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Jeremy Johnson, CFA

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  • Amdocs: A Cash Machine On Sale [View article]
    I didn't say anything about them losing market share historically. The worry is that in software new entrants can come quickly and establish rapid market share gains. Happens all the time, the usual response is for the dominant player in the industry to just buy any new competitor. That is why free cash flow looks so great at so many tech companies until you look at the acquisition line. Right now, Amdocs appears to have this under control, but in the future that can change. Picking stocks is not as easy as buying anything with a FCF / Capitalization ratio greater than the market.
    Dec 18, 2014. 03:46 PM | Likes Like |Link to Comment
  • NewLink Genetics: Examining Likelihood Of Success In The Impress Trial [View article]
    Went through pretty much all the analysis you have done myself some months ago but I see two issues. First is the treatment group: it is only 69 patients, so we are trying to extrapolate an improvement versus base line when we could just be looking at statistical noise. It is just a matter of 3 people living longer than expected which could be accounting for the difference.

    Second is the control arm. In JASPAC-01 which is the most recent large trial the median survival in the Gem arm was 25.9.

    LN+ was 62% in that trial, a bit below RTOG and I can't find a 19-9 number.

    However versus RTOG, I think SOC FOLFIRINOX in 2012-2014 timeframe could easily add 2 months, and I think Dr. Link has referenced in or around this number. I have looked at various studies and independently agree.

    From the standpoint of an investor, I would have to use 23-24 months MS control to get comfortable with owning the stock.

    Back to the first point, I think the 95% CI on 3 YR overall survival for NGL-0205 (Phase II) of 39% is probably 10+ points either way (it was 7 points either way for ~180 patients in JASPAC), so the 3 YR could easily be anything down to 25% and be consistent with the data statistically. So really extrapolating from the Phase II is just noise. Based on some commentary I have seen I think that this Phase II was purposefully underpowered by management so they could leave the door open for a Phase III and I believe this is common in the industry where management doesn't believe in the product.

    Having said all that I think there is a good chance the final analysis will show a greater than 20% improvement, but I have serious doubts as to the 30% improvement in the second interim. I did own the stock from the low-20s to the high-20s because the valuation made sense for the risk -- since that time of course Ebola has created some noise in the name and the company avoided having to raise equity in the public markets by selling IDO -- all good things that have built real additional value in the stock but not really germane to algenpantucel. Now the value will be driven solely by this 2nd interim and I think the chances are low it will clear the bar.

    I would like to see your analysis on the timing of 1st and 2nd interims updated for a 24 month control.

    Thanks for the article.
    Dec 18, 2014. 03:28 PM | Likes Like |Link to Comment
  • Amdocs: A Cash Machine On Sale [View article]
    Love this company, have owned it from the mid-30s. Two things give me pause: 1) customer concentration, 2) new competitors: can't recall all the names but have read about a few startups that are nibbling at small portions of their business. I don't really know their products that well, but in software I get a bit nervous that companies don't invest enough to keep their offerings current. They can do it because maybe 2-3 companies dominate the market they are in, but it leaves the door open for new entrants.
    Nov 20, 2014. 10:43 PM | Likes Like |Link to Comment
  • Now Is The Time To Buy Travelzoo [View article]
    You have to trust the people you invest with -- that is they have to be credible and have character. I am not sure why anyone would trust Bartel at this stage. His management of this company has been a seriously lacking. I see from his bio, he has two masters degrees and two phds -- I think we can deduce that his priorities are elsewhere. This may be his craigslist.
    Oct 24, 2014. 09:17 PM | Likes Like |Link to Comment
  • GoPro: Fully Diluted Market Cap Is Really $10.4 Billion - Stock Could Fall 75%+ [View article]
    To get the enterprise value or market cap of a firm with stock options outstanding you add the fair market value of the stock options, you don't multiply the number of options by the current share price.
    Sep 11, 2014. 12:53 PM | 1 Like Like |Link to Comment
  • Chipotle Customers Might Not Have Said 'Yes' To Higher Prices [View article]
    Yes, they are all over Southern California. I was discussing with a friend yesterday, the food used to be better but they have migrated over the years solidly into the value category, at this point it is really no different then going to Del Taco or Taco Bell for the most part, but it can be a bit healthier. The menu has migrated over time though and a lot of people I see at El Pollo Loco order the prepared items as opposed to the chicken pieces.

    Chipotle is a different class of restaurant. I am not sure how they do it but in some way Chipotle manages to deliver a slightly and noticeably higher quality of food for roughly the same price or just a bit more than "fast food" (outside of $1 menus which face it get pretty boring and are not very profitable). And the restaurant is much nicer inside, the employees more friendly (and more of them per customer) ... really when deciding where to eat there is never a debate between those two places with people I know.
    Aug 5, 2014. 12:34 PM | Likes Like |Link to Comment
  • Chipotle Customers Might Not Have Said 'Yes' To Higher Prices [View article]
    Been eating El Pollo Loco on and off for 20 years, Chiptotle has nothing to fear from them. The chicken at El Pollo Loco is decent, but every other ingredient is at or below the level of Taco Bell.

    And the only reason to go to Qdoba is to get the queso or if the line at the Chiptotle around the block is too long.
    Aug 4, 2014. 10:25 PM | 1 Like Like |Link to Comment
  • Rocket Fuel's Fall From Grace May Be Temporary [View article]
    It's a perfectly viable strategy to reinvest your net income in expenses such as marketing and R&D in a business like this. In fact, you will probably be forced to by competition. The time to milk this company for cash flow or net income is not now.

