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MtnWolf

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  • Lumber Liquidators: A Potential Winner [View article]
    Re: installation, actually LL has added a "consultation" service to assist in oversight of the logistics of installation. They booked $2.5MM in rev 1st 9 mo. of 2013. Not sure how this is marketed to the customer, whether it is bundled or a sep line item.....but that is a lot of rev in the first year. I have not done a LL store check, so just speaking from what I read.

    I am skeptical about this service.........it could easily lead to over charging the customer and add to LL's rep for being horrible on customer satisfaction.

    Company name is not the only thing that is negative..........go to the website and check out the color scheme and formatting......reminds me of a store front in a part of town that is mostly populated by pawn shops, tattoo parlors and liquor stores.

    Lastly, don't forget the Chairman's leasing deals for some of the co. real estate. That too is old fashioned and I thought went out 20 yrs ago when public companies realized that the appearance of good corp governance might actually be important.......

    All that said, this stock has a lot of surface attributes that long-only growth managers using
    OPM (other people's money) look for, such as store expansion all internally funded, strong SS comps, rising margins, etc. etc. That means, the stock will work until they miss a quarter or until we have an actual recession which impacts consumer spending.

    It is on my list of names to short at some point when a crack is more visible, but for now I am staying away.
    Feb 14 03:09 PM | 1 Like Like |Link to Comment
  • Tempur Sealy: The Ultimate High Risk, High Reward Investment [View article]
    SCSS and CONN are not comparable. The target demographic is much different. SCSS is aiming at solid middle class, age 34 to say 55, with a differentiated product.

    CONN is doing well b/c it is selling to lower income strata and ~80% of transactions are done using CONN internal credit which is under written to subprime FICO scores.

    There are two conceptual ways to think about this. First, the ACA is arguably pounding on middle class consumers via massive hikes in insurance premiums, while median real disposable incomes are stagnant. Now the ACA is also impacting lower income people, but compared to higher incomes. the lower demographic gets more direct subsidy from the "entitlement state" ( e. g. earned income tax credit, food stamps, etc. etc.) So for now at least, the CONN's customer is relatively better off. And Obama's goal is to continue this trend, by squeezing the middle class via fees, taxes, and so forth (yes I know, he references the "rich 2%" in speeches, but his policies are just as deadly to the much larger middle class). His goal is to flatten the income and wealth distribution curve, and guess who is in the fat part of that curve?

    2nd'ly, credit availability is currently in its wide-open, reach-for-risk expansion phase, and this condition will continue and perhaps even become more ebullient in 2014. As long as this is the case, CONN can cruise along. When the credit cycle starts to tighten, I would not care to own CONN, as I think it is an inherently poor business model, but for now it is being shielded by the factors mentioned above.

    TPX, I dunno, I don't have insight. SCSS, a very good financial model in terms of return on investment......if they can get the marketing plan straightened out, the stock is a compelling value in here. But for the moment, they are struggling.
    Jan 16 12:15 PM | 4 Likes Like |Link to Comment
  • SandRidge Energy: Disappointing Asset Sale Reinforces Valuation Concerns [View article]
    I fully agree w/ TimeonTarget's positive assessment of Richard's analytical ability. Furthermore, I think all serious SA members ought to be offended by RHMASSING's unwarranted, cheap, personal and uninformed comments in the post above. There is no need for making abusive or sarcastic attacks on another contributor just because they happen to disagree with your position or opinion on a stock.
    Jan 11 01:52 PM | 4 Likes Like |Link to Comment
  • Annaly Capital Management: Shocking Price Action [View article]
    StoneFox, glad to see someone cogently argue the other side on NLY. Hang in there. I am actually glad to see most of the comments in this post, the sentiment is clearly negative on the stock. Or confused. Not very many bulls that is for sure.

    Investors need to realize the back up in the Treas 10 yr that began in April/May was the most violent in the last 3 decades. Impact on unhedged NLY MBS book was therefore severe. But that is already priced into the stock, and w/ co. reducing leverage and hedging more, unlikely to be repeated. Of course the question is begged: is mgt. zigging defensively when they should have zagged? e. g. like the Gold producers who sold forward all the way up from the bottom of bullion in 2001-02. We shall have to wait and see on that and whether mgt. responds when MBS is priced to attractive risk adjusted yield.

    I believe it is most likely that the short end of the curve remains anchored at or near zero during 2014, and maybe the 10 yr drifts up a little if RGDP surprises on the upside.......but yield curve therefore remains still steep. Lastly Fed is very cognizant of the fragility of the repo market and will act to prevent disruption. Indeed, they already have a program in place to provide a ton of additional liquidity support.

