Seeking Alpha

Paulo Santos

 
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  • Emerson Radio: Update, Going Neutral
    Sat, Jun. 28 MSN 17 Comments

    Summary

    • Emerson Radio was a buy because of the likelihood of growth and profits in a company trading below cash.
    • However, the latest earnings report compromised both growth and profits.
    • As such, I have turned temporarily neutral on Emerson Radio.
  • Philip Morris: The Dividend Will Eventually Be At Risk
    Fri, Jun. 27 PM 251 Comments

    Summary

    • Philip Morris provided reduced guidance.
    • While the reduced guidance is attributed to temporary factors, I believe there is a structural problem at work.
    • The structural problem are e-cigarettes, they are disrupting the traditional cigarette industry.
    • There are further reasons to believe dividends and buybacks at Philip Morris have peaked already.
  • Quick Consequences From Obama's Freeing Of Crude Exports
    Wed, Jun. 25 BNO, TSO, USO 22 Comments

    Summary

    • Allowing crude exports has consequences for several assets.
    • Most of the consequences flow from a tighter Brent/WTIC spread.
    • I identify some winners and losers from this situation.
  • A Tale Of Unbridled Optimism
    Tue, Jun. 24 AAPL 129 Comments

    Summary

    • There seems to be excessive optimism regarding what Apple's upcoming iWatch can do.
    • This is borne by the reaction to my former article. Expectations for the iWatch have gone irrational.
    • Excessive optimism is dangerous for the share price.
  • Inflation Is Rearing Its Ugly Head
    Mon, Jun. 23 SPY, QQQ, DIA 168 Comments

    Summary

    • There are some signs inflation is showing up, after years of money printing.
    • This is happening both in the U.S. and globally.
    • With money printing being the main factor driving markets upward, inflation is probably the main roadblock towards the rally continuing.
  • An iWatch Cannot Move The Needle Much
    Sun, Jun. 22 SWGAF, AAPL 387 Comments

    Summary

    • There's tremendous expectation regarding the iWatch.
    • However, I show that the iWatch cannot move the needle for Apple.
    • This is so even if we use rather optimistic assumptions, including making Apple the worldwide leader in the watch space, which is rather unlikely to happen.
  • How Price-Sensitive Are Amazon.com's Customers? A Tale Of Two Tablets
    Sun, Jun. 22 AAPL, AMZN 79 Comments

    Summary

    • We have doubts regarding Amazon.com's customers' price sensitivity.
    • Clearly, Apple customers are not that price sensitive. When Apple launches a new product, it becomes its hottest seller, even though it is more expensive.
    • As for Amazon.com, we have reason to believe things can worsen in reverse. The article presents proof of why I say this.
    • All in all, this price sensitivity does not bode well when Amazon.com is trying to sell a mid-tier phone at high-end prices.
  • Lakes Entertainment: There's Hidden Value And Optionality
    Fri, Jun. 20 BJK, LACO 8 Comments

    Summary

    • Lakes Entertainment has several undervalued assets in its balance sheet.
    • Valuing these properly, even using conservative assumptions, gives us a notion of the possible upside.
    • Furthermore, there are even assets that have been written down to zero and present positive optionality.
    • On the downside, there are no immediate, obvious, catalysts. This might mean the stock, while undervalued, can behave as "dead money."
  • Electromed: Possible Catalyst For A Positive Re-Rating
       • Thu, Jun. 19 BAX, HRC, ELMD 13 Comments

    Summary

    • Electromed sells a competitive medical device meant for airway clearance.
    • This medical device is analogous to what Baxter delivers in the peritoneal dialysis market, only for airway clearance.
    • Electromed has launched a new model and is seeing accelerated revenue growth. Electromed is also near attaining profitability.
    • It seems to me that Electromed shares will re-rate higher as the market sees the growth and likely profitability for a seller of an high-margin medical device.
  • The Hail Mary Phone
    Thu, Jun. 19 AMZN 85 Comments

