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Weighing Machine

 
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  • 3 Stocks Which Would Be Expensive At Half Of Today's Price
    Mon, Aug. 18 GNC, LNKD, LOCO 3 Comments

    Summary

    • Market capitalization greater than $1 billion.
    • P/E of at least 25x on author's estimate of 2016 EPS.
    • Share price outperformance during the third quarter.
  • 3 Cheap European Large Cap Stocks
    Mon, Aug. 18 MT, TSCDY, VLKAY 3 Comments

    Summary

    • Stock down at least 15% year to date (in USD terms).
    • Normalized P/E below 12x.
    • Market capitalization greater than $20 billion.
  • 3 Overvalued Stocks To Consider Shorting
    Fri, Aug. 15 GRUB, PLUG, SCTY 27 Comments

    Summary

    • Limited/non-existent history of profitability (frequently a history of losses).
    • Limited barriers to entry and prospect of increased competition.
    • Overvaluation – P/E ratio above 50 or a P/Sales ratio greater than 7.
    • Material share price outperformance vs. S&P 500 and Russell 2000 over past year.
  • Bill Ackman's Campaign Is A Gift To The Long-Term Herbalife Shareholder
    Thu, Aug. 14 HLF 78 Comments

    Summary

    • Since Bill Ackman launched his campaign against Herbalife shares have underperformed the S&P 500 by 1300 basis points.
    • Herbalife trades at a multiple of just over 7x 2015 expected EPS (roughly equivalent to free cash flow per share).
    • Herbalife is using all of its free cash flow to repurchase stock. Continued repurchases at 7x earnings will lead to rapid EPS growth over the next several years.
    • Situation is reminiscent of tobacco company stocks during the 1990s- early 2000s. After several years of buying back stock at 6-7x earnings, tobacco stocks had market leading returns.
    • Herbalife could potentially trade north of $200 by 2018/2019 if the taint persists (followed by a re-rating).
  • 3 More Cheap Stocks Insiders Are Buying
    Thu, Aug. 14 WAC, TWI, AVT Comment!

    Summary

    • Underperformance vs. S&P 500 thus far in 2014.
    • Normalized P/E ratio less than 10x.
    • Insider buying in last month.
  • 3 Very Cheap Stocks With Insider Buying
    Wed, Aug. 13 ASPS, HLF, SGMS 7 Comments

    Summary

    • Year to date underperformance vs. S&P 500.
    • Price to Earnings (or normalized free cash flow in the case of SGMS) of less than 10x.
    • Share buybacks within the past 6 months.
    • Insider buying within past 2 weeks.
  • Scientific Games: This Equity Stub Has Significant Upside In The Making
     • Tue, Aug. 5 BYI, SGMS 10 Comments

    Summary

    • On Friday, it was announced that Scientific Games would acquire Bally Technologies in a $5 billion transaction.
    • The combined entity is expected to have post-synergy EBITDA of $1.25 billion, nearly twice Scientific Games' $765 million market cap.
    • The transaction creates an industry leader in the rapidly consolidating gaming supply industry. Scientific Games has several market leading positions and significant recurring revenue.
    • Via holding company MacAndrew & Forbes, billionaire Chairman Ronald Perelman owns 40% of Scientific Games and recently added to his position.
    • Though highly levered, if Scientific Games is able to achieve its synergy targets, the author expects the stock to quadruple. With modest growth, the stock could increase tenfold.
  • Cott: Headline Miss Masks Underlying Improvement; 100+% Upside
     • Fri, Aug. 1 KO, PEP, COT 7 Comments

    Summary

    • Headline EPS miss masks several positive developments during the second quarter. The business has stabilized after a tough couple of years and is poised for growth.
    • Cott trades at less than 6x my estimate of 2015 free cash flow.
    • The company will increase returns to shareholders via dividends and buybacks.
    • A return to rationality by Coke & Pepsi in the North American soda market could boost Cott's EBITDA by 25%.
    • As the market appreciates the improvement in Cott's business, the author expect shares to appreciate 130+%.
  • 3 Stocks I Expect To Double Over The Next 3 Years
    Wed, Jul. 30 C, DTAS, HLF 18 Comments

    Summary

    • Underperformance vs. S&P 500 for past 3 years (or since IPO in case of Stock Building Supply).
    • Price to Normalized Earnings of less than 10x.
    • Strong balance sheet – defined as net debt to EBITDA below 2x for non-financial companies. For Citigroup, the bank’s Basel III Tier 1 ratio should be greater than 9%.
  • 3 Out Of Favor Small-Cap Stocks Which Could Double
    Tue, Jul. 29 EBIX, ESI, SREV 7 Comments

