Intel (INTC) might be a double in the next five years, writes Jack Hough in Barron's, as the company racks up market-share gains in tablet and smartphone chips, sees big demand for lucrative server chips, and PC sales stabilize. Then there's the company's capital spending-spree - it should cut manufacturing costs and allow more wins in high-end foundry contracts, including from Apple which has been forced to use Samsung for the work. [View news story]
Beyond the sex appeal of mobile and cloud - there is a very large refresh cycle of slow adopters who are still using Windows XP coming that will contribute to handsomely to the fortunes of Intel moving forward.
According to this April 2013 WIkipedia (http://goo.gl/TGnf), 38.31% of the OS market is still using XP. These people will be forced to refresh by the end of 2014 due to support and security end-of-life by Microsoft.
Reviewing The Sears Risk Of Insolvency Using The Altman Z-Score [View article]
I agree these are positive, but do not even come close to moving the needle for this company at this stage.
Plus, these things never get mentioned in communication coming from Sears. That is what blows my mind - if they want to be a real estate company, why do they never talk about it? It is all about operations right now and that is the worse part of the business.
Reviewing The Sears Risk Of Insolvency Using The Altman Z-Score [View article]
MSF - Do you have a source for this quote? I searched both the most recent transcripts and the 2013 annual letter and this is not a direct quote from either of those.
The only mention of monetizing real estate is from the annual letter: "Fourth, we are able to realize the value of the real estate in situations where we own the stores or where the lease terms are attractive to third parties."
Reviewing The Sears Risk Of Insolvency Using The Altman Z-Score [View article]
If real estate is the bullish thesis, why is there no mention of this on the conference call or in the annual letter?
According to what we know, Eddie is 100% focused on operations, which burned nearly $750m in the past quarter.
SHLD literally has a liquidity crunch on its hands which is why they are divesting assets just fund ongoing operations.
Why is Eddie selling the service agreement business? Because it is extremely profitable, predictable and can fetch a high multiple. Problem with this is that it is going to kill earnings. Depending upon the multiple, we could be giving up $10-$50m of pure profit with the sale of this business.
This is not a very "Berkshire" move in my opinion.
Reviewing The Sears Risk Of Insolvency Using The Altman Z-Score [View article]
I am still long - but that does not mean I am blind to the facts. I also appreciate an honest discussion about what is working at sears (very little) and what is not (most everything).
Reviewing The Sears Risk Of Insolvency Using The Altman Z-Score [View article]
Cash flow statement from the most recent 10-Q:
Cash Flows from Operations - (713) Cash Flows from Investing - (56) Cash Flows from Financing (Short-Term Borrowing) - 633 Net Impact to Cash this Quarter - (138)
Reviewing The Sears Risk Of Insolvency Using The Altman Z-Score [View article]
I read the conference call transcripts line-by-line and Eddie sounds competent as a manager of Sears.
Problem is that he is embroiled in the daily tactical issues and his bandwidth to focus on the horizon and to develop a long-term strategy for the company is minimized. Factor in ESL and all of the other things Eddie has his hands in and the problem gets even worse.
The ONLY positive news from this report was the 20% increase in online. Seriously...20%?? If I want online growth there are 100's of other companies that do not have the problems of Sears that can provide me with multiples of growth higher than this.
It appears that Eddie truly believes he can turn the operations around and he is not focused on monetizing assets which is the only bull case for most people who are long.
Reviewing The Sears Risk Of Insolvency Using The Altman Z-Score [View article]
We are nearly 10 years into this experiment and things are not improving. Eddie overplayed his hand early with billions in buybacks that have provided zero long-term return for shareholders. Buybacks only work if you have sustainable earnings, which Sears has not had for 20+ quarters.
As the Z-score indicates, liabilities continue to either increase or hold steady, while assets, and more importantly the productivity of assets, continue to erode.
I have a position in Sears, but anchoring to the idea that somehow the balance sheet will blossom into an income producing cash cow for shareholders is getting very thin.
More on Sears Holdings' (SHLD) Q1 results: Domestic comparable store sales fell 3.6%, comprised of decreases of 4.6% at Kmart and 2.4% at Sears U.S., blamed on weather related declines in lawn and garden; excluding that category, comp store sales would have gained 0.3%. Online business rose 20% Y/Y. Says it may put its service agreement business up for sale to raise cash. Shares -13% AH. [View news story]
Short term borrowings up $651m y/y.
Cash position down $306m y/y.
There is nothing good to pull from this report...horrible.
More on Sears Holdings' (SHLD) Q1 results: Domestic comparable store sales fell 3.6%, comprised of decreases of 4.6% at Kmart and 2.4% at Sears U.S., blamed on weather related declines in lawn and garden; excluding that category, comp store sales would have gained 0.3%. Online business rose 20% Y/Y. Says it may put its service agreement business up for sale to raise cash. Shares -13% AH. [View news story]
Service agreements have to be the most profitable part of the sale?
