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  • Weight Watchers: A Plan At Last [View article]
    My guess is also to take care of the debt - in case they find that refinancing the debt on favorable terms doesn't occur as expected, then they might just choose to retire it with cash generated over the next few years. The act of cutting the dividend alone should allow cash to pile up at HQ and so that will ease bondholders enough that they can refinance easily and then, at some point, resume dividends and/or do a one time dividend once they feel comfortable with how much they've refinanced.
    Nov 15, 2013. 01:42 PM | Likes Like |Link to Comment
  • Weight Watchers: A Plan At Last [View article]
    I like that they're paying attention to changing consumer preferences, however I hope they're not losing sight of who their customers are. They are not helping people lose weight for the first time - the meetings really cater to those who couldn't get help anywhere else and failed at other attempts. This is like AA - you don't find people on their first drinking offense at AA. You go to AA once you've had many incidents and everything else like family intervention was already attempted.

    My only point is that I hope they don't try to alter the meeting business too much. If the online division wants to cater to first time weight loss attempts, that's great, but the accountability and peer support you get from a meeting hasn't yet been replicated and the network effects present in that model are very much barriers protecting the firm from competition. The only point I'm making is that I don't think they should mix the target customers between the online and meeting business.
    Nov 8, 2013. 09:52 AM | 1 Like Like |Link to Comment
  • Measuring Weight Watchers' Wide Moat [View article]
    Well, remember that it is possible for him to be right, but the stock drop before it recovers. Remember how the Dow was at almost 6600 in 2009? You could have said it was undervalued at 8,000, and you'd probably be right, but it was still going to drop down to 6600 before coming up to the 15.5k or whatever it is today.

    To the extent that they can buy back stock, remaining shareholders could benefit more with purchases at a low price.
    Nov 1, 2013. 09:56 AM | Likes Like |Link to Comment
  • Measuring Weight Watchers' Wide Moat [View article]
    One possibility I'd like to throw out there - what if the goal of MyFitness Pal and others is to get enough traction and then design their own "points" system with support from others? Obviously, there's a network effect in those itself, because for any 1 company to really benefit, they'll want to see that it's recognized by others, and so it would likely require multiple companies to start selling products with their brand listed on it.

    The meeting business is golden in my book - do you think the online business is just as strong or maybe a little less?
    Sep 26, 2013. 11:32 PM | Likes Like |Link to Comment
  • Measuring Weight Watchers' Wide Moat [View article]
    It seems like there's been a lot more competition from weight loss methods in the last decade - wouldn't it be natural for revenue to be challenged for existing providers even if they are the best?

    I'm not particularly concerned by it except to the extent that these moats don't hold up with the increasing usage of online products.
    Sep 26, 2013. 10:58 AM | Likes Like |Link to Comment
  • Measuring Weight Watchers' Wide Moat [View article]
    I took a quick look and it seems like they've deployed $400M into franchise acquisitions over the past decade or so, roughly. They went from having (roughly) 30% of operations run by franchises and they're down to maybe half of that now. So the point is that it's conceivable that if the rest of the franchise owners sell to them, they'll be able to put another $400M to work over the next decade. In addition, any expansion abroad may offer some opportunities for additional capital.

    I do wonder what the details are for franchise purchases - it doesn't seem like they have to compete with others, so I'm guessing there was some kind of metric agreed upon when they created franchise rights in the first place.
    Sep 26, 2013. 09:34 AM | Likes Like |Link to Comment
  • Measuring Weight Watchers' Wide Moat [View article]
    I think there is an educated assumption here that weight loss is tougher than what those resources make it out to be in some cases. I'll list out what I'm thinking:

    1. Apps - they don't provide direction from a leader, require you to build your own network of friends for any group based peer support, and don't require any payment meaning that people are less likely to be "invested" to the same degree. It's much easier (mentally) to walk away from.

    2. Local gyms - they don't focus on behavior modification nearly as much as they focus on exercise. Exercising can drive benefits (obviously) because it might make the person think twice about eating unhealthy foods though.

    3. Online information - educates, but very tough to put into practice. Alcoholics Anonymous would be moved to an app and cigarettes wouldn't be in use if it was just education.

    4. Meetups - potential, but the search costs are a bit higher. Even finding a book club on meetup can take effort and they aren't always continued, because the person arranging them has to put in significant effort and often faces people not showing up (easy to commit, but not as easy to finish reading the book) and so they discontinue it at certain points. Yes, once it's established, it can work well, but that's not easy. In the case of a book club, there might not be any preexisting alternatives. In the case of weight loss, you have a company that for $40-60/month will give you local meetings and online tools with a proven track record. Is it really worth creating an alternative that won't be support by $300M/year in advertising?

