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Marty Chilberg

 
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  • Sequenom Has Taken All The Right Steps To Reach Profitability [View article]
    Sure thing. No computer acces today to more fully respond but some examples are:
    1) VisibiliT is not priced at $800. That is the list price. The ultimate price will be much lower. For reference purposes, MaterniT has a list of $2700 with an estimate average reimbursement of around $1000.

    2) NIPT isn't a substitute for invasive procedures. It elimates the need for them if there is a negative test result. Biggest benefit of NIPT as roughly 97 percent of the results are negative

    3) biosciences segment was actually profitable. It needed a lot of investment to grow which would have taken away from the larger diagnostic opportunity.

    4) the IP purchase contributed to the opex savings but not quite as you described. The royalties are in COGS. The savings were primarily from reduced legal costs and the $2m reimbursement was a piece of it

    Hope that helps
    Nov 7, 2014. 10:01 AM | Likes Like |Link to Comment
  • Sequenom Has Taken All The Right Steps To Reach Profitability [View article]
    Good effort but several inaccuracies. Readers should do more due diligence if interested in SQNM
    Nov 6, 2014. 07:26 PM | Likes Like |Link to Comment
  • Update: Honeywell Increases Dividend 15%; Reconfirming Thesis [View article]
    Typo first bullet.
    Nov 2, 2014. 10:04 PM | Likes Like |Link to Comment
  • Lithia Motors - Big Warning, No Immediate Appeal Despite 20% Sell-Off [View article]
    Morgan Stanley upgraded $LAD to overweight today. Stock up 4% on a terrible tape.
    Oct 15, 2014. 10:00 AM | Likes Like |Link to Comment
  • Like Coal? Buy Alliance Resource Partners [View article]
    Also worth noting that $CSX had a good earnings report tonight, driven by an increase in freight volume of 7%. CSX is considered a proxy for coal
    Oct 14, 2014. 06:24 PM | 1 Like Like |Link to Comment
  • Like Coal? Buy Alliance Resource Partners [View article]
    Just added $ARLP today. With this balance sheet, yield, coverage and FCF the stock is fundamentally sound and with the stock oversold and an RSI14 at 22.0 it's a pretty easy call.
    Oct 14, 2014. 03:45 PM | 2 Likes Like |Link to Comment
  • Lithia Motors - Big Warning, No Immediate Appeal Despite 20% Sell-Off [View article]
    I'm happy to take the other side of that $LAD trade. The company did not issue a "big warning for Q3". They preannounced that their revenues were better than analyst consensus but that earnings would be roughly 4% below guidance due to lower margins on used car sales. The magnitude of the sell off was due to their guidance for C15. The current quarter guidance is expected to continue in C15 with revenue remaining robust but they dropped earnings by roughly 8-9%.

    Once the dust settles investors should look at their multiple and earnings track record. The stock is now trading at about 11x the revised C15 expectations. Roughly half the secular growth expected and they have now reset expectations to allow for future outperformance.
    Oct 14, 2014. 10:55 AM | Likes Like |Link to Comment
  • IMF Says Markets Could Experience 'Widespread Disruption' [View article]
    “We don’t put much into what they say from a market perspective,” Rick Fier, director of equity trading at Conifer Securities LLC in New York, said in an interview. “They must be getting nervous as to where the growth is. The recent volatility we have been having is due to growth scare out of Europe and that is still the problem.”

    Warren Buffett, said at the Fortune’s Most Powerful Women Summit in Laguna Niguel, California that stocks are now “in a zone of reasonableness.”

    Former Fed Chairman Alan Greenspan said on July 30 that equities would see a decline after surging virtually uninterrupted for the past three years. That came six months after a CNBC interview in which he said “stocks, in a long-term sense, are still undervalued by any objective measure.”