    Summary

    • Shares are down at least 15% year to date.
    • Market capitalization is less than $1 billion.
    • Enterprise value to revenue is less than 2.5x.
    • Net Debt is less than 1x EBITDA.
  • 3 Laggards With 50+% Upside
    Mon, Jul. 28 BLDR, MOVE, JGW 2 Comments

    Summary

    • Underperformance vs. Russell 2000 over past year.
    • Market capitalization greater than $300 million.
    • Price to normalized earnings below 10x.
    • Net debt / normalized EBITDA below 2.5x.
  • Citigroup 'B' Warrants: Playing The Outlier For An Outsized Return
    Wed, Jul. 16 C 18 Comments

    Summary

    • Citigroup 'B' warrants have plummeted and are selling at less than 3 cents each.
    • While it is unlikely that Citigroup will trade above $178 per share by October 2018, it is certainly possible.
    • A combination of an improved operating performance, accretive buybacks, and a higher multiple of book value could catapult Citi shares to $200+.
    • In such an instance, the warrants could increase 100-fold. That said, this is a low-probability event, and one must understand this is speculation (with likelihood of total loss).
  • Countrywide PLC: 11.5x Trough Earnings With Ample Buyback Capacity; 90-130% Upside
       • Wed, Jul. 16 CTYWY 22 Comments

    Summary

    • Countrywide PLC is the leading UK's largest residential real estate agency. It trades at just 11.5x 2014 estimated earnings.
    • 2014 housing transactions in the UK are expected to be 33% below the 30 year average level of housing transactions. Normalization of the housing market provides significant upside to earnings.
    • At a normal level of housing transactions, Countrywide could earn L0.66 per share. At today's price of L4.70, Countrywide trades at just 7x my estimate of normal EPS.
    • Countrywide is nearly debt free and highly cash generative. Were Countrywide to lever its balance sheet to 2x EBITDA, the company could repurchase ~25% of outstanding shares.
    • Countryside could make an attractive acquisition target for a strategic buyer like Berkshire Hathaway or a private equity group.
  • Cynk Technology: A Win-Win (Or Lose Less) Solution For Both Longs & Shorts
    Sun, Jul. 13 CYNK 21 Comments

    Summary

    • The halt of Cynk Technology shares has created an uncomfortable situation for both CYNK longs and shorts alike.
    • Longs suffer from the high probability that shares end up worthless. Shorts suffer from high borrow costs during the duration of the halt.
    • By contacting their brokers to loan out Cynk shares owned, longs can re-coup a potentially meaningful percentage of their capital through rebates while lowering borrow costs paid by shorts.
    • This is a win-win (or lose less) for both longs and shorts in this unfortunate situation.
  • CYNK Technology: Promoters Push Market Cap To $655 Million Despite $39 In Assets And No Revenue; 100% Downside
    Wed, Jun. 18 CYNK 89 Comments

    Summary

    • Paid promoters have helped push CYNK market cap to $655 million after a 3,650% increase in the share price on Tuesday.
    • CYNK had assets of just $39 (no zeros omitted) as of March 31, 2014 and a cumulative net loss of $1.5 million. The "company" has no revenue.
    • CYNK claims that it is "a development stage company focused on social media." However, the "company" does not even have a website and has just one employee.
    • With no assets, no revenue, and no product, CYNK has no value. Author expects that CYNK shares are worthless.
  • If Achillion Was Going To Be Taken Out At A Big Premium, Baupost Would Probably Own It
    Mon, Jun. 16 IDIX, ACHN 22 Comments

    Summary

    • Achillion shares have increased 165% since Merck's acquisition of Idenix was announced.
    • Investors seem to be expecting that there is the potential for Achillion to be taken out at a signficant premium to its current price.
    • However, Baupost, the shareholder who knew Idenix best, does not have a meaningful stake in Achillion suggesting that investors are misguided.
    • Sell-side brokers touting the stock have different incentives than investors and should not be relied upon.
  • Take Advantage Of The Market's Pop And Short These 3 Stocks
    Thu, Jun. 12 ATHN, NOW, Z 3 Comments

    Summary

    • Market has presented yet another opportunity to short low-quality, high priced businesses. Companies mentioned in this article all sell at greater than 8x trailing revenue.
    • In addition to being expensive, none of these companies have generated meaningful levels of profitability.
    • All 3 companies are lead by highly promotional management teams which have consistently touted the terrific opportunities ahead while dumping hundreds of millions worth of stock.
    • Author estimates downside of 60-80%.
  • Papa Murphy's: Franchisee Relief Plea Portends Imminent EBITDA Decline - Shares Could Fall 80+%
       • Tue, Jun. 10 FRSH 29 Comments