    Summary

    • Amazon.com's Fire Phone offers mid-tier specifications for a high-end price.
    • It thus requires ignorance of the smartphone market, to be bought.
    • The phone would be very profitable if it sold in high numbers.
    • However, the most likely outcome is for the phone to be a dud given how absurdly mispriced it is.
  • Saratoga Investment Corp: Potential Catalyst For A Revaluation
    Thu, Jun. 19 SAR 20 Comments

    Summary

    • Saratoga Investment is a BDC making loans and managing a CLO in the U.S.
    • Right now, Saratoga Investment trades at a significant discount to its peer group.
    • I believe this discount stems from the fact that Saratoga Investment does not pay a quarterly dividend, something which seems likely to change soon.
    • Once Saratoga Investment starts paying a quarterly dividend, the stock is likely to eliminate its present discount, implying roughly 41% upside for the shares.
  • Why Doesn't Bohai Pharmaceutical Go Up?
       • Wed, Jun. 18 BOPH 18 Comments

    Summary

    • Bohai is a traditional Chinese pharma company.
    • Its stock is supposedly trading at close to 1 times earnings, and its revenues show decent growth.
    • Yet, as long as an issue I identify in the article isn't cured, the stock remains highly speculative.
  • Tesla's Q2 Goes Down To The Wire As Well
    Mon, Jun. 16 TSLA 219 Comments

    Summary

    • Delivery numbers for May have arrived for Tesla's main markets.
    • These numbers continue to tell a story of stagnation.
    • Still, with the opening of the U.K. and China markets, Tesla is likely to still be able to meet Q2 deliveries guidance.
    • A different story seems to be forming for Q3, Q4, with yearly guidance requiring re-kindled growth in Tesla's main -- and stagnated -- markets.
  • Is Intel Impossibly Leaky?
    Fri, Jun. 13 INTC 51 Comments

    Summary

    • Intel unexpectedly raised revenue and gross margin guidance.
    • This brought with it a feeling of "dejá vu".
    • A cursory look at the past shows that in many similar instances, Intel seemed to have anticipated the surprise.
    • This pattern has historically compromised any excess returns from buying after the positive surprise.
  • This Is Amazon.com's D-Day And The Alibaba Troops Are Disembarking
    Wed, Jun. 11 BABA, EBAY, AMZN 151 Comments

    Summary

    • Alibaba is about to open a store in the U.S.
    • Selling through Alibaba will be massively cheaper than selling through Amazon.com, so the suppliers will have much higher profits or much lower prices when doing so.
    • 3P selling through Amazon.com is Amazon.com's most profitable segment, having a threat to that segment is a major threat to all of Amazon.com.
  • Here's What Amazon.com's Smartphone Will Do
    Fri, Jun. 6 BBRY, AMZN 248 Comments

    Summary

    • Amazon.com's smartphone doesn't hold much mystery.
    • In the best case scenario Amazon.com's smartphone will get about as much market share as BlackBerry.
    • Yet, Amazon.com went up two BlackBerries with all the speculation.
    • In the end, Amazon.com's smartphone is likely to be a negative for Amazon.com's profitability.
  • Emerson Radio Corp. Update
       • Wed, Jun. 4 MSN 10 Comments

    Summary

    • A catalyst did not materialize.
    • However, things are still evolving favorably for Emerson Radio Corp.
    • Two risks were eliminated, and the company is close to start showing revenue growth again.
    • All in all, I put the stock's value at $3.70, a 111% upside from its recent quote.
  • Cannabis Capital Corp: You Can't Make This Up
       • Wed, Jun. 4 CANV, CBCAE 32 Comments

    Summary

    • The marijuana bubble produced its share of crazy booms and busts.
    • It also led many companies to include "cannabis" in their names.
    • Most of these companies' shares have already imploded, but one stock I have identified hasn't.
    • This stock will drop 90-95% with 99% certainty, one only needs to look at its balance sheet to know why.
  • Delticom Update: The Amazon.com Of Tires Is On Track, Though Seemingly Not
       • Sat, May. 31 DTOOF 2 Comments

