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Owen

Owen
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  • Why The McDumpster Meat Scandal In China May Be A Bigger Deal Than You Think [View article]
    Yes, zgb, we heard you the first two times.
    Jul 24, 2014. 04:50 PM | Likes Like |Link to Comment
  • Why The McDumpster Meat Scandal In China May Be A Bigger Deal Than You Think [View article]
    "Cannot put my finger on it, but something is amiss with Mickey D's current operation."

    Yes, who needs fundamental analysis when you can rely on your gut feeling for solid investment decision-making?
    Jul 24, 2014. 03:11 PM | 6 Likes Like |Link to Comment
  • Why The McDumpster Meat Scandal In China May Be A Bigger Deal Than You Think [View article]
    Every couple of years, some Chinese technocrat needs to remind his superiors that he is due for promotion, or perhaps he is disappointed by the contents of his "red envelope", and goes on a tainted-food campaign against a foreign restaurant chain--any old one will do.

    This has been the system there for decades. The chains have to genuflect and apologize, even if they did nothing wrong, since there is no independent food safety commission, and the courts are just an arm of the same government.

    Foreign chains just chalk it down to the cost of doing business in China. No one other than sensationalistic journalists (and one or two SeekingAlpha analysts) pay much attention to this. Next quarter's figures from China won't even show a hiccup. Google for similar such incidents, correlate with subsequent sales numbers, and see for yourself.

    This is a tempest in a McFlurry.
    Jul 24, 2014. 01:50 PM | 7 Likes Like |Link to Comment
  • Electricite De France SA And Pricing: The Big Boys Win [View article]
    With an average daily volume of under 100 shares, and a typical volume of zero, it is hard to turn this analysis into anything actionable, unless you have access to European exchanges.
    Jul 23, 2014. 09:33 AM | Likes Like |Link to Comment
  • Yahoo Tying Its Future Even More Closely To Alibaba Is Worrying [View article]
    "I think most people agree that the company is undervalued"

    True. Most people also agree that ulcers are caused by stress (they aren't), and in 1999, most people agreed that valuation methods of the past aren't applicable to the "new economy", and that "this time it's different". It wasn't.

    I never concern myself with what most people agree on, except when it comes to exploiting their mispricing of assets. One scientific formula carries more weight with me than a million people telling me what they all believe to be true.

    I don't have a "counterargument". I'm not here to sell anything or convince anyone. I merely questioned the implied assumptions in your comments and in those of others here.

    Absent evidence to the contrary, my bet would be on Yahoo continuing to do the same thing it has done over the past 15 years, namely, rely on slowly shrinking legacy operating income to fund acquisitions that eventually yield no additional income. They were lucky with Alibaba, but unless they stumble on another megahit of similar scale, I have no reason to assume the BABA windfall wouldn't end up where all the rest of their money goes to.

    So far, very few of Yahoo's actions actually increased the total value of the company, as measured by total equity or any other metric. But who knows--maybe your staunch belief that this time it's different will turn out true. Stranger things have happened.
    Jul 18, 2014. 02:22 PM | Likes Like |Link to Comment
  • Yahoo Tying Its Future Even More Closely To Alibaba Is Worrying [View article]
    "I'm pretty sure I can sell before then and obtain 100% of the value indicated in the sum of parts analysis, meaning up to $40-45/share."

    If that sum-of-parts value isn't in the stock price today, what makes you think it will be there tomorrow?

    Value investing relies on the premise that the stock price will match the intrinsic value of the company _eventually_. It makes no guarantees as to the immediate future. And indeed, stock prices often deviate from the intrinsic value for stretches lasting many years.

    Your short-term stock price forecast seems to rely more on wishful thinking than it does on fundamental analysis. But by all means, I wish you the best of luck.
    Jul 18, 2014. 05:19 AM | Likes Like |Link to Comment
  • Yahoo Tying Its Future Even More Closely To Alibaba Is Worrying [View article]
    "We are only talking about the near term with the BABA ipo and maybe out a year."

    No, we are not. Your assessment of their net worth assumes Yahoo will liquidate within a year. If they don't, as is likely the case, it doesn't matter how much they are worth on paper today. They'll continue squandering away those billions, making one ill-conceived acquisition after another. Given enough time, it will all be gone.

    Every cent the company earns on advertising and other operations will, eventually, be wasted buying some dead-end company that will do nothing but burn capital. You, the Yahoo owner, will not see any of that money, unless Microsoft takes another go at buying them for a grossly inflated amount.
    Jul 17, 2014. 05:17 PM | Likes Like |Link to Comment
  • Yahoo Tying Its Future Even More Closely To Alibaba Is Worrying [View article]
    Close, Fraser, but not quite as simple as that.

    Yahoo has an operating profit, and due to the peculiarities of GAAP, can report positive earnings every quarter. But this is where things get tricky.

    You see, if Yahoo spends $1B buying a worthless company, let's call it eGarbage.com. Now, since eGarbage has no tangible assets, the transaction adds $1B to Yahoo's Goodwill line, rather than being reported as an expense.

