Chad Brand

http://www.peridotcapitalist.com

32 Comments

    • Google: Believe It or Not, The Stock Looks Cheap [view article]
      Frank,

      I blog at www.peridotcapitalist..... Seeking Alpha has permission to repost my articles on their site. Therefore, I have no affiliation with SA and they have no say over what I write. If I were an employee of SA and was writing about Google, perhaps a disclosure would be helpful. In this case though, I don't think there is a conflict of interest. If you disagree, by all means feel free to express that to SA's editors.       May 16 12:39 AM
    • Dell-RadioShack Merger? I'm Not Holding My Breath [view article]
      Even though RSH is a much more focused retailer than Sears and Kmart as far as product lines go, I still think the common thread is a brand that has been losing customers, not gaining them, for years. I agree that at some point Day will have to grow the business, just like Lampert will have to do with Sears.

      However, I think investors underestimated how much juice could be squeezed from Sears/Kmart, hence the stock's move from 15 to 175. There is still a lot of room for SHLD, and the same goes for RSH. Once they reach peak margins I will likely sell RSH because I do not believe Day can bring many more customers in the doors. That said, he could easily get RSH's EPS to $2.50 just with the current sales base of $4B. If that happens, the stock is $35 or $40. At that point, I'd be a seller.

      I think we just disagree how high it can go before it reaches its potential. The same goes for SHLD... they won't be able to boost sales that much, even with the new marketing plans underway, but margins still have a way to go, which will propel the stock higher. Neither stock is a sell... yet anyway.

      As far as a misstep causing it to drop like a rock, I just don't see what can go wrong. They have very few customers as it is. If you still shop at RSH today, you're not going to change your mind and go elsewhere as they try to improve the buying experience. The business is at rock bottom from a sales perspective, so how could it get any worse as long as they keep costs in line and don't blow cap ex on low return projects? I guess they could drive people away as they make changes if they make poor decisions, but that seems unlikely.       May 12 06:51 PM
    • Dell-RadioShack Merger? I'm Not Holding My Breath [view article]
      How is that not exactly like Sears Holdings? Isn't Kmart exactly the same as RadioShack as far as a retailer that has lost its relevance and been beaten by most of its competitors? It's a perfect comparison.

      I'm not saying RSH is a great buy for the next 5 years, but earnings are what drive stock price. Once Day maximizes the earnings power (in this case, margins from a stagnant revenue base) then the investment thesis is over. My point is that we're not there yet. He can get EPS well north of $2.00, which will push the stock higher.

      There is nothing that can "catch up with you." All that will happen is one day he'll wake up and realize that nothing else can be done because BBY is getting all the business and he can't squeeze anymore juice out of the orange. The upside will be gone, but the stock won't tank unless some horrible management team runs it into the ground again.

      It's EXACTLY the same thing as SHLD. Where do you think Day is getting these ideas from? Perhaps from when he helped Lampert lead Kmart out of bankruptcy and into the black? Nobody ever was seen in a Kmart either, but he managed to build up enough cash from it to buy Sears!       May 12 01:07 AM
    • Dell-RadioShack Merger? I'm Not Holding My Breath [view article]
      That's the same exact argument that was made with SHLD. RSH is strictly a margin story. I agree the stock is extended after a jump from 18 to 32 almost overnight. However, as was the case with SHLD, metrics like same store sales are irrelevant. Stocks are all about earnings and estimates are still too low. May 11 02:06 PM
    • Dow: Longest Winning Streak in 80 Years [view article]
      Geoff,

      I totally agree that the streak itself is not important. The only reason we even know that it was 24/27 up days is because the media reported it constantly. I think the key is trying not to get caught up in the euphoria and chasing it too far. How we got to be overbought (whether it was one day up 9% or 24 days up 9%) isn't important itself, but it is notable only because when streaks reach once in 80 year levels, it signals that the market is indeed overly extended to the upside. After all, if such a streak wasnt usually followed by sell-offs, then streaks like this would happen far more frequently. Hence, it isn't surprising that the Dow is down 125 today, for instance.       May 10 03:21 PM
    • Capital One Financial Reduces Guidance on Mortgage Weakness [view article]
      Quarterly numbers for COF vary so much that they always beat or miss by a fairly wide margin, so I think the annual numbers are all that really matters. Quarterly fluctuations just give us trading opportunities.

      If you annualize the 12 cents due to the mortgage biz you get a 48 cent annual impact. They cut guidance by 40 cents. They clearly didn't expect mortgages to be as weak as they were (everything was okay until March when NEW started the panic) and now they are assuming no incremental eanrings from mortgages in 2007. That seems to explain the 40 cent cut in guidance for the year.       Apr 24 02:52 PM
    • Sam Zell's Tribune Takeover Bid: A Lesson in Contrarian Investing [view article]
      If he didn't want the newspaper business, wouldn't he sell that off in pieces and keep things like the Cubs? If they sell the Cubs, they are more heavily invested in newspapers, not less. They obviously see more potential in it than the market does. If not, why do the deal? Apr 04 11:26 AM
    • Google: A Year After The Wall St. Journal's Cover Story [view article]
      Given the market swoon lately, that really is the question to be asking now that the stock is under $440 per share.

