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Stephen Percoco, CFA  

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  • Sell Consolidated Water [View article]
    Yes, you are correct. Sorry for the error.
    Apr 17, 2015. 05:13 PM | Likes Like |Link to Comment
  • Energy Management: A Key Growth Driver Within General Electric [View article]
    I will admit that I do not know a lot about the end user markets and so I am deferring to GE management for its assessment of the growth potential of the business. I would be surprised if GE broke this out as a separate segment to highlight its "zero growth potential." I think that it is also important to remember that acquisitions are a part of the growth story, both in rounding out the product line and acquiring new technology. Before you pass judgment on Energy Management, I suggest that you take a closer look on the changes taking place within the business.
    Mar 23, 2015. 05:33 PM | 2 Likes Like |Link to Comment
  • Grocery plans from Target to veer away from typical packaged food fare [View news story]
    CPB is making a push in packaged fresh foods through its recent Bolthouse acquisition and is also launching a line of organic soups. While Target may emphasize upscale and trendy food and beverage items, I would be surprised if they simply abandoned the best selling grocery store SKU's like Campbell's Tomato Soup. I think that CPB and some of its food products peers will be able to manage the transition at Target.
    Mar 3, 2015. 05:42 PM | Likes Like |Link to Comment
  • Campbell Soup: Buyout Target? [View article]
    Josh, I agree that dividend yield is the primary driver of CPB's valuation. This is the case with most consumer staples stocks today. Investors seem to care only about yield and not about the P/E multiple. The recent buyout rumors have added about $2 to CPB's stock price. The bigger issue, in my opinion, is the company's drive for product diversification and growth. It is doubling down on its branded product strategy, ramping up product innovation and expanding into packaged fresh foods and organic baby food with the acquisitions of Bolthouse and Plum Organics. The strategy is controversial because CPB's track record in product innovation is mixed at best. (It has created many good quality products but has had difficulty getting a high enough level of repeat sales to earn a permanent place for them on grocers' shelves.) I for one would prefer to see the company ratchet down its product innovation efforts and focus on delivering greater value to its core customers, many of whom are still income-challenged and therefore cost conscious. I do not believe that a valuation method that is derived from equity book value is appropriate in CPB's case because book value is quite low after many years of stock buybacks. (This is why the stock trades at 9X book and its price-to-tangible book is negative.)
    Jan 27, 2015. 08:25 AM | Likes Like |Link to Comment
  • National Bank Of Greece: Still A Work In Progress [View article]
    Sorry for the delay in replying. At the end of 2013, NBG listed a total of €5.96 B of loans, €2.59 B of investment securities and a receivable of €0.44 B all from the Greek state. Together, that equals a total exposure of €8.99 B to the Greek state. (Not included in the loans is a derivative which has been bifurcated and included presumably in NBG's derivatives exposure. I did not see any separate disclosure relating to this.)

    NBG does not provide as detailed a breakdown in its interim footnotes. But it did disclose that the loans to the Greek state had increased to €6.32 B at Sept. 30, 2014 (from €5.96 B at Dec. 31, 2013).

    Although I did not find any specific references to impairments on the Greek state exposure, I believe that it is likely that the Bank has booked no reserves against these loans and investments because 1) they are post-PSI exposures (i.e. after the 2012 debt write-down) and 2) all of the loans and securities are (or should be) current on their interest payments.

    It must be noted, however, that exposure to the Greek state is different from total public sector exposure in Greece. NBG also has exposure to other governments (presumably local) and public sector entities (including those slated to be privatized). When all of these are added together, I calculate the total exposure at €20.46 B, according to the bank's year-end 2013 20-F filing. Here too, the impairments appear to be low.

