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  • Apple Should Lever Up For A Massive Share Repurchase [View article]
    Hi Ubeenfranked,

    Here’s a brief example that explains what I wrote in my article. Company with 1 million fully diluted shares outstanding, $2.5 million net income, no debt, no cash, trading at $100 per share – 40 P/E, in 8% interest rate environment. The EPS is $2.50 per share ($2.5 million net income and 1 million shares out). Company raises $10 million in debt at 8% (5% after tax) which it uses in entirety to repurchase 10% of shares outstanding. After repurchase, there are 900,000 shares outstanding and $2 million of net income ($2.5 million net income minus $500k of after-tax interest on debt). Now EPS is $2.22, almost 12% less than prior to the buyback.
    Company with 1 million fully diluted shares outstanding, $2.5 million net income, no debt, no cash, trading at $20 per share – 8 P/E, in 5% interest rate environment. The EPS is $2.50 per share ($2.5 million net income and 1 million shares out). Company raises $2 million in debt at 5% (3% after tax) which it uses in entirety to repurchase 10% of shares outstanding. After repurchase, there are 900,000 shares outstanding and $2.44 million of net income ($2.5 million net income minus $60k of after-tax interest on debt). Now EPS is $2.71, almost 10% more than prior to the buyback.
    Let me know if you have questions. Hope you follow me, have several unique, thoughtful and actionable stock picks in the pipeline.
    Feb 21 07:30 PM | 4 Likes Like |Link to Comment
  • Pro-Dex: Potential Insider Buys Suggest Dramatic Stock Rise [View article]
    We spend dozens and dozens of hours researching a stock and then writing an article. We think it's fair to hope that people making comments spend a few minutes researching their thoughts before posting. In this case, you could find very quickly in PDEX's 10-K that they have minimal NOLs. Your idea is an interesting one, but is not so in this case.
    Jan 27 11:39 AM | 3 Likes Like |Link to Comment
  • Pro-Dex: Potential Insider Buys Suggest Dramatic Stock Rise [View article]
    Weighing Machine - thanks for your comment. While we acknowledge that problems are possible (we mention the potential failure of new programs to ramp in risk factors), we believe that conclusion is highly improbable.

    First, the company is sitting with ample cash to weather a fairly significant storm (ample cash for an authorized 750,000 share repurchase program). If it is not just "problems," but a significant deterioration in business prospects the Board could be guilty of securities fraud by raising funds without disclosing a material change in the company's outlook. We hardly think this is likely.

    Second, if there were "problems" we'd expect the AO and Farnam to do everything in their power to avoid committing more capital. Perhaps they'd try to execute a PIPE where they put in no more funds. At a minimum, they'd give investors the opportunity to oversubscribe to the offering, and personally buy as little as possible. (Buying all unsubscribed shares, hardly likely). On November 19th Nick Swenson sold his significant holdings in ELSE back to management - he hardly appears reluctant to cut bait. (Notably, Farnam was also involved with ELSE and they too dumped their position).

    We strongly believe the fact pattern supports our view.
    Jan 22 06:13 PM | 3 Likes Like |Link to Comment
  • ExOne issues Q4 warning, peers fall in sympathy [View news story]
    How about PRLB which isn't a 3D printing company, but trades at an absurd multiple, and in-line with the group?
    Jan 14 04:26 PM | 3 Likes Like |Link to Comment
  • Intel: The Inconvenient Truth About Good-Enough Computing [View article]
    As you state, Moore's law in an undeniable reality. However the fact that computing performance continuously improves, doesn't negate the fact that we are, for most, in very much a "good enough" world.

    Incidentally, I am typing this on a more than good enough $249 Samsung Chromebook...couple years ago would have been at least a $999 notebook.

    As an aside, not completely intellectually honest of you to give Intel credit for their $2bn investment in mobile. First, they have been, quite unsuccessfully, investing in mobile for years. Second, since mobile is an ongoing trend, if they don't succeed, they will face quite pressing issues in a few years, so while they could in theory choose not to make the spend, it would cause serious long-term issues. Third, even if they do succeed in mobile, they will have to spend on an ongoing basis (albeit, perhaps somewhat less).

    If you want to really true-up the P&L probably makes sense to also back out from EPS the probable share loss in server and future additional declines in PC.
    Jan 14 07:51 AM | 3 Likes Like |Link to Comment
  • Valuable Insights Positions For 2014: Still An Abundance Of Unique Ideas In Small Caps [View article]
    Hi Hammy,

    Yes, you can go to Sumzero and Vic and the work there is, on average, far superior to SA. However, I'd use the analogy that it's like going to Christie's or Southeby's - of course there will be excellent product, but you'll be bidding against other experts. SA is much more like a flea market, albeit, one where you can find a number of excellent opportunities. But the signal-to-noise problem is exactly why the SA opportunity may persist (and what Pro is trying to address). I'd also suggest that some of the inane pumps on SA create opportunities to short.

