Kehong Wen

Kehong Wen
Contributor since: 2010
I used to like PIR story, but decided to bail completely at the end of last year. At that point, it was quite clear that the "omni-channel" strategy wasn't working. It was a little harder to see that it wasn't going to work going forward. The argument that convinced me to pull the trigger was the following.
With less than two billions dollar in sale, the business was not nearly at the scale necessary to justify the substantial investment in e-commerce. Alex Smith appeared to fancy himself chasing after shoppers who are very tech savvy and need instant updates, forgetting those shoppers are probably not his core customers who are looking for value as well as pleasant surprises.
Contrast his vision with the thriving off-price chains such as Ross which was at a much larger scale and selling stuffs that aren't nearly as bulky. Ross never bothered to venture into e-commerce, not seeing any value in return to investment. Even in a cut-throat retail environment, there are chains that don't cater to the phantom desire of the "new" shoppers who aren't necessarily going to stick around. One could argue that the more Pier One tries to satisfy the preference of these customers, the more they'll be looking to comparison shop elsewhere.
Has the story changed? Not really based on the latest call. Smith is still very set on this omni-channel strategy that he's been enamored about. It's been costly and hasn't resulted in increasing online/offline traffic. Meanwhile, I suspect this has been a huge distraction from merchandising and luring the repeat customers.
If my arguments hold, going forward from here it still looks like a sell. Grabe any small rally to bail.
Sad story.
Jim Bullard is way out of line here, attacking the FOMC decision, attacking Larry Summers for writing his views, attacking Jim Cramer for doing his job. He is NOT a FOMC volting member this year, and is acting like he is. Moreover, he apparently has tried to meddle with the Fed decision through back door and is now voicing his frustration, on CNBC and elsewhere. He is pretending to represent FOMC on which he is really a minor figure. He likes to think of himself as the Fed chief, often wrong but never boring. All he really does is to attract attention to himself: Me, me, me; my view, my take, my read, my conjecture,... and not to the actual data and basic macroeconomics.
Yes, unemployment rate 5.1% looks on target, but who is to say that the real NAIRU is somewhere close? If so, where is the wage pressure?
And Core PCE inflation running at only 1.3%, what does that show? Very close to target? If inflation is nowhere to be seen, who is to say that the zero rate is an "emergency" rate that must be raised to "normal?" Maybe it is even above the normal rate that's consistent with the underlying NAIRU and the current rate of inflation. Rates market appears to support this view. Leading economists appear to support this view.
So why does this Ballard person has the balls to act like his views should be adopted by FOMC? This is a huge ego on display... Investors take note.
Bullard's assessment is just wrong: The Committee's objectives have not been met and are getting further away. Look at his graph on page 21. Inflation is so far below 2% and is drifting lower. How can he conclude the objectives have essentially been met?
It's a disaster, which calls into question the December report, which then calls into question the entire omni-channel strategy that PIR is pursuing with ever shrinking margins. At less than $2b annual sale, it's too small to justify the online foray. I believe Alex Smith has made a costly mistake of going after what's fashionable - a Macy style omni-channel strategy, instead of what works for his core customers. It's time for him to go.
Brutal self-assessment is a good start for turning around the business. This is so much better than blaming the weather etc...
It's good that Smith admitted the mistake of going promotional. That was a bruising contest which only served to down grade the brand... ignore market share, serve your core customers well. Pier 1 should learn from Apple...
mkt cap ~ 7.5B!
"As of December, Pandora had 76.2 million active users, 1.58 billion listener hours (20.73 hours per listener), and a radio market share of 8.60%. The company's month-to-month user growth was 5.20% while month-to-month listener hours increased by 6.04%."
Please take a look at the January audience metrics: http://bit.ly/1fWlt4z;highlight=
It looks like listener hours after the holiday has stopped increasing. Market share falling. More importantly, active listeners decreased to 73.4 million! Your title is a bit misleading.
LL is reporting next week. Time to short? Lumber prices have shot up 30%. Labor costs have increased. Dollar has weakened against RMB. Gas prices have gone up. Margin pressure has built. Expect to see that in last Q and next Q. Yet the share price seems to expect a blow-out at 64.
PCE core up by 0.1%. Risk of deflation!
Cost of production is running up. That can be an important factor.
Can you elaborate on the point
"As several data points in the global iron ore market suggests dramatic increases in market pricing for iron ore,..." ?
Thanks.
I like your thesis. There is only one problem: India and Japan won't like it.
Great analysis. I enjoy reading the article.
Shares of competitors such as Diamond Offshore (DO) have also been under pressure (off 14% since April 20). The market is pricing in the political implications for the industry, i.e. more regulation and limits on offshore drilling. That appears to account for most of the "over-reaction" identified here for Transocean. One can still argue that if the containment effort and cleanup are somewhat better than expected, this fear may be eased over time.
So the opportunity here is a bet on the direction of the U.S. energy policy. If the administration does not reverse course because of this accident, then RIG and DO are good buys at these levels.
Very good article. I have a short position on HOV. It helped.
seekingalpha.com/artic...
