Chad Brand

http://www.peridotcapitalist.com
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    • Tue Jan 16th 23:23 PM | Rating: 0 0
      Commented on:
      Morningstar Analysts: Confused On Fair Value?
      Okay, let's use JNJ as an example.

      Morningstar's fair value estimate is $76 per share. If they use DCF models to come up with fair value estimates, it makes sense to set bands since DCF models are never accurate. If the lower band is a "consider buying" point and the upper band is a "consider selling" point, how can you justify setting the margin of error at over 30% (31% in the case of JNJ)?

      The upper band selling target of $100 is given in the chart above. That represents 31% above estimated fair value. If we go 31% below fair value we get a lower band buying target of $52 per share. It still makes little sense. Buy JNJ at $52, sell JNJ at $100, but hold JNJ at $53 and $99 and everything in between?

      That is essentially saying "we have no idea what fair value is." If that is the case, perhaps they need to come up with a new way to value stocks.
      View article »
    • Wed Jan 10th 11:09 AM | Rating: 0 0
      Commented on:
      Blockbuster vs. Netflix: Playing the Online DVD Rental Market
      However, in the fourth quarter NFLX's market share of new accounts came in at around 55% versus BBI's 45%. It remains to be seen if BBI can maintain that momentum, or if it was just a one-time pop thanks to more advertising. Maybe BBI will maintain that level of marketing.
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    • Wed Dec 20th 10:12 AM | Rating: 0 0
      Commented on:
      Heely's Rolls Into a Faddish Footware Market
      I think a lot of people get burned on the short side because they short things like this right away as soon as they get overvalued. However, if the momentum is still upwards, you can get your head handed to you. I would wait until the thing stabilizes for a while and make sure the earnings estimates aren't too low before shorting. Waiting it out for more clarity might mean you don't short at the exact top, but even if it drops a bit and then you get involved after your level of confidence in the timing is better, there will still be plenty of downside to profit from.
      View article »
    • Sat Nov 18th 19:43 PM | Rating: 0 0
      Commented on:
      Sears: Don't Invest For Retail Alone
      Hi Steve,

      A couple thoughts come to mind.

      As far as finding quality investment opportunities, I am of the belief that in most markets there are always undervalued investments. Sometimes they are harded to find than others, but they are there if one is willing to look. It is true that investment assets have risen dramatically, and there are more people looking for places to put money, but even if hedge funds did not exist, that money would have been invested through more traditional vehicles. I have no reason to believe that value investing will become less and less feasible due to the growth of the hedge fund industry.

      As far as whether Lampert allocates his best investment ideas to his hedge fund, or to Sears Holdings, they are essentially one and the same. Why do I say that? Lampert's hedge fund has 75% of its assets in SHLD stock. This equates to 42% of the company. Lampert's personal wealth is also tied up in the hedge fund, as is the case with many hedge fund managers. Given this is the case, he has an incentive to use SHLD as his investment vehicle of choice when he finds good opportunities. After all, his money, as well as his clients' money, is mostly invested in SHLD stock.
      View article »
    • Mon Oct 30th 01:05 AM | Rating: 0 0
      Commented on:
      Can Buffalo Wild Wings Fly?
      The valuation isn't "cheap" but rarely would be for a company growing earnings 25% annually. I think a 30 P/E is very reasonable, which nets a price objective of ~ $60 sometime in 2007.

      The fact that football season doesn't last forever is a non-issue. Earnings projections already factor in the seasonality of a sports bar business.

      As for competition, the restaurant concept is always a crowded field, but BWLD is catching on nationwide, and there is little reason to believe that their target demographic (young men) won't continue to embrace it.
      View article »
    • Sat Sep 30th 20:08 PM | Rating: 0 0
      Commented on:
      Bulls and Bubbles Are Not Synonymous
      So the median home price fell 1.7% in August year-over-year. Is that really a bubble bursting? We'll see what happens from here on out, but the average American can withstand 2% declines pretty well, so it'll have to get a lot worse for most people to really be adversely affected in a major way.
      View article »
    • Thu Sep 28th 19:34 PM | Rating: 0 0
      Commented on:
      Bulls and Bubbles Are Not Synonymous
      Actually, prices nationwide are expected to rise by less than 3% in 2006 and 2007, according to the NAR. Some areas are seeing drops, but the national housing market is not seeing price declines. Check their web site for current projections. Home sales in units are dropping, however.

      If you are speculating in investment property, then yes, you can lose more than 20% since you are overly leveraged and your time horizon is brief, so your percentage return is poor. However, most people live in their houses and don't live in CA, NY, FL, or Vegas, so for the overwhelming majority of people, their house will not decline by a large amount. Hot markets could very well decline 20 or 30 percent, but that segment represents only a small sliver of the overall housing market, which is why median home prices remain steady.