      Current estimates are for earnings growth in 2007, 2008, and 2009 to be 35%, 29%, and 25%, respectively. Given that Google's margins will contract over time as it enters lower margin businesses, sales will have to grow by 40%, 35%, and 30% over the next 3 years just for them to hit those numbers.

      Personally, I'm not willing to pay a high multiple for a stock with such high expectations built into the shares. There is very little room for upside, in my view. The most I would be willing to pay would be 30 times 2007 numbers, which comes to around $425 per share.

      Paying more than that would require more confidence that 1) current growth projections are likely, and 2) they might even have decent upside to them. With 30 to 40 percent sales growth baked in for the next 3 years (which is an eternity in tech land) it is not going to be a piece of cask for the company to meet or exceed current expectations.

      So that's my two cents.       Mar 02 05:18 PM
    • Google: A Year After The Wall St. Journal's Cover Story [view article]
      Of course there are many other possible scenarios. I could have sold it at $330, or at $510, or at any other price in between. However, I can't speculate as to when/if I would have sold later if I chose to hold my stock, because it's unknowable.

      Nothing fundamentally has changed with Google over the last year... they are still going into new markets, spending a lot of money to do so, and hoping to cash in on those other businesses as well as overseas. So, if I didn't sell for the reasons I did, I probably would have held the entire time like Mr. Gordon did.

      The point is, since I sold my stock, Google has underperformed the market, so doing so has helped my returns. Long term holders like Mr. Gordon have also done well, as the stock has risen nearly 20% in the last year. So, both camps are happy. That was the point of the piece.       Mar 02 01:31 PM
    • Google: A Year After The Wall St. Journal's Cover Story [view article]
      So you are saying I should have not sold GOOG but rather kept it while it underperformed the S&P 500? Hardly a way to generate superior investment returns. I prefer to outperform, but maybe that's just me. Mar 02 11:42 AM
    • Halliburton: Is Its Discount Warranted? [view article]
      Another couple of reasons they would do this is to 1) avoid having a lot of selling pressure on KBR once the spin-off occurs, and 2) reducing the number of small investors in KBR.

      If HAL shareholders are given a little bit of KBR (relative to their HAL stake), they will either sell the KBR stock when they get it because it is a just a small amount and doesn't really fit with their other regular sized positions, or they just keep it there. The result is either 1) lots of selling of KBR, or thousands of people owning odd-lots of KBR (under 100 shares), which is costly from a shareholder services prospective.

      If they can get some investors to swap all of their HAL for KBR, those issues are reduced and HAL's total share count drops without the company needing to do a buyback.

      If I owned HAL I would not trade HAL for KBR, but they are hoping some people will.       Feb 22 10:23 AM
    • Negative Savings Rate: Not So Worrisome [view article]
      I would agree that a huge proportion of American families have not saved enough for retirement, but that is not the point of my piece. The point is, a savings rate that ignores the largest component of actual savings (retirement savings) is not an accurate number. You can certainly argue that even if the savings rate is actually positive, it is still too low. I would not disagree with that, but it is an entirely different topic on conversation.

      As for gold, its price has much more to do with bank reserves than it does with the U.S. savings rate. I actually recommended investors be long gold in my 2007 investment picks, but the reasons have nothing to do with savings rates.       Feb 02 05:51 PM
    • Analyzing Gradient Analytics (BVF, RACK) [view article]
      Donn,
      Hate to tell you, but I have never recommended investors buy RACK shares, so nobody lost any money on such advice.       Feb 01 02:14 PM
    • Yahoo's Report Tonight Unlikely To Impress [view article]
      Investors seem to be reacting positively to the ahead-of-schedule release of Panama in after-hours trading. However, there is no guarantee that Panama will indeed allow YHOO to regain market share from GOOG. It is possible, clearly, and YHOO is banking on it, but let's see some evidence before we draw that conclusion.

      I was not short YHOO due to the Panama delay, but merely because of the valuation gap with GOOG. YHOO does have a wider product offering compared with GOOG, but let's not forget that YHOO is still mostly about search. After all, they get 88% of their sales from search.       Jan 23 09:40 PM
    • Analyzing Gradient Analytics (BVF, RACK) [view article]
      Donn,

      It really is "all about valuation." The business model hasn't changed in the last several months, but the stock price doubled between earnings reports. Why? Because with $6-$7 in net cash and $1 in EPS, a stock price of $18 attracts value buyers. I suspect the same thing will happen again after another 40% haircut.

      Chad       Jan 18 08:30 PM
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