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Jonathan Selsick

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  • J.C. Penney: Realistic Possibilities In The Face Of Serious Liquidity Issues [View article]
    I'm not really sure how to put a dollar value on the observation was more simple in the sense that the jcp name still attracts eyeballs comparable to Macy's and Kohl's, so the name still resonates with a large number of people.

    Agree with you on the capex being ordinary expenses for the most part, on the items you list in the article.
    Feb 5 01:27 PM | Likes Like |Link to Comment
  • J.C. Penney: Realistic Possibilities In The Face Of Serious Liquidity Issues [View article]
    Great analysis..makes it clear that without a meaningful "snap back" that the outlook is bleak.

    The Home segment is the one that has seen the worst decline since 2010, going from 18% of revenues in 2010 down to 12% in 2012. In the first half of 2013 it was mostly "closed for remodeling" so my guess is that 2013 Home contribution will be even worse. I was hopeful when I saw Home represented 50% of their sales in Q3, however Ullman does not mention it in today's release so I'm guessing the in-store performance of Home is still weak. In general, I think the Home improvement sector is strong, and the company has stated that fixing Home is a priority, but it remains to be seen whether all their new designer lines can gain traction.

    The online business is showing the best growth, with traffic stats that are comparable to both Macy's and Kohl's. is still ranked very high which confirms for me that the brand still has value. Nevertheless with online sales just north of $1.1 billion this year we would need to see this increase significantly to make a meaningful contribution to the "snap back".

    Time is not on their side and there are some significant headwinds like declining mall traffic.

    Starbucks did have a bounce back after Howard Schultz returned to the company, but granted they weren't in as precarious a position as JCP is now. Their choice of new CEO to replace Ullman will be very important. Will be interesting to see how it plays out.

    With implied volatility so high, selling the Jan 2016 $3 or $4 puts seems better than being long the stock, for anyone so inclined.
    Feb 5 01:24 AM | 2 Likes Like |Link to Comment
  • PotBelly: More Downside Ahead [View article]
    Nice article..well thought out. Agree that it's all about growing store count and being able to maintain margins. Perhaps they can ramp up faster and/or possibly do more international deals like the Middle East, but at the current pace I think your valuation methodology is very generous.
    Jan 23 03:40 PM | Likes Like |Link to Comment
  • Are VQT And PHDG Investments Or Hedging Tools? [View article]
    Krystof, appreciate the feedback. I think deciding on a ratio of VEQTOR:SPY will depend on your own risk preferences and how much of a drawdown you wish to tolerate. We may be overcomplicating the thought process here, but if I were to get back to the basics I would summarize as follows:

    The two key ideas behind VEQTOR are : 1) volatility is negatively correlated with SPY, and 2) that volatility/changes in volatility are predictive of future SPY performance. If you have satisfied yourself that both of these are true more often than not, and wish to use volatility as a market timing mechanism, then there are different ways to adjust your SPY exposure to suit your own risk preferences, either by using a product like VEQTOR, or VXX, or simply lowering your SPY exposure.

    Nov 19 02:55 AM | Likes Like |Link to Comment
  • Are VQT And PHDG Investments Or Hedging Tools? [View article]
    Krystoff, thanks for the encouragement.

    Just wanted to clarify that I am not using T-bills as a hedging mechanism. Like the VEQTOR my model uses volatility to determine the net equity exposure, which could be 100% long to 100% short. The percent of the portfolio not invested in equities is put into short term T-bills simply as a safe repository for the excess cash not invested in SPY. The returns from the T-bills are immaterial to the performance of the model.

    The point I was trying to make was that being long SPY and VXX in some ratio is basically the same as being net long or short the SPY in some percentage, and that you can achieve the same or better results as VEQTOR without using a volatility product (VXX), by simply adjusting your net SPY exposure.
    Nov 17 04:56 PM | 1 Like Like |Link to Comment
  • Are VQT And PHDG Investments Or Hedging Tools? [View article]
    Elliott, you are correct. If you are holding 50% of SPY and 50% of VQT, and VQT is comprised of say 50% of SPY and 50% VXX then technically you are holding a portfolio of 75% SPY and 25% VXX.

