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Nat Stewart  

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  • A Massive Tender Offer Has Created A Solid Buying Opportunity In Winmark Corp. Shares [View article]
    Nag? I take the time to reply and that is what you call me? ; )

    There is no cult around the CEO. After following the company for at least 5 years and investing over that period, I simply think he is a good, competent person with integrity, though not (like everyone) without occasional error as I documented in my last Winmark article (along with the successes).

    The current capital allocation as I understand it to invest in the leasing business, special dividends, or share buybacks - and they make decisions at each point based upon the opportunities in each area relative to the others. It makes perfect sense to me.

    If I have any question it is if being a bit less restrictive in growing the leasing business would be worth it in terms total return - however I don't have the inside point of view needed to grasp the issue fully.
    Apr 19, 2015. 08:56 PM | 1 Like Like |Link to Comment
  • A Massive Tender Offer Has Created A Solid Buying Opportunity In Winmark Corp. Shares [View article]
    David,

    two things.

    First, private shareholders are not able to replicate a leveraged buyback for a number of structural reasons related to taxes and constraints on how collateral can be utilized to secure a loan. Never mind the fact that we don't control payout policy. If we leveraged against a different asset, well then we would be encumbering a different asset, not at all the same thing, and we would still not be able to pay interest pre corporate tax, and principle without the second layer of taxation on shareholders. Bottom line the premise to your first comment was incorrect.

    When I see this type of faulty premise my motivation to reply is fairly low, as I have limited motivation to discuss issues of a very general financial nature vs. the specific focus of my article. And even then, if or if not anyone agrees with me does not matter to me. Time will reveal who is correct and I accept that.

    Second, in terms of value u are looking at a static moment in time. U have to look at flows over time to see how value is built. Maximizing the value of equity has allot of moving parts and depends on many factors both internal (capital needs, other reinvestment opportunities, etc) and external to the company (such as interest rates available to fund purchases with).

    Bottom line in a few years our same share count will own (likely free and clear, as I expect the company to pay down the debt) 20% or so more of the company than they did before they started their massive 2014 buybacks which lead up to this tender offer. That value (the extra 20% we own) is going to compound as the company grows (and hopefully, style encore develops from its early stage to a mature business) while our 2.4% interest expense paid by the company will be linear. that is how value is created with finance and (most importantly) a sound company with great economics.

    If the company had decided to issue a 100M dividend rather than buy back shares, I would have supported that as well - only I would have wished that I owned more in my tax-differed account vs. my taxable account.

    Regardless, I believe Morgan and his team have made a sound decision. The low interest rates are an enourmous opportunity that should not be passed up by any company with reliable cash flows, IMO. That is how I see things.

    The caveat to the above is that all of these issues are secondary to the health of the business and its fundamentals. As it is, they will be able to pay back the credit facility quite quickly, the term loan fast too, and we will be left with a larger % ownership than we otherwise would have. IF the current franchises hold steady or grow a bit, and Style Encore moves out of its early stage successfully, it will prove to be a home run. These guys really care. Look at the top level managers. U will hardly ever find a company where the key executives have such a high level of stock ownership relative to their incomes. While I don't know the future and my crystal ball is quite cloudy, these are the kind of people I like to invest beside - and this is a very good business.
    Apr 18, 2015. 08:56 PM | 1 Like Like |Link to Comment
  • A Massive Tender Offer Has Created A Solid Buying Opportunity In Winmark Corp. Shares [View article]
    You have a very solid understanding of this company and its management philosophy. Thank you for commenting. If you include the repurchases made in 2014 with this tender offer, they have retired over 1M shares within the past 16 or so months at an average price of a little over 82 or so.
    Apr 18, 2015. 07:42 PM | 1 Like Like |Link to Comment
  • A Massive Tender Offer Has Created A Solid Buying Opportunity In Winmark Corp. Shares [View article]
    David, In my opinion what you are saying lacks both an understanding of basic corporate finance as well as specific knowledge of this company. We will have to agree to disagree.
    Apr 17, 2015. 07:50 PM | 1 Like Like |Link to Comment
  • A Massive Tender Offer Has Created A Solid Buying Opportunity In Winmark Corp. Shares [View article]
    This company's free cash flow (levered) per share is very similar to its after tax earnings per share. As such when EPS goes up, cash flow per share also goes up. With an after tax cost of debt of around 2.6% this is a no-brainer. We (shareholders) will become wealthier than had this event not occurred.

    They will be able to have net zero debt within 2-3 years or perhaps even less, if they choose to do that - after which point continuing shareholders will own a larger % of the company free and clear.

