satyr's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/315452/comments http://seekingalpha.com/article/178617-torrent-of-positive-developments-for-gpu-makers?source=feed#comment-811599 811599 Fri, 18 Dec 2009 00:19:46 -0500 http://seekingalpha.com/article/178321-the-long-case-for-mckesson?source=feed#comment-809129 809129 Wed, 16 Dec 2009 18:25:06 -0500 http://seekingalpha.com/article/178298-rite-aid-s-earnings-to-reflect-larger-struggles?source=feed#comment-807743 807743
Every retailer has struggled in 2009, and will likely do so at least halfway into 2010. Keep in mind that RAD only needs to hold its ground in order to justify a higher valuation, which it may or may not be able to accomplish.

A very important fact that I don't see mentioned here is that Jean Coutu owns 1/3 of the stock. The family has stated clearly that if the current formula does not work, a sale of the West Coast stores would be appropriate. That would raise a significant amount of cash which could be used to pay down debt, as well as bolster the East Coast franchise, where they dominate all of the competition. If you look at what Long's was able to do with a chain of only 500 stores, it is not difficult to see a case here for significant value.

One more thing: being on someone's "bankruptcy list" never does a company's stock any favors. But, RAD should never have been on such lists. Inclusion was gratuitous and a way for various services to garner attention with their sky-is-falling prognostications. If you take a look at the debt maturities and cash flow, that becomes rather clear.]]> Wed, 16 Dec 2009 01:25:40 -0500
Every retailer has struggled in 2009, and will likely do so at least halfway into 2010. Keep in mind that RAD only needs to hold its ground in order to justify a higher valuation, which it may or may not be able to accomplish.

A very important fact that I don't see mentioned here is that Jean Coutu owns 1/3 of the stock. The family has stated clearly that if the current formula does not work, a sale of the West Coast stores would be appropriate. That would raise a significant amount of cash which could be used to pay down debt, as well as bolster the East Coast franchise, where they dominate all of the competition. If you look at what Long's was able to do with a chain of only 500 stores, it is not difficult to see a case here for significant value.

One more thing: being on someone's "bankruptcy list" never does a company's stock any favors. But, RAD should never have been on such lists. Inclusion was gratuitous and a way for various services to garner attention with their sky-is-falling prognostications. If you take a look at the debt maturities and cash flow, that becomes rather clear.]]> http://seekingalpha.com/article/174744-ge-is-david-hartzell-s-highest-conviction-holding-here-s-why?source=feed#comment-774524 774524
I do have to say, though, that Jack Welch was not as great as many people believe. For years, he was the darling of B-schools and considered the most brilliant CEO of his time. If you do a little foresnic research, what you find is that he hid a lot of problems that were later inherited by others. His ego was huge, and that often got in the way of making good decisions to undo previous bad decisions. It may be here not there in terms of making a current investment in GE, but if the topic interest you, do a little research and you find that I am right. ]]> Mon, 23 Nov 2009 21:56:34 -0500
I do have to say, though, that Jack Welch was not as great as many people believe. For years, he was the darling of B-schools and considered the most brilliant CEO of his time. If you do a little foresnic research, what you find is that he hid a lot of problems that were later inherited by others. His ego was huge, and that often got in the way of making good decisions to undo previous bad decisions. It may be here not there in terms of making a current investment in GE, but if the topic interest you, do a little research and you find that I am right. ]]> http://seekingalpha.com/article/174830-shrewd-investors-are-buying-a-p-s-unique-bonds?source=feed#comment-774112 774112
In the short run, the return of around 10% is attractive in of itself. You don't get that kind of clip off a typical investment these days without accepting a reasonable amount of risk (not to say it does not exist here).

Eventually, I see a couple of longer term outcomes that raise some worries. First, if GAP flounders and ultimately goes belly up, I have not crunched and extrapolated the numbers to get a sense of what the holders of this debt might expect to get. Has anyone done the math on this? Second, I am in the camp that says that we will run into inflationary problems before too long, and bond values will drop as rates ratchet up. So, if I were to jump into GAJ, I don't see the case to be holding it for more than about 6 months or a year.]]> Mon, 23 Nov 2009 18:19:54 -0500
In the short run, the return of around 10% is attractive in of itself. You don't get that kind of clip off a typical investment these days without accepting a reasonable amount of risk (not to say it does not exist here).