    The idea behind VQT, i.e. using volatility to time the market is meaningful and the results have been good historically based on their input parameters. Implementing it via VQT is a bit of a paradox because holding VQT is essentially the same thing as being long the SPY and short the SPY, in some ratio, at the same time; might as well be simply net long or net short a certain percentage.

    I have a model that measures volatility in a different way to VQT but nevertheless allocates exposure between SPY (long or short) and T-Bills dynamically, based on the risk profile plus an additional valuation filter. There is no need to own volatility futures, and the model actually outperforms the VQT over a 10 year back-test on all measures (higher returns, higher sharpe and lower drawdowns).
    Nov 14 02:42 AM | Likes Like |Link to Comment
  • Are VQT And PHDG Investments Or Hedging Tools? [View article]
    I re-created the VEQTOR index to compare to a similar volatility based product I developed, and have back-tested the VEQTOR from 2003 till 2013. There are some minor differences between my re-created VEQTOR index performance and the actual VEQTOR index performance (I re-balanced my VEQTOR model weekly, and used the VIX to measure returns as opposed to the near term VIX futures), but the differences are very slight.

    The average annual return over the 10 years was 14.03% with a standard deviation of 12.54% based on weekly returns annualized. The largest rolling 12 month draw-down was 16.91%. As Fred indicates, it generally lags the SPY slightly in bull markets but does well during extended draw-down periods in the SPY. It did not do well in the flash crash but did okay in the 2011 debt crisis period.

    Some things worth knowing about the VEQTOR index:

    1) It is essentially a volatility trend following system. When volatility picks up it increases the allocation to volatility, so it's betting that the trend will continue. It therefore has the same drawbacks as any trend following system; sensitivity to choice of moving average periods etc.

    2) There are many parameters in implementing the methodology; 5 to classify the different levels of volatility, 3 to determine the moving average trend, and then 15 for position sizing. There are also a few for their stop loss provision. The parameters they have chosen are reasonable but the results are definitely sensitive to changes in some of the variables, as are most of these types of models with many variables. In any model that has been optimized, you should understand how sensitive the results are to changes in inputs.

    3) The model continues to add to volatility exposure even at very high levels of volatility. Historically, the highest returns to the SPY have come shortly after periods of very high volatility, so this is counter intuitive. Depending on the choice of moving average period, the model may or may not capture the recovery.

    That being said, the concept behind the model is very good and so far the index has held up well. I think their choice of inputs seems reasonable, but you should understand what you are buying into.
    Nov 3 02:42 PM | 1 Like Like |Link to Comment
  • A Macro Approach To Forecast The S&P500 [View article]
    Lance, it would be interesting to see the a chart showing the historical correlation (1960 - 2012, or at least 1990 - 2012) between the actual S&P index level and the level derived using the p/e multiple from your first article, multiplied by the earnings derived from this article. Thanks.
    Aug 11 01:05 AM | 2 Likes Like |Link to Comment
  • Hertz - Still Good Risk-Reward? [View article]
    Nice piece Chris.
    Aug 5 01:07 AM | Likes Like |Link to Comment
  • Long 3D Systems Corp [View article]

    FYI Protolabs is not a 3D printing company at all. They are a rapid prototyping company, using CNC and injection molding, but not 3D printing technology. From their website:

    "Proto Labs is the world’s fastest provider of CNC machined and injection molded parts. Our Firstcut and Protomold services utilize proprietary computing technologies and automated manufacturing systems to provide both prototype and short-run production parts. "

    Rapid prototyping using 3D printing is trying to gain traction in their space. There are some very good discussions about the merits and hype of 3D printing on their blog located here:

    Best of luck to you.
    Jul 19 02:19 PM | 2 Likes Like |Link to Comment
  • 3D Systems: Food For Thought... And Concern [View article]
    Hi Mark, I was perusing your website tonight and noticed the article you wrote, challenging the projections for the 3D printing market by IDTechEx. I also read their summary of their report located here, which has some insightful comments, particularly about the home market.