    Therefore: NLY reinvests coupons at higher yield, funds at attractive spread, maybe runs leverage a little higher, grows the Comm RE biz, and all of this is positive for earning power. So I think reward/risk is decent on NLY at this price.
    Dec 10 08:38 AM | 1 Like Like |Link to Comment
  • Saleforce.com: 3 Simple Questions For Wall Street Analysts [View article]
    I don't buy puts b/c the timing is as you said - UNK

    I also am lousy at forecasting, so instead of trying to guess when
    CRM might miss numbers or otherwise have a problem, I just
    monitor stuff in real time. No need to try to pick tops or figure out
    when the game is over.......stocks that have no fundamental floor
    near the current share price will provide plenty of opportunity on the
    way down........and a combination of technical analysis plus a take on the fundamentals will suffice.

    Stocks are driven by expectations, and inevitably when expectations become sufficiently inflated, every company will eventually fail to meet them.
    Nov 22 09:40 PM | 1 Like Like |Link to Comment
  • Saleforce.com: 3 Simple Questions For Wall Street Analysts [View article]
    Bravo on your article! Great job of satirizing the sell side. Could not agree more. The amazing thing is, despite all the nonsense during the 1st Internet Bubble, nothing has really changed. The SEC has been pathetically impotent in achieving better research for individual investors, and especially in ignoring the farce of "non-GAAP" earnings.

    Nonetheless, I think shorting CRM is a tough game at the moment. The rationale is sound, but a less painful approach is to wait until the uptrend is broken (share price, that is) and then pile on into a declining anti-momentum pattern. Not sure when that will occur, it takes infinite patience to wait for it. CRM will get crushed in the next bear market, that is for sure, but right now the speculators and the mutual funds using OPM ( Other People's Money) can use zero interest rate liquidity to maintain levitation in stocks like CRM and numerous others.
    Nov 21 08:36 AM | 11 Likes Like |Link to Comment
  • Dillard's Earnings Beat Analysts Highest Estimates [View article]
    OK, thanks.

    Still think you ought to run an LBO model on the company if you really think that is the ultimate end game. Credit window is wide open now,
    thanks to Ben B. and the boys (and now Janet). So if they are going to do it, and really think the stock is cheap at $90, this is the time to go for it.
    Nov 19 10:51 AM | Likes Like |Link to Comment
  • Dillard's Earnings Beat Analysts Highest Estimates [View article]
    LA, thnks for the reply and addl' insight.

    Yes I have been in a DDS store. But haven't done a lot of time there - I don't like to shop so 15 minutes in a dept store is a lifetime for me.

    I retired in early 2007 and for the record never bashed DDS in my working career. Never owned it either, but if you look at the LT chart, I did not miss anything. The stock was around high 20's to $30 in 2007 and had been that way for a long while, after completely sitting out the 1990's bull market. So owning it back in the day was a good way to get fired as a money manager, IMO.
    The big turnaround started after that, and to be sure, it has been a good turn, with solid progress in improving gross margins.

    I don't think it is the buy side that should be criticized on missing DDS, it is the sell side analysts. They have hated the company forever.

    I don't hate the co. - I just don't happen to think it is a very attractive stock to buy at this point in time. And since the Dillard family is selling while using shareholder's capital to shrink the cap, maybe they are not 100% on your side either. Just food for thought.
    Nov 17 10:00 PM | 1 Like Like |Link to Comment
  • Dillard's Earnings Beat Analysts Highest Estimates [View article]
    For bit of a contrary opinion.........

    1st the positives: DDS is an inexpensive stock, at ~ 11.2X fwd eps and 5.4X EV to EBITDA. Mgt. has done a good job of expense control. Co. is holding its own in terms of sales in an environment where the total pie is not growing very much and missteps can be disastrous, e. g. JCP's "experiment"

    The not so great: When you adjust for the non-re gains, hold tax rate constant and shrs. ostd. constant, earnings per share are not growing near as fast as the reported figures. That is, 16% instead of 25% for the 9 months, and 9% vs. 12% for the 3rd qtr. Still OK, but not really dynamic organic growth. Mdse. gross margin was down 40 bps in the quarter on barely positive sales growth, so like other dept stores, DDS is having to do some discounting to keep
    volume intact. Inventories were up 6.2% yr/yr so there should be some concern DDS is too heavy going into holiday season given comp sales running at only 1%.

