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  • Ambassadors Group - Successful Turnaround Unlikely [View article]
    New Capital, nice write up and as a long I enjoyed hearing the bear case.

    It looks to me like, Ambassadors Group has done away with the shady marketing practices. This is evidenced by the overwhelmingly positive reviews from the 2013 and 2014 travel seasons in contrast to the large number of negative reviews from the 2011 and 2012 travel seasons. It is a striking improvement and clearly detailed on Consumer Affairs website: people to People reviews. Just follow the link below and page back, it's easy to see.

    On the latest CC the VP of marketing pointed out that negative brand perception had fallen 65% from 2013 to 2014 and that positive brand perception was at an all time high since taking surveys from 2007.

    Also keep in mind that 30% of enrollment for 2014 travel season came from mediums other than direct mail. (info provided on most recent CC)

    I think you are making a very good point about enrollments. Enrollments have not stabilized. The numbers cited on the most recent CC are net enrollment down 6.8% from 18,149 to 16,849. Core Student Ambassador net enrollment down 8.4% from 14,591 to 13,138. The numbers used in your article above likely include discontinued operations. (Some investors may prefer seeing the discontinued operations included. I like to see both.)

    I like most of your points about the interim CEO. However, the new interim brings a lot of fire power and has recently purchased stock in the $3.75 to $3.78 range.

    It is worth noting that two directors left the board recently and were replaced by a representative of Bandera and the current interim CEO. Also Lisa Rapuano, of Lane 5 is now Chairman of the Board. So the activists are now in total control: majority of the board, board chair, and interim CEO.

    Thanks for a well written bear case.

    May 13, 2014. 11:08 PM | Likes Like |Link to Comment
  • The Short Case For World Wrestling Entertainment [View article]

    The right play here is to put WWE at $30 a share into the too hard category. At this price, it is neither a good short or long candidate. You've done a good job highlighting the long risk. Ironically, the reason one shouldn't short is the same reason you shouldn't go long at this price: we just don't know with certainty what WWE will look like in a couple of years.

    Let's say management gets it right this time and by 2015 the TV deal is 3X what WWE had before, the new network has 3 million subscribers, and OIBDA is $183 million. Given that execution, (as crazy as it may sound) with an outlook for network growth to 6 million subscribers (as crazy as it may sound), a short at $30 is going to get (and please forgive this) body slammed.

    Is it likely: Nope. Is it possible: yes.

    Second, there is really no telling how long the speculation will last. If you short at $30 and the stock moves to $40 with more speculation, what then: short more?

    Buffett says it best:

    “Charlie and I (Buffett) have both talked about it. We probably had a hundred ideas of things that would be good short sales. Probably 95 percent of them at least turned out to be, and I don't think we would have made a dime out of it if we had been engaged in the activity. It's too difficult. The whole thing about 'longs' is, if you know you're right, you can just keep buying, and the lower it goes, the better you like it, and you can't do that with shorts."

    Ron Capel

    Mar 17, 2014. 09:22 PM | 2 Likes Like |Link to Comment
  • Build-A-Bear: Trading At 60% Of Book Value But Still A Short [View article]
    Josh, BBW was a great short in early 2007 when it was trading at $27 but one may not have seen it looking thru the rear view mirror. Your analysis is well done, but that doesn't make BBW a good short today: past may be prologue or it may not be.

    BBW plans to close 40 to 60 stores and remodel/downsize another 50 or so stores by 2014. With a target store base of 225 to 250 stores by 2014, it means they will impact 40% of the store base with change in two years. (Remodel or sales transfer.) The most recent press release shows that the 6 new prototype stores had average q/q sales growth of 30%. So it's possible that we see BBW play out as a good Bear new co/ bad Bear legacy co.

    Before I'd short the stock, I'd love to hear how BBW will run out of money before they can accomplish the closures or remodels or how BBW's new prototypes were really propped up by ad spending that's unsustainable. In other words it's obvious the model hasn't been working for some time, but it's not obvious that the new plan won't work.

    Andreas makes a great point about a potential buyout and BML. Brad Leonard is a top value investor. By being on the board, he has a perspective and info we do not have. With a near 14% stake in BBW, BML has a strong financial incentive to see BBW succeed.

    Thanks for the write up,
    Feb 4, 2013. 10:29 AM | Likes Like |Link to Comment
  • McRae Industries: This Company Is Hard Not To Like [View article]
    Seth, nice article. My valuation analysis of McRae is similar to yours. It's hard to see how this stock doesn't reward folks long term. Also it looks like it has the three best words in investing big time: "Margin of Safety".

    To add to your article, shareholders interests are aligned with management. This is a family controlled company with the McRae family controlling 40% of the stock and 60% of the vote. McRae's run the company and are compensated very reasonably.

    The catalyst for this company will likely be in March. This is probably when McRae will learn if it has secured additional Military boot contracts. It is true that military spending is tight, however McRae has invested (as you point out) in new boot production capabilities. The new equipment allows McRae to bid on boot constructions it had not previously been able to bid on. So the upgrade opens up the possibility of more Military boot revenue streams for different boot types. It is not simply a plant update.
    Feb 16, 2012. 02:48 AM | 1 Like Like |Link to Comment