    The potential for future write-downs is a much more complicated issue. At this point, the country is meeting its obligations as agreed and has not asked formally for any additional debt relief. As is now well known, one political party, Syriza, is campaigning on a platform that would seek additional debt reductions now from Greece's creditors, but the details of those proposed debt reductions have not been disclosed (if indeed they do exist). Many observers believe that Greece will have to restructure its debt again eventually; but whether and by how much the country will have to lower its debt still depends upon the strength of its economic recovery which is now in the early stages.
    Jan 7, 2015. 09:26 AM | 1 Like Like |Link to Comment
  • National Bank Of Greece: Still A Work In Progress [View article]
    If Greece exits the euro, the impact on NBG will depend upon how Greece accomplishes the exit; for example, how Greece treats its creditors and what support it gives to the banking system. I have not thought through all of the possibilities, nor do I have sufficient knowledge of the intricacies of Greece's banking system, the functioning of the government or its formal agreements with the troika to offer any well informed guidance on this issue. Judging from the recent performance of Greece's stock market and the bank stocks in particular, it is probably safe to say that share prices will fall; but I will leave it to those who follow the country more closely to offer their opinions, if they are willing to do so. I do, however, believe that it is premature to suggest and also quite unlikely that Greece will leave the euro in the near term (say in 2015).
    Jan 4, 2015. 09:10 PM | 2 Likes Like |Link to Comment
  • National Bank Of Greece: Still A Work In Progress [View article]
    I have not changed my views. I still see good upside potential in ATHEX and NBG (and I am still long). Of course, now that Greece is going to the polls on Jan. 25, share prices in Greece may remain volatile. That said, some press reports suggest that Syriza is moderating its views in an effort to reassure the troika and financial markets that it will not take steps to derail Greece's economic recovery, if it does come to power. If this is true, market concerns about the impact of a Syriza-led government should subside.
    Jan 1, 2015. 09:02 PM | 2 Likes Like |Link to Comment
  • A Bounce Could Signal A Bottom For Denbury [View article]
    In DNR's latest Analyst Day presentation, the company shows that the Thompson field has been producing for at least the past couple of years (and probably for some time before then). The daily production rate has been about 1,600 barrels for the past two quarters and has fluctuated between about 1,300 Bbls/d and 1,800 Bbls/d for the past two years. Although DNR's Green CO2 pipeline has been extended to the Houston area, a chart in the slide presentation shows Thompson as a future CO2 flood, so I assume that Denbury has not started CO2 injection there yet. FYI, reserves at the Thompson field are listed as 30-60 million barrels.
    Dec 31, 2014. 12:02 PM | Likes Like |Link to Comment
  • National Bank Of Greece: Still A Work In Progress [View article]
    Thanks for the link. I reviewed a previous Blackrock report, but I have not seen this update and I will read it with interest. As for David Einhorn's long position in the Piraeus and Alpha warrants, do you mean evaluating the investment or reviewing an investment analysis that was prepared by his analysts? Of course, I would be quite interested in Greenlight Capital's analysis of the warrants of those Greek banks, if I can find it.
    Dec 30, 2014. 12:23 PM | Likes Like |Link to Comment
  • National Bank Of Greece: Still A Work In Progress [View article]

    I will try to comment on some of your questions and observations.

    3. I am not sure what you would expect management to say about the extra dilution. While I was surprised when the bank completed the second round of capital financing, it was also evident - given the pressures caused by the economic downturn in Greece and the demands of regulators - that NBG and the other banks might need to raise more capital in the future. If NBG fails to raise the amount of capital specified in its restructuring plan, it may have to embark on a third round of capital raising. What would you want management to say?

    4. I have not read the Reuters report, but I will over the next few days. I think that in most restructurings, new capital gets most of the equity and existing shareholders get substantially diluted or wiped out. You can argue that new capital in this case is short-term oriented, but what's most important from NBG's perspective is to receive the capital to strengthen its balance sheet. I do not think that this constitutes praise of short-term speculators.

    6. I think that in many situations where existing shareholders are wiped out, there will be accusations that shareholders have been duped. Current shareholders - including those who have participated in the recent capital raises (or bought the new shares in the secondary market) - still face significant risks. I have tried to provide a framework that highlights the (short-term and long-term) upside potential for shareholders, while acknowledging the remaining downside risks.

    7. I am not aware of any intention or initiative on the part of NBG management to monetize the bank's DTCs.
    Dec 30, 2014. 12:14 PM | 1 Like Like |Link to Comment
  • Greece Schedules A Parliamentary Election, Shares Plunge [View article]
    According to the WSJ: New Democracy's candidate, Stavros Dimas, received 160 votes, which was at the low end of expectations. Political observers had been expecting that he would get 160-165 votes in the first round. 135 MPs voted "present"; while 5 were absent. The next vote will be held on Dec. 23.
    Dec 17, 2014. 05:19 PM | 1 Like Like |Link to Comment
  • Greece Schedules A Parliamentary Election, Shares Plunge [View article]
    No, CCM, I have not been following the situation there as closely as you. You raise some interesting points and make a good point about a possible favorable market reaction, if the government gets 175 votes or better on the first round.

