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Joseph Levy

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  • As Coal Heats Up, 3 Companies With Persuasive Coal Stories [View article]
    I did take a look at the company (SCEI). You can click on the link below to see info about operating results, balance sheets and other metrics:

    spreadsheets.google.co...

    However, I would caution anyone to be somewhat skeptical about the numbers reported by this company. They have been notoriously late in submitting their filings (10K's etc) to the SEC. Also some of the amounts reported are atypical. For example in 2009 they reported other expenses of $11 million related to escrow shares; $25 million for the cost of a private placement; and $5.7 million of net derivative losses. Similarly there were unusual income and expense (loss) amounts for the six months ended 06-30-10.

    They have reported impressive growth in sales after 2007. I will continue to follow the stock in the future but personally I won't do anything until I'm comfortable that their reported numbers are accurate.
    Oct 6 10:51 PM | 2 Likes Like |Link to Comment
  • Is Apple Worth 8.4 X Research in Motion? [View article]
    Whenever there are a lot of comments to an article I like to send back my thoughts. Today, I was out of my office all day and the same will be true tomorrow. Therefore, I will probably post my comments late on Wednesday. Thanks for your interest and while the consensus was against my analysis I do appreciate your comments (except for one).

    Best

    Joe
    Jun 28 11:48 PM | 2 Likes Like |Link to Comment
  • Breaking Up Goldman: A History Lesson [View article]
    Those of us who look closely at fundamentals and search for value (combined with potential for future growth), did not buy stocks selling at ridiculous multiples of analyzed sales and operating with large losses, even back then. What makes it shameful is that GS was considered the "cream of the crop" of investment bankers and had the smartest people in finance working for them. They were the leaders in the industry and were setting the standard. Unfortunately, they literally sold their clients "short" and profited handsomely from shamefully overpriced stocks that were anything but the long-term "growth stocks" marketed and hyped by them. Goldman acted in the same greedy and unethical way more than a decade ago as they are accused of today (for their actions during recent years). They have been sued numerous times for alleged improper actions since going public in 1999 and continuing up to the present time ...... and that will continue in the future as long as the culture of super greed exists at the company.
    Jun 22 12:30 AM | 2 Likes Like |Link to Comment
  • What to Buy in China [View article]
    Thanks for the info on CYD. I did take a quick look and it appears cheap in relation to earnings but the balance sheet gives me some concerns. Total liabilities are increasing quicker than shareholders equity and cash and I can't view it the same way I research the companies I follow. My starting point for researching any company is to download info into a programmed 5 page excel spread sheet that picks up info automatically from 10K and 10Q filings. I use the I-Metrix service for this, which allows me to get annual info from 2003-2006 and quarterly data thereafter (takes approximately about one minute). My worksheet also has built in formulas and I add data about historical prices, consensus estimates etc. I could not do this for CYD because they file 20-F and 6K, which don't get picked up by I-Metrix. There are so many companies to look at that I automatically eliminate those where I can't download from I-Metrix the info to my 5 page worksheet report. Good Luck with CYD
    May 18 02:02 AM | 2 Likes Like |Link to Comment
  • Top 10 Pick: Amazon Financials Understate Growth [View article]
    Hi Arne,

    I wish I could be as optimistic as you. From what I see we are heading towards some type of major financial disaster.

    Federal budget deficits peaked in 1992 at $290 billion. Thereafter deficits declined each succeeding year, until going green to a surplus of $69 billion in 1998. Surpluses increased each year from 1998 through 2000 ($236 billion surplus) and then declined to a surplus of $126 billion in 2001 before going red in 2002.

    From 2002 through 2008 the annual deficits ranged from $158 billion to $459 billion and averaged $305 billion during those seven years.

    In 2009, the deficit ballooned to $1.4 trillion. One could argue that the $800+ billion "stimulus" was the primary cause of the gigantic 2009 deficit. However, the annual deficits for 2010 ($1.29 trillion), 2011 ($1.30 trillion) plus the estimated 2012 deficit ($1.33 trillion) are out of control and suggest we have had four straight years (not just one year) of enormous “stimulus” spending.

    The bottom line is that we have had an $800+ billion "stimulus" in each of the past four years, coupled with historically low interest rates bordering on 0%. We have little to show for the financial lunacy, besides the $16+ trillion and growing debt, and declining GDP growth, now at an annual rate under 1.5%. Not only has the U.S. been living off a credit card but the irony is that we are following the examples of Greece, Spain, Italy, California etc. What's the saying about learning from history???????

    I am curious what makes you optimistic?

