Seeking Alpha

Vanilla Value

Vanilla Value
Send Message
View as an RSS Feed
View Vanilla Value's Comments BY TICKER:
Latest  |  Highest rated
  • Deeply Undervalued IXYS Is Our Top 2014 Value Pick With Target Of $22.5 [View article]
    Book value of equity, especially tangible book, is valuable outside traditional sectors such as financials. Many net-nets are blown tech IPOs... semiconductor companies also typically have cash positions and no debt, which is the best kind of equity makeup.

    I like to think of all companies as having a cushion in equity that earnings*(1-payout ratio) constantly contributes to and hopefully grows.
    Jan 11, 2014. 12:30 PM | Likes Like |Link to Comment
  • Noose Starts To Tighten Around Herbalife's Neck [View article]
    The SEC outlined nothing new in its Investor Alert. If anything, saying "[r]ecently, the SEC has sued the alleged operators of large-scale pyramid schemes for violating the federal securities laws through the guise of MLM programs" implies that the SEC has already sued the companies they suspect of being pyramid schemes. The SEC has been silent about Herbalife in particular.

    Herbalife isn't an old company. A true pyramid scheme would be long gone 10+ years later. Shorting MLMs is not a new strategy either; it's been utilized since the 1980's.

    Herbalife provides a peer service to lose weight. You go every day and are congratulated for coming and making the next step to losing weight. Weight Watchers and Alcoholics Anonymous also use this strategy because it is so effective. I like the commentary from Bronte Capital on this subject that you can find here:

    And using the word gordo to describe overweight hispanics is extremely offensive. I thought this article had some potential, but after that and the lack of any mention of the Amway rule, which is the main thing that matters on whether Herbalife will sink or swim, I have definitely changed my mind.
    Oct 18, 2013. 12:01 PM | 9 Likes Like |Link to Comment
  • Lucas Energy Puts Up Another Poor Quarter, But There Could Be Hope [View article]
    To correct myself, those 6 Month numbers are not trended, just regular. Trended annually would be double those numbers.
    Aug 20, 2013. 07:54 PM | Likes Like |Link to Comment
  • Lucas Energy Puts Up Another Poor Quarter, But There Could Be Hope [View article]

    I think this analysis is very surface level, and I'll show you why I think that.

    1. The point about the loan. I found this in the Loan Agreement:

    Asset Coverage Test. Permit, as of any Test Date, the ratio of (i) Total Proved PV10% as in effect on the Test Date to (ii) the Obligations as of the Test Date to be less than 4.00 to 1.00; provided that in no event shall the Total Proved PV10% be less than $30,000,000 at any time.

    So, what this and the bit about dilution at the end mean is that Lucas is not allowed to put on additional debt. They must pay the interest on the loan with a small dilution. $1mm and currently OTM warrants are not a lot in the big picture for what is a stable 2-year loan with a relatively sane 12% coupon.

    2. This is a great turn-around story to me as long as current trends hold steady. EBITDA was positive in Q1 and Q2 as well as long as one excludes the $200k in temporary G&A as is outlined in the earnings release. Q2 was not as good as hoped, but the market certainly didn't respond as negatively as you make it out to be.

    I ran my own pro-forma numbers, and Lucas's situation compared to last year is much improved, albeit dilution was part of that cost. The 6-Month EBITDA trends look steady and very positive to me.

    3. Management. From the IR website, the three in major leadership roles have all been brought in over the last year. It takes longer than a year to turn around a company. They all have extensive experience in the field and with private equity oil & gas investments as well. And with the changes, I see a great trend forming. The 6-Month trended EBITDA numbers look as such (with the G&A adjustment):

    Q2 2013: $264,417
    Q1 2013: -$1,289,191
    Q4 2012: -$1,516,379

    4. What you say about G&A is true because Lucas has no scale with their current production. Of course larger, established producers will have lower G&A costs per barrel. This is a reserves, future production, and management turn-around story.

    I'm glad this stock got on my radar. I have no position now, but I will certainly be going long in the coming months. Your presentation seems quite one-sided. There are HUGE difficulties ahead for this company, but that doesn't mean the value isn't there if management pulls through. I'd like to hear what you have to say to my analysis.
    Aug 20, 2013. 07:26 PM | Likes Like |Link to Comment
  • Tesla Motors Presents A Terrific Shorting Opportunity [View article]
    Confirmation Bias
    Aug 6, 2013. 08:46 AM | 12 Likes Like |Link to Comment
  • Why I'm A Seller Of Volatility And VIX Products [View article]
    The event is China; the Chinese banking system needing liquidity from the PBOC could be an indicator of future problems.

    Of course VIX products detoriate over time... they're short term trading tools for retail investors and not intended to generate positive returns over time. Trashing something that is destined to fail doesn't make you smart.
    Jun 26, 2013. 06:37 PM | Likes Like |Link to Comment
  • Opko: Retail Investors Vs. The Insider Cliff [View article]
    Keep it up, Richard. The groupthink in here is hilarious. Bought 10 6/22 6 puts last week as a casual position, it'll be fun to see what happens
    Apr 9, 2013. 01:28 PM | 4 Likes Like |Link to Comment
  • Live Performance Of A Momentum-Based Strategy [View article]
    Where do you work where you thought that momentum is "probably the simplest to model?" The other two recommendations are really easy to model. Momentum is not. Smoothing a feed and finding the derivative of RSI for buy and sell signals is not easy.
    Mar 28, 2013. 04:26 AM | Likes Like |Link to Comment
  • The Successful Failure Of PIMCO Total Return ETF [View article]
    It's a different fund with different holdings that's also run by the legendary Bond King. I thought that was the idea? If that weren't the idea, Bill Gross probably wouldn't have had an almost 50% allocation to mortgage-backed securities last August... the goal is return, return, and more return for the shareholders, not mirroring PTTRX.

