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  • Cashin sees bubble in cloud/mobile tech names [View news story]
    Most companies won't sell much over 5 times sales long term. The reason being, of course, is that a 10% profit margin on a company selling at 5 times sales is a company with a PE of 50. If the company had a 25% profit margin, a company selling at 5 times sales is a PE of 20. It is tough to maintain a price above a P/S of 5 -- Google successfully accomplished a smooth let down from its above P/S of 5 days... but, again, Google has a monopoly on one of the definitive features of the 21st century.

    Even companies whom have good brands with strong profit margins don't sell above 5 times sales. E.g., COH sells at around 3 times sales and it has some excellent profit margins compared to competitors.

    Don't forget some others taking part of the bubble: TRLA at a P/S of 11, Zillow at a P/S of 18.9 (!!), or TSLA at a P/S of 11.92 (!!!). It is worth pointing out that TSLA is a particularly bad offender since it is in a segment of industry which typically has low profit margins.
    Oct 19, 2013. 03:57 PM | 19 Likes Like |Link to Comment
  • An End To Our Relationship With Yahoo, A New Era For Equity Research [View article]
    Personally, I think there is a HUGE bullish sentiment on SA. We need way more bears here. Besides, anyone who is long and has someone write a negative piece about their stock thinks the author is vile and misleading. It is extremely uncomfortable as an author -- especially when you view yourself as doing a service to the longs whom, you think, are making a big mistake with their money.

    But, let's be honest, the same is true in the other direction as well. Stocks go both up and down.
    Jul 25, 2014. 01:26 PM | 18 Likes Like |Link to Comment
  • An End To Our Relationship With Yahoo, A New Era For Equity Research [View article]

    Yahoo is strategically separating itself from SeekingAlpha because, for one thing, they are lunching their own platform. But yahoo is a representative of establishment media -- they are hoping through sheer force of will to establish a platform which can compete with SeekingAlpha.

    Trying to do that, of course, completely ignores the competitive dynamics of social crowd-sourced communities.

    If you look at Yahoo's new "contributor driven" blogging platform it is basically a tumblr-like thing. This means, of course, that Yahoo's contributor blogs cannot be commented on, as basically every other website in the world can. (They can be "reblogged," analogous to retwitting, but that doesn't really fulfill the function.)

    Tumblr is great for certain things... like picture blogs (did you know much of Tumblr is porn? 50% is "not safe for work") and such things. But for intellectual discussion? Nope definitely not. In fact, putting investment ideas in a tumblr like medium is pretty insulting to the general intelligence of the investing public. Using tumblr will force them to sit a tier below the Montly Fool, imo.

    SA already has the commentator base -- which is probably more valuable than its contributor base if you ask me. We have people like Moon Kil Woong or JasonC. Tumblr doesn't have that.

    Anyways, the point is Yahoo thinks they can build something similar to SA. I am deeply doubtful of that. Their current version is laughable.
    Jul 27, 2014. 05:38 PM | 17 Likes Like |Link to Comment
  • Seeking Alpha Crowd Wisdom Predicts Future Stock Returns [View article]
    There is so many interesting lessons from that research. So far the best lesson it teaches: if the commenting crowd *really* disagrees with your article -- you had better look in the mirror.
    Mar 19, 2014. 10:45 PM | 10 Likes Like |Link to Comment
  • Markel: Baby Berkshire Is On Sale [View article]
    Thanks for bringing this to our attention. This is a well written piece. I do take a bit of issue with your interpretation of [B]:

    Gayner writes:
    " [B] Then I would look at our net investments per share, which was total investments minus all the debt. I would then think to myself, well, if this insurance company continues to operate at an underwriting profit, and at least stays the same size, then all of the net investments per share are actually working for the shareholder, so that value should be added."

    The company may operate at an underwriting profit, but a strong majority of its investment assets on the balance sheet have maturities in line with expected losses. That is, the timed payout of the bonds are timed with expected payments. E.g., as of June 30th, it had $10.6B in fix maturities and it had $10.0B in unpaid losses and loss adjustment expenses. At least $10 billion of those fixed maturities are due to flow out the door in the form of claims. So... I just take quite a bit of issue with the notion that you add in *all* the securities they hold. In this case, the company needs at least $10 billion in fixed maturities to be a going concern.

    A contrary interpretation would be one where you take all the investments and subtract the reserves and debt, with an ending value of $2.1 billion.