    Now, fast forward a couple of years. As it turns out, eGarbage doesn't turn out to be the brilliant acquisition all were hoping for. Yahoo has two options: keep hoping for a turnaround, or bite the bullet and report a write-down of part or all of the $1B. Even if they choose to write it down, that would still not show up in the standard reported figures, since it is a "one time, non-cash event", as financial engineers are wont to call it. Sadly, this type of thing is far from a one-time event in Yahoo's history, and while it is a non-cash event today, it was a plenty-cash event a couple of years ago, as are the acquisitions the company is making today and will have to write down in a few years.

    But don't take my word on it. Ask yourself this: if the company is making money, and not paying any dividends, wouldn't it stand to reason that their book value will grow over time? How come the book value and total equity have remained essentially constant over the past six years? Where has all that "profit" gone?
    Jul 17, 2014. 02:13 PM | Likes Like |Link to Comment
  • Yahoo Tying Its Future Even More Closely To Alibaba Is Worrying [View article]
    "No brainer buying at that price if it gets that low."

    Again, you are assuming that Yahoo puts that money in T-Bills and sits on it, rather than continuing to destruct value by overpaying for useless acquisitions.

    A drunken sailor on shore leave with $100 in his pocket cannot be said to have the same net worth as a frugal widow with $100 in her purse, even if GAAP tells you the two are equivalent.
    Jul 17, 2014. 10:27 AM | Likes Like |Link to Comment
  • Yahoo Tying Its Future Even More Closely To Alibaba Is Worrying [View article]
    "Cash is worth cash. YHOO has $4B of that + mkt sec."

    I see $1.2B cash plus $1.7B marketable securities minus $1.2B in long-term debt and $1.2B in deferred long-term liabilities, for a net cash of just $0.5B.

    If we're doing balance sheet analysis, let's do it properly. Excluding Alibaba, the company does not have anything close to $4B in net tangible liquid assets.
    Jul 16, 2014. 06:13 PM | Likes Like |Link to Comment
  • Yahoo Tying Its Future Even More Closely To Alibaba Is Worrying [View article]
    "If Alibaba does well or exceedingly well post IPO, a definite possibility, and Yahoo! eventually makes solid progress with its turnaround"

    Why bother with a turnaround at all? Their BABA stake will earn them far more than new or improved products are likely to.

    At this point, their best strategy is to turn themselves into a pure holding company, and put the operations side out of its misery. As a holding company, all it would need is a staff of a dozen or so, to manage regulatory filings and suchlike. Maybe they'll even get a few bucks for the yahoo.com domain name.

    I'm not being facetious here. At this point, I believe Yahoo will be worth more as a pure owner of ALibaba than as an operating company.
    Jul 16, 2014. 02:50 PM | 1 Like Like |Link to Comment
  • Yahoo Tying Its Future Even More Closely To Alibaba Is Worrying [View article]
    "That would price them out at around $2-3 per share. Really?"

    Absolutely.

    Let's do the math: the sustainable portion of their core business will likely earn them about half of the current $1B a year, and will continue declining slowly. Businesses in run-off mode typically garner a P/E multiple between 4 and 8. Generously picking the upper end of that range leads to a valuation of 8x$500M or $4B, which works out to a per-share price of $4.
    Jul 16, 2014. 02:44 PM | Likes Like |Link to Comment
  • Yahoo Tying Its Future Even More Closely To Alibaba Is Worrying [View article]
    "And if BABA's IPO is met with the same response as FB it would be a bigger disaster."

    I doubt that. YHOO trades close to the value of their BABA stake. The market already values the core-Yahoo products at close to zero, which is probably a fair assessment.
    Jul 16, 2014. 01:10 PM | Likes Like |Link to Comment
  • Yahoo Tying Its Future Even More Closely To Alibaba Is Worrying [View article]
    Companies like Yahoo and AOL are in business due to little more than user base inertia. Each time Yahoo "revamps" its email, finance services, MyYahoo or their search engine (does anyone still use that?), they end up with something klutzier and less usable.

    I still remember how in 1998, you could use Yahoo Finance to track futures contracts and options on futures in your Yahoo portfolio. During much of 2013, you couldn't even enter a negative number into their portfolio to indicate a short position or margin debt. Progress?

    At this point, YHOO shares are little more than a derivative or a When-Issued proxy for BABA.
    Jul 16, 2014. 12:33 PM | 1 Like Like |Link to Comment
  • FAB Universal: Glaring Contradictions In Its 2013 10-K [View article]
    I appreciate the analysis, but I'm not quite clear what the article is supposed to achieve.

    The stock traded a grand total of 100 shares today, which is a rare busy day for it. It seems it hasn't traded a single share for months until today.

    What exactly are we supposed to do with the knowledge you have bestowed on us? I'm not even talking about liquidity here; there is no bid to pick up any shares we wish to sell. Perhaps you can create a market by offering to buy back some of the shares you are short, allowing others to initiate their own short position.

    While insightful, your article can only be seen as pure science, as it cannot have any practical application.
    Jul 11, 2014. 05:59 PM | 1 Like Like |Link to Comment
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