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  • America's Car-Mart: A Subprime Lender Masquerading As A Car Dealer [View article]
    Why isn't the ROE higher? It generates only low teens ROE. For a company taking that kind of credit risk, you would expect better returns. $3 earnings on $25 BV is 12% ROE. OK but not great.

    Here is what management said in 10K:

    Management believes that the ultra-low interest rate environment combined with a lack of other investment alternatives is attracting excess capital into the sub-prime automobile market and increasing competition. In an effort to combat the increased competition the Company will continue to focus on the benefits of excellent customer service and the “local” face to face offering to the market in an effort to help customers succeed.

    It didn't do too bad during the recession, so I think that puts a dent in the idea that this is a cyclical business. In fact, it looks to be the other way around, the company does poorly in the face of increased competition from the traditional car dealerships. So while I agree that this looks overvalued, it doesn't look like the kind of business that has or will blow up. So far, management has actually done a pretty good job of credit quality. Remember that the company sells these cars at 100% markup, so if it needs to repossess the car, it still has decent collateral.
    Aug 30 11:20 AM | 1 Like Like |Link to Comment
  • Update: Penn West's Internal Review [View article]
    This could be management giving themselves a reason to lower the dividend. Interesting to see if/when management steps up and buys more shares or issues themselves options. It's been a while.
    Aug 16 08:20 PM | 3 Likes Like |Link to Comment
  • RadioShack: Buying The Stock Outright Is Still A Losing Proposition. But With Downside Protection, It Is Becoming A Viable Bet [View article]
    Speaking of retailers with cash problems, do you have any opinion on JCP? The bonds have been recovering nicely this year and the stock looks ready to head back to $15. I don't want to hijack this thread, but I imagine the same people trade RSH & JCP.
    Aug 10 06:55 AM | Likes Like |Link to Comment
  • It's The End Of The Coal As We Know It.. [View instapost]
    Any way to get that coal from Wyoming or wherever to China?
    Jul 26 02:08 PM | 1 Like Like |Link to Comment
  • Blyth's Management Can't Be Trusted: Stock Drops 85%, Yet CEO Makes Millions Via ViSalus [View article]
    I wonder if it isn't just incompetence. The Jr. took over and was responsible for this deal, and he was just so desperate for a home run to show that he was a big shot that he got taken by a bunch of savvy salesmen. You have to remember, Blair and Mallen and especially Sarnicola are professionals. They are the .0001% when it comes to selling ice to Eskimos. They sandbagged the results, then reworked the deal so that they were guaranteed cash if the milestones were hit, and then hit every impossible milestone like clockwork. And the Georgens were on the hook and couldn't do much about it.
    Jul 26 10:33 AM | Likes Like |Link to Comment
  • Blyth's Management Can't Be Trusted: Stock Drops 85%, Yet CEO Makes Millions Via ViSalus [View article]
    There are some things I want to take issue with here. First, Partylite isn't worth 8x ebitda. It's a dying brand with on-going revenue and promoter erosion. I think 3-4x is more like it. Internet segment isn't worth .5 sales, may not be worth anything.

    Second, I don't think the family is really as underhanded as this article would have it. They did make money off an early investment in Visalus, but the gains from that investment have been dwarfed by the massive losses in Blyth. Second, the author writes that "The 2.5% stake [in Visalus] is worth $18.2 million" which of course is wrong. The 2.5% is worth zilch.

    The Georgens' got taken by some very slick hustlers, no doubt about it. But they lost more money here than anyone else, by far. It's not even close, and the losses in the stock vastly outstrip the $21M from the early investment in Blyth. It's not clear why the Georgens' decided to make such a catastrophic investment in Visalus, other than a genuine faith that it would turn into a mini-Herbalife, plus the fact they were already pot committed. They just got taken by some very slick grifters who "sold the dream." That's what they do, and the Georgens were just another one of their marks.
    Jul 26 09:20 AM | 1 Like Like |Link to Comment
  • Does Private Equity Deliver Alpha [View article]
    But in the example above, the cost is also the cost *to Kleiner.* It's the opportunity cost. Kleiner both pays and earns the cost. That's what makes it confusing.
    Jun 13 12:40 PM | Likes Like |Link to Comment
  • Does Private Equity Deliver Alpha [View article]
    This is just a minor point and I don't mean to pick on one person, but how can a firm "earn" a "cost of capital"? A cost is a expense, and nobody would say "earned expenses." Is the sense then "earned a higher return on capital"? The "cost of capital" language is so confusing that I get the impression that nobody really understands it, or maybe that's just me.
    Jun 13 07:34 AM | 1 Like Like |Link to Comment
  • RadioShack: The Reports Are Telling [View article]
    laterre why don't you write some articles and share your wisdom on distressed debt investing? It would be very well received and, well, I can't think of what would be in it for you, but the rest of us would benefit.
    Jun 11 11:40 AM | Likes Like |Link to Comment
  • AMD: A Great Value At $4 Per Share [View article]
    All else being equal, you want enterprise value to be lower than market value.
    Jun 1 03:18 PM | 1 Like Like |Link to Comment
  • Substantial Upside As USA Truck's Turnaround Trucks On [View article]
    So a trucking business that's lost money for the last three years straight is worth 3.5x book value? That is optimistic. By this logic, I should go out a buy some trucks and they'd immediately be worth 3.5x what I paid for them.
    May 24 11:22 AM | 2 Likes Like |Link to Comment
  • Cowen Group: A Turnaround Is Evident [View article]
    You make some interesting points but I just don't see it. Ramius performed poorly because the economy is improving? Ramius suffered huge losses during the crisis, that's why it had to do a reverse merger with Cowen. Clients will pull their money in a poor environment regardless of the performance. It sounds more like Ramius does poorly in all environments. The Cowen bank had a great quarter but the whole business still managed less than 10% ROE. Cohen said the *target* ROE is 10%, which is nuts - there is no reason an asset management firm should have that kind of lousy ROE. The cash from the convertible could be used to buy asset managers, and the incremental returns plus the tax credits could generate quite a lucrative return on that capital. But if management is targeting a 10% ROE, I don't see how the whole thing trades for more than tangible book value.
    May 13 04:54 AM | Likes Like |Link to Comment
  • Cowen Group: Incredible Upside In 2014 [View article]
    What is wrong with Ramius?

    Annual returns across all of the products:

    2012: 4%
    2013: 2%
    2014 Q1: 2%

    What's the point?
    May 11 06:01 AM | Likes Like |Link to Comment
  • Herbalife's Astonishing Response [View article]
    You make good points. America is not running out of fat people. The world is not running out of fat people.
    May 7 06:22 AM | 1 Like Like |Link to Comment
  • Herbalife's Astonishing Response [View article]
    "Moral outrage as a profit making strategy" is pretty ugly way to make your living. This is a classic shakedown: demonize, moralize and then capitalize. Pershing Square is turning into the PUSH Coalition of hedge funds.
    May 6 04:35 AM | 2 Likes Like |Link to Comment