    Summary

    • Delticom reported Q1 2014 earnings.
    • These are clouded by the Tirendo acquisition, a pro-forma inclusion of Tirendo in Q1 2013 already shows significant improvement.
    • Taking into account the European replacement tire market's size, we can estimate a TAM for Delticom.
    • With further assumptions, we can derive significant potential for Delticom's share price.
  • E-Cigs Are A Different Industry From Traditional Tobacco
    Fri, May. 30 BTI, LO, MO 39 Comments

    Summary

    • The e-cig market is intrinsically different from traditional cigarettes.
    • Thus, while Big Tobacco might dominate entry-level e-cigs, it has no hope of dominating the e-cig market.
    • The e-cig market will be fragmented and consist of highly-customizable devices and e-liquids.
    • Furthermore, there are now signs that the e-cig market is entering the mainstream. The impact on Big Tobacco is likely to accelerate quickly.
  • Sears Earnings Offer Us Our First Glimpse Of Lands' End First Quarter
       • Fri, May. 23 SHLD, LE 3 Comments

    Summary

    • We can try to estimate Lands' End's Q1 from the earnings just reported by Sears.
    • This exercise shows that Lands' End is for the most part stagnated.
    • However, conducting the exercise shows other factors which mean Lands' End will likely be an interesting investment.
  • Sears: The Good, The Bad, The Ugly
    Thu, May. 22 SHLD 75 Comments

    Summary

    • Sears actually had something good to say. Same-store sales improved dramatically.
    • But these came at the cost of lower margins.
    • And Sears is burning cash dramatically as well. Sears is still on track for an ugly outcome.
  • Callaway Golf: Concentrated In The Worst Possible Space And With Financial Risk
       • Wed, May. 21 DKS, ELY 15 Comments

    Summary

    • Dick's Sporting Goods painted a horrid picture for the golf market.
    • Callaway Golf is a pure-play on golf, so stands to be penalized by this development.
    • Things are even worse, because Callaway Golf carries significant debt and is not generating much in the way of EBITDA, so a deteriorating golf market might impact its solvency.
  • Alloy Steel International: Founder's Death Will Have Significant Implications
       • Wed, May. 21 AYSI 30 Comments

    Summary

    • Alloy Steel International was tremendously cheap at 0.7 times EV/EBITDA.
    • Yet, it had a major problem: nepotism.
    • That's what makes yesterday's death of its founder so relevant. The death of the founder increases the likelihood of the company being sold or being managed neutrally towards minority interests.
    • Either way, it's likely that the death of the founder is going to make the share price trade several times higher in the next few months.
  • India Is Probably A Sell Right Now
    Wed, May. 21 EPI, ISXIF 19 Comments

    Summary

    • India is incredibly loved right now after the Modi rally.
    • Yet, as I show in this article, there might be reasons to doubt the Indian market at this point.
    • The reasons include sentiment, valuation and fundamentals.
  • The One Amazing Thing About Sears
    Wed, May. 14 LE, SHLD 146 Comments

    Summary

    • Sears keeps spinning off assets.
    • This is unusual. Usually creditors would impede these moves.
    • As Sears spins off more valuable assets, the likelihood of bankruptcy increases, and the recovery for creditors in the event of bankruptcy decreases.
  • Tesla's April Sales Begin Flowing In
    Tue, May. 13 TSLA 192 Comments

    Summary

    • Data regarding Tesla's April deliveries are flowing in.
    • When we compare this data to the previous quarter, it is below the average monthly sales registered then, even though the delivery pipeline was supposed to be full.
    • However, at the same time, the April deliveries exceed January's, so in that regard, the data are inconclusive.
  • Enphase: Strong Story, Strong Growth And Decent Valuation Make For Substantial Upside
       • Tue, May. 13 TAN, ENPH 15 Comments

    Summary

    • 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
    Fri, May. 9 SKUL, ZNGA, AAPL 296 Comments

    Summary

    • 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
    Thu, May. 8 TSLA 380 Comments

    Summary

    • 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
    Wed, May. 7 AMZN, CSCO, FB 18 Comments

    Summary

    • 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
       • Tue, May. 6 AMIC, IHC 10 Comments

    Summary

    • 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.