    But I think the market value of Markel is probably better explained by the tangible equity value of around $4.7 billion -- or by its pro-forma earnings which have a run rate of $636 million (assuming no seasonality). With a current market capitalization of $7.3 billion, the market is assuming an earnings capitalization rate of 8.7%. I have not studied Markel in any reasonable depth and this is just a comment from looking at the balance sheets and pro-formas. Perhaps one could say that Markel as worth $6.3 billion (annualized pro-forma earnings at PE of 10) plus its $2.1 securities balance -- that would put the value of the company at $8.4 billion or maybe $8.6 billion if you add in the value of its ventures business.
    Oct 23, 2013. 11:09 AM | 9 Likes Like |Link to Comment
  • Weight Watchers: Excellent Business At A Fire Sale Price [View article]
    Who cares about girls in that age group? That is not the target demo of WW. They average age of a WW member is 50. We are not talking about people who want to "look good for spring break" or something. We are talking about people who want a solution which works and will pay for it.

    Of course the kids don't use WW -- but isn't that how it has always been?
    Mar 31, 2014. 04:27 PM | 7 Likes Like |Link to Comment
  • Are You Valuing This 'Auto Company' All Wrong? [View article]
    When we think about the cost components of a TSLA, it should be obvious that the typical economics of TSLA are the same as an *auto* and not that of a pharmaceutical. For one thing, pharmaceuticals are awarded temporary monopolies on chemical delivery mechanisms. If TSLA had a monopoly on EV's or luxury vehicles, the analogy might be closer.

    But one can understand the economics (or "logic of a business" to use Alfred Sloan's phrase) in terms of pricing and cost. A good business, if we follow the canon of Buffett, is one where prices can be increased annually because the brand supports higher pricing. A good business, further, has low capital expenditure requirements -- meaning that to increase production of the good requires only small incremental investments. A good example of this would be Coach or Coca-Cola. They have pricing power and low capital investment needs -- they also have very nice ROEs.

    Tesla has neither quality. Its prices are bound by the prices of other luxury vehicles. To increase its production will require enormous capital expenditures. These traits make Tesla different from a business with "good economics" and they certainly make Tesla different from a pharmaceutical.

    The broader point is: the market will eventually value TSLA like other autos. I recommend individuals who are long the stock to look in the mirror and read up on the "escalating commitment bias." Look at the relative market caps of of Ford ($65 billion) and General Motors ($47 billion). Take a look at Porsche ($13 billion).

    Porsche probably has better pricing power than Tesla, but it still sells at 65% of Tesla's $20 billion (probably more like $23 billion diluted) market capitalization.

    I think that TSLA longs would be wise to become Tesla shorts at this juncture. It is not about the product -- it is about the stock price.
    Oct 9, 2013. 12:14 PM | 7 Likes Like |Link to Comment
  • In the wake of numerous scandals involving Chinese companies listed on Western stock exchanges, Chinese authorities are cracking down on ... those who raise the questions. Huang Kun - part of the team which put together a negative report on Silvercorp (SVM) - was arrested in Beijing at year's end and expects to soon face criminal charges. Documents suggest Silvercorp worked with officials on the investigation of Mr. Huang and even helped pay for it. [View news story]
    China isn't going to win the war against economics, I don't think. But they will try.
    Feb 16, 2013. 04:19 PM | 7 Likes Like |Link to Comment
  • Chronically Criminal: Shielding The Public From Medical Marijuana [View article]
    @ Sean Nolan

    I write articles for "personal gain" but also because I just want to share my research -- but that is basically that is what everyone does. Including you:

    For instance, you wrote last week:

    "Going long on MJNA is a great bet to increase your portfolio 10+ times. MJNA fluctuates daily and that provides a great opportunity to not only go long, but to also day trade and short. Some days in the past months have seen gains over 65%. Timing is key as this stock is extremely volatile, so do your research and buy when it's low, preferably below 30 cents, but it's not going to stay low forever; don't miss out on the green rush!"

    Those are pretty fraudulent statements frankly. I mean, I have found good companies, but never ones which promised to increase my portfolio by ten times. (No ten baggers yet! But guess what? If I find a ten bagger I will share it on SA for "personal gain" and if I am right people won't say "oh you are just writing this for personal gain" they will, instead, say "thanks! coat tail riding sure is a good practice!")
    Feb 16, 2013. 11:27 AM | 7 Likes Like |Link to Comment
  • Windows 8 And The Microsoft Constituency: A Unified Theory Of Everything [View article]
    Ouch. Well, I don't mean Microsoft's engineers "in-house," I mean the armies upon armies of software companies which write software for the Windows operating system. The world of development for Windows applications is still larger than, say, Apple's environment. The article was meant to emphasize the productivity increase that software engineers gain from the new architecture. Looks like I missed my point.

