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Rohan Mulgaonkar  

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  • Buy Centene For Strong Upside [View article]
    New price target of $75 by year end.
    May 16, 2014. 10:11 AM | Likes Like |Link to Comment
  • Buy Centene For Strong Upside [View article]
    Centene as high as $67.5 today.
    Apr 22, 2014. 01:53 PM | Likes Like |Link to Comment
  • Buy Centene For Strong Upside [View article]
    6:07 am Centene beats by $0.12, beats on revs; guides FY14 EPS in-line, revs in-line (CNC) : Reports Q1 (Mar) earnings of $0.57 per share, $0.12 better than the Capital IQ Consensus Estimate of $0.45; revenues rose 31.9% year/year to $3.35 bln vs the $3.25 bln consensus.
    Apr 22, 2014. 08:08 AM | Likes Like |Link to Comment
  • Crossroads Systems: Patience Should Be Rewarded With Solid Returns [View article]
    Thorough and detailed analysis. I'm long at $2.37.
    Apr 8, 2014. 05:24 PM | Likes Like |Link to Comment
  • LeapFrog: 4 Reasons Why Shares Are Highly Undervalued [View article]
    A few back of the envelope adjustments to LF's current book value reveal a rough, but fairly sensible estimate of what LF's market value should be.

    Marketing expenditures in the form of advertising have been around $40 million recently on an annual basis. Capitalizing that amount using a discount rate to reflect the high uncertainty of marketing benefits (say, 20%) and allowing advertising a 3% long-term growth rate yields a synthetic capitalized "brand" asset of $235 million ($40 million / 17%). Doing the same for R&D (with a higher 25% discount rate to reflect competition and higher uncertainty) with estimated annual $40 million in expenses growing at 3% long-term gives about $180 million. There's no need to add any value for the worth of internally developed intangibles, as LF already capitalizes product content costs. As such, $180 million would reflect the total capitalized amount for the value of LF's "secret sauce," as it were. We can leave PP&E as is, or add a reasonable markup to reflect market values--either way, the value is not material given LF's primary operations. LF also has off-balance sheet debt-like commitments such as operating leases and royalties, but these are negligible.

    With existing total assets of about $412 million, LF's new total asset value incorporating the above adjusted capitalized assets is around $830 million. If we're optimistic, we can further develop a DTA schedule, but LF's management is playing it safe (a welcome change from the older form of aggressive forward guidance by previous management) and so should we. Dividing the new asset value by approx. 70 million in diluted shares outstanding results in a per share value of $11.80. Given the trajectory and high likelihood of further valuation allowance releases, I'd say $12 is a fair current market value for the assets.

    Of course, that would still be a sum of the parts analysis. We are still missing the synergies that those assets provide in bringing to life the entire LF entity (after all, Coke is not just the sum of factories, syrup, advertising expenses, and brand name; there's the intangible spark that enables these elements to form together in just the right way to "be Coke"). $13-$14 is thus a good approximation of fair value, IMO.
    Sep 5, 2013. 10:09 PM | Likes Like |Link to Comment
  • Sell Builders - Too Many Housing Headwinds Ahead [View article]
    The stock market priced in the current good news in housing over the last couple of years. By the same token, over the last 6 months of housing stock declines, the market again priced in Fed tapering and other issues expected to happen several months early. That's the answer to the "if housing is doing so great, why haven't housing gone nowhere" question--essentially an issue of leading indicators. The problem is, the manic stock market loves to price in short-term and not long-term news.

    Once again, housing stocks will probably start to gain later this year after interest rates, and therefore mortgage and refinancing rates, stabilize (post-Fed tapering). More importantly, in the long-term, the fundamental drivers for housing are very strong absent the Fed's intervention.

    I would look to execute limit orders for the likes of HOV or DHI at prices 5%-10% lower than the current stock value.
    Aug 23, 2013. 03:16 PM | Likes Like |Link to Comment
  • New Homes Sales For July Plunge: Short Every Homebuilder Rally [View article]
    Wow, I can't believe this article was published. "All the homebuilder stocks will go below $5 before the housing bear market is done and many will go bankrupt." Obviously, complete nonsense. Homebuilding shorts are (potentially) a good trade in the short-term given mortgage rate increases and the impending Fed tapering announcement (though perhaps a good deal of the short action has been priced in).

