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Tom Armistead
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I'm a well-informed retail investor and post on SA in order to expose my thought process to critical examination and comment from readers. It makes me a better investor. I'm particularly proud of bullish macro articles posted in 2009 and later, in which I presented ideas that encouraged me to... More
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  • Altera Has Historically Been Very Adroit In Repurchasing Shares

    I've been working on a bullish follow-up article on Altera (NASDAQ:ALTR), after Xilinx (NASDAQ:XLNX) laid an egg on their most recent quarter. Basically I see Altera as developing very favorably against the chip industry as a whole and against its fellow PLD designer in particular. But when I looked at the company's history of buybacks what I found was interesting, very interesting. So I thought I would put it out as an instablog, short and sweet.

    During 2007 and 2008, Altera bought back 22% of its common shares, at an average cost of $17.78 for 2008 and $21.16 for 2007. By 12/31/2010 shares were worth $35.58.

    That's very impressive performance, to double your money between 2008 and 2010, particularly with 2009 being a very difficult year, to say the least.

    It should be noted that the PLD business has this long, slow, complex cycle, some 5 or 6 years per node and many nodes in play at any one time. It's hard to analyze or predict, although management of the company has a better chance of getting it right than outsiders do.

    So for the first six months of 2014, Altera bought back 3.3% of shares outstanding, and has an authorization for more. They paid an average of $32.50. The company borrowed $1.0 billion in 2013, "for stock repurchases and general corporate purposes" and has an amount in excess of that invested in treasuries, as an economic hedge on their interest rates.

    After looking at this for a while, I see the increased repurchase activity as an indication that management expects the shares to be worth considerably more within a 2 to 3 year time frame. The last time they bought back a lot of shares, they did very well for shareholders.

    Disclosure: The author is long ALTR.

    Aug 11 9:07 AM | Link | Comment!
  • Intel: Updating My Opinion

    Back in December last year I took a somewhat unorthodox look at Intel (NASDAQ:INTC) and liked what I saw:

    With shares trading at $24 at the time, I split the difference between the market's price and my $46 indication and decided to invest on the basis shares would hit $35 by the end of 2015.

    2Q 2014 earnings were a beat and raise, with additional buybacks for a kicker. The stock made it up over $33 after hours, and at this point the situation is moving much faster than I was looking for.

    So, is there a way to get from here up to the $46 that looked so farfetched at the end of last year? The answer is yes, if you think they will ever make any money in mobile. As of the latest report, they had lost $2 billion for six months in the Mobile and Communications segment. Contra-revenue, in part. Annualized, that works out to 78 cents a share.

    TTM earnings are $2.02, using the just completed 2nd quarter. Add 78 cents, under the assumption they at least stop losing money on mobile, and you are at $2.80 per share. Applying the company's five year average P/E of 14.1, $39 comes into view. It's easy to get up over $40, if you think they might actually make money in mobile, or command a higher P/E.

    After putting this through the blender, I'm investing on the basis that shares will reach $40, again by the end of 2015. As always, a quarterly review is needed, to track developments by segment.

    Disclosure: The author is long INTC.

    Jul 16 6:53 AM | Link | 7 Comments
  • Responding To The Bad News On Coach

    Coach (NYSE:COH) tanked on the analyst/investor day presentation. My position was long Jan 2016 35 calls and short Aug 2014 52.5 calls. I rolled the Jan 2016 calls down to 30, bought back the 52.5 calls and sold Nov 38 calls.

    Before taking action, I listened to the presentation, or more accurately, viewed the slides and listened to the sections that were of interest to me. I also browsed a few articles and the comment stream here on SA.

    Giving management two years to do the turnaround, the end result might be EPS of $2.50 and a share price of $40, with the market expecting them to grow 7% going forward, in keeping with the segment of the luxury goods market they are in. I got the 7% from the presentation, that's what they think is out there for the industry through 2018.

    Over the years, management has done a good job creating value, as can be verified by the growth of sales, EPS, shareholder's equity, etc. Closing 20% of stores, and doing what they have to do to bring down inventory, update the store format, and appeal to a younger demographic, improvement can be expected. Management has the financial resources and the determination to take strong action to address the problems.

    It's possible they won't be able to restore the lost cachet, or to retain the existing customer base while transitioning to a look that will be more current. The brand has been cheapened by excessive flash sales and it will take a while for corrective action to restore perceptions. I think it's more likely they will succeed than not.

    In the meantime, I can earn premium selling calls, and if it goes over $38 in November I will be both surprised and pleased.

    The loss incurred riding the stock down to the current level is a sunk cost. In the meantime, I think I can make money from where it is.

    Disclosure: The author is long COH.

    Jun 20 3:37 PM | Link | 11 Comments
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