    Thanks for the star though, that was generous.
    Jun 25, 2012. 09:09 PM | 7 Likes Like |Link to Comment
  • An End To Our Relationship With Yahoo, A New Era For Equity Research [View article]
    Bull markets will always drive down quality and bear markets will always drive it up. Over many cycles, I don't see how SA can avoid this to be honest.
    Jul 25, 2014. 01:38 PM | 6 Likes Like |Link to Comment
  • Yelp, Inc.: In A State Of Cognitive Dissonance [View article]
    "Also, according to the SEC filings, Yelp insiders have sold $928 million worth of stock. This is unreal as only in America can you have an enterprise value of $4.3 billion and insiders have sold more absolute dollar value of stock than FY2013 revenue by a factor of three, yet retail investors are chasing this name."

    Great paragraph.
    Jun 6, 2014. 04:32 PM | 6 Likes Like |Link to Comment
  • The Fresh Market: A GARP No-Brainer In A Fabulous Market [View article]

    I am only non-GAAP when I estimate maintenance capex, otherwise I am using GAAP figures to calculated free-cash-flow excluding growth capex. This is the way many people smarter than me calculate earnings. E.g., it is the same as Warren Buffett's "owners earnings." In Security Analysis, it has a discussion about adjusting depreciation for "true" depreciation... so free-cash-flow, insofar as it is earnings plus depreciation & amortization, plus/minus one-time irregularities, plus/minus the long-term trend in working capital, less maintenance capex, has been promoted as the way to value stocks since at least 1934. (Technical note: the cash flow statement only came into its modern existence in 1987 and therefore Graham was using a "balance sheet" approach to measure/check earnings.... which, I might add, is basically what the cash flow statement does these days.)

    "I personally don't care much for those analyses which rely on non-GAAP financials because they are not real - every earnings statement that references non-GAAP measures requires a statement that they should not be relied upon or used in place of the GAAP financials."

    They are real, although it depends on who is doing the math. Some retail establishments, for instance, put depreciation into their COGS -- if one knows depreciation accurately (and one can find the consolidated number on the cash flow statement) then one could remove the depreciation from COGS thereby creating a *new* (but real) "gross margin" and "gross profit." If that gross profit is more comparable with other retail establishments, how can one say that is not "real." Furthermore, to think that accounting numbers are real in the first place is a mistake. They are accrual based which implies many judgments on the accountants part.

    "When the company begins paying their income taxes based on their non-GAAP net income let me know and then I might take them a little more seriously."

    Ummm, you do know that companies do exactly that right? They don't pay taxes on their GAAP net income -- if they did, wouldn't every company have a similar tax rate? No, they pay taxes under different rules than Generally Accepted Accounting Principles. Tax rules for depreciation are different than GAAP accounting rules, for instance. That is why there are accounting entries like "deferred tax liability" (e.g., they have recorded GAAP revenue but not actually recorded TAX revenue -- hence "deferred tax liability") and "deferred tax asset" (they have paid TAXES on something but not counted it as revenue/income in GAAP yet).

    "This article, in requiring dependence on non-GAAP financials, along with the caveat (i.e. CYA) that all 6 of the points in the final paragraph be true, for me exemplifies why this is not a no-brainer."

    Well, I am glad you read the piece at least. You'd be surprised how many people criticize without even reading. Also, I really wouldn't call the last part CYA since those are just the things a long-term investor should watch. E.g., if I buy and management gets worse, that should be a red flag that my analysis needs to be reevaluated because management isn't as good as I thought. That is all those 6 points are about. Thanks for reading.
    May 26, 2014. 11:28 AM | 6 Likes Like |Link to Comment
  • Cashin sees bubble in cloud/mobile tech names [View news story]
    That is a good point, although FB is a different beast than many of the others mentioned.
    Oct 19, 2013. 05:17 PM | 5 Likes Like |Link to Comment
  • Mar. ISM Manufacturing Index: 51.3 vs. 54.0 consensus and 54.2 prior. [View news story]
    51.3 means that most manufactures are expanding production. It doesn't make sense to talk about *expectations* with the ISM number because of how it is calculated. Therefore there is no "miss" and besides, if you want to complain about the economy just look at the 40,000,000+ persons on foodstamps. Keep in mind that if this were the 1930's, those people would be in-line outside of soup kitchens. As it is, we get to hide their poverty by sending people on food stamps discrete little visa cards which contain tax payer funds. While the grocers know, to some extent, the social appearance of poverty is effectively concealed from our eyes. Welcome to psychological economic management. Its an interesting system.

    But the point still remains, ISM numbers are not the sort of numbers where "expectations" make any sense what-so-ever. It is like trying to predict the price of gold -- it is merely human caprice and subjective psychological anchoring.
    Apr 1, 2013. 12:41 PM | 5 Likes Like |Link to Comment