Sammy Pollack

Long/short equity, contrarian, research analyst, portfolio strategy
Sammy Pollack
Long/short equity, contrarian, research analyst, portfolio strategy
Contributor since: 2011
I do not think a deal would need to be financed entirely by debt as you suggest. Could be a mostly stock deal. Both KSS and M are trading at similar valuations at around 10x earnings.
Not suggesting that they should close down all 1,000+ stores that KSS or JCP operates just the weakest ones. Perhaps 100-200 locations where there is overlap.
Synergies are stronger buying power and also SG&A reduction. Consolidation would also mean better pricing power. Note that each quarter KSS incurs over $1billion in SG&A expense while M incurs over $2billion per quarter. Total SG&A between the two companies of at least $12 billion per year. There are huge opportunities to cut expense here if the companies merge. While a lot of this is likely due to things such as rent, I think it is fair to say a combined entity could reduce SG&A by ~1-2billion per year.
Another potential benefit from a deal would be increased leverage when negotiating will mall operators. The shrinking number of big box retail outlets means that it is harder for malls to find tenants. If M combined with KSS, I think they would be able to negotiate better rent rates which would help boost profits. 
Right now KSS, M, and JCP all have to make significant investments in their online platforms. If consolidation occurs the total amount spend here would decrease. Instead of KSS and M maintaining separate online divisions each with all the same expenses it would become one.
By buying more stores, M could increase the percentage of stores it is closing from the combined entity.
This is particularly true in malls where M and its potential buyout target both operate stores. The end result would be consumers with less department store options and a greater revenue per store figure for M.
M would also realize significant operational synergies from a deal. ALSO, all of these retailers will need to make significant investments into their online channel. M has already started doing this but JCP and KSS are behind. Significant synergies can be realized by having to invest into only 1 online platform where as currently the department stores all have thier own online platforms.  
If business continues to be tough and they "let other chains go out of business" as you suggest, then price competition will increase and margins will compress. Struggling chains such as JCP have little they can do other than reduce prices and thus put pressure on others to do the same. Perhaps JCP is not attractive because they will go out of business. However, I do think KSS is more attractive given the fact that it continues to remain very profitable despite the challenges.
Yes, it is true that BX has negative income during the crisis. Certainly, BX is much more leveraged to the markets than TROW or BLK. That being said, over the long-term this is a positive as BX will benefit from the rising tide of the markets. BLK and TROW benefit to a lesser degree from rising markets.
taxes that would have to be paid upon sale of these assets reduces the value
I agree in general that companies should not issue debt to finance large dividend payments. However, while V and MA both pay dividends the amounts are so small that it is not an issue.
I think any offer would have to value VOD at at least $42 per share
SEAS is already in a "tailspin"..... thats why the stock is attractive
Thanks for pointing this out will have it changed now
I think that is a good way to play DTV
If the deal does not go through I would expect DTV to trade down to the mid 70's. The deal should close sometime during the beginning of 2015
Debt cost are falling now but if interest rates rise then MGM will really be in trouble. With interest rates hovering close to all time lows it seems likely that rates will move higher over the next few years which could increase MGM debt cost.
investment realizations are happening slower than anticipated
Murdoch could simply go hostile and take his offer directly to shareholders
thank you
Firstly, given the number of stock ideas I discuss on SA it would be very difficult to have skin in the game on every call. I sometimes take a position in stocks I discuss. See one of recent articles below.
While I firmly believe SIRI is a sell, I am also not a big fan of short selling because losses are unlimited while gains are limited.
There is no reason to do a reverse stock split because there is no positive impact. A reverse stock split does not increase the value of shares outstanding. XOM could increase the dividend.
Does SCTY have any advantages other than first mover advantage? Is there anything stopping competition from undercutting their pricing if the business model proves successful?
The issue is more complicated than saying FSLR is profitable and SCTY is not because SCTY has a different business model that could lead to increasing profits over the long-term as revenue from existing systems outweighs the cost of new installations
GE will eventually make new all-time highs, it might take time but I am confident that we will see new all time high. GE's move away from financial business mix and towards industrial business mix should help make sure GE takes out old all-time highs within the next decade
Could not agree more with your sentiments about how awful our corporate tax system is. I hope, however unlikely it may be, that the government thinks about trying to lower its own corporate tax rate as opposed to simply creating some form of rule to close the loophole.
Total is based France so the tax savings would not be the same.
I like your strategy of selling Jan 2016 puts makes a lot of sense to me
not necessarily, depends on how the deal is funded. If its mostly stock and cash then XOM need not loose its AAA rating. If the deal would be funded by raising debt then XOM could lose AAA rating
No, there is not another JNJ but PG, PFE, MRK, and UL are somewhat similar to JNJ. There is no question JNJ is an exceptional and unique company. I just think the current valuation is problematic. Since you said you are a dividend investor you might want to consider looking at Verizon. The yield is much better and so is the valuation.
I like VZ more if you are investing for income
covered call strategy is interesting at this point given the high valuations. I don't think covered call strategy makes sense for most stocks given the M&A environment right now. However, selling covered calls if you own JNJ is probably not a bad idea at this point.
Not necessarily saying JNJ is a sell if you are already in at a good price just think if you are looking to put new money to work there are better stocks than JNJ.
Larry Ellison is one of the richest people in the world currently worth about $50 billion. Its true that he has done many acquisitions but he had done an amazing job of integrating into ORCL and, most importantly, making money for shareholders.
would not worry too much about the Venezuelan charges because these would be a one time hit
While those might be true there are other positives that make IGT interesting such as its strong cash flow relative to earnings and booming online and mobile gaming business. GTECH is already in talks to buy IGT so at least one bid is highly likely.
BNO is probably a better play because, as you said, middle east exports go mostly to Europe