Sears Holdings' Valuation: Between Berkshire Hathaway And Bankruptcy [View article]
No - seriously, phenomenal article. You do a great job of outlining how we got to this point in SHLD and what the possible end-game may be.
Your analysis is detailed, fair and based on facts. Thank you for posting this great piece of research.
Aflac: Insure Your Portfolio With Value [View article]
Intel (INTC) might be a double in the next five years, writes Jack Hough in Barron's, as the company racks up market-share gains in tablet and smartphone chips, sees big demand for lucrative server chips, and PC sales stabilize. Then there's the company's capital spending-spree - it should cut manufacturing costs and allow more wins in high-end foundry contracts, including from Apple which has been forced to use Samsung for the work. [View news story]
According to this April 2013 WIkipedia (http://goo.gl/TGnf), 38.31% of the OS market is still using XP. These people will be forced to refresh by the end of 2014 due to support and security end-of-life by Microsoft.
Reviewing The Sears Risk Of Insolvency Using The Altman Z-Score [View article]
Plus, these things never get mentioned in communication coming from Sears. That is what blows my mind - if they want to be a real estate company, why do they never talk about it? It is all about operations right now and that is the worse part of the business.
Reviewing The Sears Risk Of Insolvency Using The Altman Z-Score [View article]
The only mention of monetizing real estate is from the annual letter:
"Fourth, we are able to realize the value of the real estate in situations where we own the stores or where the lease terms are attractive to third parties."
Not quite as opportunistic as your quote.
Reviewing The Sears Risk Of Insolvency Using The Altman Z-Score [View article]
According to what we know, Eddie is 100% focused on operations, which burned nearly $750m in the past quarter.
SHLD literally has a liquidity crunch on its hands which is why they are divesting assets just fund ongoing operations.
Why is Eddie selling the service agreement business? Because it is extremely profitable, predictable and can fetch a high multiple. Problem with this is that it is going to kill earnings. Depending upon the multiple, we could be giving up $10-$50m of pure profit with the sale of this business.
This is not a very "Berkshire" move in my opinion.
Reviewing The Sears Risk Of Insolvency Using The Altman Z-Score [View article]
Reviewing The Sears Risk Of Insolvency Using The Altman Z-Score [View article]
Goodwill April 2012 - $841m
Goodwill April 2013 - $379m
Real Estate? This is factored into the Z-score and its value is deteriorating, especially as it relates to total liabilities.
Sears as a ESL investment vehicle? Where are you getting this info? Annual letter, quarterly reports, 10-Q? There is no evidence of this.
Reviewing The Sears Risk Of Insolvency Using The Altman Z-Score [View article]
Cash Flows from Operations - (713)
Cash Flows from Investing - (56)
Cash Flows from Financing (Short-Term Borrowing) - 633
Net Impact to Cash this Quarter - (138)
Is this sustainable?
Reviewing The Sears Risk Of Insolvency Using The Altman Z-Score [View article]
Problem is that he is embroiled in the daily tactical issues and his bandwidth to focus on the horizon and to develop a long-term strategy for the company is minimized. Factor in ESL and all of the other things Eddie has his hands in and the problem gets even worse.
The ONLY positive news from this report was the 20% increase in online. Seriously...20%?? If I want online growth there are 100's of other companies that do not have the problems of Sears that can provide me with multiples of growth higher than this.
It appears that Eddie truly believes he can turn the operations around and he is not focused on monetizing assets which is the only bull case for most people who are long.
Reviewing The Sears Risk Of Insolvency Using The Altman Z-Score [View article]
As the Z-score indicates, liabilities continue to either increase or hold steady, while assets, and more importantly the productivity of assets, continue to erode.
I have a position in Sears, but anchoring to the idea that somehow the balance sheet will blossom into an income producing cash cow for shareholders is getting very thin.
More on Sears Holdings' (SHLD) Q1 results: Domestic comparable store sales fell 3.6%, comprised of decreases of 4.6% at Kmart and 2.4% at Sears U.S., blamed on weather related declines in lawn and garden; excluding that category, comp store sales would have gained 0.3%. Online business rose 20% Y/Y. Says it may put its service agreement business up for sale to raise cash. Shares -13% AH. [View news story]
Cash position down $306m y/y.
There is nothing good to pull from this report...horrible.
More on Sears Holdings' (SHLD) Q1 results: Domestic comparable store sales fell 3.6%, comprised of decreases of 4.6% at Kmart and 2.4% at Sears U.S., blamed on weather related declines in lawn and garden; excluding that category, comp store sales would have gained 0.3%. Online business rose 20% Y/Y. Says it may put its service agreement business up for sale to raise cash. Shares -13% AH. [View news story]
Leapfrog Has International Expansion And New Products To Excite Investors [View article]
Sounds like $MAT has had limited success in the tablet space.
Leapfrog Has International Expansion And New Products To Excite Investors [View article]