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  • Jason Industries: Insider Purchases Validate Undervaluation Of This Hidden Champion [View article]
    Mark, I agree with your end assessment that there is significant upside here (and have similar outlook for 2016), but I don't think the math behind your target price is correct.

    If I am following you correctly, $95 million x 6 = $570 million enterprise value. Less $401 million of net debt is about $170 million equity value. With 22 million shares outstanding you get to ~$7.65 price target.

    However, it would appear that you need to take into account the convertible preferred equity ($45 million), as well as there are an additional 3.4 million shares of "rollover" shares that are convertible to common stock on a 1 to 1 basis (shown on financials as non-controlling interest but search "rollover" in Q). In addition, there are numerous restricted and performance based shares that have been issued to management (~2.7mm shares currently issued) that ultimately have some claim on company.

    I think when you account for these items you get to a price that is much closer to, if not below, the current stock price (at least based upon 6x 2016 EBITDA).
    Oct 21, 2015. 01:45 AM | Likes Like |Link to Comment
  • Inarguable End To Decoupling [View article]
    1) I would not confuse growth %'s with actual amounts. Imports can't grow 15% per year. It is not sustainable (simply put they overtake the economy). Growth at mid single digits does not seem unreasonable (if not slower than the past)

    2) You are making the argument that "there is no demand for anything" and decoupling is essentially a myth. This might be true, but you actually do not show any data to support the domestic side of the equation you refer to. Presenting the case domestically would strengthen your case. Data you present does speak to why China's growth is not recovering to past years but does not speak to state of the US economy. Maybe china is no longer competitive? Maybe U.S. economy is worse than reported. Who knows.
    Nov 5, 2014. 02:08 AM | 1 Like Like |Link to Comment
  • To Handsomely Beat The Market, Buy Petroamerica Oil With Both Hands [View article]
    "Buy... with both hands"

    How do I do this? Do I need two computers and two mouses that allow me to simultaneously purchase with each of my hands?
    Aug 26, 2014. 04:04 PM | 2 Likes Like |Link to Comment
  • Bottom Is In For 3D Systems [View article]
    This is one of my favorite comments of all time.
    Jun 9, 2014. 11:01 PM | 1 Like Like |Link to Comment
  • Arotech: A Dead Battery In Disguise - Why The Stock Is Worth No More Than $2 Per Share [View article]
    LJ - I am not advocating long or short as this is the first time I have seen anything on this company.

    But you cannot judge a stock by its price alone. A $2 stock might be the same value as a $4 stock... It all depends on how many shares are outstanding. ARTX stock price is $3.71 and its mkt cap is ~$72mm according to Yahoo. Alcatel-Lucent has a stock price of $3.92... its market cap is ~$11 billion. Huge difference.

    Happy investing and good luck.
    Apr 22, 2014. 08:24 PM | 1 Like Like |Link to Comment
  • Wabtec Remains A Frustrating Mix Of Quality, Opportunity, And Expectations [View article]
    Stephen, thanks for the article. You are right... There is a huge untapped market. But the reason that it is frustratingly slow entry abroad is because of barriers to entry. These are the same barriers that make Wabtec's presence in U.S. so dominating... Huge installed base of customers (for record, 50% market share is only on braking products though they have a lead position in many others too).

    Much of the international share they have gotten has come from acquisitions of companies in the markets with installed customer base.

    One thing to look out for here is what is organic vs. acquisition growth. If you look at their 10k's going back to 2006 and look at their Acquisition Footnotes, you can see that organic growth under current management has been between 4-5% on a CAGR basis (since 2005) and just 1% since 2008. They have cut R&D costs as a % of sales by nearly 2 pts. With their most recent acquisition announced, they have have announced 23 acquisitions since beginning of 2006 with run rate revenues equal to 40% of their 2014 revenue guidance. The average multiple they paid on revenues was just 1.2x. They are trading over 3.0x 2013 revenues and 2.7x 2014 revenues... For a collection of businesses relatively recently acquired for 1.2x.

    I would be very wary of a manufacturing business trading at 3x LTM revenues and 25+x earnings that only grows 4-5% per year absent M&A.

    Good business though. Good luck.
    Mar 18, 2014. 03:49 PM | 1 Like Like |Link to Comment
  • Lululemon Athletica May Finally Recover In 2014 [View article]
    Thank you Alex for the article. Even assuming your earnings profile is correct, your midpoint valuation still reflects nearly 29x LTM EPS in 2019 - and that's on basic share count so maybe 30+ times diluted. That's a big number 5 years out and would reflect some pretty heady growth going forward from that point.