    Meanwhile FactSet just publishes the numbers:
    Forward 12mth EPS for S&P 500 $137.50
    Reference periods:
    Oct-04 $950
    Apr-09 $900

    Fwd PE currently at 15.0x
    10Yr range:
    Low 11x fall-2008
    High Jan-05 $17x

    Quarterly net margin projected 9.9%
    Reference periods:
    Q2-14 10.1%
    Q1-14 9.8%
    Q4-13 9.7%
    Q3-13 9.5%
    TTM Oct-04 8.25%

    Q3-14 Bottom-up EPS estimate $29.07
    Reference period:
    Q3-13 $ 27.10

    Q3-14 estimated revenue growth 3.6%
    slightly higher than expected at start of quarter (3.5%)
    Oct 7, 2014. 08:25 PM | 1 Like Like |Link to Comment
  • The Matching Principle And The 'Investment Is Killing Earnings' Myth [View article]
    This is really getting quite old. I've enjoyed your articles in the past but will not in the future. You appear to believe that some companies hide behind a statement that they are "investing in the future" to explain depressed earnings. Ok, everyone has a right to their opinion.
    However 2 of your story bullets are just inaccurate:
    Premise: I show how profits really come about, and how they're incompatible with such a theory.
    Reality: I see nothing in this article that shows how "profits really come about or now they are incompatible. You make a blanket statement that comes tantalizingly close to call some CEO's such as Jeff Bezos a liar, you have to come with some support to back it up. I see none.

    Premise: I also show that GAAP accounting is actually based on a principle which runs directly counter to such a theory.
    Reality: Accounting theory does not protect the income statement at the expense of the balance sheet. If Bezos is investing in Drone technology, this is reasonable likely expensed based upon rules associated with technological feasibility and net realizable value. Accounting theory would force him to write it off unless they are far closer to commercialization than I believe.

    You state: What this means is that when you have costs in the present which are supposed to be producing revenues in the future, then those costs are not recognized in the present - they are recognized at the same time as those revenues show up.
    Reality: The majority of costs associated with future new product releases in most industries are expensed as incurred and not held to match against future revenues.

    Since you mention MSFT let's look at their reality. I would hold them out as an example of what I'm saying. Historically they have capitalized a very small amount of their product development costs. They have capitalized none of their advanced R&D costs. They have invested in businesses that have incurred huge losses that ate into their profitability such as phones, xbox, search, consumer software, zune, etc. These are all examples of what companies claim when they say they are investing profits in the future.

    And I was not implying that this explanation is being misused by Amazon. Quite the contrary. I believe that is exactly what they are doing. You suggest that AMZN cannot go 4 entire years saying it's present earnings are depressed due to investment. That tells me you don't understand AMZN well enough to see what they are investing in. If you think their Amazon Fresh is a money maker you never heard of Home Grocer or Webvan. They started investing in this because they see the value of establishing a home delivery route that provides products on a routine basis. This will likely lose money for another 5 years unless they minimize their rollout strategy, When I looked at Home Grocer they needed to invest $50m in losses in one market (Seattle) before they could turn break even. That is one market that is not even in the top 10 as far as population demographic data.

    Sorry to have started this dialog. I just didn't believe readers should hear that Bezos is lying to them about the current costs of investing in future earnings streams. He is telling the truth.

    For full disclosure: I have no position in AMZN and have no intent to take one in the future. I don't agree with this broad shotgun spending strategy but I don't doubt that it is happening.
    Oct 6, 2014. 04:50 PM | 3 Likes Like |Link to Comment
  • The Matching Principle And The 'Investment Is Killing Earnings' Myth [View article]
    I have not made a single comment about AMZN or any other company. In fact I think AMZN is dramatically overvalued by the market and have no way of fundamentally convincing myself it is a sound investment.

    My only comment have to do with your explanation of accounting. I'm a CPA and a retired public company CFO and found your rationale distorted and commented accordingly. Sorry if you disagree but my comments stand. Though matching of revenues and expenses is a valid concept that is incorporated in accounting theory, it applies more to accrual basis accounting than it does to expense deferral or capitalization.

