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  • Herbalife At Risk: The FTC Can't Ignore Demonstrable Evidence [View article]
    Without taking sides on the argument, this article is an opinion piece posted on an analysis site. Usually SA merits primarily fact-based analysis, whereas it is noteworthy that the headline cites "Demonstrable Evidence" but in the body and conclusion, the author states they "believe" there is such evidence. None was cited. Furthermore, the primary reference for the article is a prior article by the same author using similar opinion-based "analysis." Numerous logical gaffes can be cited in the article: e.g., does anybody accept the premise that Carl Icahn likely did not bother with due diligence on this investment? The basis for this assertion is that he allegedly cited the ticker symbol incorrectly in an interview.

    This op-ed seems more suitable for CNBC infotainment purposes than for thoughtful evaluation on SA. Just saying.
    Mar 13, 2014. 10:16 AM | 7 Likes Like |Link to Comment
  • Bitcoin: The Future Of An Illusion [View article]
    A key difference between the dollar and a Bitcoin is that the dollar is backed explicitly by the total combined economic wherewithal of approximately 400 million US citizens. Failure of the dollar requires their collective failure to ensure its survival. It may be some particularly ugly sausage-making, process wise, to observe how the value of the dollar is kept in check, but so far, so good.

    With Bitcoin, there is no such group joint & several backing, but rather the price merely reflects the number of USD's (ironic, huh?) the last pair of Bitcoin buyers/sellers were willing to transact at.

    Which, if you think about it, makes Bitcoin seem not like a currency, but more like a share of stock. A stock with a few peculiarities, one should note: i.e., there is a very limited float, very difficult impediments to trade, a lot of hype, no recurring earnings value, and since it is intangible, no tangible value, no reporting or transparency requirements, no insurance requirements, and so on. In other words, virtually all penny stocks on the pink sheets have better qualities than a "share" of Bitcoin.

    So who would want a share of Bitcoin? What service can it provide? Arguably, it's primary potential uses may be to facilitate the Bitcoin owner's ability to trade: i) for other goods and services in an opaque way so as to avoid sales/use or income taxes (albeit illegally doing so), and/or ii) in a more opaque way (vis a vis law enforcement authorities) in goods and services that are themselves illegal. Otherwise, it's just the latest "get rich quick and try to get out quick" scam.

    If I'm right, what will bring it down is not the envy of old-schoolers hanging on to the dollar ( guns and bibles) despite the overwhelming superiority of the Bitcoin currency exchange system, but rather the likelihood that regulatory authorities will allow it to exist so long as it starts to play by the rules: i.e., report gains/losses and all those things that must happen when people buy sell other stocks, avoid using it for nefarious purposes, and so on. If Bitcoin resists, governments will eventually shut it down just as they've done with rogue banks and companies. If it complies, it will quickly become, investment wise and otherwise, about as sexy as Myspace.
    Dec 2, 2013. 04:02 PM | Likes Like |Link to Comment
  • Why We're Still Fans Of Google [View article]
    Am I missing something here, or did the authors insert the wrong chart corresponding to their Margin of Safety Analysis?

    Text (copied below) has share value range of 823-1301, while the bell curve shown in the article depicts values of $125-$231.

    Our discounted cash flow process values each firm on the basis of the present value of all future free cash flows. Although we estimate the firm's fair value at about $1,062 per share, every company has a range of probable fair values that's created by the uncertainty of key valuation drivers (like future revenue or earnings, for example). After all, if the future was known with certainty, we wouldn't see much volatility in the markets as stocks would trade precisely at their known fair values. Our ValueRisk™ rating sets the margin of safety or the fair value range we assign to each stock. In the graph below, we show this probable range of fair values for Google. We think the firm is attractive below $823 per share (the green line), but quite expensive above $1301 per share (the red line). The prices that fall along the yellow line, which includes our fair value estimate, represent a reasonable valuation for the firm, in our opinion.
    Oct 1, 2013. 09:35 AM | Likes Like |Link to Comment
  • BlackBerry: The Absolute Coolest Brand In South Africa [View article]
    Two comments tangentially supporting your article, in the first case, and your conclusion, in the second. Here goes:

    First, "Searching For Sugarman" is/was a great movie, and I've even downloaded some of Sixto's music which is like vacationing in the 70s. Awesome parallel you draw here to our sometimes somewhat inward-looking view at the investment world, while giving short shrift to what matters outside the CONUS.

