Jason Rivera

Deep value, contrarian, nano-cap, micro-cap
Jason Rivera
Deep value, contrarian, nano-cap, micro-cap
Contributor since: 2012
@Reed Parlato
Completely agree. I do know they have eliminated some of their debt but unless they get rid of a lot more the above thesis still remains intact. Like I said though in the original article, I hope I am wrong about that poor outlook.
Not sure, details have been vague thus are on specifics of the situation. I still haven't found anything that describes what exactly an "Outside" shareholder voter technically is.
Great reply, here are my thoughts.
1. I do not think the company is doing everything necessary to create value for shareholders. I think they have been destroying value. I think shareholders would be much better served if the company were bought out as just one example. Also if you are in them for the 5% dividend why not own someone like Altria who almost certainly will be around years and decades from now, has a gigantic moat, and has dominant market share? KOSS has lost 80% of its value in recent years so even with its 5% dividend if you have held during that time you have still lost quite a bit of money. Much better ways to get yield than in a company like KOSS in my opinion. On top of that KOSS might not be around for years or decades more like some of the bigger dividend yielders will be.
2. I admittedly do not know a ton about options but I do know about the games companies can play with options and I am extremely biased against companies giving a lot of options and having the ability to reprice them to any degree. Makes me extremely nervous as a potential shareholder that the potential is there to do things that are untoward, especially with how poorly the company has been run in the last several years in my eyes. Mix this with the poor corporate governance issue and some of the other issues I talked about in the article and I do not trust its management.
3. Just because management has bought shares when its stock price has been below $5 a share does not mean that is a good thing for shareholders. If the company buys shares back when the company is overvalued they are destroying shareholder value further. Companies are supposed to buy back shares when they are undervalued and issue shares when overvalued to maximize shareholder value. In my eyes KOSS is massively overvalued, even including its substantial NOL's, at $5 a share.
As an extremely conservative value investor I have two major criteria that a company needs to pass in order for me to even consider buying.
1. Is the company undervalued enough where I have a substantial margin of safety: Usually at least 30-50% undervalued relative to my estimate of its intrinsic value.
2. Can I trust management.
KOSS fails both of these major criteria for me.
At this point I have not looked too much into that law firm or the potential law suit. I have been more concerned with getting a big enough group of shareholders together to push for a much higher offer.
At this point I have been in contact with investors in BOBS who combine to own around $10 million worth of its shares at the $15.50 offer price. Nothing firm at this point but will keep everyone in the loop. If you would like updates on what I and others are doing in this situation please follow my blog and or follow me on Twitter because I will post updates on those two places faster than I will here.
Thank you for your comment.
I do not use either of the companies products and just went by the numbers. Beats has been ascending extremely fast and crushing any and all competition up to this point including KOSS. KOSS has lost 80% of its value in the last several years for example.
I am not sure why comparing a wireless headset to one that is wired is not a fair comparison and I admittedly have no direct knowledge of the sound quality of either companies products. The two products I listed in the article I just wanted to compare price points and an aesthetic point of view which one looked better since apparently a lot of people who buy Beats are doing it for the perceived cool factor.
I do know that being technically superior does not always mean better or more sales. Just look at the previous generation of video game hardware for a perfect example. Most hardcore gamers (Including me) thought the Wii was for kids, had horrible graphics, and was generally a garbage system outside of Zelda and Mario and it went on to sell the most systems of the last console generation because it was able to garner more casual support.
Same thing with the comment about KOSS being around longer than Dr. Dre has even been born. It doesn't matter how long a company has been around if it doesn't evolve, get better, continue to improve, and has a competitor who comes around and changes the industry landscape in some meaningful way.
Thanks again.
Thanks a lot @SC Stock Hunter.
Nice to hear from you. Haven't in a while and hope you are doing well.
I have not been paying much attention to the market or individual companies lately unfortunately as I have been getting my book written and published. Now that all of that is done and the book is released I am going to start researching companies again in the next week or so and hope to have another valuation and analysis article ready as soon as possible.
Sounds great and I hope you bought into the company before its rise.
Completely agree, everything is still improving except for the KFC operations which are still lagging.
For those of you who want to see the results yourself here is the page.
Congrats on your gains thus far.
I got its English language filings from the following site that linked to BOBS investor relations page.
I agree they could be a buyout target if they keep growing as well and efficiently as they have been. They do need to improve the margins at the YUM subsidiary also as they have generally been lagging the rest of the company like you said.
Thanks for your comment.
I hope and think you may be right.
Do you still see BOBS being a potential buyout target like you did in December?
Congrats on your gain.
I plan on holding this stock for the medium to long term especially with the short and medium term catalysts in place and the continued improved profitability so I am not really worried about a one day or month drop. I would look at that as an opportunity to buy more shares.
Hopefully they are more profitable than the last time they did the festival and have all of their logistical and efficiency issues fixed. If I remember right I think they were barely profitable last time due to those issues.
Thanks for the link to my article Black Coral Research, really appreciate it.
5X, 8X, 11X, and 14X EBIT + cash and cash equivalents + short-term investments+NOL's:
5X28.9=106+32=176.5/8.... R$ per share=$10.95 per share + $5.30 in NOL's=$16.25 per share.
8X28.9=231.2+32=263.2/... R$ per share=$16.33 per share + $5.30 in NOL's=$21.63 per share.
