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"Risk comes from not knowing what you're doing" Warren Buffett I look and sift the world for such misplaced bets. When I occasionally find one, I first exploit it for profit. Then, I write about it for anyone else interested in such ideas. Twitter: @unemon1 Scribd:... More
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  • Why A Licensing Accnouncement Could Be A Catalyst For A 100% Rise In PPHM Shares:

    Disclosure: I am long PPHM.

    Additional disclosure: shares at $1.68 average

    Tags: PPHM
    Feb 20 10:20 AM | Link | Comment!
  • Mechel OAO Only Needs Marginal Improvements In The Market Prices Of Its Products … To Survive!

    But it needs them in the near future!

    My view on MTL:

    If nothing Changes … BK is what's next! If situation improves: huge potential 10x!

    What should you take from the table?

    1. Gross Margins are at around 30%.
    2. Total selling Distribution and operating expenses (net of Provisions) are about $550m
    3. Other Income and Expenses are approx. $200m (mainly Interest expenses. I ignore FX*)
    1. Mechel needs to generate at least $750m Operating Profits per quarter in order to sustain its business.

    How could it be done?

    1. Improve the Gross Margins (Cuts on Total selling and expenses already done).

    At current Revenue Levels, Mechel would need to improve its gross margins by approx. 508bp to 35.90% (from the 30.82% achieved in 2013Q3)

    Due to fix costs … sensibly improving Gross Margins at current Revenue/Quantities level will be difficult for Mechel. The positive news is that Mechel has already implemented Costs Cutting strategies aimed at improving the profitability (such as Gross Margins). If commodities prices were to rebound Mechel Gross Margins are expected to expand quickly and reach higher levels than those booked during the 2009-2011 rebound!

    1. Increase Volumes (on a quantity basis) and maintain the same Cost Structure (i.e. 30.82% Gross Profit Margins)

    1. Hope in a recovery of the Commodities and Mechel's products prices!

    .* Assumption: Input Prices (i.e. Production Costs) increase at a 55% of the rate of Sales Price development.

    Mechel OAO … to survive would need a 8% increase in the price of its products.

    However, Prices and Volumes are both in a dynamic relationship. During Boom and Bust in the Commodity industry they seem to be positively correlated.

    Under the same assumptions we had a few minutes ago … let's see how Mechel's EBIT* would behave if made dependent on % increase in Sales Volumes and % Increase in price. (Gross Margin are also assume to be dynamic … governed by the relationship presented under 2.).

    At this point … MTL common shares are no more than an option. I am Long!

    Disclosure: I am long MTL.

    Feb 19 11:44 AM | Link | Comment!
  • Some Of The Many Reasons Why I Am Long ... YGE

    Disclosure: I am long YGE.

    Tags: YGE, CSIQ
    Feb 18 8:32 PM | Link | Comment!
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