Ranjit Thomas

Linn Energy: High Dividend, Low Valuation

The problem with LINE is that like a lot of other exploration companies, they generate no cash, pumping huge amounts into capex. The high dividend yield is illusory because it is funded by regular equity issuances - no different from a Ponzi scheme. Also, they were smart/lucky enough to hedge most of this year's production at high prices. As these hedges come off, they will be in deep trouble.

Lampert Sells More AutoZone Shares: What Happens Now?

Don't see anything wrong in Lampert selling to lighten his substantial stake. AZO doesn't look overvalued at 13x EPS and FCF, and management should be lauded for actively returning cash to shareholders. Compare it to ORLY, for instance, that is trading at 20x EPS, where trailing FCF is negative (calling into question their earnings quality), and management is busy dumping their stock.

AutoZone: The End of a Bear Market Bulwark?

Maybe your analysis can be improved by looking at AZO's PE and FCF multiple? I believe these are still pretty reasonable, especially compared to a competitor like ORLY.

Why Are Mutual Funds Accumulating Medassets?

MDAS trades at 27x EPS, with 10% EPS growth, which looks solidly overvalued. I wouldn't be surprised if funds are looking at the revenue growth rate of 25% and buying it, but this growth is fueled by acquisitions. Looks like the analyst estimates for next year are too high. The stock is bound to come down as these estimates are revised downwards.

O'Reilly's Earnings Accelerate, but Stock Price Stalled

Look at the cash flow statement. ORLY burned through $60Mn this quarter, and free cash flow is negative $160Mn in the last twelve months. These are the kinds of numbers one usually sees with companies that have borderline accounting fraud. So disregard the reported "profits" and follow the cash.

Beaten Down Natural Gas Likely to Stay Down, Making Producers a Short

Agree with the article. RRC and HK seem to be the most overvalued at 40+x EPS and 5x revs. And this includes the benefit of significant hedges this year. As the hedges roll off, bankruptcy is a possibility.

Why I'm Bullish on Whole Foods

A company at 24x '09 EPS burning cash is a buy? Thank goodness for technical analysts! And don't forget the convertible they issued that dilutes the equity above $14.50.

O'Reilly Automotive Benefits from the Slump

ORLY hasn't generated any cash in the last 3 years, with free cash flow being more than negative $40Mn in 2008. It spends a huge amount on capex, and doesn't seem to flow it through into depreciation, thus inflating earnings. Aggressive accounting at best, borderline fraud at worst. Why would anyone want to buy a company at 18x low quality earnings, when half the market is trading at a single digit multiple?

What Happens When You Hold Leveraged ETFs for More than One Day?

I think there is one big reason why leveraged ETFs tend to go down irrespective of the trend in the market they are meant to track. The ETF rebalances every day, with the extent of the rebalancing dependent on how much its sector goes up or down. So it incurs huge and constant trading costs, particularly when the market is volatile. I don't believe this reason has been highlighted by anyone as a cause for the performance drag in leveraged ETFs, and why they are not suitable for a buy and hold strategy.

Praxair Has Potential for '09 Breakout Performance

Look at the cash flow statement, not just reported earnings. The stock is at ~50x trailing free cash flow, which implies that reported earnings have been aggressively managed. It looks like the company under-depreciates, which will catch up with it soon.

Coinstar: A Countercyclical Play?

The stock is at 30x proforma EPS, has negative free cash flow over the last 12 months, and a business model at risk of obsolescence. And they are about to issue a huge amount of stock to the owners of Redbox, who will be sure to dump it on the market. This is as sure a short as one can find in this market.

PIMCO High Income Fund: Look to Swap Out

All the similar Pimco closed end funds (e.g. PTY and PCN) have been distributing dividends in excess of investment income available to shareholders. The yield is misleading - it can be anything the fund manager wants it to be. Bill Gross thy name is Bond Ponzi!

AeroVironment Will Fly on Government Contract

More like fly and crash land! The stock trades at 30x EPS and 50x FCF, so you'd think that this and many other orders are already priced in? Put an aggressive 20x multiple on it, and AVAV is a $25 stock for 35% downside. Hard to find such stocks in today's market, but here it is.

Either Gold Has to Come Down - Or Gold Miners Need to Come Up

Most gold miners hardly generate any cash. Take a look at the cash flow statement for NEM. Free cash flow for the last 12 months is negative. So I would argue that the miners are overvalued.

O'Reilly Automotive Continues to Shine

ORLY is trading at 20x EPS and has a consistent history of not generating any cash. Free cash flow for the last 12 months is negative, making the reported earnings suspect. This is one of the best shorts in this market.