    For those who are not aware of the process: the government will vote to elect a new President on Dec. 17. If necessary, it will also hold a second vote on Dec. 23 and a final vote on Dec. 29. In order to elect a President, the government needs at least 200 members of Parliament to vote on Dec. 17 and Dec. 23, but only 180 on Dec. 29.
    Dec 16, 2014. 08:12 PM | Likes Like |Link to Comment
  • Greece Schedules A Parliamentary Election, Shares Plunge [View article]
    My repeated references to Mr. Tsipras and the fewer references to Mr Samaras were made only because I tried to focus on the key issue: the impact of the Presidential poll on the financial markets. Mr. Tsipras is clearly the protagonist. Without his pressure, the Presidential election would be a non-event. From where I sit (5,000 miles away from Athens and not immersed in the day-to-day opinions of the cognoscenti on developments in Greece), the Prime Minister has done a fine job under very difficult circumstances. I wish him success in the upcoming vote.
    Dec 14, 2014. 10:10 PM | 1 Like Like |Link to Comment
  • How Much Does It Cost To Produce One Barrel Of Oil? [View article]
    Christoph, thanks for the analysis. Your figures raise a number of obvious questions. Why are non-income related taxes so different among these four? What explains the differences in depreciation? Also, do we know anything about the dispersion of production costs within each company. For example, what might the standard deviation of production costs be within each company?

    While the average prices are interesting, it would be more meaningful to know what costs are at the margin, since that will have the most impact on price. Then, we might be able to assess the likely response of production to both price declines and price increases. I do acknowledge, however, that production cost information for marginal producers is probably tougher to obtain.
    Sep 2, 2014. 07:50 PM | 1 Like Like |Link to Comment
  • Brightcove 2014 Second Quarter Earnings Preview [View article]
    I was disappointed in the company's second quarter earnings and the change in its outlook. Brightcove essentially delivered second quarter earnings that met management guidance. I was hopeful that it would be able to deliver better earnings (or a lower loss) based upon cost cutting. However, growing revenue is the key issue.

    The loss of the Rovio account is disappointing, but the company makes the case that this was a unique customer whose usage differs from the typical target customer profile. Based upon management's comments on the call, Rovio accounts for 3.8% of total revenue - or about $4-$5 million of revenues - but 15% of its streaming volume. This suggests that it is less profitable (on an operating margin basis) than Brightcove's other customers. Still, the loss of Rovio will have a meaningful impact.

    The lowering of 2014 guidance - from revenues of $126-$130 to $122-123.5 million and the increase in non-GAAP net loss from $0.19-$0.25 to $0.24-$0.28, reflects partially the loss of Rovio, but most of the Rovio loss will show up in 2015. This will provide at least a modest headwind for 2015 results.

    Yet, the change in guidance was relatively modest. For example, the new guidance for non-GAAP loss reflects an increase in the loss of between $0.5 million and $1.5 million. Of course, this is disappointing, but it is not too surprising for a company that is still working through a big platform integration under challenging market conditions.

    In my opinion, the stock's 38% decline was due mostly to the sudden resignation of CFO Christopher Menard. His resignation is effective August 28. He will serve as a consultant to the company until November 30. Brightcove's chief accounting officer, Christopher Stagno, will serve as interim CFO until a replacement is found. We were told that Mr. Menard was leaving to pursue other opportunities, but that is obviously not the whole story. I think that the Street took the resignation pretty hard, because it views Mr. Menard as quite capable.

    Of course, the company's second half performance will determine whether the plunge in BCOV's shares is justified. Clearly, there is more uncertainty, but if you take management's comments at face value, the drop in the share price seems way overdone. That said, I suggested in this article that progress toward profitability should come through cost cutting, but we learned on the conference call that the company is still in hiring mode for sales, marketing and R&D. Perhaps this is justified, but if Brightcove does not get traction in revenues soon, it will eventually have to cut costs more aggressively.

    My first article on BCOV was entitled "Give Brightcove Some Time." I think that this advice still holds true today, even though it appears that Brightcove will need at least a little more time than I initially thought.

    Given Friday's sharp plunge in the share price, I expect that the stock will recover some of that loss in the weeks ahead. Whether it is able to hold any recovery (or ultimately go higher) now depends even more upon how things unfold over the next six months and beyond.
    Jul 27, 2014. 10:14 AM | 1 Like Like |Link to Comment