    My investment strategy today is very defensive and includes the following: Covered calls with short term expiration's; Long in the money puts with expiration's in 2014 and 2015; Long a limited number of micro-caps that I'm willing to hold for years; and Short a limited number of equities, including Amazon.

    I think Amazon is a very good company that lacks financial discipline. As you know, depending on the stock price, a very good company can also turn out to be a poor investment.

    Good luck on your other investments besides AMZN and please let me know why you are so bullish?

    Best,


    Joe
    Oct 24 05:02 PM | 1 Like Like |Link to Comment
  • Apple Is Worth More Than 8X RIM, But... [View article]
    I previously disclosed that I sold my position in RIMM before the end of 2010, basically breaking even when the stock was trading in the 50's.

    When playing golf with friends I joke that the only thing more humbling than playing golf is investing in stocks. I think my article about RIMM vs. APPL is a perfect example of this. I no longer follow RIMM and don't have an opinion about the stock today.
    Aug 29 11:20 PM | 1 Like Like |Link to Comment
  • Is Apple Worth 8.4 X Research in Motion? [View article]
    You are correct. However, as disclosed in my article discussing my 2010 performance I closed my RIMM position during 2010 at a breakeven. It is important to be flexible when making investment decisions both on the upside as well as on the downside. Apple is an incredible company that has achieved remarkable performance in the last 5 years.
    Jan 14 10:58 PM | 1 Like Like |Link to Comment
  • My 2010 Results: 8 Up and 2 Down (Average Net Increase +35.9%) [View article]
    HRBN is very cheap in relation to its fundamentals as are many China small cap and micro-cap companies including SORL and WATG. HRBN's sales and earnings have been good with sales and EPS going from $23.6 million/$0.66 in 2005, to $40.4 million/$1.01 in 2006, $65.4 million/$0.91 in 2007, $120.8 million/$1.20 in 2008, $223.2 million/$0.94 in 2009 and $427.5 million/$2.76 in the 12 months ended 09-30-2010 and analysts are estimating sales of $500.7 million for 2011 with EPS of $3.05.

    In 2010 the stock traded in a range from a low of $14.95 to a high of $26 ... thus the current price ($18.08) is much closer to the low end of the range. I don't own HRBN currently but it is on my watch list because I believe the stock is cheap based on its fundamentals. Also, there is the possibility the company may be taken private and the price mentioned is $24.

    Since October 2010 we have been a net seller of stocks and our current cash and equivalents position is just under 30% of our total assets, which is a very high percentage for us. However, we have been buying both SORL and WATG around their current prices (approximately $7.50).

    Hope this helps.

    Best.

    Joe
    Jan 26 12:09 AM | 1 Like Like |Link to Comment
  • Natural Resource Partners: An 8% Dividend, But Cause for Caution [View article]
    Hi Jim,

    I believe some of your advice is right on, especially for investors to only invest in companies they understand and have properly researched. My feeling is that most investors would be best served investing in mutual funds or ETFs rather than individual stocks, unless they devote at least 20 hours a week researching individual stocks and understand how to read financial statements. This article on NRP was extracted by the Seeking Alpha editors (not my decision) from my original article published as:

    seekingalpha.com/artic...

    Since that article was published coal stocks have been "on fire". The only coal stock I owned at that time was PUDA, which has performed very well even after the pullback last week, when they announced a secondary offering. BTU has also performed very well. My cautionary comments regarding NRP had to do with the atypical dilution to limited partners valued at $832 million (32 million common units at $26 a unit) received by the holders of the IDR's as a forfeiture of their interest. Up through 09-30-10 this dilution had not yet kicked in on the financial statements and it will be interesting to see the impact on future valuations for limited partners shares in periods after the company starts reporting the full impact of the dilution. If you are aware of a similar deal executed for IDR holders, other than by NRP, I would be interested in knowing the symbols of such other companies.

    Thanks for you comments and continued success in investing.