Eventually, I see a couple of longer term outcomes that raise some worries. First, if GAP flounders and ultimately goes belly up, I have not crunched and extrapolated the numbers to get a sense of what the holders of this debt might expect to get. Has anyone done the math on this? Second, I am in the camp that says that we will run into inflationary problems before too long, and bond values will drop as rates ratchet up. So, if I were to jump into GAJ, I don't see the case to be holding it for more than about 6 months or a year.]]> http://seekingalpha.com/article/174443-rip-retail-stores-closed-in-2009?source=feed#comment-772096 772096 Sun, 22 Nov 2009 15:11:51 -0500 http://seekingalpha.com/article/174407-bank-dilution-looms-for-2010?source=feed#comment-768294 768294 Thu, 19 Nov 2009 20:33:25 -0500 http://seekingalpha.com/article/173683-stocks-bounce-but-big-name-investors-aren-t-convinced?source=feed#comment-764027 764027 Tue, 17 Nov 2009 13:41:33 -0500 http://seekingalpha.com/article/173571-report-from-europe-more-soggy-economic-data-but-stocks-don-t-care?source=feed#comment-764005 764005 Tue, 17 Nov 2009 13:31:54 -0500 http://seekingalpha.com/article/171731-how-to-play-buffett-s-big-bet-on-america?source=feed#comment-748219 748219 Fri, 06 Nov 2009 12:23:23 -0500 http://seekingalpha.com/article/157803-cvs-is-in-good-health-barron-s?source=feed#comment-747483 747483 Fri, 06 Nov 2009 03:48:24 -0500 http://seekingalpha.com/article/171525-cvs-caremark-tumbles-on-lost-business?source=feed#comment-747482 747482
I have followed pharmacy rather closely since 2003 and have observed CVS/Tom Ryan and their approach to growth. On the one hand, I give him credit for being very aggressive and able to drive a hard bargain. They stole the Eckerd chain and also Caremark. On the other hand, he is just the kind of figure that you find embroiled in the ugliest of scenarios, whereby hubris causes one to lose sight of integrity and legal doctrine.

By chance, I have had the unwelcome opportunity to watch how CVS/Caremark operates from a customer's perspective over the past year as I have been assisting a family member who has coverage through an employer medical plan. Their inability to communicate internally is mind boggling. You can call them about an issue and if you talk to 5 people you will get 5 distinct answers, all of them in conflict. It is no wonder that they have lost clients.

All of this is not to say that the stock is a bad buy (or a good one). Ryan will pump hard to bring the stock price back. But, he'd better be careful. He made some fairly big promises that he now can't deliver. It would be interesting to know when it became apparent that these contracts would be lost. This company has been a Wall Street darling for a while, which is always a bad sign. Caveat emptor.]]> Fri, 06 Nov 2009 03:43:51 -0500
I have followed pharmacy rather closely since 2003 and have observed CVS/Tom Ryan and their approach to growth. On the one hand, I give him credit for being very aggressive and able to drive a hard bargain. They stole the Eckerd chain and also Caremark. On the other hand, he is just the kind of figure that you find embroiled in the ugliest of scenarios, whereby hubris causes one to lose sight of integrity and legal doctrine.

By chance, I have had the unwelcome opportunity to watch how CVS/Caremark operates from a customer's perspective over the past year as I have been assisting a family member who has coverage through an employer medical plan. Their inability to communicate internally is mind boggling. You can call them about an issue and if you talk to 5 people you will get 5 distinct answers, all of them in conflict. It is no wonder that they have lost clients.