    But yes it is a binary outcome for this company in all likelihood, it will either be a market leader in the industry or it fall to the wayside and its valuation will follow.

    I will not be the long-term investor that finds out and I suggest if anyone is not fairly knowledgeable about the intricacies of the industry and have some glimpse of the transaction level economics that they stay away.

    And please, try to win your arguments on the merits rather than slandering me by comparison to a sell-side analyst that sold himself out.
    Jul 30, 2014. 02:52 PM | Likes Like |Link to Comment
  • Declining Propane Demand Will Eventually Threaten AmeriGas' Dividend [View article]
    Working capital was a $90 million use in 2013. If you look at the accounts the moves are not large are confined to a modest rise in A/R and a decline in customer deposits. The company should not manage the distribution around changes in working in capital. The company produces all the cash it needs and more from operations to fund the distribution. No one should have an issue with them drawing a bank loan or using excess cash to fund small changes in working capital -- some of which may be due to the prior year's acquisition.
    Jul 9, 2014. 12:11 PM | Likes Like |Link to Comment
  • Rocket Fuel's Fall From Grace May Be Temporary [View article]
    Well I took my short-term gain a few dollars higher than the stock is today, but I still think it is an attractive valuation at the low-20s if you believe in the market they operate in. The fact they make no money is not relevant.
    Jul 8, 2014. 01:00 PM | Likes Like |Link to Comment
  • Declining Propane Demand Will Eventually Threaten AmeriGas' Dividend [View article]
    First off, the company does not need to raise equity or borrow to pay the distribution. It is fully covered by cash from operations. The EPS is low because of intangible amortization. Also, the company has a large credit facility if it needs money in the short-term. And really this is not a company that need access to capital markets continuously.

    For the TTM period Net Income + Depr. & Amort - Capex / Distribution was 1.15x.

    APU is really in two businesses, one is retail propane to homeowners, the other is cylinder exchange. The first does have long-term challenges, but the second I believe continues to grow. It is not worth installing natural gas just have a BBQ. Cylinder exchange also occurs to industrial users, if I remember correctly. It is really the cylinder exchange business that gives APU the margins it has.

    There is one other company people can look at which is Suburban Propane (SPH). It is not involved in the cylinder exchange market, but is quite large.

    Ferrellgas and AmeriGas are currently fighting the FTC over a collusion charge involving Wal-Mart -- this probably is a bigger near term risk than anything else.
    Jul 8, 2014. 12:50 PM | 3 Likes Like |Link to Comment
  • Rocket Fuel's Fall From Grace May Be Temporary [View article]
    I think this is the beginning of a good entry point if you like this market space. About 1.5x next quarter revenue annualized sales when adding back the cash.

    The company's cash burn is quite low and probably 100% discretionary.

    Wouldn't want the company to make money at this stage, they would just end up getting run over by competitors that were willing to fund growth at a faster rate.

    If you don't like the space, obviously there is really no good entry point.
    May 9, 2014. 01:45 PM | 1 Like Like |Link to Comment
  • U.S. LNG Export Terminals: A Big Potential Investment Blunder [View article]
    Doesn't matter how expensive it is, the 50 mtpa from AUS will come to market regardless. I think the returns on those projects may be a bit subpar, but the gas will flow one way or another. The variable costs of production are tiny. This is a lot of supply for the LNG market to absorb and could impact the market for years with lower prices on the spot market.

    This is not an argument against holding Cheniere by the way. It is only to say the market some future projects expect may not be there.

    Also the transportation benefit is not negligible. The additional cost of shipping from the US as opposed to Australia is not much more than the all in wholesale gas price in the US currently. If spot Asia normalizes to spot Europe when Australia comes online, the transport fee will mean 25% extra cost when trying to sew up a new LNG project based in the US.
    Jan 14, 2014. 12:05 AM | Likes Like |Link to Comment
  • U.S. LNG Export Terminals: A Big Potential Investment Blunder [View article]
    Production declines are due to cheap gas, the production increase was producers living off the capital they raised when prices were higher and also capital raised from dumb and strategic money.

    You would see a huge linear supply response as you moved from 4 to 5 to 6 dollar gas. The gas comes out of the ground so fast in these fracked wells, the projects are practically self financing.

    Everyone worries about the decline rates so much and in the long term it may be problem, but in the short term the high decline rates are a major positive. Your project payouts are measured in years instead of decades as with for example an oil sands project.

    But the easy money has been made on the drilling side (which is largely a land game). Now it is finding ways to arb $5-6 gas against more expensive energy, either gas on the international market (spot LNG is $19 -- might be able to make some money there?) or against crude by converting heavy vehicles to natgas, for example.

    Australia will start bringing on a massive amount of LNG in 2014-17 from many discrete projects (BG, Cheveron, Inpex, Santos, Origin). Up to 55 mtpa will come out of these projects while the global market was 240 mtpa in 2012. Australian production is much more of a threat to the viability of U.S. gas on international markets that the sustainability of shale fields. There is also another 50 mtpa of projects outside of Australia...
    Jan 7, 2014. 12:57 AM | Likes Like |Link to Comment
  • Why Stan Druckenmiller Is Wrong On IBM [View article]
    Would Brando buy IBM or Amazon?
    Nov 24, 2013. 06:30 PM | Likes Like |Link to Comment