Joe Friday

Earnings Will Sink Blue Nile's Stock

The real fools are the investors who entrust their money to those managers. If my money was in one of their funds I would be calling them up to find out their ratioinale for investing my money in NILE. That would be a fascinating conversation.

Earnings Will Sink Blue Nile's Stock

This is indeed a highly manipulated stock. It does not trade on valuation. Nobody in the market could possibly justify the purchase of this stock on any valuation metric (which begs the question...why are the institutions holding it?)
The key here is float analysis. The total share issuance is 14M.

According to Yahoo, 126% of all the shares outstanding are held by institutions and 3% are held by insiders finance.yahoo.com/q/mh.... I am not sure how this is possible, and it may not be entirely accurate, but it helps explain the manipulation. There is virtually no truly free float for the retail investors.
The total number of shorted shares is now 2.7M. But, it is important to note that during the run from 20 in March to 66 last week, the short position declined from 6M to 2.7M. With the float as tightly tied up as it has been, each bump in price has caused more and more weak shorts to cover (margin calls), and it has been hard to borrow, adding more short squeeze fuel. The short squeezes combined with the tight float has forced the price higher and higher. If you watch the trading in this stock you will note a tendency to have it run up in the early trading based on the margin calls and borrow calls from the previous day.
The tight float is indeed a two edged sword, however. Any large holder that trys to exit will drive this down very quickly. Nobody reallly beleives this stock is "worth" 65. The question the institutions need to grapple with is how do they exit and get their hands on the mirage value. In addition, the 3M shares that have covered are all waiting on the sidelines hoping to get in for the ride down...Any combination of selling of any size from those burned shorts or any one institution that trys to exit will burst the balloon.
The question is when will that happen, and can the shorts still holding wait until it does.

"the market can remain irrational longer than you can remain solvent" .. I believe the quote is attributed to Bernard Baruch.

Retail Sector Rebounds (Part II): All That Glitters

Odd that you would suggest that Fossil's p/e was a little rich at 17, but fail to mention that Nile is trading at a p/e of 92.

In general your "analysis", is exceedingly simplistic.

Blue Nile: Trading on Thin Air

if you watch the trading in this stock you will note very large swings on very little volume, especially on the open. There is very litte in the "public" float. Shorts that have to cover for margin or borrow reasons have no option but to pay up to buy the shares, and the market makers have enough control on the float to ensure they pay a healthy premium to cover. This is a classic short squeeze stock.
About 3M shares have been covered in the last six months, and this is the source of most of the run. It is not possible to justify the purchase of Nile on any other basis.
Those shorts that have covered are likely waiting to pounce on any weakness, and when they do the market makers will not pick up the paper on the way down. In addition, it is not possible to exit from this stock with any position of size without dramatically reducing the price. Thin floats are a two edged sword.

Why I'm Exiting Greenhill & Co.

The existing shareholders are wise to sell. Anyone that will give them 76 dollars for their shares should have their head examined. This is probably among the most overvalued stocks on the market today.

Has the Well of Merrill REIT Offerings Suddenly Run Dry?

thanks for pointing out that the sale has taken place. It appears that SPG did not consider this transaction to be material, and therefore worth disclosing. The important point, in my view, to come from this transaction is an indication as to current market valuations (ie where are cap rates and price per foot values today on these types of malls). Extrapolating current market cap rates to the remaining SPG portfolio will likely show, in my view, that the "equity" carried on the SPG balance sheet is not real.

Greenhill's Skill of Lifting Talent Is Golden

At 50x trailing eps, GHL is trading at bubble levels. Note that their earnings are not,for the most part, predicitable or recurring but rather will always depend on the vagaries of their advisory business. The one recurring reveneue stream they have is their capital management business which generates income from the management of a series of partnerships. All of those partnerhships have lockup periods that will start to come to an end in the next year or so...Given the poor performance of all of these funds, one would expect redemptions from most investors at the first opportunity.
The book value of the company is approximatley 6 dollars a share.
At 12x book and 50x eps I would not be long GHL.
for a more detailed analysis see seekingalpha.com/artic...

The Bull Case for Simon Property Group

when it comes to malls, one always needs to keep in mind that it doesn't take many vacancies or bad debt tenants to result in negative cash flow. A typical mall lease is alwasy net net to the landlord, losing a tenant means not only losing base rent, but, in addition the contribution of that tenant towards operating costs and taxes. If you believe that either vacancies will be on the rise, or that rents will be lower on renewal for any maturing leases, then you want to avoid the mall owners. They are at risk. The effect of the retail problems is not immediate, but it is inevitable.
In the case of SPG specifically, one should be concerned about their very large exposure to Macy's. If M closes a significant number of stores, that would be very costly for SPG. In general, SPG is probably a better short than a long.