All of this is not to say that the stock is a bad buy (or a good one). Ryan will pump hard to bring the stock price back. But, he'd better be careful. He made some fairly big promises that he now can't deliver. It would be interesting to know when it became apparent that these contracts would be lost. This company has been a Wall Street darling for a while, which is always a bad sign. Caveat emptor.]]> http://seekingalpha.com/article/171139-the-hartford-only-paper-profits?source=feed#comment-746444 746444 Thu, 05 Nov 2009 11:49:09 -0500 http://seekingalpha.com/article/168697-why-apple-is-worth-80?source=feed#comment-733431 733431 Wed, 28 Oct 2009 01:20:21 -0400 http://seekingalpha.com/article/167543-three-small-cap-stocks-on-the-verge-of-breakouts?source=feed#comment-724116 724116 Wed, 21 Oct 2009 16:23:02 -0400 http://seekingalpha.com/article/167180-readers-ask-rite-aid-somaxon-pharmaceuticals?source=feed#comment-720712 720712
Mary Sammons is another matter, and if she were running the company I would short it into oblivion. However, she is more of a figurehead at this stage.

I tend to agree with Citizen Chin on this one. Rite Aid has market share on the East Coast and is rationalizing their store base. It will still be some time before they turn a profit. But, they are due to begin debt paydown in the next quarter and have enough cash flow to keep up the fight for a very long time. Eventually, they will turn earnings positive, or sell off a significant piece of the store base (i.e.: West Coast) in order to get enough cash to wipe out a large amount of debt. The question is timing, and that is highly dependent upon the economy.]]> Mon, 19 Oct 2009 13:15:27 -0400
Mary Sammons is another matter, and if she were running the company I would short it into oblivion. However, she is more of a figurehead at this stage.

I tend to agree with Citizen Chin on this one. Rite Aid has market share on the East Coast and is rationalizing their store base. It will still be some time before they turn a profit. But, they are due to begin debt paydown in the next quarter and have enough cash flow to keep up the fight for a very long time. Eventually, they will turn earnings positive, or sell off a significant piece of the store base (i.e.: West Coast) in order to get enough cash to wipe out a large amount of debt. The question is timing, and that is highly dependent upon the economy.]]> http://seekingalpha.com/article/166882-cramer-s-mad-money-it-s-all-about-apple-10-16-09?source=feed#comment-720698 720698 Mon, 19 Oct 2009 13:07:30 -0400 http://seekingalpha.com/article/166494-cash-for-clunkers-the-hangover?source=feed#comment-716526 716526 Thu, 15 Oct 2009 13:19:50 -0400 http://seekingalpha.com/article/163836-retail-firms-at-risk-for-bankruptcy?source=feed#comment-695430 695430
One company on the list that I follow closely is RAD. They have no major debt coming due this or next year, and have net positive cash flow. In fact, they have announced that they will begin reducing debt beginning February 2010. How that translates to BK is beyond comprehension. As Chris Rodriquez notes, they do have real estate on the market. But, when you have around 5,000 locations, it is not unusual to be shifting footprint, as well as closing under performing stores while newer, better located stores are opened. This is part of an ongoing and well-documented effort by RAD management.

Quickly, regarding LilBob's comments about RAD pricing - while I can believe that they are selling items for 10% or 20% more than other stores, you do have to remember to compare apples to apples. 7-11 gets a lot for a can of tuna when compared to Wal-mart. But, when you want to stop make a quick purchase, it is still worth it. Most of the front-end product in drugstores is more about impulse and convenience than trying to compete with large grocers and discounters. If you compare RAD prices to Walgreen or CVS, I think you will find them to be similar. But don't take my word for it. Independent research has proven this out. In an individual market this may or may not be true. However, none of us can visit 15,000 stores to determine the true mean, so we rely on independent samples to tell us the story.

As for the rest of the list, I have no specific opinion, other than to say that the outfit that produced it does not have a good track record.]]> Tue, 29 Sep 2009 12:32:24 -0400
One company on the list that I follow closely is RAD. They have no major debt coming due this or next year, and have net positive cash flow. In fact, they have announced that they will begin reducing debt beginning February 2010. How that translates to BK is beyond comprehension. As Chris Rodriquez notes, they do have real estate on the market. But, when you have around 5,000 locations, it is not unusual to be shifting footprint, as well as closing under performing stores while newer, better located stores are opened. This is part of an ongoing and well-documented effort by RAD management.

