Michael Goode

http://www.goodevalue.com

33 Comments

    • ON: Mon Jun 23rd 17:25 PM
      Commented on:
      Microcap Ideas: Photochannel Networks
      How is this a value stock? The company is trading at an absurd P/S ratio (even assuming the Costco contract doubles revenues, the forward P/S is still 4.6, and the company continues to lose huge sums of money), and last I checked, this business is highly competitive and it is DYING! Everybody and their mother now owns a photo printer. Online / mail-order services such as Shutterfly are cheap and high-quality. There has been a clear progression in the industry from everyone going to the photo developer to people printing photos themselves. Sending digital photos to be printed by a store is an interim stage that will see gradual but steady declines in volume over the next decade. Back while in college I worked at an independent photo shop that experienced the digital transition, so I have some understanding of the economics at work here.

      Even if Photochannel continues to grow sales, earnings will likely never amount to much because this is a low-margin business. All Photochannel does is offer a website back-end. There are many other companies that have similar programs (such as the aforementioned Shutterfly). There is no reason to believe that Photochannel can outcompete them.

      For example, from the company's last 6k, network costs and sales and marketing ate up 61% of revenue. So the company's gross margin is about 39%. Once you add in the necessary high R&D expenses and the G&A expenses, there is little hope for a double digit net margin. I do not believe that Photochannel is an attractive investment at these prices and in fact I am betting against it.

      (www.sec.gov/Archives/e...)

      Disclosure: I am short Photochannel (PNWIF).
      View article »
    • ON: Sun May 11th 18:14 PM
      Commented on:
      The Impending Mortgage Crisis: Part Three
      Good point GeoffB.
      View article »
    • ON: Sat May 3rd 23:51 PM
      Commented on:
      The Impending Mortgage Crisis: Part Two
      Hey jcrash, I appreciate your perspective. I'll work on a post to explain why I believe your argument is wrong.
      View article »
    • ON: Thu May 1st 12:39 PM
      Commented on:
      The Impending Mortgage Crisis: Part Two
      Karchad - so in 2000 did you listen to the market and buy tech stocks? Or in early 2007 did you listen to the market and buy Countrywide? The market is sometimes right, sometimes wrong.
      View article »
    • ON: Wed Apr 30th 23:13 PM
      Commented on:
      A Tale of Two Oil Companies: Stormcat Energy and Fox Petroleum
      Well, it looks like I was right. After accounting for FXPE (now FXPT)'s 5 for 1 reverse split, its current price is $0.61. SCU on the other hand is at $0.97. That makes for a 73% decline in FXPT's stock price and a 26% gain in SCU's stock price. Not bad, eh.
      View article »
    • ON: Tue Apr 29th 21:17 PM
      Commented on:
      The Impending Mortgage Crisis
      Wow - 68 comments. Maybe I should write about housing troubles full time! Thanks for all the interesting comments, praise, and criticism.

      As to the question of whether people would walk away, consider that many people move frequently. People who will stay in an area may keep paying, but someone who is forced to move will gladly walk away from negative equity. The more people who do that, the less aspersion society will cast upon those who do it, which will encourage more people to do it.
      View article »
    • ON: Thu Apr 24th 17:35 PM
      Commented on:
      The Impending Mortgage Crisis
      Oh, and I guess I didn't write the article very well. The main point of the article that no one seemed to focus on is that what is going to make this different is that people who can afford to pay their mortgages will walk away when they end up with negative equity. NOBODY has that in their models. That is what is scary. Well, to me that is exciting--now that I took a loss on my house I hope that prices fall much more so that I can buy again.
      View article »
    • ON: Thu Apr 24th 17:33 PM
      Commented on:
      The Impending Mortgage Crisis
      Wow! A lot of comments here. Most of them interesting. I don't have time to respond to all of them, of course, but I wanted to add a couple points.