    Second, on Saturday it was my wedding anniversary, so when my wife asked if I'd accompany her to a mall (wow, they still have those?) to exchange a dress, it was an offer I couldn't refuse, if you know what I mean. While she did her thing, I wandered the mall not to look at the things, but to see who's selling what. Actually a surprising number of newer names with mall address these days. Anyway, I happened to walk past the Apple store, and this in a tony upscale mall in Dallas on a Saturday morning, and it was anything but stuffed with customers. Not empty, but certainly not getting the kind of buzz as the Organic Cosmetics store was.

    I bought my share (and then some) of Apple products the last several years and owned a lot of Apple stock, which I sold off when they quit hinting about the next blockbuster product in the pipeline and the "mother of all backlogs" for existing product. I presume Apple will be around and healthy decades on, just as MSFT has done, but I think we've seen the worst of the damage it is going to cause to BBBY, Nokia, Samsung, and others. So if these contenders are still on their feet here and actually thriving elsewhere, I think your thesis is supported.
    Jun 3, 2013. 11:08 AM | 6 Likes Like |Link to Comment
  • How Inflation Could Happen In The U.S. [View article]
    By the way, the "unfunded liabilities.....stroke of a pen" conclusion is spot on.

    I have long reasoned that we have agreed to enter into a loan to ourself, in order to purchase something from ourselves that we are now realizing we will not cannot afford. The prospect of driving ourself insolvent to deliver on that contract is far less likely than our renegotiating the contract.

    Rather than one bold stroke, I anticipate the medicare funding gap will be alleviated by the sum of many little nips and tucks.
    Feb 24, 2013. 04:11 AM | Likes Like |Link to Comment
  • How Inflation Could Happen In The U.S. [View article]
    Excellent analysis, thank you.

    Followup question I would appreciate your view on, is the concern I have recently heard voiced that there is a global race by many countries to devalue currencies relative to other currencies in order to spur domestic exports, and this will lead to inflation.

    What is your assessment of that hypothesis?

    Side note, I find SA appealing because of the abundance of thoughtful and fact- and analysis-based articles, such as this yours, and enjoy and often learn from the intellectual back and forth demonstrated in many of the above comments. However, I suppose it is only human, though nevertheless somewhat disappointing, that certain commenters find the need to make personal attacks should an author come to conclusions that conflict with the commenter's beliefs. Ironically, those ad hominum retorts are usually devoid of comparably illuminating insights, and instead rather heavy on unsubstantiated dogma.
    Feb 24, 2013. 04:04 AM | 3 Likes Like |Link to Comment
  • How The Herbalife Short Squeeze Would Work [View article]
    So, lots of opinions about HLF: good company or bad, Ackmann: good guy or bad, and so on. Not that any it really matters regarding the investment thesis, but perhaps its fun to argue and try to convert each other to our own compelling views. Not that this actually happens.

    Then there is the question of what an investor should do now. I think, with regard to HLF, one has to grant the following premises:

    i) Ackmann, Loeb, Icahn, etc., have strong interests in HLF at least for the short-term

    ii) Their long/short interest is not likely to be as a result of, or meaningfully impacted by, near-term fundamental performance of the company

    iii) we do not KNOW what any of these parties will actually decide to do. This is the point that convinced me to get out of the stock.

    I believe Icahn and Loeb intend to make money and would love to do it at Ackmann's expense. I believe conversely that Ackmann wants to stay in to zero, and make ungodly amounts of money, and be able to say "I told you so," and consider himself smarter than Icahn.

    All this being said, they don't know, nor care, that I exist. They don't care whether I make or lose money on HLF. It won't factor into their thinking at all. As a matter of fact, I have no true idea of what their gameplan is, or might become.

    I cannot say for certain that Icahn hasn't already bailed on his long position, or might do so 5 minutes from now. If he did, that news would hit the street like a rock, and hopes for a short squeeze would grow very thin very fast.

    Nor do I have any idea about whether the SEC or any other government body will make any adverse announcement about HLF or other MLM's, that might stir the pot in ways I can't anticipate.

    All of these unknowns generate extraordinary risks that aren't worth sinking your money into until the clouds clear. Unfortunately for HLF, seems like each time the sky clears along comes the next tempest, and we go through all of this once again.