    The Y chart graph on debt/eq is misleading. I calculate total debt to equity at 53% vs. 41.2% yr ago and LT debt to equity 43.9% compared to 39.8% last year. Maybe Y chart is excluding the subordinated debt but that is not correct. In other words, financial leverage is increasing, not falling. Also, the deferred tax liability is declining which is what happens when fixed assets are not being renewed, e.g. what is a permanent interest free long term loan from the Govt. becomes a drain on cash. This is confirmed by the cash flow statement which shows taxes as a negative impact.

    The high level view on DDS is the company is slowly liquidating. Store count is falling. Not investing in new stores. Not refurbishing existing stores. CAPX is down almost 42% this year to date, while share repo up 86%. DDS has no worthwhile investment opportunities, so mgt. is correctly investing in the equity base. Oh by the way, insiders, specifically the Dillard clan, are also liquidating as they remain sellers of the stock with no insider buying. So using the company share repo to support the stock is very convenient for the Dillards.

    To rely on Street "price targets" which have a mean only 4% higher than the current stock price does not seem like a sound strategy to me.........the expected return for equity - any equity, not just DDS - should be a lot more rewarding than that to take equity risk.

    If you think the company is in fact liquidating and you want to play that as maybe the family takes the co. private someday, fine. Not sure why they would want to do that, b/c the reason they went public in the first place was to have a method to monetize the holdings. But regardless, if you think that is the game to play, then analyze the company on a liquidating basis and recognize it is cheap for a reason - companies with no organic growth will not sell for multiples much beyond what DDS is priced at, and if interest rates ever head back up, this is a 10 P/E stock at best and more like 8 if earnings hit the wall.

    I realize all mature dept stores have issues, but personally I would rather pay a little more for some of the better operators such as M or JWN. Dillards is not really a great company.

    Disclosure: I have no positions in any of the stocks named.
    Nov 16 10:33 AM | Likes Like |Link to Comment
  • Salesforce.com Might Be Riskier Than It Seems [View article]
    I always admire investors who actually know (and use) something as quaint as the Altman Z-score. Based on a lot of the hot air I read in SA and see on CNBC, this bubble environment to which Paulos referred has created a lot of mindless speculation and "momentum" trading, of which CRM is just one example.

    I also suspect, but cannot document, that some algo funds may be targeting stocks with big short positions/small floats/positive momentum/no earnings via trying to force the shorts to cover. By that I mean, some of these stocks do not go down that much even on sloppy days in the market, and this seems inconsistent with their implied Beta's.
    Oct 11 08:23 AM | 1 Like Like |Link to Comment
  • Salesforce.com Creates A $30 Billion Industry [View article]
    A paradox: In the biotech world, often a company share price goes up while earnings are negative. The metric is revenue opportunity on commercialization of R&D. Now suppose a product is approved and the company begins to report positive earnings. The stock goes down b/c "investors" suddenly realize how expensive the shares are. If CRM ever starts to report GAAP earnings with a plus sign, the same thing may happen.

    Here is another analogy: would you take a medication that is manufactured in a non-certified facility? Most people would not. Yet a lot of "investors" ignore the notion of what non-GAAP means.