    Good luck on your investment and happy investing!
    Dec 19, 2013. 08:42 PM | 1 Like Like |Link to Comment
  • Microsoft's Google Bash Backfires [View article]
    I fail to see the investment significance of this article.
    Dec 17, 2013. 12:26 AM | Likes Like |Link to Comment
  • Japanese Hyperinflation? Don't Bet On It [View article]
    The issue is that with declining population there is less active workers to support government programs and debt. Today, majority of Japan's debt is priced at essentially 0%, but it still makes a very high % of government outlays. If the market balks and rates go up, interest costs will overwhelm the budget. This will force a devaluing of the Yen to meet debt obligations. There is basically no conceivable way for Japan to get its debt balance back in line, so if the market ever stops believing the deflation story it will happen quickly. Boom. Don't thank me, thank Kyle Bass for his passionate dedication to this cause.
    Jul 29, 2013. 04:24 PM | 2 Likes Like |Link to Comment
  • Lululemon: Quality Issues More Extensive Than Reported [View article]
    I do not know the % that Groove represents, but the company does consider it their signature pant.

    Management has said the affected product represents 17% of all bottoms available, but I believe its a much higher % of both pant and total revenues.
    Apr 26, 2013. 12:57 PM | Likes Like |Link to Comment
  • Lululemon: Quality Issues More Extensive Than Reported [View article]
    Michael, thanks for the comments. FYI, we are not short at this point. Given recent price action, someone must think that LULU will make positive announcements regarding product shortages soon, maybe with Q1 results. This could result in a price spike / short squeeze. As a result, were on the sidelines.

    However, over the long-term I believe the story deteriorates.
    Apr 26, 2013. 11:00 AM | Likes Like |Link to Comment
  • Capital Southwest Corporation: $1.00 For $0.61 [View article]
    One issue just glancing at the balance sheet is that the company does not record deferred taxes on its unrealized gains as part of net assets (they do have a small amount of deferred taxes related to pension expense). With over $469mm of unrealized gains, an investor would have a tax liability of over $70 million or ~ $18 per share if the company was liquidated (also assuming he only pays long-term capital gains tax of 15%). Combined with the private companies / lack of liquidity of investments, this could at least partially explain the discount (not that the taxes need to be paid today).

    Anyways, interesting article and definitely worth exploring further. I think the next analysis needs to be looking at the company's history of where values were marked on unlisted investments vs. where they were sold. A solid track record would definitely help the case.
    Mar 19, 2013. 10:31 PM | Likes Like |Link to Comment
  • Short The Lemon [View article]
    It is funny how every time an author writes an article that questions LULU's valuation out comes the the take it on faith crowd chanting "two words: international expansion," as if that solves everything.

    We admire LULU's meticulous business model / practices... enough to know they have been the key to success. So just because they are beginning to more aggressively expand into these mysterious international markets does not mean suddenly they no longer will have to go through the painstakingly slow process they have always gone through: open up show rooms (btw, they have had a show room in Hong Kong for two!!! years now and are just now opening a store), build relationships with local fitness instructors, build brand awareness, train employees, pick the ideal real estate locations...

    In other words, international expansion does not increase the pace, it just potentially sustains it for longer... with increased costs of working in far flung places. But as the base gets bigger the growth comes down because it does not scale that easy. It really is that simple. In fact, what should really worry people is the fact that comps for the 4th quarter, even if higher than guidance, will likely be lower than mid-teens. There is only so much in sales you can push through a 2,800 sf store.

    Another key issue not being discussed: a year ago they were saying they would not focus on international markets because they had so much opportunity in the US. Literally 9 months later the story changed. Why?

    Regardless, we are neither long or short. We recommend conservative, long-term investors avoid. We will be watching Q4 for:

    1) Guidance on SS sales for 2013 - Single digit guidance is really bearish at current prices
    2) How many stores are they actually going to open and where - if it stays less than 40 range then growth is not scaling
    3) Margin guidance - our guess is op margin leverage is gone as a result of increased costs with expansion. If that is indeed the case that is another bearish sign.
    Mar 18, 2013. 02:15 AM | 1 Like Like |Link to Comment
  • Apple Is Worth $265 [View article]
    Putting the cash issue and everthing else aside, the dcf terminal value is fundamentally flawed. The tv = roughly 3x his terminal earnings. A simple no growth assumption and 8% discount rate would result in 12x multiple and much different result.

    Let's all move on. It's busted analysis.
    Mar 7, 2013. 01:10 AM | 1 Like Like |Link to Comment
  • Our Response To Robert Walter Regarding Herbalife And 10b5-1 Plan [View article]
    Right or wrong, I have no opinion or position, the logic of this article is faulty. The entire crux of the argument is based isolating the bold text but ignoring the text that comes immediately after it:

    Herbalife's future share repurchases, if any, may take place from time to time [at management's discretion] based on market conditions, and shares may be purchased in open-market, privately negotiated or other transactions. (Emphasis added)

    Author makes argument that repurchases are "at management's discretion", but then ignores that they may be through "privately negotiated or other transactions." Privately negotiated or other transactions could refer to a lot of things but certainly includes ASRs which can often be structured to result in repurchases through what normally would be a blackout period. Of course, the plan would have to have been put in place ahead of time and be binding as noted.

    Again, the authors accusations may or may not be correct, but this particular argument does not seem to benefit the case.
    Feb 23, 2013. 06:26 PM | Likes Like |Link to Comment