    I think the only long term solution is to take the company private, which if the stock price diminishes but the operating cash flow holds up, becomes increasingly feasible.

    But I'm still not betting on it.
    Jan 31, 2013. 12:46 PM | Likes Like |Link to Comment
  • How The Herbalife Short Squeeze Would Work [View article]
    I bailed on this stock right around my basis of mid-40s. I'd enjoyed its runup to ~70 and then watched it get repeatedly pummeled by one allegation after another. Ackmann took its knees out, then - and I thought I'd never say this - Icahn came to the rescue and, at least for me personally, gave me an exit point to get out "whole."

    What seems missing in all of the banter above is that i) this stock isn't trading on fundamentals, so it is not worth arguing how much the stock price should be (i.e. zero or maybe $60), ii) none of us know when Ackmann or Icahn will throw in the towel and our thesis will evaporate, and iii) this stock price is only as good as the latest news or rumor.

    For all those reasons, I wish it good luck, and I'm sleeping better at night knowing I'm only a spectator.
    Jan 30, 2013. 03:01 PM | 5 Likes Like |Link to Comment
  • Is Apple Really A 'Buy'? [View article]
    Your point is valid, though one has to remember that Apple's growth has tended to be carried on new/additional products it brings out, which then increase the size of its overall market.

    First it was the MP3 market, into which they brought the iPod. The market actually expanded as a result, and they captured a certain share that eventually maxed out and presumably quit growing.

    But Apple didn't.

    They brought out the iPhone, which is repeating the same cycle as the iPod did, and will certainly reach a point of growing more slowly, if it hasn't already.

    But then the iPad is still relatively in this cycle, so....

    If one takes a snapshot of Apple's product mix and assumes it doesn't change/grow, then the company's growth will certainly be limited to the sum of the market sizes for its products.

    But over the past decade they have tended to have new products in the pipeline, and so their total market size may jump again, should they bring out iTV or other rumored products. And this doesn't include the growing impacts of the recurring-revenue service-side of their business, which one would have great difficulty seeing as approaching maturity.

    So your point is probably accurate in theory, and if no new products/services emerge, will eventually become reality. Apple longs are betting the company, based on its track record, will innovate new products and services, and avoid this for the foreseeable future.
    Jan 14, 2013. 10:05 AM | Likes Like |Link to Comment
  • Is Apple Really A 'Buy'? [View article]
    This is not an investment analysis, per se.

    First, the "law of large numbers" is actually not a law, scientific or otherwise. Suggesting it is, is a false premise. Therefore, your first point is merely personal conjecture.

    Your second point is more or less that they're somehow uniquely in a tough business. Of course, you don't provide a basis for what makes this industry uniquely difficult.

    Your point 3 is that many large previously successful firms eventually peaked then lost their value. As a point of fact, historically, virtually all of them have. But this has no bearing on any successful company at any random point in time.

    Ironically, your dismissive comment about Cramer - of whom I'm neither a fan nor detractor - suggests his investment analysis is simplistically contrarian. You don't give him credit for the load of fundamental analysis he does to back his recommendations -- and I would argue that your article lacks comparable due diligence.

    SeekingAlpha tends to be a quantitatively oriented site where analysis, rather than opinion, is the measure of merit. By that standard, your article is uncompelling.

    For disclosure purposes, I continue to be long Apple, though I sold down at 550 and at 650 late last year.
    Jan 13, 2013. 03:50 PM | 14 Likes Like |Link to Comment
  • Will Herbalife Battle Become A 2013 Trend? [View article]
    I struggle with the basic question as to why MLM model should be inherently suspicious.

    In well-organized, mature markets, manufacturer to wholesaler to retailer to consumer has proven effective, notwithstanding the presence and costs of the "middlemen." Lately, we've seen more examples of wholesaler serving also as retailer (ala Amazon), and everybody wins by removing one of the middlemen. Everybody but that middleman, naturally (e.g., Circuit City, Best Buy, etc.). Setting aside the complexity of compensation programs, I have viewed HLF distribution as more or less having achieved the same efficient model (i.e., one, rather than two, layers of distributors) by selling its products to consumer via agents who get their product directly from the manufacturer. The main downside, it has appeared to me, has been the lack of retail visibility/availability of the product line.

    Conversely, in less mature foreign markets, the agency distribution model seems appropriate and is much more commonplace, as there simply aren't the plethora of online or bigbox options available to buyer or seller, and people like to buy products from locals whom they trust.