    As a point of reference, the entire biotech industry has been reeling since the CMS gap fill CPT coding debacle. That forced many companies to recognize ALL expenses including cost of goods sold as incurred and to recognize revenues when the cash is eventually received. In many cases (as can be found in transcripts of public companies from SQNM, CBMX, DGX, LH, ILMN etc) this means that revenues are recorded up to a year AFTER all expenses have been recorded.
    Oct 6, 2014. 12:56 PM | 2 Likes Like |Link to Comment
  • The Matching Principle And The 'Investment Is Killing Earnings' Myth [View article]
    I did in fact read the entire article. This comment itself is misleading. " It means that the very accounting is conceived so that such an effect is minimized". This is just not accurate. Accounting does not attempt to minimize current expenses when there are potential future revenues. Refer back to my previous examples. These are not "theoretically minor". In fact they are usually far larger than the costs that are able to be deferred and matched against future revenues.
    Oct 6, 2014. 11:41 AM | 1 Like Like |Link to Comment
  • The Matching Principle And The 'Investment Is Killing Earnings' Myth [View article]
    Your reliance on a poor understanding of the matching principal makes this article largely unreliable. Matching does indeed attempt (but not guarantee) a matching of income and expense. Consider the statement: "What this means is that when you have costs in the present which are supposed to be producing revenues in the future, then those costs are not recognized in the present - they are recognized at the same time as those revenues show up".

    Unfortunately that is just not accurate. A larger underlying tenet of accounting is that the balance sheet is a representations of assets that have some net realizable value. That means that most research and development expenses are expensed as they occur prior to "technological feasibility" is ensured. Marketing investments in researching new markets, creating brands, advertising the pending launch of new products, etc are all expensed prior to revenues. Companies hire technical support, customer service and sales employees prior to revenue generation and all are expensed as incurred. Even though inventory builds prelaunch are capitalized and matched to their ultimate sale, the concept of standard cost kicks in and a large amount of factory overhead, process implementation and other manufacturing costs are in fact expensed. Whether investment in future growth is or isn't a reason to excuse poor current earnings of any company is dependent upon the circumstances. But the rationale of reducing current earnings in an effort to increase future revenue growth is valid and worth evaluating as a shareholder.
    Oct 6, 2014. 10:47 AM | 1 Like Like |Link to Comment
  • Microsoft: Dividend Increase Vs Buyback? [View instapost]
    Company announced the increase of 3 cents or 11% increase today.
    Sep 16, 2014. 10:24 PM | Likes Like |Link to Comment
  • TeleCommunication Systems: Growth Drivers on All Fronts [View article]
    Thanks. I haven't done a deep dive nor prepared a forecast for quite a while, but I do listen to conference calls and track order and hiring activity. The company has stated that they believe the business cycle bottomed in the Dec-13 quarter. Activity would indicate that may very well be true. They have increased open job postings from 32 in January to 81 now. The recent order for $13m is pretty small but with their low cost VSAT business and prime status on CS2, they are the military go to vendor for SatComm business. With increasing activity in both Ukraine and more importantly Middle East, the probability of incremental orders is pretty high and likey why they have been rallying of late.

    Commercial business remains pretty good. NG911 market share is over 60% but still state/fed funding constrained. Trending up in funding though. Also liked their agreement on Indoor LBS. This is a big future opportunity (projected to grow at 45% CAGR)and NextNav is putting a lot of money into indoor antennas/beacons. The connected car opportunity continues to look good with both QNX and now the AT&T Drive Studio.

    They have restructure the debt to the point where I don't see it as a big negative anymore. FCF is adequate so they are in a good position if the top line starts growing again.

    I should probably ping their CFO for an opportunity to chat and dig deeper. Note that I do post comments about them in an investor forum I helped start. Mostly about SQNM but I'm adding comments on a lot of other companies I watch and hope to grow the content to be more robust over time. Only a month old so just getting started. Check it out if you get a chance.
    best
    marty
    http://bit.ly/1nO4a7M
    Sep 11, 2014. 11:30 AM | Likes Like |Link to Comment
  • Sequenom Q2 2014 [View instapost]
    Company provided update during Morgan Stanley breakout that Intl M21 accessions were 12% of total. That was up nicely from Q1 so the issue was domestic rather than Intl
    Sep 9, 2014. 06:59 PM | Likes Like |Link to Comment
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