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The Unintelligible Investor

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  • National Research Corp: Research That Pays [View article]
    Thank you, Ellsworth.

    I don't disagree with your assessment. As I said, I think the assumptions of the model are conservative. There is definitely more upside risk than downside risk to fair value.
    Nov 11, 2013. 06:29 PM | Likes Like |Link to Comment
  • National Research Corp.'s Class B Shares: The Low-Risk Double [View article]
    Couple points: first, what is the incentive for the manager to take the company private? This is a solidly profitable, high growth company that commands a high multiple ... not your typical candidate for an LBO.

    Second, he would have to pay alot of dividends to the Bs to have enough cash to fund a buyout ... B holders might find they've earned their investment back via dividends before the buyout ever comes.
    Nov 1, 2013. 09:11 AM | Likes Like |Link to Comment
  • National Research Corp.'s Class B Shares: The Low-Risk Double [View article]
    The outcome you are describing is a definite possibility. That would also explain the suspended dividends. Why pay dividend tax and then pay inheritance tax on top of that when the trust can receive an outsized windfall from acquisition, all while maintaining voting control.

    Still, Chris has highlighted that even if the business is acquired, the downside in the shares is quite small relative to the upside if the business is not sold. Even if succession/inheritance planning is his primary concern, he still has an incentive to sell the business for as much as he possibly can.

    "Heads I win, tails I don't lose too much" as Buffett would say. Especially since the valuation is much more reasonable than I initially thought.
    Oct 31, 2013. 02:18 PM | Likes Like |Link to Comment
  • National Research Corp.'s Class B Shares: The Low-Risk Double [View article]
    I stand corrected ... yes, took the amounts quickly off of Yahoo.
    Oct 31, 2013. 11:19 AM | 1 Like Like |Link to Comment
  • National Research Corp.'s Class B Shares: The Low-Risk Double [View article]
    While I agree that the B shares should trade at a much greater premium to the A shares, you have failed to address the whether the current price of the firm as a whole is a fair one.

    B Shares market cap is ~$670 mil
    A shares market cap is ~$430 mil

    That's a $1.1 bil market cap for a company with perhaps $20MM - $21MM in net income in F2014. Thats about 50x P/E.

    If the Bs were to double, the multiple would be closer to 100x.

    The company appears to have grown very well in the past 10 years, but do you have any sense if this will continue in the future.
    Oct 31, 2013. 10:29 AM | 4 Likes Like |Link to Comment
  • Oracle: 40% Upside And More For Patient Investors [View article]
    I am going to jump in here and say that, in my mind, it is pretty clear that 1) FCF should incorporate growth via acquisition ... An acquisition is simply another way for a company to reinvest its cash flows in order to grow the business. It is, in that sense, no different than using the cash to invest in new products internally. The ability to allocate capital successfully is a factor that must be used to evaluate management and determine growth rates whether that capital is allocated within the business or outside it via acquisition.

    and 2) you don't need "proof" in order to incorporate such growth in your valuation. We are trying to project the future here. The past we know with certainty, but there is no real "proof" that anyone can give of anything going forward. If you believe in the ability of a company to allocate capital effectively, then you should incorporate that into your growth rate projections.

    ..... Now, whether ORCL is a good capital allocator is another story ......
    Oct 21, 2013. 09:24 AM | 2 Likes Like |Link to Comment
  • Premier Inc.: Healthcare Crisis Creates A Growth Environment [View article]
    Well written article ... unfortunately, after reading it in detail, I still don't really understand how PINC earns its $$.

    Do the members pay for software that gives them access to healthcare data?

    I read "group purchasing organization" and I think "buying group". Does PINC buy medical supplies on behalf of or facilitate the purchase of medical supplies by its members?
    Oct 18, 2013. 09:39 AM | 5 Likes Like |Link to Comment
  • IPO Preview: SFX Entertainment [View article]
    hmmm ... prospectus pro formas show the post-acquisition company is going to be bleeding cash. The growth is impressive but they have serious work to do make this venture even profitable, let alone worth $1 bill market cap.
    Oct 9, 2013. 09:51 AM | Likes Like |Link to Comment
  • Datalink: An Underappreciated, Long-Term Play On Cloud Computing [View article]
    Great analysis ... I see no problem with an growth-by-acquisition strategy so long as the acquisitions are reasonably priced. Given the high valuations in the sector, it may be tough to find such reasonably priced acquisitions.

    Unfortunately for me, I don't think the upside outweighs the downside to a large enough degree to justify purchase. I think your belief that the "worst" case scenario is a 50bps decline in operating margins is aggressive.
    Sep 23, 2013. 09:40 AM | 1 Like Like |Link to Comment
  • New Jersey Resources: Superstorm Creates A Superb Opportunity [View article]
    thanks for the feedback ... increasing long-term rates have obviously had a major impact since I wrote this ... it will be interesting to see if dividend growth can be maintained in the face of higher borrowing costs.
    Sep 16, 2013. 09:01 AM | Likes Like |Link to Comment
  • Moody's And S&P: Lawsuits Can Be A Good Thing For The Value Investor [View article]
    yes i did quite well on this one ... still waiting for the next big opportunity ... let me know if you find something
    Sep 14, 2013. 10:26 AM | Likes Like |Link to Comment
  • "War" breaks out between AIG and Berkshire [View news story]
    that is an interesting point ... it is a bit out-of-character for Buffett to start a business from scratch, especially to take on an already soundly entrenched competitor. If the commercial insurance business is so appetizing and AIG has a leading position (including top management), why wouldn't Buffett just buy AIG? particularly with AIG appearing to be so undervalued (at least from a P/BV perspective).

    Perhaps buffett thinks there are some truly ugly assets still in AIG that he wants no part of ... or maybe buffett already tried to buy AIG and was rebuked????
    Sep 13, 2013. 10:24 AM | Likes Like |Link to Comment
  • Apple's P/E Calculation: Subtract The Cash? [View article]
    thank god someone addressed this "net of cash PE" nonsense. thank you for that sir!
    Aug 30, 2013. 08:54 AM | Likes Like |Link to Comment
  • Here's What Happened The Last Time The Fed Owned All Outstanding Treasuries [View article]

    It looks like an interesting article and I look forward to reading it tonight, but within the first 3 paragraphs I was struck by this thought ... wouldn't the end of the deadliest, costliest conflict history has ever known help to improve investor sentiment somewhat???? Thus supporting equity markets even in the face of recession? A short-term recession related to decreased demand from the military industrial complex is an afterthought when investors once again have complete assurance of the ongoing survival of the free world.
    Apr 5, 2013. 10:16 AM | 11 Likes Like |Link to Comment
  • New York & Co.: Buy This Turnaround Story Before Everyone Else Does [View article]
    It is a strong report but I have a couple issues: Revenue growth of 10% per year still seems rather aggressive given sales per sqft, yoy comparable store sales, and net sales all grew at much less than this clip over the past 3 years and given that the business ahd difficulty maintaining 10% revenue growth pre-2009 when it was opening what turned out to be a glut of new stores. What exactly is expected to drive this revenue growth?

    By extension, a P/E multiple of 16x or more again seems aggressive.

    Also, did you account for the 2-3% drag of the share dilution?
    Feb 25, 2013. 11:47 AM | Likes Like |Link to Comment