    Their report projects a total market size of $4 billion by 2025, versus the $10.8 billion projected by Wohler's by 2021. So they are projecting a market size of approximately one third projected by Wohler's, which is a significant difference. This would make the valuations of all the 3D companies even more absurd than what I had presented. Also interesting from the chart in your article that they project market size to decline for the next two years.

    You obviously have a good take on the industry, but can you give some color on specifically where you think the exponential growth is going to come from, and what IDTechEx might be overlooking.

    Many thanks
    Jul 12 01:27 AM | Likes Like |Link to Comment
  • 3D Systems: Food For Thought... And Concern [View article]
    Ira, I think that it definitely will make the adoption of the technology more user friendly to the home user, making it just as accessible as a 2D printer. So far most of the users have been hobbyists, and I do see it as an exciting educational tool or toy for kids.

    In terms of market size recalibration, I simply don't know the answer. I don't believe it's a surprise to industry insiders. If you watch this recent TED video ( of Terry Wohler's regarding the applications for 3D printing, it is clear that he is aware of the exciting possibilities.

    The Wohler's report, quoting from Wohlers "was produced with help from 70 co-authors in 21 countries, as well as 74 service providers and 31 system manufacturers from around the world." So its a fairly broad based spectrum of input, but I cannot say whether something like the Miscrosoft participation is anticipated in the forecast.
    Jun 27 03:31 PM | 1 Like Like |Link to Comment
  • 3D Systems: Food For Thought... And Concern [View article]
    Glenn, the choice of discount rate reflects the risk entailed in reaching Wohlers industry size projections. I don't think 15% is unrealistic if you consider typical yields across the risk spectrum; say 5% for AAA corporate bonds up to 25% or 30% for venture capital transactions.

    While I agree with you that the industry has phenomenal implications for many other industries, all I am saying is that based on the most authoritative estimates of where the market will be in 8 years, and ascribing a value to the entire industry based on that size, in today's dollars (using the 15% discount rate), that DDD, by itself, is being valued at almost the entire value for the whole industry - even though they currently have about a 16% market share.

    To value DDD as you say "predicated on the possibility of a breakthrough that catapults it in an unforeseen way" is investing simply based on hope.

    Thanks for the response and I will take a look at "Makers".
    Jun 26 07:55 PM | 2 Likes Like |Link to Comment
  • 3D Systems: Food For Thought... And Concern [View article]
    Agree XONE, with a market cap of around $700 million seems very overvalued too. In 2012 they sold 13 machines for a total revenue of $28 million and a net loss for the year of about $10 million. In Q1 of this year they sold 5 machines. With a gross margin of 42% in 2012, they would have to sell about 200 machines each year to justify a $700 million value. That's about a ten fold increase from this years run rate.
    Jun 26 01:18 PM | 1 Like Like |Link to Comment
  • 3D Systems: Food For Thought... And Concern [View article]
    Opportunist, I agree that the analysis hinges on the credibility of Wohlers research. They do appear to be the authority on the industry, and I since 3D Systems cite Wohlers research in their own investor presentations, I think that is confirmation of Wohlers credibility, and 3D Systems tacit acknowledgement that Wohlers growth projections look rosy enough. If 3D Systems had another authoritative source with better projections, I'm sure we would have seen those instead.

    I do agree that SSYS, without extensive knowledge of the company, does seem like a more focused company, with a significantly higher market share of installed printers than 3D Systems. Thanks for the response and I'll check out your website.
    Jun 25 08:24 PM | 1 Like Like |Link to Comment