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  • Whole Foods Market, A Nutritious Investment  [View article]
    Great analysis. One question regarding the value of debt you used in your DCF. Given that operating leases are essentially debt, shouldn't this be subtracted out from your firm value? The PV of WFM's operating lease commitments is roughly $6,300mm. If you subtract that out of your firm value of $19,190, you're left with a per share price closer to $37.
    Jan 5, 2016. 09:20 PM | Likes Like |Link to Comment
  • Discounted Cash Flow: What Discount Rate To Use?  [View article]
    To be fair, there aren't really two schools of thought, at least as you've broken them out.

    In fact, the very definition of a discount rate is the rate that investors require given a certain level of risk. To say it is simply the desired return is a bit misleading, because that "desire" is a function of how much risk investors perceive in the investment.

    Also, I think you may have misinterpreted the term "margin of safety." The margin, or buffer, an investor applies to their valuation is mainly used to account for the risk of their valuation model being wrong, not the company risk. In other words, the margin of safety provides a cushion against errors in calculation.

    By applying a large margin of safety to a valuation with a haphazardly determined discount rate also strikes me as a bit odd. It's almost like a 3-step process to getting a randomly chosen discount rate, which given your initial 10% required ROR and 50% margin of safety, comes out to something like 120%. With that approach, you might as well take any stock's market price and say to yourself, I'm only going to invest once it's price falls 80% from where it is today. At least it would save you the time of doing any kind of leg work.

    I will admit that valuation and the determination of its inputs can seem like a huge exercise in futility once you dive in and start to realize that a lot of this is really just applying a "best guess" framework. Still, I do believe it is better to be generally correct than precisely incorrect, so it is worth your while to use a rigorous method to estimate the discount rate.
    Dec 30, 2015. 04:13 PM | Likes Like |Link to Comment
  • Monster: Current Affairs  [View article]
    I apologize for the passive-aggressive tone. I too am a fan of healthy debate and though, I may disagree with some of your points, I appreciate well written posts like yours. I look forward to your future articles.
    Jan 30, 2013. 11:19 AM | Likes Like |Link to Comment
  • Monster: Current Affairs  [View article]
    It seems my initial post was deleted. Giving you the benefit of the doubt that it was merely a slip-up, here's a link to the post again:

    I think you should give these high school teenagers more credit. These days they are facing an increasingly daunting workload. Between class, homework, sports, and other extracurricular activities, they are sleeping later and waking up earlier. And guess what they’re relying on to fuel them through these long days?

    “CBS news reported in early 2011 that nearly half of all teens drink coffee on a daily basis to stay awake in school.”

    You’re also unfairly assuming that coffee is reserved for the morning, when in reality most of these teenagers will visit their local Starbucks during a lunch break or after school. It’s a frequented study spot for these kids who are trying to cram in biology homework before soccer practice or who are trying to prepare for a final over the weekend.

    I’m not trying to mock your work, but merely pointing out that one of your observations is naïve at best. High school kids drink coffee. High school kids also drink energy drinks. The comparison holds weight. And in this comparison you’ll find that coffee from your local barista has more caffeine per ounce than a Monster energy drink. It is quite simple actually.
    Jan 30, 2013. 01:00 AM | Likes Like |Link to Comment
  • Monster: Current Affairs  [View article]
    "Capital Ladder Advisory Group agrees with everything the CEO has outlined to explain the ingredients in a Monster Energy drink as well as the comparisons offered to a cup of coffee. However, and here lies our problem with the CEO's explanation; in what world are teenagers drinking coffee in the amounts similar to the consumption rates of teenagers drinking Monster Energy or any energy drinks for that matter? The question we propose to the CEO is the underlying root of the problem. He's comparing coffee, which is consumed less by teenagers and adolescents than most any other beverage on the market except alcohol product, to energy drinks. There is no way that this should be the comparable product metric. If this is the defense the company has to offer, I'm of the opinion it is not only a baseless comparison but could prove to be highly irresponsible or even negligent by the company in the future."

