Jonathan Verenger

Long/short equity, growth at reasonable price, deep value, research analyst
Jonathan Verenger
Long/short equity, growth at reasonable price, deep value, research analyst
Contributor since: 2012
Twitter is a glorified message board. It's not that revolutionary of a product. If they just focused on real time search it would be more valuable but they're unwilling to commit to pivoting their business model. In its current form it's not worth that much
Taser is a solid company. Problem is the stock is expensive
Couple of things:
"This is evident in the fact that Bitauto cannot close the size gap with Autohome despite backing from Baidu (NASDAQ:BIDU). Additionally, despite the rising competition threat to ARPU, gross margins have risen every year since 2010."
1.) Autohome is actually already signed on with BIDU:
http://bit.ly/1YmzkEQ
2.) BITA actually has more subs than ATHM at 21,400
3.) BITA garners a significant amount of traffic through partnerships like JD and Tencent's WeChat so looking just at monthly unique visitors is a bit misleading.
Also, there's some issue with the ownership structure for ATHM. Telstra owns a significant chunk and has expressed an interest to sell. Conversely BITA just had a big purchase from JD / TCEHY so they likely won't sell and more likely might buy.
Just some of my thoughts.
That is my thinking. Will take a longer time to develop than CTRP. But maybe within a decade. Keep an eye on EXPE entering the market too. I don't know if they would partner up with MMYT or go it alone.
If only this game was so easy as to pick winners every time. In order to stay in the game long enough you need to cut your losses quickly. I took a hit on this and just moved on. I'm sorry again if you followed me.
Crazy how much this dropped. I ended up taking a 30% hit on this stock. I typically draw the line at 15% but this dropped so fast I didn't get out in time. I'm sorry to have picked this one. You have to draw the line somewhere on your losses and recognize that the market knows more than you do. Clearly some fraud was going on here.
Unbelievable huh? This market is lethal. The only advice I can give is to cut losses quickly. I've found so many times that the first sale I make is the best one.
My take:
*this had some momentum traders behind it who bailed
*the market is so jumpy right now
*sell the news
*stops got cleaned out
*shorts pressed
*then some people spread the news about the writer that brought a lawsuit on 10/8 against the writers of Bajrangi Bhaijaan which is due to go on trial and the judge ordered that the revenues be held until the trial in 2 weeks and people panicked.
The lawsuit, by the way, is a claim that the story was stolen from another writer who is seeking $7.7 Million in damages and that he have his name added to the script. EROS was not the writer or producer, just the distributor, so if that was the reason for a majority of the selloff then a $400 to $500 Million market cap hit for a $7.7 million suit which EROS most likely has no liability for is a bit of an over reaction.
The selloff yesterday could have been exacerbated by fears about a lawsuit that was filed claiming the biggest hit of the year in India was copied. The writer filing the suit is asking for $7.7 Million and for his name to be added to the film.
http://bit.ly/1Gf73NA
The courts are holding up releasing the revenues from it until the trial is done which i think is in 2 weeks. I don’t believe EROS is at fault either way because they didn't write or produce the film - they just signed a deal with the producer to distribute it. Probably reason people panic sold.
Either way its amazing that a $7.7 Million lawsuit could potentially be the reason behind a $450 Million market cap drop.
If you're not long yet I think this is a good opportunity to buy.
Abu - Thanks for the reply. Today was a horrendous day for the stock, clearly. People have to be very honest with themselves on how long they want to hold it and how much pain they can take. This is no doubt a risky company given that it is based out of India and rules and regulations are different there than the US. But the upside is potentially quite large.
I've heard the pirating thing a lot and it reminds me of the US 15-20 years ago. Napster and all of the other sites that were set up to pirate content have more or less been squashed. New ones come up but they get squashed again and people have to deal with pop ups and potential viruses from the new sites. Some people may be ok with it but a lot of people will come to realize the value you get with streaming type services is worth the small investment.
EROS allows free viewing with ads and I think this platform alone could generate significant ad revenues. If they can grow it into a critical mass type app then I could see it becoming something like a social networking app as well, a la Tencent (TCEHY). Movies / tv shows are "sticky".
Again, best to keep the position small and be honest with yourself about how much risk you can tolerate.
