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Jeffrey Walkenhorst, CFA  

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  • The Patient, Old-Fashioned Approach Still Works: 2010 Portfolio Recap and Outlook [View article]
    Hello VOL FAN and beststockpicker,

    No changes to my positive Seaspan (SSW) view. Seaspan as well as Global Ship Lease (GSL) are very stable, real-estate like businesses capable of supporting real estate-like debt loads. Shipping sector fundamentals -- and the global economy for that matter -- are no longer distressed, bringing liquidity and investor interest back into the container shipping sector. Neither Seaspan or Global Ship Lease are near default nor do I expect them to be. Note that both managed to survive the horrendous 2008-2009 period. Seaspan has the potential to meaningfully increase its dividend payout over the coming years as the company's in-service fleet grows. Importantly, management is contractually incentivized to increase the dividend.

    I include additional commentary on SSW here:


    I hope this helps.


    Feb 12, 2011. 09:38 AM | Likes Like |Link to Comment
  • How Sustainable Is's Moat? [View article]
    Follow-up, for more color on different views around "wire service" providers, please see below. Note that industry change and secular shifts are often challenging, especially with so many constituents. Yet, we all know that the Internet and mobile devices are here to stay....

    the wire-service conundrum
    A look at how the wire-service business has changed for florists and an analysis of the role wire services should play in florists’ businesses today.

    The Real Wire-Service Conundrum

    Response from FLWS and others:
    wire services respond to royer
    BloomNet, FTD and Teleflora present their views regarding Ken Royer’s article, “The Wire-Service Conundrum.” which sparked some controversy in our May issue.

    Jan 1, 2011. 10:25 AM | Likes Like |Link to Comment
  • How Sustainable Is's Moat? [View article]
    flowerchild - I'm uncertain of specific fixed or variable pricing around different fulfillment options, but note that -- as part of the network -- florists may benefit from higher order volumes (and revenue/profit) than otherwise.... Also, my understanding is that Bloomnet offers pricing advantages over FTD and Teleflora networks.

    Litigation is a risk for any business. Per the company's latest 10-K, the most recent case was settled -

    From time to time, the Company is subject to legal proceedings and claims arising in the ordinary course of business.

    On December 21, 2007, Plaintiff, Thomas Molnar, on behalf of himself and a putative class, filed suit against the Company claiming false advertising, unfair business practices, and unjust enrichment seeking unspecified monetary damages. The Company admitted to no wrongdoing with respect to this matter, but entered into a settlement agreement with the parties to this matter in order to avoid protracted litigation. The presiding trial Judge’s Order Granting Final Approval of the Class Action Settlement and Entry of Judgment was issued May 17, 2010. The Company has sent out the applicable notices to the class members, and the Company accrued for the estimated cost of the settlement of approximately $0.9 million within its general and administrative expenses.

    My view is that the company remains focused on the right priorities to enhance shareholder value.

    Happy New Year,
    Dec 31, 2010. 07:24 PM | Likes Like |Link to Comment
  • How Sustainable Is's Moat? [View article]
    Marcier, you're right that all consumers should pay attention to service/delivery fees, etc. when ordering from an e-commerce company such as This is true for all online or telephone purchases from any retailer. Based on my own experience, service/delivery fees will vary depending upon product, timing, and source (e.g. local florist or direct-to-consumer). My understanding is that a large percentage of floral orders are fulfilled by local florists versus "DTC" (e.g. ProFlowers). When ordering from, you can see/know what you're ordering as a gift for someone who may live in a distant location. In this case, where/when you may be unfamiliar with local florists, will fulfill your order through a florist with vetted and reliable quality.

    Unfortunately, as infinitee00 pints out, sometimes customers have experienced mixed results ordering flowers through I've never seen "" before, but -- interestingly -- "" also scores LOW as does and although is at the bottom (with largest sample size)....

    By contrast, scores very well -

    Fortunately, is striving to do better and guarantees satisfaction:

    "What if I'm not satisfied with my order or it was not received?
    Providing exceptional flowers and gifts and superior customer service is important to all of us at 1-800-FLOWERS.COM®. If there's something we've done and you're not completely satisfied with your order, we'll redeliver, refund, credit or offer a comparable replacement if the original product is not available.
    Email us using our online Customer Service Inquiry Form
    Call us at 1-800-468-1141"

    Clearly, customer satisfaction is critically important to grow and maintain a franchise. Notably,'s 50 to 60% average repeat business in a given quarter has been nudging higher over time and provides evidence of customer loyalty.

    Hope this helps.

    Dec 28, 2010. 11:20 PM | 1 Like Like |Link to Comment
  • 4 Software Infrastructure Companies to Consider [View article]

    Indeed - forward growth remains a key question and you're right that the valuation is no longer as attractive at current levels as it was in the low $20s. Yet, management has proven themselves highly capable operators and capital allocators.

    One note - no debt on the balance sheet.

    Dec 21, 2010. 10:57 PM | Likes Like |Link to Comment
  • 4 Software Infrastructure Companies to Consider [View article]
    Hi Margin of Safety, thanks for the post.