    Apparently, this world:

    “According to a study done in 2011 by the firm NPD, 10% of all visits to gourmet coffee shops were by consumers under 18 years of age. Last year, that number was 13%. And, not only are more teens starting to drink coffee, research is showing that they're also likely to be life-long coffee drinkers. In 2002, 24% of 18-24 year olds drank coffee. By 2010, that number was at 37%.”

    So I’ll give you that yes, teenage consumption energy drink is still much higher (roughly 1/3 of all teenagers drink energy drinks). But there is still a substantial number of teenagers drinking coffee. So the point that has to be made is that the comparison ISN’T BASELESS. Furthermore, any litigation toward energy drinks would present a case of double-standard if coffee wasn’t included in that same discussion. As long as a teenager can just as easily buy a 16-oz coffee from Starbucks (330 mg caffeine) as they can a 16-oz Monster (160 mg caffeine), the case, is baseless, not the comparison.
    Jan 28, 2013. 02:50 PM | Likes Like |Link to Comment
  • Western Union's Fair Value Is At $21, Even In A No-Growth Scenario  [View article]
    One of the interesting aspects of WU's competitive moat is that their customer-base is primarily made up of third-world immigrants sending money back to their families/friends in their home countries. These families are predominantly un-banked and therefore need the money in cash. Technology won't have the chance to disrupt WU's business until these people set up bank accounts. Even then, WU has anticipated this and have made inroads in their own online/application development.
    Jan 28, 2013. 06:00 AM | Likes Like |Link to Comment
  • Monster Beverage (MNST -4.7%) slips lower on persisting concerns over the impact of energy drinks. Three members of Congress have sent letters to companies in the industry requesting more information on their products and advertising claims, according to the WSJ. A rumor is also circulating around that the company could be Einhorned.  [View news story]
    Concerns are definitely overblown. Energy drinks have existed for decades now with much of the same ingredient profiles. Take Japan's Lipovitan for example, which has been in existence since 1962. People try to demonize energy drinks for their caffeine amounts, but most energy drinks have less caffeine per ounce than your typical Starbucks espresso. Hell, there's even more taurine in baby formula than there is in a Monster. Given Monster's leading market share, their shareholder friendly stock repurchases, and their push into international markets, I see a much higher share price in the next 3-5 years. In fact, I'm hoping a panic-induced sell off continues so I can continue to load up.
    Jan 19, 2013. 09:06 PM | Likes Like |Link to Comment
  • Time To Sell Sprint And Buy Softbank  [View article]
    Ok, one more for you guys...I just noticed that there's also SFTBF. Is this a sponsored ADR by Softbank?
    Dec 28, 2012. 04:38 AM | Likes Like |Link to Comment
  • Time To Sell Sprint And Buy Softbank  [View article]
    Thanks for the information guys; this clears up a lot of confusion I've had with these unsponsored ADRs in the past. I appreciate the help!
    Dec 27, 2012. 03:37 AM | Likes Like |Link to Comment
  • Time To Sell Sprint And Buy Softbank  [View article]
    Hey Thomas, great article on Softbank! I just have a question I was hoping you could help me with: what's the difference between the ADR and the Tokyo listed stock (besides the technical definition of an ADR)? The reason I ask is that the Softbank investors site only lists the Tokyo stock and makes no mention of the ADR and I've had trouble finding out when the ADR was even listed.

    Thanks for your time and merry Christmas!
    Dec 26, 2012. 02:14 AM | Likes Like |Link to Comment
  • Get Paid To Buy Microsoft At Bargain Levels  [View article]
    Great post! Quick question: do shares ever get put to your account before expiration or does it only occur after?

    Also, was just curious as to formula you used to calculate annual returns. I got 24.98% for the Dec 12 puts.

    Oct 25, 2012. 11:04 PM | Likes Like |Link to Comment