheap relative to the stock's forward earnings growth. We do not see shares of DTS being worth that much given its present growth rates and where peers are trading at. But on the other hand, the slide below $15 was also excessive.
    Aug 23, 2014. 04:56 PM | 3 Likes Like |Link to Comment