    Joseph Levy
    Dec 12 10:51 PM | 1 Like Like |Link to Comment
  • As Coal Heats Up, 3 Companies With Persuasive Coal Stories [View article]
    There maybe a market for the technology someday in the distant future but currently there has been little acceptance of what EEE is offering. This company was hyped up to a market cap valuation that exceeded $1 billion in 2005 when their sales were under $1 million. Thereafter sales grew until reaching a peak if 2008 at $58.9 million but the net loss totaled $36.3 million. Thereafter sales have dropped off dramatically and they have also discontinued certain operations. For the six months ended 06-30-10 they reported total sales of $203,000 and a net loss of $8.1 million from continuing operations and another $4.1 million in losses from discontinued operations. At 6-30-10 they had $9.5 million in cash and equivalents but total liabilities amounted to $49.3 million and a deficit in shareholders equity of $7.3 million. The future looks bleak and they will be fortunate to survive.
    Oct 3 07:10 PM | 1 Like Like |Link to Comment
  • China Jo-Jo Drugstores: Huge Growth Potential Along With Risks [View article]
    The Company has an ambitious plan to grow the number of stores to more than 200+ by the fiscal year ended March 2015. I concur with the author that investors need to be wary of potential pitfalls (accounting irregularities, etc) with any micro-cap stock operating in China and thus we limit our positions in any such company to no more than 1% of the total assets in our fund. There are two analysts providing estimates for CJJD:
    FYE 03-31-11 Revenue $77.81 million and EPS $0.83: FYE 03-31-12 Revenue $122.03 million and EPS $1.17. CJJD's more limited operating history and numbers, as well as analysts consensus estimates, compare very favorably to those of China Nepstar (NPD).

    CJJD Worksheet: spreadsheets.google.co...

    NPD Worksheet: spreadsheets.google.co...

    We have a long position in CJJD and no position in NPD.
    Sep 28 02:32 PM | 1 Like Like |Link to Comment
  • China: Where Micro Cap Growth Opportunities Abound [View article]
    I don't have first hand knowledge.

    There are 6 large and well known investors that have positions totaling from a low of 100,000 shares to as much as 942,000 shares. Also, they had a public offering on 04-28-10, which was underwritten by Madison Williams and Company and Rodman & Renshaw, LLC that raised $17.5 million for CJJD. I would think the aforementioned investors and underwriters would have performed due diligence in connection with their activities involving the Company.

    There are great opportunities in China but as you stated there also also large risks. Therefore I do not take any large positions in any single China company and believe strongly in having a diversified portfolio of China companies. Our investment in CJJD is equal to less than 1% of the total assets in our hedgefund.

    Previously I wrote an article on HOGS: seekingalpha.com/artic...

    I mention in that article that a good way to get exposure and diversification in areas like China and India is by investing in mutual funds that specialize in those areas. Within the article I list some funds with their performance results in recent years.

    Thanks for your interest.
    Sep 19 06:01 PM | 1 Like Like |Link to Comment
  • Share Repurchases + Hoarding Cash = Stock Price Underperformance [View article]
    I want to thank everyone for their comments. My responses are as follow.

    I'm more interested in what the BOD do for the "common" shareholders rather than the personal decisions made by Gates and Balmer. Bill Gates is unique in that his philanthropic activities dominate his decisions concerning MSFT stock, which is completely unrelated to the investment merits of others buying or selling MSFT stock. His personal generosity may creating an opportunity for others to buy MSFT shares at good prices in relation to their fundamentals. Also, I would not begrudge him higher dividends if all the "common" shareholders benefit from such action.

    It seems the main argument for not increasing the dividend is that funds from foreign earnings would have to be brought back from overseas and taxed before getting distributed to shareholders.
    I don't know how much of their cash, equivalents and short-term investments (totaling $36.788 billion) are held outside the U.S. versus cash and equivalents in the U.S.

    There is no disclosure how much the additional taxes would be if funds were brought back to the U.S. I think there may be merit in paying the additional taxes so more funds could be distributed to shareholders as cash dividends rather being hoarded or used to repurchase common shares. These share repurchases have turned out to be losing investments for the common shareholders since the average buy back price is greater than the current price of MSFT shares. There is little evidence to support the belief that share repurchases help boost the price of a company's shares (look at RIMM, CSCO, INTC, IBM etc). Also, when they buy back shares (close to $80 billion in the last few years) is MSFT using overseas funds and are there any tax consequences involving funds used for share repurchases?

    I believe if a company is public it should be run to maximize long-term benefits to "common" shareholders and the BOD should follow policies to maximize shareholder value. In such an "ultra low rate" environment dividend returns to shareholders from a mature company, (with decent but not exceptional growth) are a much more important part of a company's market valuation versus metrics like earnings per share or how much cash a company is hoarding on its balance sheet. I believe this is borne out when comparing the relative valuations versus underlying fundamentals of a MSFT to companies like VZ and T, who pay out dividends close to 6% rather than just 2%.