    5. Online communities - works to some extent and for certain types of people. Reddit.com has a weight loss category as an example and I think a lot of people are able to make it work. They have lengthy documents on how to approach it, but that takes significant time and effort to go through. It's a bit more complicated than a simple "points" system too. I think it can work, but it's not really worth it in comparison to WW.
    Sep 24, 2013. 03:59 PM | 1 Like Like |Link to Comment
  • Greenlight Capital: A Trendy Yet High-Quality Investment [View article]
    Are P/E ratios useful with a reinsurer focused on catastrophic risks? If you sell coverage for an earthquake, earnings will make the CEO look like a genius until the day an earthquake strikes.
    Aug 13, 2013. 09:58 AM | 1 Like Like |Link to Comment
  • Dell Offer: The Price Is Not Right [View article]
    He is offering a choice though - shareholders can do as they wish in his offer. They can take cash or continue to be shareholders.
    Jul 9, 2013. 09:28 AM | Likes Like |Link to Comment
  • Authentidate Has Significant Opportunities for Revenue Growth [View article]
    I haven't been following the situation - they have good employees, I've just found myself moving in a different direction. I'm typically on the hunt for a business filled with enduring moats these days, and mostly based on already proven, historical fundamental performance. Feel free to send me a PM to discuss this as you'd like.
    Apr 19, 2013. 09:28 AM | Likes Like |Link to Comment
  • Dell - Shareholders Are The Winners If 3 Fight For 1 [View article]
    http://yhoo.it/11Onh9s
    Apr 9, 2013. 10:39 AM | Likes Like |Link to Comment
  • Dell - Shareholders Are The Winners If 3 Fight For 1 [View article]
    Shwarzenblitz - while they give that argument to the public, I think there are at least other views on what could actually be taking place. There are many companies that are public, yet able to maintain a long term focus. (Berkshire is the most obvious example)

    One factor that plays into it is how much control/trust the CEO has with the public and more importantly, the board, who should ultimately be representing the stockholders. He's got 14% of the firm: http://1.usa.gov/Zrzzix

    In a large company, 14% is a lot and more than any other person. He really doesn't have to respond to the public as it stands now.

    And let's also look at history. A low stock price is *good* for shareholders, so there could arguments made for wanting a low stock price. All else equal, when $1 is spent on share repurchases, the lower the stock price, the more that can be bought back, leaving remaining shareholders with a larger piece of the pie. In the long term view, this lower stock price eliminates a lot more shares outstanding that you have to "share" the business and it's earnings with. The best historical example of this is Henry Singleton - he went from owning 50% of Teledyne down to 2%, and then back up to 10-20% ownership by repurchasing stock below intrinsic value. The change in share count did wonders, because it was an excellent way to allocate capital.

    The point is this - by buying out shareholders below intrinsic value, remaining value accrues to those with a longer time horizon. Michael Dell is probably telling the truth regarding freedom/flexibility by not being public, though I'd argue there are many other benefits accruing to him by simply conducting a large repurchase/recapitaliz... whether that's through buying out many shareholders or a transaction that leaves a public stub for investors to participate through.

    You bring up a good point though - being private is probably one benefit of Silver Lake and Michael Dell may be hoping for just that so he gets more control. Stock option issuance may be tougher once he's private though (see his earlier days of stock option usage and you'll form an opinion on their approach to that)... so there are a number of factors in this deal.
    Mar 28, 2013. 03:38 PM | 1 Like Like |Link to Comment
  • Dell - Shareholders Are The Winners If 3 Fight For 1 [View article]
    The real benefit of the previous offer to Michael Dell was that he could roll his investment into the new firm after having bought out most shareholders below intrinsic value. So he gets a lot of benefits accruing to him, and that's probably what motivated him.

    Now that deals are coming in where shareholders can decide to retain an interest and/or sell it off, Michael Dell is still given the opportunity to continue retaining his ownership. This means that his incentive to send a counter bid is lower.

    That doesn't mean Silver Lake will back down - they won't get any investment transaction/deal if this doesn't occur, but Michael Dell is likely open to any party coming in, except to the extent that he opposes something they'll do, like break off the financing division and sell it to GE/etc.

    Another bid could happen, but I don't expect it to be too aggressive, because Michael Dell will make plenty from any of these buyouts. Any higher of a bid and it'll decrease the return he makes, because either option still let's him keep his stake.
    Mar 28, 2013. 10:47 AM | 1 Like Like |Link to Comment
  • Michael Larson: Investment Manager To Bill Gates [View article]
    Thanks for writing this up and covering Larson - he isn't discussed too much.
    Mar 13, 2013. 01:53 PM | Likes Like |Link to Comment
  • I Still Don't Fully Understand Prem Watsa's BlackBerry Investment [View article]
    Watsa was right in his net current asset calculation... the thing is, if running the business erodes that value away, it doesn't matter how much cash is behind the stock.

    The envelope with a $1 inside of it, but being sold to you for 50 cents, is my favorite analogy. But if the envelope couldn't ever be opened, then it doesn't really matter how much is inside.

    (For the record: I have no clue on Blackberry specifically and Watsa is an intelligent guy... but it's definitely far outside of my wheelhouse)
    Mar 13, 2013. 09:17 AM | Likes Like |Link to Comment
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