SA editor's picks often times are not the best article. This is a good example.
"VV" is possible, that's largely a function of how China, India and Brazil perform in the second half of 2010. The reason is that the strong V we're seeing now with U.S.-based multi-nationals is highly dependent on the growth of these countries. The "affluent" consumers alone will not be sufficient, now that they're getting hit with higher taxes in coming years.
Thanks for the discussions.
I agree with your sense. MP will probably hold them for quite a while, and exit gradually over the housing upturn. Investors need to be aware that MP's holding value will be exceeding the current market cap, which together will need to be justified by future earnings. Right now, the potential dilution is not made clear by common valuation ratios on portals like Yahoo Finance, although the company has started to calculate if-converted book equity per share. For Q1, it came in at a low $1.74.
Interesting enough, the March new home sales did go up, by a lot. Of course, much of that was due to the pending expiration of the tax credit. But if you look beyond the low end of the market, it is possibly a slow upturn from here.
However, that turn may not justify the parabolic rise in home builder shares last week, which could very well be a short squeeze effect.
Good point, but no.
I just tried to calculate roughly the market value of all equity-like claims including preferred and warrant at current date. Note I took the difference between the share price and the convertible prices.
Book value as state remains the same.
To do the pro-forma as you suggested, the "market cap" would be a lot higher than 1.4B.
I hope this analysis makes sense. At least it's a way to look at the dilution effect before it happens.
The only problem with this article is that the author keeps urging others to go short, but never reveals his own positions. Is he shorting the sector himself? Or is he waiting to go short? Why wait?
It was a pretty good quarter. If the infrastructure push from stimulus materializes, it could have a bit more upside.
High gross margin, and it can pass on raw material costs. Management solid. Good stock to own to benefit from the manufacturing-led recovery.
SPF reports -0.02/shr loss, revenues fell 16.3% year/year to $175.4 M. That's a big disappointment, although there are reasons to like about the company's positioning (net new orders and backlog increased by large amounts). Shrs will be under pressure today.
"Short-term fluctuations may create an entry point."
That may very well apply to GS.
Entrepreneurs are the real force creating upward mobility in this country. They create new industries and jobs for college grads.
Housing is but one of the assets for building wealth. Business is another. The end of "college+home" formula does not mean the end of upward mobility as long as entrepreneurship is encouraged and practiced.
The Americans had gotten too comfortable with the old formula, which might be part of the cause for the housing crisis. All the while, the Chinese have become a lot more entrepreneurial. That has helped made a communist country a lot more capitalistic.
Unfortunately, the crisis and the ensuing need for government intervention and support has made both countries more socialistic.
Bay Area is creating jobs again. Housing near the coast is bouncing back quicker. It looks like it's already heating up, despite all the problems with financing. Foreclosures are more limited in these areas.
The Cramer shouting effect was about 4%. Here is my brief comment:
iqrinvestments.blogspo...
Price to sales should be much lower than 1.5. SPF did more than $1b and the cap is less than $600M. Book value should stabilize now, so P/B is a good metric to use. It's possible that SPF is becoming a growth stock again, as the job situation improves. In that case, the multiple should increase.
At $5.5 it's about fairly valued.
Amazing! Why would the CEO respond to that article? Nothing better to do?
I look forward to your analysis of these home builders. But it's kinda late.
Jeffrey Saut:
"Why are we so sure inflation will return? It is because for decades that has been the easiest political solution for the debt accumulation of our citizenry and our government."
seekingalpha.com/artic...
A moderate inflation is OK, but not hyperinflation.
Bill Gross's Action:
"Nine months ago, United States government debt accounted for half of the assets in Mr. Gross’s flagship fund, Pimco Total Return. That has shrunk to 30 percent now — the lowest ever in the fund’s 23-year history — as Mr. Gross has sold American bonds in favor of debt from Europe, particularly Germany, as well as from developing countries like Brazil."
See www.nytimes.com/2010/0...
Great article, Andrew.
Yahoo Finance's Henry Blodget kept saying "The market is 20-30% over-valued, however you look at it." He is probably using the same mis-guided logic as well.
I read Professor Shiller's work long before I got into finance. Unconventional work that makes you think about the big problems.
Bloomberg just reported that Blackrock has become bullish for the long bonds. Remember they've bought BGI. $3.35 trillion in asset. The Fed has got big helpers.
www.bloomberg.com/apps...
Wow, that's a long article you referred to with a lot of data research. Thanks.
I don't know what the Fed is doing. But I think it has a lot of helpers now that the credit market is stabilized, and investors are searching for yields. The banks are doing "carry trades," borrowing at zero, and lending out to the Treasury at 4% or better. The insurance companies have to invest their premiums and match their liabilities. They'll be buyers whenever yield picks up a bit. The pension funds, maybe big buyers too.
I don't think the savvy ones are taking up much exposure on the long end. The PIMCO of the world are staying away from the risk.
In any case, this is definitely one of the most important curves to watch, for equity, fixed income and commodity investors alike.