    Also, this analysis is pretty bunk if you look at the correlation between the two in a total return (appreciation plus yield) comparison, which is the return scenario you get if you reinvest dividends. Since Total Return is so prolific, I would expect that many investors do. You can see this here:

    Just hit X on the other bond funds and put in BOND for Compare Symbol. The correlation appears to be pretty good based on a quick glance.
    Mar 1, 2013. 03:31 PM | 1 Like Like |Link to Comment
  • Tesla Tanks After Reporting Wider Loss Than Expected, But Profit In Sight [View article]
    You probably won't be happy when you check your brokerage account tomorrow.

    The Nasdaq circuit breaker is the only thing that stopped the downward momentum for today. TSLA reached the circuit breaker in 20 minutes of trade...
    Feb 21, 2013. 05:31 PM | 2 Likes Like |Link to Comment
  • Electric Vehicles Have Tons Of Upside, Tesla Lacks Performance Metrics [View article]
    I would say they were quite a disappointment. Didn't meet the car sales expectations, EPS, and reservations didn't really go to the downside or upside. However, the first question the Goldman analyst asked in the Q&A was about reservations, which does mean something.

    Overall, the future profitability argument is starting to evaporate. And why else would the company be valued at $4 billion and change? There are a lot of expectations built into that market cap, and now Tesla actually has to start turning profitable to meet them.
    Feb 21, 2013. 02:47 AM | 1 Like Like |Link to Comment
  • Electric Vehicles Have Tons Of Upside, Tesla Lacks Performance Metrics [View article]
    Step 3 says that Tesla has a cap. rate of 4% and then a cap. rate of 1% is used in the calculation of Residual Value.

    Using 4%, I got a RV of $1.775 B and a PV of $1.406 B. By your calculations, this results in an equity value of $1.127 B, a steep discount to the market capitalization.

    I'm curious about your methodology and how you came to a cap. rate of 1% in your calculation, or whether you made a mistake. This swings the value of the DCF calculation massively.

    Thanks, otherwise great article.
    Feb 19, 2013. 12:32 PM | 2 Likes Like |Link to Comment
  • 4 Concrete Reasons To Be Short Herbalife Right Now [View article]
    I'm pretty confident this is Bill Ackman's widowmaker trade. He could go delta neutral with options, but it would be obvious to the many hedge funds now paying close enough attention to Herbalife to see a pin drop.

    His short is so enormous that to close it out... I must quote Carl here that it truly would be "the mother of all short squeezes." Ackman's arrogance clouded his judgement. This trade brought him from in the red for the year to up 12%, but at a terrible, terrible cost.

    Here's my favorite article I've read on the subject:

    And if you haven't watched it, the CNBC brawl is unbelievably entertaining.
    Jan 30, 2013. 02:49 AM | 1 Like Like |Link to Comment
  • Mr. Market Should Be Looking At Apple's Cash Flow Rather Than Its Profits [View article]
    I have a certain level of respect for those who take the time to write articles on SA, but you made quite a few errors in the article, and I'm quite surprised I'm the first one to point it out.

    First, you say simply "cash flow." I assume you're talking about operating cash flow, but it's pretty unclear and cash flow can mean many different things.

    Then, your definition of free cash flow. Free cash flow is not equal to operating cash flow minus capex. Your figure is right, but your understanding of it is faulty. FCF adds depreciation expense and docks out capex to find the actual amount of cash for shareholders the company generated during the period. That's a FCF yield of 11.5%, which is still very impressive. EV is not typically used to calculate FCF yield.

    The first two mistakes were pretty insignificant. However, your talk of ROIC was completely bunk. For one, free cash flow is not used in the calculation of ROIC; the numerator of the calculation is equal to net income minus dividends, which is around $40B.

    But then choosing to dock Apple's long-term marketable securities out of the denominator? That's just plain incorrect. The definition of capital is very broad, but by any relevant definition, invested capital must include those securities. It's true that the $30 billion or so of capital on their balance sheet is theoretically generating $47.4B of FCF, but it's pretty insignificant because so much of Apple's production is outsourced. It looks nice on the balance sheet, but there's a whole lot of capital in China working to create iPhones. It's impossible to get a figure of FoxConn's invested capital, but analysts do know there are over a million employees working to make Apple products there. And that move has now hamstrung Apple; there were shortages in almost every product this quarter due to problems in their gigantic supply chain.

    You and the commenters can believe whatever you want. Apple will push higher in time, but it may push lower beforehand. The big picture I see is that Apple grew revenues by 18% yet had lower TTM EPS. Their competitors knew where to hit Apple to make the company hurt, and that's margins. Plus the slower growth in iPhone sales and lack of the usual spikes in growth after rolling out new products. Apple had to be the golden boy, to consistently out-innovate its competitors to keep the sky high margins and revenue growth. But, any company is human. Or at least without Steve Jobs any company is human.
    Jan 25, 2013. 07:12 PM | 1 Like Like |Link to Comment
  • Android Is Dead, Part 3: The Numbers [View article]

    He made them up
    Dec 20, 2012. 03:00 PM | 3 Likes Like |Link to Comment