CAREFul Investor

Cal-Maine Foods: Buy This Golden Egg

Question:

FCF seems to flucuate greatly. Will the company generate a cash build of close to $100mm this year (giving it close to $200mm next year or $8+ per share) OR will they have to replenish their hen supply this year (every two years) such that there will be no cash build in 2009/10?

What has the historical p/e muliple been for the company -- earnings seem highly cyclical.

Fredrick’s of Hollywood and Movie Start Inc.: Reverse Merger Mania

Sounds like you have been speaking with the deal's bankers too much. Why would you recommend investors to purchase common of the acquiring shell when the post-deal company will be majority owned by a preferred? Your light-hearted caveat emptor on this issue

"I do not include the preferred stock dividend because I assume conversion to common stock (this will not happen, but I must avoid double counting the cost of that preferred stock and I count it as diluted common stock)."

Seems naive at best.

What exactly is the dividend rate? What is the preference? Is there a reason why you don't mention that Frederick's has had some serious problems in the past (Chap. 11) and why it isn't considering it's own IPO?

Did you factor increased public company costs in your analysis? Sarbox, accounting, legal, reporting, etc.? It seems like the 5% g&a savigns you reference can be quickly sopped up here.

A 32 P/E, even pro-forma'd for a 16 p/e when speciality retailers are currently trading at 7x trailing EBITDA (SHOO, KCP, CHRS, etc.) seems really expensive.