KSTHANE

H&R Block: Stars Are Aligning

Ah, I read that but it didn't register the first time. I guess that is the key issue to the story then. I'm not a financials analyst or a legal expert so I think I just need more understanding regarding that APR calculation. Are application fees typically included in APR calculations?

Is there any reason that JTX couldn't get an agreement with HSBC or some other bank similar to HRB's agreement?

Regardless of all of these skeptical questions, I agree with your overall premise. I think that the bigger competitive threat is Intuit though, so I was pleased to hear on the last call that they are going to be more proactive with advertising.

H&R Block: Stars Are Aligning

Well, the sell-side isn't completely ignoring the issue. I just read a sell-side research article from Northcoast Research dated October 28 that discusses the implications of the banks reducing fees. Their response was that JTX will simply add an application charge (if a customer wants a RAL) that will be roughly equal to the profit the company earned when it was getting higher margins on the higher fees. While the charge would be separate, it would not mean that y/y pricing is any higher than past JTX customers received.

I guess if HRB was smart they would point out in advertising that their smaller competitors are charging these fees and that they have no such thing...or maybe they should charge the fees too.

Return to actual knowledge and skill for managers and analysts

The CFA credentials are important...which makes me wonder how someone who has it (as indicated by Lee's profile) would not know what the letters in CFA stand for.

Best Buy Reaction Could Reflect Sentiment Change

They picked up 200bps of market share, the most they have picked up in the last 3 quarters. It looks like they're gaining share to me.

Kohl's: The New Target?

It's not just Wal-Mart's value proposition that is hurting Target, it's Wal-Mart's new focus on apparel that is hurting Target. Wal-Mart has started merchandising up while Target has had to merchandise down (on price).

Suddenly the customers that used to shop at Target are walking into a newly remodeled Wal-Mart store that has beautiful, clean floors, no blue vested employees, a softer blue hue and more feminine signage and a completely revamped apparel assortment that actually comes from brands they've heard of....oh, and it's cheaper too. Wal-Mart has moved up the ladder while Target is trying to climb down it.

That doesn't mean Target isn't worthy of investment though. Their P-fresh stores concept really sounds like it can work and the company can get unit growth in smaller markets with them without sacrificing too much ROIC.

Kohl's has the same story it's had all along...they're not taking share from Target, they're taking it from mall based department stores like JCP and Sears.

Scrutinizing Apollo: The Deeper You Look, The More Problems You See

My favorite line is the one where he says that Apollo launched major advertising to keep visibility and enrollments up. Maybe the reason they're advertising a lot more now is because it's a hell of a lot cheaper? Maybe their advertising is more visible (radio and TV spots as opposed to online ads) because they're chasing higher quality students which is an indicator of a higher quality program?

I also like that his reasoning includes that "the administration" will be watchful of students racking up piles of debt getting an education from Phoenix. First off, currently having 350,000 students is not some random fluke from clever advertising and marketing...it's an indicator of value and quality. Second, if the administration wants to target a racket in education they should focus on the far larger pool of people going to public schools that are racking up debt and not repaying. Those students aren't usually nearly as prepared to pay debts because they don't already have jobs like many APOL students do. "The administration" targeting a relatively small pool of non-trad students at Phoenix would be counterproductive to what it actually wants to accomplish.

Target Shoppers Heading to Wal-Mart in Droves

Bernstein produced a research piece a few months ago that attempted to answer the question of whether Wal-Mart was taking market share from Target and the answer was no. The reality is that both stores continue to take share from mom and pop retailers but especially from grocers in the markets that each is operating.

Of course Target isn't going to suddenly have a full, new plan just because the economy is weaker. For the past 5 years they've been adding more consumables to the mix and they're simply going to continue that plan along with emphasizing the "pay less" part of the slogan. Frankly, I'd be more concerned if management was going to come up with a brand new strategy due to this recession. Downturns like this should be included in any management team's long term strategy and a brand new plan would indicate to me that they weren't good long range planners to begin with.

As for Ackman, I don't really mind if he gets seats on the board but I think his plan is financial engineering at best. I am not a fan of his plan for TGT.

Retailers Are Missing an Opportunity in Counterfeit Goods

Stupid premise. As soon as consumers learned that Coach made their own knock-off bags for street sale they would abandon the brand on principle alone.

Should Nike Make a Play for Under Armour?

Nike tried to purchase Under Armor before they went public and it didn't happen. I've heard that Plank is an extremely arrogant, cocky guy and would be unwilling to sell in this environment.