Quickly, regarding LilBob's comments about RAD pricing - while I can believe that they are selling items for 10% or 20% more than other stores, you do have to remember to compare apples to apples. 7-11 gets a lot for a can of tuna when compared to Wal-mart. But, when you want to stop make a quick purchase, it is still worth it. Most of the front-end product in drugstores is more about impulse and convenience than trying to compete with large grocers and discounters. If you compare RAD prices to Walgreen or CVS, I think you will find them to be similar. But don't take my word for it. Independent research has proven this out. In an individual market this may or may not be true. However, none of us can visit 15,000 stores to determine the true mean, so we rely on independent samples to tell us the story.

As for the rest of the list, I have no specific opinion, other than to say that the outfit that produced it does not have a good track record.]]> http://seekingalpha.com/article/162490-a-big-investor-s-betting-on-safeway?source=feed#comment-685021 685021
I think the reaction was too strong, as the fundamentals for SWY are reasonably good. Much of their scheduled capital outlays are flexible, given that they have already made the lion's share of their Lifestyle store update push. Also, they have modified their mix to be more competitive with the top end players (e.g.: WFMI) and invested in pricing in order to give some grief to KR and at least some of the discounters. This last move is what is shaving both margin and putting a small crimp in the top line. Eventually, the price wars will reach a stalemate, but I don't see that happening for a while - certainly not by January.

What I do imagine is that the strike threats from Colorado will subside, which is something hanging over SWY at the moment. Not that the unions have always refrained from shooting themselves in the foot (look at the SoCal strike earlier in the decade that nearly bankrupt the UFCW), but I think they may take a queue from the CAW and others, and decide to be satified that they have jobs and benefits. There are already more people signed up to replace them than there are jobs to fill. 10% unemployment has a funny way of doing that.]]> Mon, 21 Sep 2009 12:48:42 -0400
I think the reaction was too strong, as the fundamentals for SWY are reasonably good. Much of their scheduled capital outlays are flexible, given that they have already made the lion's share of their Lifestyle store update push. Also, they have modified their mix to be more competitive with the top end players (e.g.: WFMI) and invested in pricing in order to give some grief to KR and at least some of the discounters. This last move is what is shaving both margin and putting a small crimp in the top line. Eventually, the price wars will reach a stalemate, but I don't see that happening for a while - certainly not by January.

What I do imagine is that the strike threats from Colorado will subside, which is something hanging over SWY at the moment. Not that the unions have always refrained from shooting themselves in the foot (look at the SoCal strike earlier in the decade that nearly bankrupt the UFCW), but I think they may take a queue from the CAW and others, and decide to be satified that they have jobs and benefits. There are already more people signed up to replace them than there are jobs to fill. 10% unemployment has a funny way of doing that.]]> http://seekingalpha.com/article/162040-don-t-bet-against-king-kroger?source=feed#comment-684319 684319
When costs decrease, profit margins actually increase, provided that prices are not lowered by more than that incremental change. In fact, what happened is that Kroger lowered prices by more than the deflation cost of goods. The reason is competition from other major grocers and big box discounters.

This is not to say that things will not go well for Kroger. But let's not misunderstand the mechanics of how margin works. Furthermore, it is important to understand cause and effect. Decreasing cost of sales did not lead to lower ticket prices. Kroger, as well as all other grocers, make decisions about pricing every day of the week. They set prices according to what the market will bear (i.e.: attracting customers). The exception to this is Costco, which operates on a cost-plus model. ]]> Sun, 20 Sep 2009 18:32:06 -0400
When costs decrease, profit margins actually increase, provided that prices are not lowered by more than that incremental change. In fact, what happened is that Kroger lowered prices by more than the deflation cost of goods. The reason is competition from other major grocers and big box discounters.

This is not to say that things will not go well for Kroger. But let's not misunderstand the mechanics of how margin works. Furthermore, it is important to understand cause and effect. Decreasing cost of sales did not lead to lower ticket prices. Kroger, as well as all other grocers, make decisions about pricing every day of the week. They set prices according to what the market will bear (i.e.: attracting customers). The exception to this is Costco, which operates on a cost-plus model. ]]> http://seekingalpha.com/article/162021-20-companies-most-likely-to-go-bankrupt-in-next-year?source=feed#comment-684315 684315
1) They only looked at companies with market caps > $1 billion. That leaves a good many off the list due to having severely impaired financial conditions and hence low market valuations. My strong suspicion is that a good many of these companies are in far greater trouble than those that this company chose to examine and list.