Can it be somewhere in between?
I think it's wise to view these Indian plays with a very long term view. When you have less than 90 million people out of 1.2 billion using broadband, there's just tremendous opportunity for growth
I've been long this for the good majority of 3 years now and have seen so many short sellers complain about silly things like the dual class structure over that time. It's a wonderful business. Stay long
Balanced comment Valu Buyer. I agree with both sides.
I have been buying back into TA since I wrote my last article and sold after it ran up to $16. I like the valuation a lot down here.
Good call. Just saw a downgrade note from S&P
I agree on YRCW. I think this is a good speculation. I do expect lower prices in the market over the fall so might make sense to leg into this one.
Good article. If I compare BITA and ATHM, I come up with a few things clearly in favor of BITA:
1.) Valuation:
EV to TTM Sales is almost absurdly skewed in BITAs favor. $1.8 Billion market cap less $825 Million cash = $975 Million market cap. TTM Sales of $531M means a multiple of 1.8. ATHM is at about 7.6.
While I agree with the issues you raised about non-GAAP earnings with regards to amort, it does make sense to normalize BITA's earnings as the amort issue will go away down the road and they are clearly currently overspending relative to recent history as they get their partnership with JD/TCEHY off the ground. I don't think it's smart to use current year EPS / free cash flow because of this.
2.) Entrepreneurial founder with 15% stake vs somewhat flailing corp holder with 50%+ stake. In this scenario I will choose the one with the entrepreneurial founder with a substantial stake every single day of the week. At any moment's notice Telstra may feel compelled to take money off the table and create a major psychological overhang for the company. And the entrepreneur founder is almost always willing to take more risk to see through to his vision. Great example of this is FB vs TWTR.
On the flip side, ATHM has much higher net margins and has had much steadier income growth. But this also might be a case of them not spending a lot on the used car market and transactions segment, which may indeed become huge parts of their business model going forward. This may again come back to them being run by a corporation looking to maximize near term profits at the expense of longer term survival.
So perhaps ATHM's investment cycle hasn't kicked into gear and the opposite may be true with them vs BITA: it might make more sense to "normalize" ATHM's earnings downward to reflect increased spending for these two segments.
In general, with internet businesses, I always am more willing to buy companies whose management team / largest shareholders consist of entrepreneurial founders vs corporations. They tend to have longer term visions of where the future of the business is heading and are willing to sacrifice profits now for potential domination of their segment down the road.
I'm still researching these two companies, but on paper it also seems to me that ATHM should take advantage of BITA's recent 70% haircut and just buy them out. That would eliminate a helluva lot of duplicate spending in marketing / advertising their current business models as well as duplicate spending in rolling out their used car and transaction based businesses.
Thanks for the idea Yeti. I typically stay away from the energy markets because I have never been able to figure out how to value oil.
"because it could go either way from here. " You said it perfectly. How could I possibly know? What if the Indian economy continues to strengthen and oil stays low...would that not inevitably be good for the rupee?
Also, consider the flipside to a strong dollar: extra demand for international travel to locations other than the US. What if a low currency is good for travel to Europe? The company mentioned this in the conference call:
"On the packages business side, our push on the long-haul travel resulted in high growth of Europe outbound bookings."
And if you look at international travel, the CAGR is actually higher (44% vs 27% for domestic) and accelerating recently (maybe b/c of the strong dollar?). See below:
YEAR International Transactions Growth
2008 - 35,644
2009 - 45,497 +27.64%
2010 - 93,757 +106.07%
2011 - 146,033 +55.76%
2012 - 185,623 +27.11%
2013 - 241,388 +30.04%
2014 - 327,392 +35.63%
2015 - 463,375 +41.54%
International transactions have grown from 3% of total air travel to 9%. Within a few years this could be a huge boost to their average ticket price, which I didn't include in my projections because international travel means much higher ticket values and higher revenues for MMYT, helping offset currency effects. You can't just look at the currency moves in a vacuum which is why I left it out.
True. I have no way of knowing currency exchange rates so I left that analysis out.
Thanks for reading.
Did you read my article above? I believe I highlighted each of these points (ie I included reduced margins as well as falling avg prices per ticket/hotel stay in my projections, talked about how despite competition MMYT is increasing market share, showed the 11% CAGR in the aviation industry since 2000, etc.).