    I am long JCOM, which finally awoke from slumber in recent months on M&A activity. For those interested, my post from last February -

    j2 Global Remains Money Making (Cash) Machine; Outlook for Growth Improves

    AND, full thesis from July 2009:

    eFax Still Alive – Short JCOM at Your Own Peril

    Dec 21, 2010. 09:58 AM | 1 Like Like |Link to Comment
  • Harry Winston: Earnings Power Points to More Upside Potential [View article]
    For easy reference, our HWD post with more details and mgmt commentary from September (we mistakenly said August above) -


    Dec 8, 2010. 03:05 PM | Likes Like |Link to Comment
  • Weight Watchers: Why I'm Going to Pass [View article]
    Hi Ben, sorry for the delay in responding... hectic few weeks.

    You're right that a smaller debt load would be preferable. Most debt was the result of the ill-timed, gigantic share repurchase a few years back (which I don't like). That said, the very stability and juicy margins of WTW's operating model enable a high level of debt. For this reason, lenders are comfortable with debt levels and WTW has been able to roll over debt - from June 10-Q:

    On April 8, 2010, the Company amended the WWI Credit Facility pursuant to a loan modification offer to all lenders of all tranches of term loans and revolving loans to, among other things, extend the maturity date of such loans. In connection with this amendment, certain lenders converted a total of $454,480 of their outstanding term loans under the Term A Loan ($151,775) and Additional Term A Loan ($302,705) into term loans under the new Term C Loan which matures on June 30, 2015 (or 2013, upon the occurrence of certain events described in the WWI Credit Facility agreement), and a total of $241,875 of their outstanding term loans under the Term B Loan into term loans under the new Term D Loan which matures on June 30, 2016. In addition, certain lenders converted a total of $332,647 of their outstanding Revolver I commitments into commitments under the new Revolver II which terminates on June 30, 2014 (or 2013, upon the occurrence of certain events described in the WWI Credit Facility agreement), including a proportionate amount of their outstanding Revolver I loans into Revolver II loans. Following these conversions of a total of $1,029,002 of loans and commitments, at April 8, 2010, the Company had the same amount of debt outstanding under the WWI Credit Facility and amount of availability under the Revolver as it had immediately prior to such conversions. In connection, with this loan modification offer, the Company incurred fees of approximately $11,500 during the second quarter of fiscal 2010.

    Meanwhile, the company is able to repurchase stock and pay the dividend. I see room for dividend hikes over the coming years.

    I suspect private equity owner Artal had a strong hand in the large buyback, which also required WTW to repurchase shares from the PE firm so as to keep it's stake unchanged - from the 2007 10-K:

    On October 9, 2003, our Board of Directors authorized a program to repurchase up to $250.0 million of our outstanding common stock. On each of June 13, 2005 and May 25, 2006, our Board of Directors authorized adding an additional $250.0 million to this program. Under this program, we will not purchase shares held by Artal. This program currently has no expiration date.
    On December 18, 2006, we commenced a tender offer in which we sought to acquire up to 8.3 million shares of our common stock at a price between $47.00 and $54.00 per share. Prior to the tender offer, we entered into an agreement with Artal whereby Artal agreed to sell us at the same price as determined in the tender offer the number of our shares necessary to keep its percentage ownership in us at substantially the same level after the tender offer. Artal also agreed not to participate in the tender offer so that it would not affect the determination of the price in the tender offer. The tender offer expired at midnight on January 18, 2007, and on January 26, 2007, we repurchased approximately 8.5 million shares at a price of $54.00 per share. The 8.5 million shares repurchased are comprised of the 8.3 million shares we offered to purchase and 0.2 million shares purchased pursuant to our right to purchase up to an additional 2% of the outstanding shares as of November 30, 2006. On February 2, 2007, we purchased 10.5 million of our shares from Artal at a purchase price of $54.00 per share pursuant to our prior agreement with Artal.

    I take the opposite stance and believe WTW is, in Warren Buffett style, exactly the kind of company we can/could/should own if the markets were closed for 3, 4, 5, 10 years. As always, the caveat is price - the lower the entry point, the better, and the higher potential return over time. $20s and low $30s are probably okay. The margin of safety and potential returns narrow should we get into the $40s.

    I've been following WTW for several years and owned shares since fall 2009 -

    Nov 4, 2010. 07:22 AM | Likes Like |Link to Comment
  • Weight Watchers: Why I'm Going to Pass [View article]
    Hi Margin of Safety, thanks for your post. A few considerations -

    - I would prefer lower debt, but is total debt at approximately 5 times depressed FCF a significant risk factor for a company with a low teens net margin, mid 20% operating margin, and a long historic record of excess cash generation? Management is steadily delevering and might be able to begin increasing dividends over the medium term.
    - The last couple of years have been tough for all discretionary companies, but aren't fundamentals now (at least somewhat) turning around? Obviously, still a tough environment.
    - Do you think WTW's private equity owner, Artal, had a strong hand in encouraging the buyback at the rich valuation (even though it did not participate so as to keep its stake high)? Also, note:
    "During the six months ended July 3, 2010 the Company purchased 1,140 shares of its common stock in the open market under the repurchase program for a total cost of $30,598." = 26.84 per share
    - Do you think WTW is a leading franchise in this market segment? Will the company be bigger, better, stronger in five years?

