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Enphase: Strong Story, Strong Growth And Decent Valuation Make For Substantial Upside
- Enphase is a beneficiary both of the general trend towards solar energy, and the trend within solar energy towards microinverters.
- Furthermore, while Enphase has done well in Q4 2013 and Q1 2014, Q1 2014 was actually penalized by bad weather.
- Enphase is also exhibiting strong operational leverage, which makes profitability likely in the short term and strong earnings growth likely right afterwards.
- All of this is available at a sensible valuation, with earnings estimates having 100% upside for 2015, and the stock probably following on the same magnitude.
Apple Is Acquiring A Fad - Not Quality - And That Is Troubling
- Apple is acquiring Beats for $3.2 billion.
- A check of Beat's history shows it likely that it's mostly just slapping a celebrity name into an OEM product.
- So Apple is buying a fad, not audio quality. Apple could have easily bought audio quality instead, so buying a fad is troubling.
- The acquisition itself is not really material for Apple's prospects, but the decision behind it is troubling and seems to show Apple is on the wrong track.
Tesla's Customer Deposits, North American Demand And The Will To Believe
- The thesis that U.S. deliveries for the Model S peaked remains in force.
- This is so in spite of Tesla talking about 10% sequential growth in North American net orders.
- This is also in spite of growth in customer deposits.
- This fact means that Tesla's 2014 35,000 deliveries estimate is in danger. Unless China/UK/Japan spring a large surprise, such an estimate would probably require growth in the U.S.
Soros And The Second Coming Of The Dark Fiber
- As with the dotcom bubble, today we're seeing an investment boom in technology, part of which can be explained by Soros' theory of reflexivity.
- This means that as the bubble goes away, which seems to already be happening, a good part of that technology demand will also go away.
- In the present case, the "dark fiber" of today seems to be cloud services, so Rackspace and Amazon.com are particularly vulnerable to this dynamic.
Independence Holding: Prime Beneficiary Of The Self-Insurance Trend
- Obamacare leads to an incentive for smaller firms to use self-insurance more extensively.
- Using more self-insurance leads to more demand for medical stop-loss insurance.
- Independence Holding is a large provider of medical stop-loss insurance and thus a prime beneficiary of this trend.
- Furthermore, Independence Holding is taking other measures which should lead to higher profitability, and there's a sign that the strategy is working, leading to strong growth in profitable business.
A Brief Look At Orocobre
- Orocobre is another credible junior lithium mining company.
- Indeed, Orocobre promises to have much lower costs than RB Energy, given its production process. And this claim is believable.
- Unfortunately, valuation work done in this article shows that Orocobre is not incredibly cheap, either, even if its claims are credible.
- Furthermore, with several companies promising to add large supply to the lithium market in 2015, there's a chance that supply will actually outstrip demand in 2015.
A Brief Look At RB Energy
- Tesla and other EV and PHEV vehicles are set to lead to greatly increased lithium demand..
- It might make sense to look for lithium producers, given the expectation of such demand..
- With large capitalization producers already reflecting the optimism, I will try to analyze promising juniors that are about to initiate lithium production..
- RB Energy is one such credible junior. I thus build a 2015 and 2016 earnings model for the company..
- Unfortunately, the earnings model shows RB Energy to be fairly valued with realistic assumptions, while still bearing a few risks which would call for a more significant discount..
The Latest Developments In The Amazon.com Saga
- The most recent Amazon.com earnings report led to another round of earnings estimates cuts.
- These cuts happen because the earnings estimates are based on faith, not a realistic model of Amazon.com's business.
- Amazon.com is doing all it can to stop the earnings erosion, but the moves Amazon.com is taking will probably create a revenue growth problem next, while not improving earnings much.
- Shipping costs continue their upward trek, and thinking that Amazon.com can stop them by launching its own delivery network makes no sense, either.
A Weird Strategy For Investing In Blyth
- Blyth presents an interesting opportunity, even when we ignore the potential for recovery or a short squeeze.
- This opportunity has to do with the high short rebate, along with high covered call yield, together with a still-decent business and high levels of net cash.
- However, a past transaction sours valuation and makes the preposition riskier than it would otherwise be.
Crude Headed Lower Again
- Crude is seeing record long speculation again.
- At the same time, fundamentals are turning unfavorable for long speculators.
- The fundamentals point to an increase in U.S. production, inventories above average and Libya restoring exports. Ukraine is not a large producer and Russia is not going to lose production.