    Regarding Chipmos I'd suggest that 1) my understanding is that this is basically on 8" not 12" bumping, so is unlikely to be significant, 2) historical customer market share shifts are minimal. Look at virtually any OSAT company today and their customer list from 5-10 years ago. While price pressure is a concern every so often, there is little historical precedent for customers jumping from vendor-to-vendor, and 3) we're talking about a company trading at 2.5x EV/EBITDA and a ~20% FCF yield. If this Korean news actually impacts IMOS' operations and they trade at 3.5x EV/EBITDA, it's still nonsensical. Despite missing numbers, botched buybacks, reducing guidance, a less than optimal capital allocation policy etc. over the past few years, shares have quadrupled over the last 2 years. Sentiment-wise, this Korean stuff is not a positive, but don't miss the forest for the trees. I rarely say something is too damn cheap, but this is. This stock is going higher in 2014. If they actually deliver on numbers, then there is huge room for multiple expansion, on top of higher numbers.

    Best,
    Val
    Jan 13 08:09 AM | 3 Likes Like |Link to Comment
  • Crossroads: Data Storage Turnaround And IP Story Could Yield Multi-Bagger Return [View article]
    This is offensive and inappropriate (other than the 1st sentence).

    I recommend any concerned party to please listen to a replay of today's conference call. It was better than I anticipated. I stand by my work on CRDS and believe anyone who buys and holds this security will be amply rewarded.
    Dec 12 05:05 PM | 3 Likes Like |Link to Comment
  • Crossroads: Data Storage Turnaround And IP Story Could Yield Multi-Bagger Return [View article]
    This will be our last post on the specific topic of why today: This is an idea we like a lot. We don't know where it will trade in 24 or 48 hours and frankly we're not looking at this minute by minute. CEO Coleman has previously commented that "patient investors will be amply rewarded." We believe doing the work is a useful exercise as is tuning into tomorrow's earnings call. We'll revisit the success of this call over quarters, not minutes, hours or days.
    Dec 11 02:34 PM | 3 Likes Like |Link to Comment
  • Icahn proposal reportedly calls for buyback of "at least" $50B [View news story]
    King Carl reading Valuable Insights on Seeking Alpha http://bit.ly/LVJMj9 - you heard it here first.
    Dec 4 04:03 PM | 3 Likes Like |Link to Comment
  • Millennial Media Jumps Back Into A Promising Ad Tech [View article]
    Stone Fox has written 6 positive articles on MM since our SHORT CALL at $14+ last September http://bit.ly/1b4oD0a - We recommend reading it to anyone considering an investment. We are no longer short, but our thesis holds.
    1. MM ex/acquisition is growing below the market growth rate
    2. Market growth decelerating
    3. Structural limitations to GM expansion
    4. Op-ex needs to grow to support top-line (this is an advertising business like newspapers or TV and requires salespeople)
    5. Limited IP/technology differentiation - we have spoken to dozens of app developers, advertisers who concur
    6. No one will buy them out at premium.
    The company is still relatively expensive with little evidence it can materially increase profitability.

    We welcome dissenting views.
    Nov 27 05:17 PM | 3 Likes Like |Link to Comment
  • Digirad: Fat Dividend Limits Risk, Operating Leverage Drives Potential 100% Upside [View article]
    Thanks for the positive feedback. To anyone that appreciated this article, or enjoys our work in general, we recommend following Inflection Point Research. Exceptional at identifying growth ideas early - while still trading as value stocks.

    We didn't include this quote, nor did we include several other positive items (i.e. a full listing of all the insider stock purchases over the past 18 months).

    As we write in our disclaimer, please do your own research. We have conviction that the more one looks into DRAD - the turnaround, cost structure, Eberwein and Board, dividend, selling from Red Oak - the more positive you will feel about the stock. And we didn't even touch on the NOLs.

    This is one of our top ideas for the next 6-12 months.
    Nov 9 10:45 PM | 3 Likes Like |Link to Comment
  • Digirad: Fat Dividend Limits Risk, Operating Leverage Drives Potential 100% Upside [View article]
    Thanks for the feedback.