I think there are better, more distressed properties out there that Nike could buy (DC Shoes from Quiksilver) where they don't have as big a presence. Nike will eventually bury Under Armor.

By the way, Under Armor's shoes are horrible and getting little traction in stores; if Nike wants to buy UA they can do it after the shoe failure materializes.

Apollo Group's Strong Earnings Are Misleading

Ah ha ha ha ha. The lawsuit that Citron highlighted in this sensationalistic piece has already been voluntarily dropped by the plaintiffs. That's what happens when you have no case.

The government's not even participating in the qui tam suit; there's probably not much merit to that one either.

Apollo Group's Strong Earnings Are Misleading

Andrew,

If the company was really manipulating numbers in a material way shouldn't there be a corresponding increase in the company's accounts receivable and then bad debt expense? Bad debt expense has only risen 80bps as a percent of revenue over the last 4 years, and has actually declined from 4.1% to 3.3% in the last 3 years. Accounts receivable have been relatively steady as well.

Also, were you aware that the cohort default rates are measured over 2 year periods in arrears? It seems like it would be difficult to manipulate that type of number.

Apollo is the largest university in the world and by far receives the most Title IV loan funding of any other education provider. They have had a policy of returning gov't money to the gov't in the case of dropouts for several years. Any movement of Title IV money is highly scrutinized by the DOE, I'm not sure that they would have just glossed over this in the many comprehensive reviews that have been done on the company in the past.

Last, the title of your report on Citron yesterday was just too sensationalistic for my tastes: "Citron Releases the Document that The Apollo Group (NASDAQ:APOL) Does Not Want You or the US Government to See." What was new in your report that the government is not aware of? Do you think they're not aware of a court case that was filed? Do you think they're not aware of the qui tam lawsuit that has been there forever? Do you think they're not aware that they themselves have APOL on month to month certification for Title IV?

The only thing your report does is highlight a new regulatory disclosure in a 10-Q that was brought on by students...not by the DOE, not by the SEC, not by the DOJ, but by 3 students.

Oh, and don't let me forget how ridiculous it is to assume that the company just had a one time bump in earnings due to price increases. First of all, this is the second quarter in which the company has experienced some tailwinds from price increases, and second of all enrollments jumped y/y as well. If pricing had stayed the same the company would have seen positive earnings results just from the higher enrollment, which you completely failed to mention.

Fast Food Looks for Growth

"ZERO" being the number one answer tells us nothing. If 100 people were surveyed and 51 people answered "ZERO" while the other 49 people answered with a differing number of times per month then I think it would be pretty easy to make the case that MCD has a pretty strong hold on the market. Oh, and let's not forget that the survey is probably biased downwards because some people will not admit to eating at McDonald's in a survey due to the health stigma attached. Another criticism of the survey that you didn't cite is taht a 100 person survey is a tiny, tiny sample size.

It's much more productive to analyze whether fast food is dead by looking at the comps. McDonald's registered negative monthly y/y comps in the US for the first time in 5 years back in I think either December or January and weather was the blame. Comps from there on out have exceeded analyst expectations every single time. This is ignoring international comps which are growing in high single digits...and the company gets 65% of revenue from outside the US!

If investors want to keep trading this stock based on the perceived "health" of McD's products, or on U.S. comps or other anecdotal evidence then more power to them.

The Importance of Stock Picking, Illustrated in Oil

I agree with wez. The general message to do more research makes sense, but the examples don't. Toys are made from plastic which is made with oil so are toys a related product? Valero and Exxon are about as different as Hasbro and Exxon considering the former in each case are just resellers of a reformulated (though obviously, Hasbro moreso) commodity.

Spitzer: Self-Destruction

Nobody actually cares about the fact that he got with a prostitute, they care about the fact that Spitzer vigorously prosecuted prostitution rings as a DA and then turned around and participated in one. I think the hypocrisy is more daunting than the fact that he wanted to get his di*k wet.

Lampert's Move Is All About Brands

It will still take this strategy some time to play out. Let's say that they do start selling their better known brands through places like Target, HD, Lowe's Autozone, etc and they start closing marginal stores, what are the remaining reasons to go to the good Sears stores? If you can go to Target to pick up your favorite brand of boxer shorts, what reason do you have to go to Sears? Over time, I think this strategy could work but in the interim they're going to be left with a lot of stores that don't sell very much stuff.