    As such, I've deemed the whole MLM issue as a "not invented here" red herring, akin to our revulsion for eating certain food types simply because we haven't been raised on them.

    Although it's a tough call to make, I've chosen to stick with HLF stock despite damage done by the cannons of notorious hedge fund shortsellers. My investment premise is based on two premises: (i) the company and its business model are legitimate, and (ii) the board, CEO, and executive team will continue to perform in as investor-friendly of a manner as they have over past several years.

    Accordingly, I expect there will be some interesting and spirited discussions in the HLF boardroom, and would be surprised if there is anything less than a concerted response up to, and potentially including, serious actions toward taking the company private.

    Anyway, I suspect we'll get a lot more clarity over the next 90-180 days, and that's what I'm in for.
    Dec 26, 2012. 12:22 PM | 1 Like Like |Link to Comment
  • Buy Gold Now Before The Coming Rally [View article]
    With all due respect, this is pretty thin on analysis and thick on hope and conjecture.

    I especially note the way your hypothesis of higher gold prices ahead is validated by quoting - "Peter Schiff, one of the most famous gold proponents....".
    Oct 26, 2012. 05:28 PM | 4 Likes Like |Link to Comment
  • 3 Signs Apple Is Turning: A Rebuttal [View article]
    I remember reading the original article and thinking similarly that the points made seemed like illogical conclusions based on the data or hypotheses presented. I give that author credit for trying, but I think your counter arguments are stronger, simpler, and more supported by the data.

    You mentioned this was your first SA post. Congrats, and come again. JT Fisher
    Sep 24, 2012. 09:03 PM | Likes Like |Link to Comment
  • Herbalife Information Disputes Pyramid Allegations [View article]
    Excellent and helpful analysis. Thank you.

    My concern with HLF has related primarily to its lack of retail presence. I buy the types of sports nutrition products they sell, but of course have to do so online since I don't personally know a distributor.

    Both as a consumer and as an HLF investor, I'd love to see these products on the store shelves where I shop and especially in bike shops and so on, and feel like there's growth opportunity that's being missed by forfeiting the retail channel to competitors who participate there.

    Would enjoy your thoughts on this aspect of company's distribution model choices.
    Sep 13, 2012. 02:54 PM | Likes Like |Link to Comment
  • 5 Ways You Can Excel At Picking Stocks [View article]
    Your approach makes sense....basically, discipline and hard work should pay off. Where it seems unwieldy for most people, would be to keep any degree of true, up to date, awareness about a short list of 100 or so stocks.

    I suggest a much more limited list unless someone is doing this full time. And maybe even then. Being full time employed, there is no way I could meaningfully watch 100 or so stocks. Instead, I watch perhaps a dozen and hold shares in maybe half at any one time.

    Overall, I prefer to invest in fewer than 10 companies at any time, switch in and out only when the thesis no longer works (I've held most of my companies for 1-3 years), and rebalance holdings as conditions merit (perhaps every 60-90 days). This approach has beat the market with very low fees and churn, and I'm not glued to the screen in my off hours. Typically, 2/3 of my holdings substantailly outperform the market and 1/3 can be viewed as either disappointments, lessons learned, or theses that haven't paid off yet, but still might.

    Altogether, I tend to do better than if I'd just bought an index fund. Perhaps others would find it reassuring to hear that they can do well for themselves with a narrow portfolio focus that requires little babysitting and minimal trading activity.

    For what it's worth, SeekingAlpha is my number one tool for monitoring the market and my companies of interest. Being alerted to high quality analysis (such as yours) on my investment interests is priceless. If I could only use one tool for my investment analyses, it would be SA, hands down.

    I commend your approach of doing the homework. Good investment returns demand it. And the math of outperforming the market while having advisor fees skimmed off the top seems too improbable.

    As a final note, a disciplined investment approach relieves investors of trading mentality, which is where perhaps individuals may be legitimately disadvantaged. Occasionally I tune to CNBC to hear what Cramer and others are saying is supposed to be the hot stock of the day or the week, and wonder how well listeners are doing by chasing in and out of those. I've seen analysis that suggests if you trade these recommendations, you're generally underwater within 2 weeks, because it's all about momentum rather than fundamentals, and the street had that info before it shared it with you.
    Sep 3, 2012. 11:24 AM | 2 Likes Like |Link to Comment