- These factors put together mean that crude will likely trade lower in the weeks and months ahead.
Amazon.com Is Doing Its Very Best To Increase Earnings
- Amazon.com has taken a massive number of measures to shore up earnings.
- Earnings estimates didn't move on these measures, so it's now less likely that earnings guide downs are required.
- On the other hand, these measures have an impact on revenue growth, whose estimates have also not moved. This makes it likely that Amazon.com will guide down on revenue growth.
Delticom: The Amazon.com Of Tires
- Delticom is an unknown ecommerce leader in the e-retailing of tires in Europe.
- Ecommerce of tires has inherent advantages, and is thus likely to continue to grow. Indeed, it grew even during a difficult 2013 for replacement tires.
- Delticom had depressed FY2013 earnings due to a cheap acquisition of an aggressive competitor. FY2014 is likely to be better both due to the acquisition and due to market recovery.
- Yet, Delticom is available at a decent valuation multiple, having sidestepped the dotcom euphoria that struck the market in the U.S.
Apple Faces A Problem And Increasing Prices Will Make It Worse
- Apple is rumored to be asking $100 more for its latest iPhone 6.
- This is a problem, because Apple has lost its ecosystem advantage and its phones are already too expensive.
- While the larger display is welcome, a larger price will make the share problem larger at a point where Android is already dominating.
- There seems to be no way out for Apple. Either it sacrifices margins or volume, and both are bad outcomes.
Going Over Walter Energy
- Walter Energy is a pure play on metallurgical coal.
- Metallurgical coal has the worst near- and mid-term prospects in the coal market.
- Walter Energy has low liquidity, is burning cash and has high insolvency risk.
- At this point and barring signs of improvement in the metallurgical coal market, I see no point in risking long positions in Walter Energy.
Whole Foods Market Faces A Short-Term Threat
- Wal-Mart has announced an initiative to sell discounted organic food.
- This is relevant because pricing is the one obstacle to selling more organic food. At the same price, most people would choose organic.
- Furthermore, this initiative is made using the Wild Oats brand, with which part of Whole Foods Market's clientele might be familiar.
- This move is thus negative for Whole Food Market, threatening either its sales volume or pricing/margins.
Back To Neutral On General Motors
- General Motors has closed the performance differential to Ford as predicted.
- General Motors has also seen its EPS estimates be revised lower as predicted.
- With my formed thesis having fully played out, I am now going neutral on General Motors as a consequence.
Going Over Alpha Natural Resources
- Alpha Natural Resources is exposed both to metallurgical coal and thermal coal.
- Metallurgical coal seems destined for a long slog of unprofitability.
- Thermal coal has favorable near-term prospects, and stagnant long-term prospects.
- Alpha Natural Resources has insolvency risk, but it's not a near-term problem.
- Putting it all together, Alpha Natural Resources might be a buy on an insolvency scare, but doesn't look like a long-term investment right now.
Final Estimate For Amazon.com Q1 2014 Revenue Growth
- ChannelAdvisor reported March 2014 "same store sales," with Amazon.com showing better than expected.
- The better showing leads me to increase estimates for Q1 2014 revenue growth.
- While the new estimates still imply a miss, the miss is much smaller, and there's even the chance Amazon.com will meet consensus revenue growth estimates.
- On the other hand, it's still likely that revenue growth guidance for Q2 2014 will be disappointing, both due to the ebook accounting change and due to an Amazon.com move.
We Have March Numbers For Tesla And A Prediction For The First Quarter
- Massive deliveries in Norway during March make it likely that Tesla will meet or exceed its Q1 deliveries guidance. I estimate 6,700 deliveries for Q1.
- This comes at the cost of Q2, though, as the deliveries have been achieved partly due to shorter delivery times.
- This means that Q2 will likely have flat-to-lower deliveries versus Q1, excluding China. This might be apparent when Tesla reports Q1 and guides for Q2.
- All the numbers continue to be consistent with peaked deliveries in the U.S.
Canterbury Park: Some Hidden Value, But Valuation Not Very Compelling
- Canterbury Park Holding Corporation operates a racetrack and card casino near Minneapolis.
- This business is steady, has two positive catalysts but the valuation is not very compelling.
- Still, there are two hidden assets which might make Canterbury Park Holding Corporation interesting if the equity becomes available at a cheaper valuation.