    I'm long WTW with positive stance on company and the stock - my latest post:


    Oct 18, 2010. 08:20 AM | 2 Likes Like |Link to Comment
  • Yahoo: Does Facebook Mean Game Over or Will Hidden Value Prevail? [View article]

    Many facets to the search deal and time will tell how it ultimately works out, both operationally and financially. If I'm not mistaken, mgmt's high level perspective is that search is becoming more of a commodity, so why not outsource search and focus more on being a content/media company. Also, even if it is a "commodity," scale matters and partnering with Microsoft brings increased scale for both parties to compete against Google (~65% of the US market per comScore: ). As part of the scale strategy, you're correct that Yahoo will be buying ads for distribution on both Yahoo Search and Bing.

    Yahoo included a deck on search at its last Investor Day:

    Sep 21, 2010. 08:28 PM | 1 Like Like |Link to Comment
  • Yahoo: Does Facebook Mean Game Over or Will Hidden Value Prevail? [View article]
    Hi smartstockinvestor,

    Why the disconnect? I think the answer might be this simple: the "Market" likes consistent growth and near-term, positive catalysts (beating expectations), which (honestly) we all like if we're owners of a company. Earnings (and free cash flow) growth is what really drives share prices. See the performance of some of the Chinese Internet leaders, BIDU, SOHU, SNDA and, to a lesser extent, SINA. Or, look outside Internet-land at the long-term performance of companies such as DLB, ESRX, or HANS.

    Until the Market begins to believe AND see (as seeing is believing for the Market) that Yahoo's management team can / will deliver on growth, margin, and ROIC targets, shares may continue to languish, especially when comScore traffic data implies "user engagement" is moving in the wrong direction. That said, this sum of the parts discount can't last forever and should correct in due course. Also, Yahoo's advanced global advertising platform may enable revenue growth even if publicly available/reported traffic figures are slightly negative (for all properties, no doubt with some up and some down on a channel by channel basis). After all, the display ad market should continue growing nicely for the foreseeable future. Yahoo is a leader in this category.

    Sep 18, 2010. 02:20 PM | 1 Like Like |Link to Comment
  • Yahoo: Does Facebook Mean Game Over or Will Hidden Value Prevail? [View article]
    Percy, thanks. The press has been working overtime on this one and the hubbub this week happened to correspond with my work... If possible, amidst reported management tensions, SMART for Yahoo to HOLD onto the Alibaba position as its value should continue to accrete alongside the growth of, Alipay, Taubao and other assets.

    BTW, one note for my above, back-of-the-envelope FCF analysis is that I did not consider any potential tax bills due from possible asset sales nor did I remove interest income from my run-rate FCF estimate (e.g. since I used implied FCF yield on EV rather than MC). BUT, still works for illustrative purposes and my intention was to highlight the hidden value in Yahoo's various assets and the fact that the core business is essentially being given away.

    The NYTs piece (via Reuters) does include some mention of taxes with regard to the Alibaba position -

    Sep 17, 2010. 08:07 PM | 1 Like Like |Link to Comment
  • The Market Is Warming to Shipping Sector on Better Fundamentals [View article]
    Michael T,
    Dry bulk - I've spent less time on the sector given the still very large order book and usually short term leases subject to spot market rates. That said, I've been keeping my eye on NM, which has relatively longer lease coverage (for this subsector) as well as some logistics exposure and exposure to the tanker sector through NNA. Generally, I'm more comfortable with SSW and GSL's REIT like business models.

    Michael D/Plan, thank you for your comments and additional insights. Indeed, the Butler commentary about CMA CGM potentially not needing add'l capital is very interesting and supports our view that GSL, in particular, is undervalued on both an absolute and a relative basis. The CMA bond action is very telling and, normally, equity tends to follow bonds....

    Sep 11, 2010. 10:52 PM | Likes Like |Link to Comment
  • PetMed Express: Why We Moved to the Sidelines [View article]
    Yes, stu - thanks for sharing that helpful insight. I've spoken to PetMed customers but wasn't sure if promo codes brought prices closer to or even better than those offered by Amazon. This is worth exploring further, yet doesn't change my more cautious stance, which is primarily based on seemingly increased competition and corresponding stalled growth and margin pressures.... Agree that the dividend raise is an excellent move and management remains committed to both growing the business and returning capital to owners. Per my mention, the balance sheet remains iron-clad with no debt and plenty of cash, which is great.
    Aug 5, 2010. 11:29 AM | 1 Like Like |Link to Comment
  • 4 Significant Earnings Results: eBay, Netflix, Amazon and PetMed Express [View article]
    thanks for your patience. My latest PETS piece is here:

    Aug 3, 2010. 12:33 AM | Likes Like |Link to Comment