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Jeremy Johnson, CFA

 
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  • Exelon: Potential Dividend Cut May Be Deeper Than You Expect [View article]
    Natural gas was $13 in 2008. Nuclear assets had different cash flows then. Natural gas isn't going back to $13 and neither will electricity pricing go back to where it was for many many years, perhaps decades.
    Nov 30 06:56 PM | 2 Likes Like |Link to Comment
  • What Amazon.com Selling Double The Kindles Really Means [View article]
    I have often had 50 pound items sent to me free of charge by Amazon. On some occasions even by 2-day mail. I have often wondered if UPS/FedEx aren't eating some of these charges through their contracts with Amazon.
    Nov 30 12:16 PM | Likes Like |Link to Comment
  • What Amazon.com Selling Double The Kindles Really Means [View article]
    I did read that piece of yours, good work. That gets back to the biggest knock on Amazon in my view (and one I agree with) their capital investment is not producing the same incremental returns it did 3-5 years ago. This is a serious problem and one that will be recognized sooner or later if it continues.
    Nov 29 09:39 PM | 1 Like Like |Link to Comment
  • What Amazon.com Selling Double The Kindles Really Means [View article]
    I think the market (not me) is assuming $4.5 billion which is simply a 4% free cash flow yield, a premium to a business like Target which is more in the 5.5% area.

    I am not saying that is what Amazon actually generates. It might, but the issue is very contentious and I am choosing not to state an opinion on the matter.

    When companies invest it is in R&D, marketing, physical assets, etc., so that is where the discretionary cash flow is going. The trick in any growth business is determining how much of that spending is necessary to sustain current revenues. Clearly, in the case of Amazon, not all of it is; hence, some is discretionary.
    Nov 29 09:30 PM | 1 Like Like |Link to Comment
  • Talking Soda [View article]
    Thanks for the info.

    Unfortunately, I don't consume sugar at all (not for medical reasons) so the machine would be a bit of waste for me. And the tap water in most but certainly not all of California does not taste that great!
    Nov 29 07:47 PM | Likes Like |Link to Comment
  • What Amazon.com Selling Double The Kindles Really Means [View article]
    I think the market assumes they generate about $4.5 billion of discretionary cash flow. In my view the biggest knock on Amazon is that their growth is becoming markedly less capital efficient but I am not sure what series of events will lead to a crisis of confidence in the company. If the CEO waits for a stock crash to pull back on spending for growth, it could wreak considerable havoc on the real business. I hope he understand this.
    Nov 29 07:35 PM | Likes Like |Link to Comment
  • Talking Soda [View article]
    This is sort of my position. I know people like to rail on short sellers, but in terms of real power on Wall Street, a firm like Fidelity owning 13% of your shares speaks volumes. These are the guys that can move the needle with a series of phone calls, including not allowing the shares they own to be borrowed (although I am not 100% sure how this works when held in a mutual fund). But if I am a long and I like the company then I want there to be short sellers, because then I can get more shares without moving the price. Capacity is a huge issue in a smaller name like this for multi-billion dollar funds. End of day, the high short interest has always had me a bit confused. I think there is a story here that hasn't been fully told.
    Nov 29 07:22 PM | 1 Like Like |Link to Comment
  • Talking Soda [View article]
    It would an extremely predatory thing to do for any retailer, legal questions aside.
    Nov 29 07:06 PM | Likes Like |Link to Comment
  • What Amazon.com Selling Double The Kindles Really Means [View article]
    How much discretionary cash flow do you think AMZN generates at run rate?
    Nov 29 06:46 PM | Likes Like |Link to Comment
  • Talking Soda [View article]
    I think it was an attractive short for 3 months in mid-2011, but that was quite some time ago now.
    Nov 29 06:14 PM | Likes Like |Link to Comment
  • Talking Soda [View article]
    Regardless of what happens to this specific company, this is exactly the wrong sort of business you want to short. It is just hard for me to believe the short ratio is caused by a genuine desire to have short economics on this business at the level of 50% of the float. The only other reason I can proffer is that event driven funds are using it as a proxy on West Bank tensions. Anyway, I haven't heard any compelling case how a short expects to make 20%+ on this name. If I am going to short something I want their to be a good chance the name will go down 50%+, and little to no chance it could double. Is there really such a dearth of short candidates out there?

    What does it cost to short this thing? Has to be astronomical.
    Nov 29 05:39 PM | Likes Like |Link to Comment
  • The cloud infrastructure market is officially seeing a price war. A day after Amazon (AMZN) cut prices by 24%-27% for its popular S3 storage service, Google (GOOG) is cutting prices for its storage offering for the second time this week: between today's drop and Monday's, Google has slashed prices by over 30%. Google and Amazon probably have the scale and cost structures needed to handle a price war, but Rackspace (RAX), which has already said it won't compete on price, could be in a tougher spot. Will Microsoft cut prices next? [View news story]
    My understanding is that Google's customer service is quite poor. They make up for it in the fact that their products typically work fairly well. I can't say my knowledge on this matter is great, but I would not be surprised is Rackspace genuinely had customer service that blew Google's away.

    And from a consumer point of view, Amazon's customer service really isn't that great either. Their only response is to basically either take the item back or give you a discount. That is better than nothing (perhaps much better), but doesn't solve many of the problems that crop up. It turns their service into take it or leave it (but we'll make it very easy for you to leave it).

    What customer service really is about is getting problems fixed, not just saying sorry we can't help you, but here is your money back.
    Nov 29 04:48 PM | 2 Likes Like |Link to Comment
  • Talking Soda [View article]
    The following is speculation, but I don't think there are genuinely many bears on this company. There is something a bit strange about the high short interest. I am curious if banks are shorting the stock in order to sell more shares to preferred clients, not because they are actually bearish. The list of holders is almost a who's who of institutional buyers. You would need a pretty keen understanding of the microstructure of the markets involved: especially option market makers, OTC derivative markets and the willingness of prime brokers to create shares for clients to know for sure what is going on here. Given all the companies I see that trade at very rich valuations with no growth story, the option value of this company alone would make it a very attractive investment to any small / mid-cap growth manager who are also desperate for anything like this. In addition, this is ripe target for a strategic buyer. Short sellers are typically a very savvy bunch, because mediocre performance as a short seller will end your career quickly because you are fighting against the stream at all times. Shorting growth stocks at reasonable valuations that 5-10 global consumer product companies could offer a 50% premium on at any moment is extremely foolish.
    Nov 29 04:41 PM | Likes Like |Link to Comment
  • Apple (AAPL) has fired the manager behind the mapping software which put a cloud over the iPhone 5 release, reports Bloomberg. Maps manager Richard Williamson was let go by Senior VP Eddy Cue, who recently was put in charge of Maps and Siri amidst a management shakeup that saw the departure of iOS chief Scott Forstall. [View news story]
    The answer depends on if you are long, short or indifferent.
    Nov 27 08:38 PM | 1 Like Like |Link to Comment
  • Is Occidental Petroleum Oversold? [View article]
    NGL price decline in general not just permian, plug it into your model versus 1 year ago and see how it impacts your run rate cash flow. If OXY was worth $100 per share a year ago, just based on this one line-item change you are around $90 (very rough of course). Short of giving you my model, I am not sure how to walk you through this, I assume you have some sort of model where you can input the value impact of commodity price changes.
    Nov 27 08:02 PM | Likes Like |Link to Comment
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