      Differentiating between a specific local market and the housing market as a whole is a crucial distinction. Silicon Valley's housing market was dessimated in '00 as layoffs mounted, but everyone else was unscathed.
      View article »
    • Wed Sep 20th 15:17 PM | Rating: 0 0
      Commented on:
      Searching for Shorts
      Christopher - This is not to say that you just go out and short the list because the names show up on it. It's just a way to get a list and then you can work off of it to try and find names that you think make for attractive shorts.

      David - The high valuations suggest investor optimism for these stocks is very high. The key would be to explore what exactly these expectations are, and most importantly, how likely is it that such expectations are exceeded. After all, stocks go up because current expectations prove too conservative. When expecations are exceedingly high, the odds of disappointment are decently high.
      View article »
    • Mon Sep 18th 14:46 PM | Rating: 0 0
      Commented on:
      Natural Gas a Better Bet Than Crude Oil
      I agree on Devon... probably my favorite of the domestic players who do crude oil as well.
      View article »
    • Fri Sep 8th 10:40 AM | Rating: 0 0
      Commented on:
      Apple's Good News Already Priced In
      Nobody is refuting the fundamental story at Apple. I have been writing about it myself. The angle this time is about the stock price and what is priced in already, not the company growth outlook. Everybody already knows about the market share gains AAPL will achieve in the PC market, so the question to ask is, "what has the market already factored into the stock price?" and "how much should you be willing to pay for the stock?" At a forward PE of 25-30, a lot is being factored in already.
      View article »
    • Wed Aug 30th 18:41 PM | Rating: 0 0
      Commented on:
      Chesapeake Stock Is Cheaper Than It Appears (CHK)
      CHK uses the natural gas futures markets to hedge its production. Every quarter the company updates investors as to their current positions. They are hedging a certain portion of annual portion of their gas through 2009 and are active in adjusting these hedges based on market conditions. You can read their latest quarterly release at phx.corporate-ir.net/p...;p=irol-newsArticle&am...
      View article »
    • Fri Jul 28th 23:53 PM | Rating: 0 0
      Commented on:
      Analyzing Gradient Analytics (BVF, RACK)
      Donn,

      Interestingly, whether RACK met or exceeded estimates, by itself, meant EVERYTHING to the short-term, momentum traders who all bailed last night after the company guided down for Q3. The stock was down 33% within minutes. I doubt the people driving it lower were digging deep into earnings quality that quickly. Estimates were done being revised higher, the chart was broken, and as a result the shares are 40% cheaper 24 hours later.

      The market is extremely inefficient in the short-run, due in large part to these types of traders. Was RACK worth 60 times earnings earlier this year? Did last night's earnings report warrant a 40% drop in the stock in a single day? Was the $6/10% drop within minutes an "efficient" response to news of Gradient's red flag of RACK earlier in the year? Indeed, I believe all three instances to be overeactions resulting from severe short-term market inefficiency.

      Anyway, thanks for the dialogue and congrats to Gradient customers who were short RACK.

      Take care,

      Chad
      View article »
    • Fri Jul 28th 10:37 AM | Rating: 0 0
      Commented on:
      Analyzing Gradient Analytics (BVF, RACK)
      Donn,

      I merely wrote what was being reported by the financial media at the time and therfore relied on their reporting/research for my comments. If the RACK situation was misconstrued by them, and as a result, by me, I apologize.

      That said, RACK has blown out consensus estimates in both quarters since my blog posting. In fact, despite the large sell-off today the company has actually guided 2006 sales and earnings above current estimates. I would argue that the drop in the stock price is due to multiple compression (it was trading at more than 60 times forward earnings when the stock was in the 50's) given that the company's projected financial results are actually higher now than they were several months ago.

      Therefore, presuming that your red flag on rising inventories was pointing to weaker financial results in the future, and such results are the reason for the stock's fall, I think is very misguided. Remember, correlation does not always imply causation. Perhaps other issues (including valuation) were also mentioned by Gradient and could be behind the drop, but given I am not a customer of Gradient, I do not know if this was the case.
      View article »
    • Thu Jul 13th 10:29 AM | Rating: 0 0
      Commented on:
      News Corp. Should Consider a MySpace IPO in the Near Future (NWS)
      Most tech IPO prices are not justified by current sales and profits. I think $5 billion would be reasonable given that any IPO will not take place for some time and the company is growing very rapidly (in hindsight the 10B number is far too high). If the Vonage IPO implied a $2.5B market value, I think MySpace could fetch $5B given that the retail interest would be very, very high. They also would not have to do a full spin-off, as most deals are not. Sell 20% and recoup your initial investment.
      View article »
    • Wed Jun 28th 09:13 AM | Rating: 0 0
      Commented on:
      Will Bernanke Throw Investors a Bone?
      Interesting take. I would think being on the "safe" side would have him lean more toward stopping and avoiding a recession, rather than hiking too much just so core CPI doesn't go much above 2%, which is hardly catastrophic.
      View article »
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