      1. The question of local vs. national. Real estate is local as long as it is driven by fundamentals. The past few years it has been driven by mortgage 'innovations'. The Case/Shiller price index most recently showed declines in all 20 cities (except Charlotte) that it tracks. While some areas will hold up better than others, prices will go down in most places. I tried to give a glimpse of this by using data from California, Philidelphia, and an anecdote from St. Louis.
      www.foxbusiness.com/ma...

      2. Regarding the importance of interest rates -- jcrash and HARM. I agree with HARM that we need to consider that low interest rates are not a pure good: as they rise (and considering how high inflation is, they must eventually rise significantly), asset prices will decline. Generally speaking, it is better to buy a cheap asset with expensive financing (you can always refinance later) than an expensive asset with cheap money (in which case if you need to sell you will face a loss).

      Ryan -- I would love to have a great short idea. There are the homebuilders, the mortgage insurers, regional banks, and the bond insurers. Take your pick. I am short them all in Motley Fool CAPS but none of them in real life.
      View article »
    • ON: Thu Apr 10th 21:44 PM
      Commented on:
      Sex May Sell, But Is It Profitable?
      Regicider -- the problem with the trading down is that none of Rick's online properties are dominant. Why would I go to CouplesTouch.com when I can go to Adult Friend Finder (although I wouldn't go to either). While I will admit to not having experienced the joys of strip clubbery, in a recession people will run out of money (strip clubs are expensive). People may not stop going but they will cut back, and that is what will kill profitability.
      View article »
    • ON: Wed Apr 9th 10:49 AM
      Commented on:
      Sex May Sell, But Is It Profitable?
      @b3rkut -- so you think that strip clubs are as addictive as alcohol and cigarettes? I doubt that--in a recession people will trade down to cheaper options, like the internet.

      The whole point about Rick's is that branding is not as useful to it as it is with Wal-Mart. Of course it is not like the staffing firms. But my bet is that it is just as vulnerable to a recession as they are. If I turn out to be wrong about Rick's the most likely reason would be that its management is better at dealing with regulation than its competitors. Regulation is one of the areas in which there are huge economies of scale (eg., having experienced lawyers on staff).

      I will revisit these companies in the future and we will see who was right.
      View article »
    • ON: Thu Mar 20th 21:47 PM
      Commented on:
      Covestor and VesTopia: Winners and Losers from Peer to Peer Investing
      I'll second alpha24seven. IB is where the best trade.
      View article »
    • ON: Sun Mar 16th 12:37 PM
      Commented on:
      A Tale of Two Oil Companies: Stormcat Energy and Fox Petroleum
      The independent report is from a company paid by FXPE to cover it. I don't know about you, but if I were paid by a company to cover it, I would realize who buttered my bread and give them a positive view. This is the same reason that Moody's, Fitch, and S&P have been too positive in their ratings of CDOs and other similar structured bonds.

      The relationship between FXPE and the company covering it is stated plainly in the report: www.investrend.com/Adm...
      View article »
    • ON: Sun Feb 24th 18:32 PM
      Commented on:
      Cytocore: More Management by Hype and Distortion
      The correction mentioned in my above comment has been made to the article now.
      View article »
    • ON: Sat Feb 16th 23:58 PM
      Commented on:
      Cytocore: More Management by Hype and Distortion
      Also, please note the following correction: the $1.5 million is not the cash burn but the negative cash flow from operations; the company's cash did not decline over the last year, but only because it issued shares and certain investors exercised warrants. So while the company is not closer to bankruptcy than it was a year ago, it is financially weak and it will need to continue to issue shares to survive. I still believe that management's buying of shares is not nearly as positive an event as the press release made it seem.

      A corrected version appears on my blog. I apologize for any errors.
      www.goodevalue.com/200.../
      View article »
    • ON: Sat Feb 16th 23:53 PM
      Commented on:
      Cytocore: More Management by Hype and Distortion
      Hey, I hope you are right and the product is good and the company can capitalize on it. If so, the world will be a better place. I will certainly not be investing, though.
      View article »
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