    Thanks for commenting.
    Apr 17, 2015. 11:01 AM | Likes Like |Link to Comment
  • Consolidated-Tomoka - Major Catalysts Plus REIT Conversion Plan Will Unlock Value [View article]
    http://bit.ly/1DNwJgO

    "Volusia clears way for more distribution centers"

    Looks like a great strategy for marketing and utilizing the 800 industrial acres.
    Apr 16, 2015. 08:18 PM | Likes Like |Link to Comment
  • Blueknight Energy Partners - A Transformative Project On The Horizon [View article]
    I believe they conceived the Knight Warrior Project when oil was around 100/barrel. Wondering how badly the lower crude price, if it stays low, will impact the economics.
    Apr 14, 2015. 01:04 PM | Likes Like |Link to Comment
  • Blueknight Energy Partners Is Headed For Higher Grounds [View article]
    The company is presently embarking on a massive capital spending project for their Knight Warrior pipeline that will make the pipeline business their biggest biz, if all goes well. The think I am wondering is if the economics (or more likely, how badly) the economics of the project have been thrown off by the low oil prices.
    Apr 9, 2015. 04:50 PM | Likes Like |Link to Comment
  • Berkshire mobile homes unit accused of predatory tactics [View news story]
    That is all very true.

    The problem is that about 50% of the adult population has below average intelligence, and poor people disproportionately have low intelligence. A massive body of evidence suggests that intelligence is mostly heritable, ie determined by genes.

    If for example we docked your IQ from its present level down to, say, 85, you might find it impossible to understand contracts or make decent far sighted financial decisions - you would be much more easy to manipulate and "dupe" into unfavorable deals.

    While individual responsibility is critical to our somewhat free society, compassion for the less able will prevent their gross abuse and create a better standard of living for such persons, which many of us see as a worthwhile goal.
    Apr 7, 2015. 09:25 AM | 4 Likes Like |Link to Comment
  • Why You Should Avoid Nathan's Famous [View article]
    Given the company's very high tax rate near the corporate maximum, the effective interest rate will be more like 6.2% do to the tax shield of interest. EBIT will be way up this year do to the new licensing agreement with John Morrell & Co. Ive seen many of these very leveraged firms trade at very high P/E ratios. Regardless, I do think a decline is likely, however the situation is worth watching.
    Apr 6, 2015. 09:30 AM | 1 Like Like |Link to Comment
  • SWK Holdings: A Micro Cap With A Solid Plan To Compound Shareholder Equity [View article]
    10K looks great. My intermediate term target is 2.05 area by year end 2015
    Apr 2, 2015. 02:43 PM | Likes Like |Link to Comment
  • A New Way To Follow Your Favorite Seeking Alpha Authors [View article]
    Looks very interesting! Great idea.
    Apr 2, 2015. 02:16 PM | Likes Like |Link to Comment
  • The Future Of Seeking Alpha, From One Contributor's Perspective [View article]
    "Why would any rational utility maximizer ever expend the effort to write a well researched article that *might* earn $150 on Pro?"

    I believe that most of the best authors are more interested in publicity, distribution, feedback, and enjoyment of writing, not the payment, which is minimal relative to the risk/reward of an investment position. This explains why people will write in-depth articles for low payment or free - so long as the distribution is good.
    Mar 25, 2015. 10:11 PM | 5 Likes Like |Link to Comment
  • The Future Of Seeking Alpha, From One Contributor's Perspective [View article]
    It is a given that allot of people love the idea of reading tons of content for free. No kidding! Everyone wants free stuff. The problem is that advertising does not support quality content.

    With "add supported" content u get lots of "click bait" from those looking to make a little money writing articles, and if the distribution is good some professional investors sharing ideas in effort to spread their hypothesis and gain exposure.

    Many of the readers who long for "the good old days" don't seem to understand that your "free" browsing was not adequately supporting the business and rewarding content providers of material beyond click-bate and hobby writing on retirement investing.

    You need to think about what is in it for "the other guy" creating the content, and for the business operating the site. Like any business, they are trying to increase profitability - and most authors want something out of it too (exposure or $$).
    Mar 25, 2015. 08:40 PM | 3 Likes Like |Link to Comment
  • The Future Of Seeking Alpha, From One Contributor's Perspective [View article]
    Sounds interesting.

    I have had a few issues when I consider writing new content, related to my particular objectives. First, my top priority has been distribution. I have experimented with "premium" submissions and also many "non-premium".

    I was expecting my last pro article to get better viewership that it did. What I am wondering is, can readers accurately target the content they want to read?

    For example, I like to focus on small-cap stocks with (mostly) a market cap between 100M and 1B. Many of these are names that most are not familiar with, so they don't get tons of readers based on the name. On the other hand small-cap is perhaps the best area to find legitimate opportunities, because they are less followed - Is there a "small cap" list or service? Others want micro caps, biotechs, dividend growth, etc.

    Second, I follow a group of about 50 companies very closely. I periodically think one is opportunistically priced, but don't do an article most of the time because doing a "book report" takes too long and the financial reward of a few hundred $$ is not an incentive, while at the same time the distribution is not that great for stocks that are not "known" names and under 1B market cap.

    I'm thinking better targeting specific interests - such as marketing a small cap section/area, might make sense. I would love to get better readership. The financial "rewards" would have to be much larger for me to potentially write with that motivation in mind - and I assume many potential authors have this issue.

    So in conclusion - we need either better distribution, or much higher earning potential, to make increased article writing worthwhile. I personally would prefer better distribution - in fact I offered to return my article payment if it could be used to advertise my content on the site, but I never heard back when I suggested it.
    Mar 25, 2015. 08:03 PM | 1 Like Like |Link to Comment
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