    And yet another analogy: Suppose you were a real estate investor and were offered a property priced at a 1% cap rate. Well if you were Japanese in 1989, you might pay that price. But a rational real estate investor today would not, even with financing costs at historic low levels. Today CRM is very expensive on FCF to share price and to sensibly buy it requires assuming that somehow FCF is going to grow enormously, yet CRM's biz model seems incapable of generating that kind of cash flow
    Sep 28 03:40 PM | 3 Likes Like |Link to Comment
  • Annaly Capital - Bargain Or Falling Knife? Questions You Must Ask [View article]
    RWM, thanks for the editing tip, I take it as constructive and positive criticism. Will try to do better in the future. Long post w/ no spacing is due to my tendency to get locked in the zone when I start typing and focus on the content rather than the presentation
    Sep 10 08:06 AM | 2 Likes Like |Link to Comment
  • Annaly Capital - Bargain Or Falling Knife? Questions You Must Ask [View article]
    I will try to clarify with some facts. 1st, NLY's MBS portfolio is accounted for on a "available for sale" basis, which means that the back up in i rates that occurred in Q2 is indeed already reflected in book value. That is because the bonds have to be marked to market every quarter. 2nd, the spread on the portfolio has already compressed, so that is a not a look forward event. That said, rates could continue higher which would further detract from book value, and spreads could narrow more.......but the point is, the violent correction in int rates rivals that of 1994 already, as the NLY CEO noted on the Q2 conf call. 3rd, the company is not sitting still, the diversification into comm RE lending will have a significant effect on earnings over time, albeit at the trade off of taking on credit risk. 4th, the stock is 91% of book at this writing and is not a bargain like it was a few weeks ago. It is a better buy under $11 and given the volatility in rates as well as shr price may well revisit that area in the weeks to come. However attesting to the durability of the company, it only got to 77% of book in 2008 during Lehman melt down, and bottomed at 71% of book in 2009. This was a period when the repo market was in danger of completely freezing up and would have absent intervention from the Fed. My point being, NLY survived the worst financial crisis in 75 years and is still in business. 5th, NLY price to book relative to the S&P 500's P/B is currently 39%, and this compares to a 10 year average of 51% with a range of 36% to 63%. This means that the stock is already discounting a lot of bad news and is therefore should be of interest to anyone seeking to buy low and sell high. Many readers of this website seem to have difficulty with that basic investment concept. And they struggle as well with the notion of discounting......by which I mean, the market has been pricing in "tapering" for several months now. In that regard, two key unknowns are who will be next Fed chairman and how fast will the nominal economy grow? The new chairman, whomever it is, seems unlikely to start off his/her term by trashing the economy, hence I would look for gradualism for an extended period. And as for the economy itself, a significant body of evidence suggests that growth will continue to be anemic and surplus capacity in both labor and overall capacity (with some specific industry exceptions) points to low inflation risk. Last, I would not blow off the recent insider buying. The mgt. at NLY has a lot more insight into how mortgages work than anyone writing on this site (including this writer) and they also have a lot more historical perspective. Conclusion, I don't think NLY is a table pounding buy today, but I do own a little bought in the recent sell off, and if/when it gets back under $11 and esp closer to 10.75 I think it merits a look. That said, the stock is not for everyone, b/c running a leveraged mortgage book funded by repo when rates may be rising is by definition a tough way to make money. Thus, readers looking for income would be well served to seek out vehicles that benefit from rising rates. Examples might be floating rate loan funds or banks which have a variable rate commercial loan book funded by core deposits.
    Sep 9 03:13 PM | 7 Likes Like |Link to Comment
  • Putin: Russia to aid Syria if attacked [View news story]
    2 comments.........1st, the ultra-cynical.......going to war w/ Syria so conveniently distracts everyone from the IRS scandal.......by the time this is over, no one will remember how Obama manipulated a Govt agency for political gains......

    And 2nd, guys like Putin only respect strength. In his meeting(s) with BO, he must have inferred (correctly) that Obama is a politically-correct weakling, thus Putin is willing to take the chance of supporting Syria, or at least offering support (apart from the weapons sales noted by other writers in previous posts)
    Sep 6 01:14 PM | 1 Like Like |Link to Comment
  • The Cost Of Mining Gold: A Q2/2013 Summary [View article]
    the all in sustaining number is a step in the right direction.......but I am going to take Mr. WinningTrader's side on this debate. Just to add to his comments, what he is getting at is why do gold mining companies get a "free pass" on the profitability metrics that apply to every other industry? Well maybe development stage biotech is similar......all the revenues and hoped for profits are in the future. But for the gold miners which have been around for a long time, you have to say, where is the decent return on invested capital? Where is the ability to internally fund growth instead of running a perpetual financing machine? Where is the consistent free cash flow to pay higher dividends and/or buy in shares when the prices are low?
    Over the last 10 years, Goldcorp has invested $11.4 bil. in CAPX + acquistions, paid out $1.6 bil in dividends, but wait, also issued $1.79 bil in new common stock......cumulative free cash flow over the 10 years was $783 million, highly variable and when evaluated as an annual average is a miniscule 9.4 cents per share. Average ROIC was 9.2% over this period, and ROE was only slightly better. And this is arguably the best of the major gold producers! And this is during a period of mostly rising gold price and thus labeled by some as a "golden era" (pun intended) for the industry.
    So here is my conclusion: gold miners can be OK to hold during a period of steadily rising gold price and generally falling interest rates, e. g. 2002- 2010 OR they can be great trading stocks the rest of the time. But in general they fail the test to be excellent investments based on fundamental criteria. A better strategy is to seek out companies with sustainable recurring revenue, consistent pricing power, and moderate capital intensity - those tend to produce high dividend growth over time and thus enhance the share price in a steady way.
    Aug 31 03:59 PM | Likes Like |Link to Comment
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