2) Some of these same companies were listed several months ago by Moody's as likely to go bankrupt in 2009. Many of those stocks proceeded to increase in price 5 to 10 fold. At the time, I analyzed a few of them and noted that there was virtually no chance of bankruptcy - due to the fact that they had net positive cash flow and no significant debt maturities during 2009. Fast forward 6 months, and it is Moody's whose lifespan ought to be questions.

3) Pardon me for asking, but who is Audit Integrity, where do they get their funding to operate, and who is auditing them?]]> Sun, 20 Sep 2009 18:23:06 -0400
1) They only looked at companies with market caps > $1 billion. That leaves a good many off the list due to having severely impaired financial conditions and hence low market valuations. My strong suspicion is that a good many of these companies are in far greater trouble than those that this company chose to examine and list.

2) Some of these same companies were listed several months ago by Moody's as likely to go bankrupt in 2009. Many of those stocks proceeded to increase in price 5 to 10 fold. At the time, I analyzed a few of them and noted that there was virtually no chance of bankruptcy - due to the fact that they had net positive cash flow and no significant debt maturities during 2009. Fast forward 6 months, and it is Moody's whose lifespan ought to be questions.

3) Pardon me for asking, but who is Audit Integrity, where do they get their funding to operate, and who is auditing them?]]> http://seekingalpha.com/article/162092-trash-is-king-beware-being-late-to-the-party?source=feed#comment-684307 684307
There is no doubt that there are some headwinds that should not be ignored, and no matter what the long term holds in store, there will be some down days in the markets. Maybe there will be a lot of them. But, keep in mind that there is still a lot of money sitting in cash accounts accumulating close to zero interest, and it appears that it is gradually being deployed into equities. Reasonable or not, this creates upward pressure on the markets.

Finally, if we are going to be intellectually honest about valuing equities, let's not talk in terms of percentages. How many stocks went up how many percent during what period of time is not relevant to anything other than historians. I don't remember this (or virtually) any self-appointed expert mentioning how many percent the market or individual stocks had lost heading into March of this year and posturing it as a reason why stocks absolutely had to go up. The idea 6 months ago was that stocks would go down, because that is what they had already done. Now, we are hearing that stocks will go down because that is not what they have done.

I do happen to know that most mutual funds have been lagging the S&P over the past 1/2 year. Why? Because they were betting against the individual investor. Now, they are hoping for a tumble so that they can save face, and many are trying to jawbone their way there. It's a tug of war, because the US government wants it quite the opposite, as do the governments of the G-20. If equity markets, currencies, and real estate values cannot be sustained at some reasonable level, no amount of stimulus or any other kind of intervention can salvage the world economies. Look for Ben, Tim, Barack, Govt. Sachs, and Warren to keep the messages positive until at least December.
]]> Sun, 20 Sep 2009 18:10:34 -0400
There is no doubt that there are some headwinds that should not be ignored, and no matter what the long term holds in store, there will be some down days in the markets. Maybe there will be a lot of them. But, keep in mind that there is still a lot of money sitting in cash accounts accumulating close to zero interest, and it appears that it is gradually being deployed into equities. Reasonable or not, this creates upward pressure on the markets.

Finally, if we are going to be intellectually honest about valuing equities, let's not talk in terms of percentages. How many stocks went up how many percent during what period of time is not relevant to anything other than historians. I don't remember this (or virtually) any self-appointed expert mentioning how many percent the market or individual stocks had lost heading into March of this year and posturing it as a reason why stocks absolutely had to go up. The idea 6 months ago was that stocks would go down, because that is what they had already done. Now, we are hearing that stocks will go down because that is not what they have done.