    However, the U.S. economy needs about 1.6 million new starts every year, and given strong(er) expected GDP growth, you can expect housing to pick up over the long run. Not to mention interest rates are still at historic lows. If you're in for the long run, HOV or DHI are solid picks. Otherwise wait things out for another couple of months.
    Aug 23, 2013. 01:39 PM | 4 Likes Like |Link to Comment
  • LeapFrog: Strong Buy [View article]
    Agreed. With a market cap at ~$800 million (about 35% higher than when the article was written), a skyrocketing trajectory, and continually superior products in a fast-growing niche, it's hard to see LF accepting any offer without a 30% premium. Buyout becoming increasingly unlikely.
    Aug 2, 2013. 09:02 AM | Likes Like |Link to Comment
  • LeapFrog: Strong Buy [View article]
    LF hits my target price (now at $12+ after hours). $14 coming by next year. Important to note strong performance in contrast to weak Mattel and Hasbro earnings. The divergence in educational tech from the pure toy industry is becoming clearer. Buyout opportunities in a cash flush environment seem ever likely. Increasingly unsure why the bigger firms haven't scooped this little company up yet!
    Aug 1, 2013. 04:58 PM | Likes Like |Link to Comment
  • LeapFrog: Strong Buy [View article]
    By the way, I'm upping my price target to $14 by Feb. 2014.
    Jul 2, 2013. 03:39 PM | Likes Like |Link to Comment
  • Possible Black Swan Events Developing In China [View article]
    A black swan by definition cannot be predicted--it is, in Donald Rumsfeld's idiom, an "unknown unknown."
    Jun 26, 2013. 01:35 PM | 28 Likes Like |Link to Comment
  • The Most Misleading Words In Investing: You Can't Go Broke Taking A Profit [View article]
    Feel free to read my two most recent articles on NCR (recommended at $27, now at $32) and LF (recommended at $8.76, now at $10.12).
    May 21, 2013. 12:41 PM | Likes Like |Link to Comment
  • LeapFrog: Strong Buy [View article]
    LF up now to $10.12. Market slowly taking notice.
    May 21, 2013. 12:17 PM | Likes Like |Link to Comment
  • The Most Misleading Words In Investing: You Can't Go Broke Taking A Profit [View article]

    Thank you for the article. I applaud the contrarian take, but the thrust of the piece's logic is heavily misleading. The Pareto Principle certainly applies to markets, particularly in the long run. The problem is that your article uses ex-post reasoning to make a priori claims.

    Conditional on knowing which of Buffet's holdings contributed to his massive returns, it's easy to invent the consequences of having sold the stock "too early." The same goes for listing the "success" of investors who held Altria and others. Extrapolating correct actions based on known outcomes is a severe conditional error, particularly in complex domains such as the stock market, where definitions of "success" are misleading at best and outright dangerous at worst. There is also significant survivorship bias at play.

    Consider also that Buffet is an outlier (as are most companies that managed to survive on a major index over the last 40 years). To paraphrase Nassim Taleb's thought experiment, imagine if you had a sample group of 500 world explorers and after 10 years, only 5 of them ending up surviving. Looking at the 5 who survived and inferring reasons for their existence (e.g. "These 5 had special x, y, z characteristics) would grossly underestimate the risks of their endeavors. The x, y, z characteristics could possibly lead to incredible feats and eventual survival (i.e. necessary though not sufficient causes), but in the vast majority of cases, they would have negative consequences.

    In other words, a priori and given a large sample, no one could predict who would win. The problem is that visible winners make the headlines and convince us of a "story," which we use to form a perverse, backward logic. Our notorious ignorance of a priori, at-the-outset probabilities compounds the error.

    Rebalancing is inherently smart because it presupposes lack of future insight. A stock that has gone up 20% may revert to the mean or it may contribute to out-sized gains. Despite what the many "seers" on this website like to claim, the fact is we don't know what will happen (except after the fact; we always have insight into the past). Rebalancing is a way of dealing with the reality of ignorance and the uncertainty of future events. I should note also that the CEO of Seeking Alpha has written eloquently and at-length on the benefits of rebalancing.

    Stock returns are of course not independent, and there is research (notably by Cliff Asness) that shows the importance of momentum factors (and a host of other so-called anomalies such as Fama's well-known small-value factor portfolios or the betting against beta "BAB" portfolios, etc.), but these are different concerns / arguments than discussed in the article above and are best left to the realm of researchers.

    Finally, you label rebalancing rules as "mindless." Yet that is the great strength of rebalancing. There's a tremendous amount of behavioral research that points to the litany of human flaws when investing (or engaging in a host of everyday activities). Having rules to stick by (i.e., non-bias driven heuristics) vastly improves our odds of performance if only because they stop us from over-meddling. Yes, the rules may be "arbitrary," but they are certainly not mindless.
    May 20, 2013. 11:56 AM | 2 Likes Like |Link to Comment
  • Leapfrog: Growth At A Reasonable Price [View article]

    One recent development as of a few days ago (from "The Street"):

    "The most recent short interest data has been released by the NASDAQ for the 04/30/2013 settlement date, which shows a 1,807,919 share decrease in total short interest for Leapfrog Enterprises Inc (LF), to 12,709,956, a decrease of 12.45% since 04/15/2013."
    May 15, 2013. 12:46 PM | 1 Like Like |Link to Comment