Blood In The Streets, It's Time To Buy Russia
- Russian stocks were cheap even before the Crimea situation.
- The Crimea situation made them cheaper still, and made for obvious capitulation.
- Given the fundamentals of Russia's economy, the massive discount seems unwarranted, and this seems like a good place to buy Russian stocks.
- The RSXJ ETF, for a variety of reasons, seems a good way to establish a long position in Russian stocks.
The $127 Billion Market Asteroid
- Bubbles usually end with supply.
- Supply has already been running strong with a stream of IPOs and secondaries, but 2 events stand to make it even larger: The Alibaba IPO and WhatsApp.
- This can then combine with record margin debt to provide for large, concentrated selling which is bound to have significant market impact.
Let Me Sway You Over
- SWAY is in the same business as RESI/AAMC.
- SWAY has more experience, is more advanced in the business and has better systems.
- Yet, SWAY trades at a much lower valuation than RESI/AAMC.
- The logical conclusion would be that investors would be better served by investing in SWAY than in RESI/AAMC.
Somewhere In Europe, 100 Model S' Destroy A Myth
- Yet another piece of evidence shows that demand for the Model S is not as strong as speculated. In this case, 100 speculative cars for sale in Germany.
- Having inventory cars for immediate delivery is incompatible with supposedly being production-constrained.
- Tesla does have a one-off card it can play in Q1 2014, if it were to shorten delivery times, which seems to be happening.
- But this again compromises Q2 2014, which looks to be flat at best (excluding China), not because of production but because of peaked demand.
- Finally, there are some worrying negative signs emerging regarding Model S reliability, though this requires further confirmation.
Tesla: The Baird Is Singing A Strange Tune
- Baird published a research report increasing Tesla's price target to $275 per share.
- In this same research report, Baird, in close contact with Tesla's management, provides estimates for Q1 and Q2 2014.
- The estimates provided by Baird are well below the Street consensus and again imply peaked deliveries in existing geographies for the Model S.
- Peaked Model S deliveries right now are incompatible with longer-term projections for the Model S and thus call into question the long term story and value.
Alphatec: An Update
- Alphatec has resolved its legal troubles, but cast in stone a $49 million loss;
- At the same time, Alphatec has contracted financing which carries 16.8% dilution;
- Valuation can be supportive of somewhat higher share prices, given Alphatec's growth story is favored both by the aging and obesity trends.
Elecsys Corporation: An Update
- The latest quarter saw a significant revenue growth slowdown, but this was misleading;
- The slowdown occurred in the low-margin EMS segment, leaving the all-important proprietary segment growing at an accelerated pace;
- Still, with the stock having moved so much, valuation is no longer as enticing;
- The more expensive valuation together with some risk for the next quarter from the end of a Saudi contract leaves me neutral on the name.
Here's How The Amazon.com Quarter Is Looking In Terms Of Revenues
- ChannelAdvisor has just reported February 2014 "same-store sales."
- These imply that Amazon.com continues to be on track to miss revenue expectations for Q1 2014.
- Together with the ebook accounting change losing its grip, these also imply Amazon.com should be on track to miss revenue guidance for Q2 2014.
Tesla: We've Got Some Numbers For February
- The thesis that U.S. deliveries of the Model S have peaked remains unchanged.
- New data for February 2014 European sales confirms European sales are running sluggish as well.
- Barring a Chinese surprise, Tesla seems on track to have trouble beating its Q1 2014 deliveries guidance.
Alphatec: Lawsuit Loss Creates Buying Opportunity
- Alphatec is cheap and acts in the growing spine surgery segment which is helped both by the aging trend and the obesity trend;
- Alphatec got cut in half in the last month due to having lost a lawsuit;
- However, the cost from this lawsuit is not final, Alphatec might have ways to avoid taking the loss without compromising most of its business;
- And even if Alphatec does take the less, such outcome is also positive due to lower ongoing costs and becoming an attractive acquisition target.
Anecdotal Evidence - Gold And Cigarettes
- Anecdotal observation shows the emergence of many new e-cigarette stores, some taking the place of former gold-buying stores;
- E-cigarettes have many advantages over traditional tobacco, so are likely to take away significant market share. The new stores indicate an acceleration of this trend;
- Big tobacco is entering the e-cigarette segment, however this segment is more fragmented and lower margin than traditional tobacco, so the shift will be negative for big tobacco.
- 3 Thoughts On Ukraine