    1) As we wrote in the article, there could be lumpiness in the business. That being said, we are 2 quarters into the implementation of a new strategy, and it has already produced the best quarter in the company's history. We can't guarantee a blow-out 4Q, although if you read the last cc transcript (everyone who might possibly buy this stock should, and should also do their own dd) it sure seems positive about the short-term as well:

    "So, we feel very good and very confident about the markets that we're currently in. And we feel like that is something that we can continue to sustain. I will tell you though, there is seasonality in gross margin. Obviously, due to weather, due to vacations and other things like that, that we have to overcome, there is definitely seasonality in our gross margin. But overall, we feel very confident about the strength of DIS and its gross margins."

    We will not rehash the quote from Inflection Point Investing below, but we would love EVERY MANAGEMENT of every company we invest in to speak of their excitement and their view that they are just at the "starting line."

    We also believe Jeff Eberwein has a plan. There is plenty of public info on how he invests. In our opinion its well worth your time to do the work and figure it out.

    2) Yes, the company IPOd too early and the original management were 1) fools, 2) misleading, 3) unlucky, 4) bad guys, 5) good guys, etc. None of the management today has anything to do with the IPO. In addition to reading our write-up, please spend 2 minutes on the Internet doing your own research (not really a question you need to ask, if you do).
    The CEO only joined the company in 2007 and has nothing to do with the IPO, and the CFO has been on the team less than 18 months. The key people on the Board are all new. We think it is now a great team.
    3) According to your SA bio you state "We trade equities, commodities and forex, day and night, long and short." If you're managing a $500+ million fund, this article is a complete and unadulterated waste of you're time. We assume that's not the case, since you chose to read it and to post a comment.
    We are not fans of the sub $100 million SA article that trades 12,000 shares a day, however in the case of $DRAD, there is reasonable volume, and we would wager, that if you wanted to, you could buy a quarter million shares first thing Monday without moving the stock more than 2% or 3%. VERY fortunately, there is currently a seller (Red Oak - a sloppy seller in our view) that will allow the next 500k - 1 million shares to be purchased at bargain basement prices. When they're done, we think the stock quickly goes to $5+ (as we will detail in instablog soon).

    We're not in it for $5+, we see substantial upside to that. Not sure what you're playing for.
    Nov 9 10:36 PM | 3 Likes Like |Link to Comment
  • Questcor And The Chronic Disease Fund: Is Free Drug Truly Free? [View article]
    Sbremer/Mongoose - Appreciate the advice on how to manage money and time my investments. We believe there are currently numerous good shorts (and longs) and timing is of the essence. No doubt we've been investing since you were in grade school. We have no desire to be run over by runaway trains so our shorts need to be well-timed. Perhaps a post-earnings short will make sense...our call. We like to see catalysts.

    Check out our track record on this site. We have only recommended 2 shorts, Groupon and Millenial Media in articles - each was well-loved, and each fell by over 50%. We're particularly proud of MM ( http://bit.ly/SN3Oin ) since we were right for all the right reasons - since the article MM is down 50%+, the NAS up 25%+, and advertising/internet/m... darlings are all much higher. Could say we nailed it.

    Incidentally, everyone should get off the conspiracy theory bandwagon. There's not some secret committee ruling Wall Street out to manipulate stocks and bash otherwise pristine, precious companies.
    Oct 22 06:09 PM | 3 Likes Like |Link to Comment
  • L&L Energy's Falsely Disclosed Phoenician Deal [View article]
    Wow, first time writer bashing for profits...Well done!

    Investors need to rely on facts, not hopes, and Wall Street needs to be cleaned up of scam companies - the entire investment community benefits from work like this.

    As an aside, am curious why this supposedly cash-rich company would need to issue debt in the first place...but I'm sure we all know the answer to that.
    Oct 21 02:17 PM | 3 Likes Like |Link to Comment
  • Weight Watchers: A Wonderful Business For A Great Deal [View article]
    We concur we several of the more critical comments in the comments section regading this article having studied WTW dating back to the mid 2000s as both prescription and over-the-counter (Alli) were being discussed as competitive threats.
    We agree that WTW has a powerful franchise, however the pace of technology change (ie online communities/apps/servi... etc.) are an accelerating threat, and has resulted in decreasing enrollment.
    We'd point out that a significant portion of buybacks has come not just from cash flow, but from debt raises. While nothing is wrong with adding debt to the capital structure, there is little room to add additional leverage, and therefore it is improbable that future repurchases will occur at the same pace as they did historically.
    Also, well worth noting that debt was taken so that Artal, the biggest shareholder, could puke their shares.
    The author doesn't mention much background behind the exit of long-time CEO David Kirchoff. We were never particularly impressed by him - he also sounded more like a TV commercial or talk-show host than a real CEO, but we can't see his exit as a favorable sign. The contrarian might say, it's baked in and any new management will be a step up, but we think the realist would say, "houston, we have a fat problem."
    Aug 27 05:21 PM | 3 Likes Like |Link to Comment
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