I like what Jeff Gundlach said about India: "When I mention the Indian equity market, people bring out these negatives. And I say, well, that means there's room for improvement."
To that point, what happens if middle class growth outperforms (as does disposable income), if my assumptions on declining commissions / avg transaction prices don't come true, and if Indian aviation growth outperforms my assumed 11% CAGR? My assumptions above don't include those upsides and you're still looking at a potential home run investment. What the stock does in the short term is anyone's guess, but I really like it as a long term investment down here at $14.
Keep in mind economic reforms began in China about 15 years before India, hence the lag. Growth in China began picking up over a decade ago and I believe India is following suit right now. I'm not saying this will occur overnight but the tailwind will get stronger and stronger. It's already beginning with 8-10% GDP growth and a big pickup in domestic air traffic over the past 12 months. Don't ignore the positive impact falling oil will have on the Indian economy. This will (and has if 20% passenger growth is any indication) spill over to more disposable income for traveling.
Take a look at this chart of Chinese GDP growth:
http://tinyurl.com/pkm...
India currently has roughly the same population as China and same China had in 2006.
Worth repeating Gundlach's comment: "When I mention Indian equity market, people bring out these negatives. And I say, well, that means there's room for improvement".
Thanks T's. I looked at your profile and like your investing mantra, although I've always said "Good things tend to happen to cheap stocks". One word of advice I can give to someone that is young is to have your own opinion and never be afraid to voice it. When it comes to the market, if you like an investment thesis and everyone else hates it, you're probably on to something.
Thanks for reading. Always important to remain skeptical and challenge conventional thinking. As far as high compound top line growth goes, I agree. I have been tracking total combined transaction growth on MMYT's platform for air/H&P and that does show 40% growth last year and 38% growth this year so far. I think this is a better indication of the growth MMYT is experiencing. Currency / margins etc are all noise right now in my opinion.
As far as India goes, I like what Gundlach says "When I mention Indian equity market, people bring out these negatives. And I say, well, that means there's room for improvement". There's pretty significant momentum building in the Indian infrastructure buildout. The big dog AMZN has committed $5 Billion to India which is a pretty significant sign in my opinion. I can think of a lot worse speculations than investing in a country with 1.3 Billion people growing 8% a year.
Wow you're still going after zillow after all these years. Persistence
"I think a far better methodology would be the sum of the market caps divided by the sum of the adjusted earnings. "
I actually did this above but adjusted it by the weighting of each holding.
The P/E measure is a fairly useful measure in determining extremes for any given security. In this case I'm looking at the biotech ETF. Doesn't mean it applies to all biotechs but it applies to all biotechs within IBB. Remember, back in 2000, which is a pretty good period to compare this current biotech period with (due to the similarities in returns / valuations I mentioned in my article), the Nasdaq was made up of a ton of "highly volatile, hyper growth, smid caps". The P/E was fairly reasonable in the 20ish range in 2007 then it went through a parabolic rise above 100x. Interestingly, when the Nasdaq bottomed out in 2002 it was around the same levels it was at in 1997. I think there's merit to using this as a way to gauge extremes in valuation.
Not sure you read my article. I'm looking at valuations of the entire index, just as you quoted me in your post above:
"Valuations in biotechs as represented by the IBB ETF are on par with the peak valuations in tech stocks in 2000"
My entire article goes through the calculation of PE for IBB in its entirety (not just GILD AMGN CELG).
Hope that helps
Thanks for the reply. What do you think is a reasonable valuation for the IBB index?
What type of stuff are you working on? I love biotech in general, just very mindful of the valuations across the board. I would need to see a very significant correction (at least 50%) to get valuations even close to what I would call interesting.
Thanks for the friendly comment. Like dieuwer says below, I would stick to the cheaper big caps or ones you feel you have an edge on. The overall ibb index is extraordinarily expensive as a whole
James - Do you have any concerns about valuations in some sectors like the biotechs? see this article, which shows a PE for the biotech sector of 100 or so (apparently iShares doesn't include money losing companies in their calculation of PE which this article covers):
http://bit.ly/1H8EECw
I'm a bit concerned about this spilling over to the broader indexes.