11X28.9=317.9+32=349.9... R$ per share=$21.71 per share+ $5.30 in NOL's=$27.01 per share.
14X28.9=404.6+32=436.6... R$ per share=$27.09 per share+$5.30 in NOL's=$32.39 per share.
At minimum at 5X EBIT+cash+NOLs BOBS should be selling for at least $16.25 per share.
At a more reasonable valuation, I again would use the 8 and 11X EBIT valuations which including cash and NOL's would make BOBS worth between $21 and $27 per share.
I wouldn't count on BOBS keeping these numbers up, but if they can BOBS will become an even better investment over time.
Yes I did, I was pretty surprised at how good the results were. Not too shocking once you see how much growth they have had in the number of franchised restaurants though as those are very high margin restaurants for them.
Same answer as before and congratulations on your gains.
Thanks for the mention and kind words Richard.
Thanks for the heads up I will have to take a look at them.
@The Hammer
I agree. They said that they hope to announce something at the AGM in April. Even just selling one of the subsidiaries for now would suffice and hopefully they have something to announce at the meeting.
I would also like to hear what you mean @wdjax0n. I didn't come across anything in my research that resembled what you talked about and would be interested to hear your take.
Thanks for your question.
To me pretty much everything within Wendy's looks to be at least at minor risk due to the massive debt and total obligations in comparison to its EBIT.
Being a very conservative investor I hate debt loads like this so anything that even somewhat resembles the total debt and obligations in relation to EBIT like this scares me and I would be worried if I was a shareholder, especially if I bought in partially for the dividend as that would likely be one of the first things to get cut if the company starts to have problems.
Here is a link to my most recent Dole article where I go into pretty good detail on what I think it should be worth after the sale to Itochu is completed. At absolute minimum I think Dole is worth $14.92 per share, and that its true intrinsic value is somewhere between $20-$30 per share.
The article also contains links to my previous articles on Dole, Chiquita, and Fresh Del Monte.
Nothing really. I stop following companies that I do not think are very good long term buys so I have not noticed its price appreciation or any news related to the company since I published my article, and our previous conversations.
Short term price appreciation means very little to me and had not noticed that it has jumped from around $9 when I was doing my research on ACET to around $10 now.
Congratulations on your gains.
Not sure at this point. Will probably get more clarity after the sale is completed.
Thank you for your comments and compliment.
Wish I would have been at $3 for BOBS excellent gains for you so far and I think further will eventually come.
That is actually a very good point about the franchises, had not thought of it that way before, thank you for making that excellent point. Maybe once they get over a certain threshold of restaurants they will either raise the franchise fee back to the R$ 90,000 that it was before, or raise the royalty fee by 0.5 or 1% point to generate more income.
Thanks for you question.
Actually I think this, along with some of the other things I outlined in my article are giant positives.
To me it means that that BOBS has at least some power over their supply chain to enable favorable terms for them in conjunction with its exclusivity agreements, which at least in part leads to some amount of float for the company, a minor moat in my opinion, the combination of which has led to BOBS increased sales and growing margins. All good things in my book.
I hope your right about some kind of buyout as that would be fantastic for all shareholders. I do not know if the four major shareholders who own about 63% of BOBS would relinquish control though unless the buyout offer was a very high price.
I agree that with that the Confederations Cup, World Cup, and Olympics all coming up should generally help BOBS.
I am a bit confused by your last sentence though. Are you saying that you think by 2017 BOBS should be worth $300-500 a share, and what kind of IPO or LBO are you thinking about for BOBS? Spinning off or selling some of its restaurants?
@Steinway Capital
Thank you for the very detailed run down of BOBS.
You obviously have spent quite a bit of time in Brazil and know how the fast food/restaurant market works pretty well from firsthand experience so thank you very much for sharing you analysis of the situation I appreciate it very much.
This is the major flaw in all of the analysis that I do is that since I do not yet have the means to travel and visit the companies I buy into, I have to rely on whatever information I can find online though company filings and other any other information I find for my analysis. It is always great to hear from someone who has actually visited the places I invest in as you obviously know more about the daily workings of the company than someone like me who just reads the filings and whatever other information I find online.
I agree with a lot of what you said about competition and how management may be distracted with continued acquisitions and I would also like to see them concentrate more on its current Bob's burger chain. Some of the above reasons are why I said I am not sure that the small moat I see within BOBS, with its relationship with suppliers, exclusivity agreements, and growing scale are long term sustainable competitive advantages.
If you do not think that BOBS has any kind of competitive advantages why do you think the company has been able to have such a high ROIC?
I would be very interested to see your thoughts on this as you are a long time follower of the company and have more direct knowledge of them than I do, and would appreciate any further knowledge you would share here.
Nice picture for your profile. Have you eaten at BOBS restaurants before and if so what are your thoughts on them?
Thank you very much. I appreciate your kind words very much.
@Roger AH
Normally I would agree with you and I would not have started to research a company who has recently deregistered with the SEC but after researching the company and its management pretty extensively I trust that management would not want to see this company slip into oblivion. Management has spent the better part of the last 20 years building BOBS up and four people who are closely involved with the company (CEO, franchise owners, and family members) own 63.2% of the company's stock so they would stand to lose a lot of money if they company started to have problems.