    Summary

    • May 30 letter from Papa Murphy's Franchisee Association (PMFA) requests moratorium on fees for 31% of franchisees who are losing money. This highlights significant distress in the franchisee system.
    • Author estimates that the implementation of PMFA's suggested fee moratorium would likely cause a 30% decline in EBITDA for next several years.
    • With a heavy debt load, a 30% decline in EBITDA has a magnified impact on equity value. Author estimates 80% downside.
    • If Papa Murphy's fails to act to save struggling franchisees, EBITDA could decline 50%. Given impact of debt, this would make the equity nearly worthless.
    • Recent failure of Homemade Pizza suggests the take and bake concept may be fundamentally flawed. Author estimates base case that Papa Murphy's has 80% downside.
  • 6 Reasons Zillow Is A Sell
       • Wed, Apr. 23 Z, RTMVF 114 Comments

    Summary

    • Zillow shares have held up well, while other momentum names have sold off. Today, Zillow trades at an all-time high.
    • After 8 years in business, Zillow is losing money, in stark contrast to the UK's Rightmove, which Zillow frequently cites in investor presentations.
    • Zillow's business model is not scaling - as revenue has grown, operating profits have turned to losses. Again, this is in stark contrast to Rightmove.
    • Zillow shares look to have 80% downside, even assuming significant revenue growth and profitability improvement.
  • 3 Cheap Small-Cap Residential Real Estate Stocks
    Tue, Apr. 15 IBP, LSLPF, MOVE Comment!

    Summary

    • Market Capitalization less than $1 billion.
    • Net Debt less than 2x EBITDA.
    • P/E less than 12x using normalized, mid-cycle earnings.
  • 7 Questions For Plug Power Investors
    Sun, Apr. 13 PLUG 195 Comments

    Summary

    • Plug Power shares have risen nearly 40-fold and the company has a market cap of $1.2 billion despite 12 years of losses.
    • It is unclear why PLUG's future will be brighter than its past.
    • PLUG trades at 3-9x the valuation of its closest peers.
    • Giving PLUG credit for its cash balance, its deferred tax assets, and its core business, the author sees downside of 85%.
  • 3 Shorts With Near-Term Catalysts
    Tue, Apr. 1 ANGI, LDRH, MONT 13 Comments

    Summary

    • Market capitalization of at least $500 million.
    • Valuation of at least 3x trailing sales or 20x trailing earnings.
    • Unproven business model.
    • Catalyst which could cause shares to fall 20% or more in the next 3 months.
  • Whiting USA Trust Now Worth Less Than $2.15, Will Fall To $0 In 12 Months
    Sun, Mar. 30 WHX 35 Comments

    Summary

    • Whiting USA Trust trades at a 64% premium to expected remaining distributions.
    • Trust payments will terminate on 3/31/15 and units will be valued at 0.
    • Given the opportunity to avoid onerous borrow fees associated with short selling, selling calls may be a better option.
  • 3 Cheap Stocks Which Could Double
    Thu, Mar. 20 HLF, OCN, WAC 9 Comments

    Summary

    • Market cap greater than $1 billion.
    • P/E less than 10x.
    • Expected EPS growth of at least 5%.
    • Year to date stock price decline of at least 10%.
  • 3 Stocks I Expect To Get Halved In The Next 2 Years
    Thu, Mar. 20 PLUG, VEEV, Z 34 Comments

    Summary

    • Trade at greater than 10x trailing revenue.
    • Inability to demonstrate scalability in existing business model.
    • Questionable growth prospects.
    • Insider selling.
  • Lifelock: 8-K Reveals FTC Investigation
    Tue, Mar. 18 LOCK 2 Comments

    Summary

    • 8-K discloses FTC Investigation.
    • Lifelock trades at over 50x P/E and shareholders seem to be ignoring this risk.
    • Herbalife, which also is facing potential FTC action trades at less than 9x P/E suggesting downside for LOCK shareholders.
  • Lifelock: Pending FTC Investigation Revealed In 10-K
    Sun, Feb. 23 LOCK 2 Comments
  • 8 Reasons Voxeljet Is A Sell
       • Thu, Feb. 13 VJET 58 Comments
  • 3 Stocks I Expect To Trade Materially Lower By 2016
    Tue, Feb. 11 RAX, SCTY, DDD 21 Comments
  • 3 Stocks You Will Regret Not Shorting
    Fri, Feb. 7 EXAS, NOW, YELP 24 Comments
  • Why The Target Data Breach Is Bad News For LifeLock
       • Wed, Jan. 15 EXPGY, LOCK 13 Comments
  • Build A Mini Long-Short Portfolio With These 6 High-Priced Shares
    Editors' Pick • Tue, Jan. 7 AAMC, AAPL, AMZN 14 Comments