S&P Downgrades Investment Bank for Being Too Good at Investment Banking

I suspect that S & P may have been referring to the requirement that only entities that have managed 10B can participate in the public private partnerships to buy up the "toxic" assets. GHL does not meet that criteria, and cannot therefore participate in that program.
As to GHL itself, it is overvalued on any possible metric. See my previous post for backup. Note that it is thinly traded and has a high short interest.
seekingalpha.com/artic...

Four Factors Guiding Blue Nile's Price Range

Your article omits a few salient facts.
1. They withdrew guidance. A clear indication that they believe that trends are worsening. The retail environment is terrible, and Nile is not immune to the economic reality of the moment.
2. They indicated in the cc that sales in the currnet quarter are trending off 15% already, and in my view they are likely to get worse before we see any improvement. In the first q of 2008 their gross revenues were 70M. That would indicate they are trending towards gross revenues of approx 59.5M for this quarter.
3. Their gross margins for the last quarter and the last year are about 21%, resulting in expected gross profits for the current q of about 12.4M.
4. S G and A last quarter was 12.4M, and that should be very close to the current overhead run rate.
5. At a revenue run rate of 59-60M they break even! That is what the facts provided during the cc would indicate.
6. Any deterioration from a revenue run rate of at least 60M/q will result in losses.

Turning to their balance sheet, it is important to note as follows.

1. Although they ended the December q with 54M in cash, they also had 63M in trade payables!!
2. In addition, their inventories were 19M at the end of the q, a decline of about 10% from the prior year, though revenues for the q were down 20%.
3. Current assets exceeded Current liabilites at the end of the quarter by only 8M. They don't have much on the balance sheet other than current assets and libailbities. Book Value, if you accept all values as accurate was 19M at the end of the quarter.
4. There are just under 15M diluted shares outstanding, resulting in a stated book value of 1.26/share. Any write down of inventory or fixed assets would reduce that number further.

At current trading levels the stock is trading at almost 17 x book!
At current trading levels, the stock is trading at an infinte p/e. there is no "e".
Management will not have the cash resources to support the stock price for much longer. Note they used their cash to buy back 66M worth of stock in 2008 (it appears they reduced the diluted share count by 2M shares for an average of about 33/share). Without the management bid in the market, the only other logical source of support is short buy backs. Once they dissipate, the stock should descend.

Given these facts, it is very hard to understand how anyone, let alone someone who is employed as an analyst could recommend this stock.

As Housing Market Struggles, Homebuilders Focus on Survival

Good Article. The one remaining piece of the puzzle after one analyzes the cash position of each builder, is determining when their loans mature and the cash balances start to decline. The cash builds are really the result of the homebuilders selling their inventory and not reinvesting the proceecds. Rather they are buidling cash in the hopes it will last long enough to get them through the storm. It is the equivalent of "burning the furniture to stay warm'. The builders who have large debt maturities in these next couple of years, may find it hard to survive.

Abercrombie's 2009 Strategy Yields Favorable Results

I think that one should be careful in giving Abercrombie too much credit.
Their strategy of holding pricing has resulted in significant same store sales declines last quarter (25%).
Even more ominous is their inventory build. In the fourth quarter last year they did 1.228M in sales and ended the quarter with 333M in inventory (24 days of sales).
In the fourth quarter just ended they did 997M in sales and ended the q with 373M in inventory (34 days).
As their CEO likes to portray them, they are an "aspirational" brand. I would avoid any company with that approach in this market environment.

Homebuilders Agree: January Was A Good Month

I listened to the cc for both CTX and RYL and there was a note of optimism with respect to the January numbers on both calls.
It is my view, however, that the January results were likely an anomaly and not an indicator of a change in trend. All economic indicators continue to deteriorate. My guess (note only a guess) is that there may have been some optimism tied to the Obama effect in January. We will see if there is a confirmed trend in the next couple of months.

Under Armour Will Overcome

NIKE trades at a p/e of 12.5 (trailing). UA has traded at a premium because it was a growth stock, but that growth has taken a pause in this market enviroment. They are a great company and deserve a lot of credit for building a great brand. The question to be determined, though is what their realistic value is. If you give them a slight premium multiple to NKE (say 15), then with their current earnings at .79 and perhaps a buck next year, they are probably fairly valued at between 12-15 dollars.

Why Won't GM Just Go Away?

Andrew, your thesis is accurate. the TARP loan for GM was a complete waste of taxpayer money. It was a transfer of wealth from future taxpayers to current GM employees, retirees and bond holders. With the exception of a few of senators, the hearings betrayed the complete ignorance of the politicians. The loan was entirely political, and it won't reverse the inevitiable chap 11 for GM, but only delay it.