I do happen to know that most mutual funds have been lagging the S&P over the past 1/2 year. Why? Because they were betting against the individual investor. Now, they are hoping for a tumble so that they can save face, and many are trying to jawbone their way there. It's a tug of war, because the US government wants it quite the opposite, as do the governments of the G-20. If equity markets, currencies, and real estate values cannot be sustained at some reasonable level, no amount of stimulus or any other kind of intervention can salvage the world economies. Look for Ben, Tim, Barack, Govt. Sachs, and Warren to keep the messages positive until at least December.
]]> http://seekingalpha.com/article/161568-trading-the-economic-recovery-potential-opportunities-are-staggering?source=feed#comment-679269 679269 Wed, 16 Sep 2009 12:46:29 -0400 http://seekingalpha.com/article/161112-overbought-stocks?source=feed#comment-674932 674932 Sun, 13 Sep 2009 16:54:37 -0400 http://seekingalpha.com/article/157803-cvs-is-in-good-health-barron-s?source=feed#comment-644570 644570 Mon, 24 Aug 2009 23:08:19 -0400 http://seekingalpha.com/article/154163-25-short-candidates?source=feed#comment-620726 620726 Fri, 07 Aug 2009 21:28:25 -0400 http://seekingalpha.com/article/148582-why-inflation-worries-are-overblown?source=feed#comment-587805 587805
In the long run, I don't see how inflation can be avoided. It is driven by monetary policy, and I don't think the printing presses have ever run faster in this country. You can't flood an economy with money supply and expect to sidestep the laws of supply and demand. Each dollar that is inserted into circulation decreases the relative value of those that were already in circulation, particularly in a sluggish economic environment. I would guess that the first clear signs will appear in about a year from now, just as the recession appears to be safely past. The irony here is that real estate may prove to be the greatest hedge, thus driving investors to purchase the very thing that has been that has was eschewed (and often blamed) at the onset of this economic downturn.

As an aside, when comparing granolas, chickens, or whatever else you are putting into your body, I would be careful to check the ingredients. In many cases, you will find you are not comparing apples to apples. ]]> Tue, 14 Jul 2009 13:43:41 -0400
In the long run, I don't see how inflation can be avoided. It is driven by monetary policy, and I don't think the printing presses have ever run faster in this country. You can't flood an economy with money supply and expect to sidestep the laws of supply and demand. Each dollar that is inserted into circulation decreases the relative value of those that were already in circulation, particularly in a sluggish economic environment. I would guess that the first clear signs will appear in about a year from now, just as the recession appears to be safely past. The irony here is that real estate may prove to be the greatest hedge, thus driving investors to purchase the very thing that has been that has was eschewed (and often blamed) at the onset of this economic downturn.

As an aside, when comparing granolas, chickens, or whatever else you are putting into your body, I would be careful to check the ingredients. In many cases, you will find you are not comparing apples to apples. ]]> http://seekingalpha.com/article/147641-15-overvalued-small-caps-from-russell-2000?source=feed#comment-581009 581009 Thu, 09 Jul 2009 14:32:18 -0400 http://seekingalpha.com/article/145508-drugstore-demand-shows-no-sign-of-slowing?source=feed#comment-563795 563795
Medicaid is even worse, and some pharmacies have simply refused to fill the prescriptions in states where the reimbursement rates have become absurdly low. At the moment, there is a standoff in Delaware over this.

RAD will probably continue to right itself, but it will be a slow process. John Standley is a superb operator, and I think the elimination of weak stores, tighter control of spend, and gradual pay down of debt will result in a smaller, but more profitable chain.

As for the comments about WMT and their impact on the major pharmacy chains, I think the case is much overstated. They are inconveniently located and the shopping experience is brutal. Cash customers make up less than 10% of the base, and these are the only ones that might be attracted to a price-oriented model. The larger threat to retail pharmacy, aside from legislation, is the push toward mail-order.]]> Fri, 26 Jun 2009 12:55:57 -0400
Medicaid is even worse, and some pharmacies have simply refused to fill the prescriptions in states where the reimbursement rates have become absurdly low. At the moment, there is a standoff in Delaware over this.

RAD will probably continue to right itself, but it will be a slow process. John Standley is a superb operator, and I think the elimination of weak stores, tighter control of spend, and gradual pay down of debt will result in a smaller, but more profitable chain.

As for the comments about WMT and their impact on the major pharmacy chains, I think the case is much overstated. They are inconveniently located and the shopping experience is brutal. Cash customers make up less than 10% of the base, and these are the only ones that might be attracted to a price-oriented model. The larger threat to retail pharmacy, aside from legislation, is the push toward mail-order.]]>