    Sometimes the world changes and BOD's have to change their mind sets and take actions to adjust rather than following failed policies (arguably share repurchases except to cover newly issued stock). Mature companies like MSFT, CSCO, IBM, RIMM etc. are still good companies but seem to think of themselves in the same light as AAPL and GOOG and do unwise things (share repurchases) trying to emulate the stronger operating growth of these "hot" companies. In the future AAPL and GOOG will become just like MSFT and their PE multiples will decline dramatically as their EPS growth rates fall off sharply. This is already beginning to happen (especially with GOOG).

    If mature companies truly wish to recapture the glory of being the "hottest" or most "innovative" company they should breakup their company's into a number of smaller companies (spinning them off to shareholders) and hope at least one or more of these new entities can become more innovative and dynamic than the giant from which they were sprung.
    Sep 19 01:24 AM | 1 Like Like |Link to Comment
  • Is Apple Worth 8.4 X Research in Motion? [View article]
    In a follow up article on July 1, 2010 I did address that point and the information is repeated here:

    "A point raised by Apple supporters is that the market cap differential between the two companies has to do with Apple’s hoard of cash and investments, which totaled $41.7 billion at 03-27-10 versus only $3.3 billion for RIMM at 05-29-10. RIMM’s operating cash flow is strong and has been increasing. For the 12 months ended 05-29-10, they generated operating cash flow per share of $6.35 versus Apple’s $14.62 in the 12 months ended 03-27-10. RIMM’s cash and investments increased from $2.2 billion at the end of February 2009 to $3.3 billion on 05-29-10.

    Also, RIMM has been using cash to buy back its shares, which resulted in the share count dropping from 593.1 million diluted shares outstanding at the end of February 2005 to 558.2 million diluted shares outstanding as of 05-29-10. Meanwhile Apple’s diluted shares outstanding have increased from under 800 million diluted shares outstanding at the end of fiscal 2004 to 923 million diluted shares outstanding on 03-27-10. This difference in philosophy in buying back shares partially explains why cash and investments at RIMM have not grown as fast as Apple’s. Even if cash and investments were deducted from both companies’ market caps, the relative market caps differential between the two companies would still be approximately 7.9 to 1."

    I also explained in that article that RIMM has increased their R&D investments significantly in recent years, which should benefit them in the future. Also, RIMM's R&D expenditures (just north of 6% of sales) have actually been proportionately higher than AAPL's (just above 3% of sales) in recent years.

    Since I wrote the two articles comparing AAPL and RIMM each company has had their share of negative publicity (RIMM's security issues overseas and AAPL's product issues involving the iPhone and iPad). Only time will tell which company was a better investment based on their prices as of the date I wrote the first article. Being a better or worse investment is not necessarily a reflection of which is a "better company". Investors can overpay when buying a "great" company, which can result in the decision being a poor investment.
    Aug 5 01:01 PM | 1 Like Like |Link to Comment
  • Breaking Up Goldman: A History Lesson [View article]
    The solution (breaking up Goldman) is easy; but how to do it is a tough one? When it comes to stocks (companies), I believe smaller is better. You have a better shot at winning if your interests are more closely correlated with the management/shareholders. The ideal is finding companies where management owns a good percentage of the shares. To revitalize capitalism, giant entities should be broken up into smaller companies. Look what the breakup of Ma Bell did for the telecommunications industry. Giant companies like Cisco, Microsoft, Intel, IBM, big financials such as Goldman, etc. seem to be peaking, treading water,sinking or getting a competitive advantage from Big Government. Had giant auto companies been broken up into smaller units, when GM peaked decades ago, that industry would be vastly different today. “Giants” should be broken up into a number of smaller publicly traded companies, with the shares of each new entity spun off to the stockholders of the parent company. I believe the sum of the parts, would in the long run, be greater than the value of the original “giant”. These smaller units would be more competitive and, in total, more innovative than the giant. Smaller companies have always been the engine of economic growth and jobs creation in the US. The problem is how to accomplish this. Getting the government involved in the process would be a complete disaster. Big government is like a cancer that saps life out of a body, in this case the economy. Government has been getting bigger, less efficient, and more corrupt as time passes. They are more and more beholding to powerful interest groups and lobbyists that are anti-competitive by nature. Does anyone believe politicians will ever act in a fiscally responsible manner at the expense of grabbing more power? I would like to see enlightened management (Steve Jobs type) take the initiative and adopt a policy of breaking up their companies and hope this would establish a trend to revitalize capitalism in the US. Of course, no one should hold their breathe waiting for such an outcome since corrupted executive power and cronyism runs rampant in the Board of Directors of “giant” corporations.
    Jun 24 01:03 PM | 1 Like Like |Link to Comment
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