The famed value investor Ben Graham used to regularly be able to dig up what he referred to as "net net" investments - companies whose current assets (adjusted by a discount factor) less their total liabilities exceeded their market caps and therefore had potential for significant stock price appreciation.
Motley Fool describes net nets like this:
http://www.fool.com/investing/small-cap/2007/03/30/net-nets-a-classic-special-situation.aspx
There is usually some sort of reason that a company's stock is trading so cheaply - like huge debt or an obsolete product, etc. With the dissemination of information so ultra efficient today, there are not a lot of these types of investments around today.
One that I have come across recently is Nautilus Inc. (ticker: NLS), maker of all manner of gym equipment and owner of Schwinn bikes. It does not fit the strict definition as outlined by Motley Fool. However, its current assets less total liabilities exceeds the current market cap by almost 50%. Essentially what the market is saying is that NLS's inventory and/or receivables are worth a lot less than what's noted on the balance sheet. That is clearly possible, but it could be worth looking at NLS as a Long position, and potentially a profitable investment if you can determine that the market is undervaluing the inventory and/or accounts receivable.
I am not putting NLS on the interest list because more homework needs to be done on the viability of its assets. But I wanted to demonstrate the concept of a (near) net net and ask you whether you know of any others worth looking into? There are tons of opportunities in the micro-cap companies for individual (retail) investors out there today.
Another name that I cannot put on the Short Interest List until someone confirms whether individuals can borrow it (a couple of months one could not) is Under Armour Inc. (ticker: UA). It had run up from its lows recently and looks expensive. At year end, there was $138 million in purchase commitments listed in the notes to the 10-k that was not there last year and amounts to 76% of total inventory on the balance sheet. The Company shed no light on it. At the same time, the Company faces a tough rollout of footwear and the management seems to have lost a bit of its well known confidence in the last couple of weeks. Let me know if this is shortable at your broker (online or otherwise).
Finally, another Short Interest List candidate, that I know has been tough to short either at work or as an individual is Green Mountain Coffee Roasters Inc. (ticker: GMCR). It is valued like it is going to the moon and it has been noted in outside Wall Street research that it changed its revenue recognition policy in the last 10-K filed with the SEC to suggest that it is booking some revenue on shipment now, rather than just delivery. Wall Street Analysts do not really know if this change added to the Company's positive 1Q09 surprise, but management is not shedding any light on things. Again, if you are able to short it in your personal account, let me know, and I would add it to the Short Interest List. From a professional standpoint, there are no shares available for my company to borrow (and then short sell).
Happy hunting!
-2outof4
Thursday, March 26, 2009
Wednesday, March 25, 2009
Does Mr. Geithner Read 2outof4?
There is not much detail here, but doesn't it sound as though Mr. Geithner is reading 2outof4?:
http://online.wsj.com/article/SB123799575291939189.html
"Resolution Authority" sounds on the surface like winding down these unsavory institutions with the least burden on taxpayers and unsuspecting customers, rather than propping up these institutions with pass throughs straight from the taxpayers.
Maybe Mr. Geithner does not like being called Timmy.
-2outof4
http://online.wsj.com/article/SB123799575291939189.html
"Resolution Authority" sounds on the surface like winding down these unsavory institutions with the least burden on taxpayers and unsuspecting customers, rather than propping up these institutions with pass throughs straight from the taxpayers.
Maybe Mr. Geithner does not like being called Timmy.
-2outof4
Morning Sunshine
After battling with a number of glum Post drafts last night and then waking up to no power this morning, this made me smile when I finally made it into work:
http://www.ibtimes.com/articles/20090325/fedex-threatens-to-cancel-boeing-jet-orders-report.htm
I've heard plenty of negative anecdotes re Mr. Smith's formative years, but I cannot disagree with Barron's assessment over the weekend that he is a top 30 Global CEO.
I still have not heard a clear explanation from ANYONE on how the Card Check legislation benefits the laborer.
-2outof4
http://www.ibtimes.com/articles/20090325/fedex-threatens-to-cancel-boeing-jet-orders-report.htm
I've heard plenty of negative anecdotes re Mr. Smith's formative years, but I cannot disagree with Barron's assessment over the weekend that he is a top 30 Global CEO.
I still have not heard a clear explanation from ANYONE on how the Card Check legislation benefits the laborer.
-2outof4
Credit Question
This is Treasury Secretary, Timothy Geithner's, plan to reestablish the flow of credit to the American consumer:
http://online.wsj.com/article/SB123776536222709061.html
It is written in plain English and not super long.
Basically, he says that he wants to bring mortgage rates down and get consumer and small business lending going again.
My thoughts are a) aren't the "near historic" low rates what got us where we are today? b) I hope the securities backed by SBA loans bought by the Fed were priced correctly (the SBA has proven incompetent at funding legitimate businesses in the past) c) we may have seen a rise in refi's this month, but I know two people, a coworker and a coworker's friend who refied just because it made sense, not because it was saving them from financial distress d) I think the securitization number was so high because Timmy gave a signal that at least in this program he would not completely screw private investors (b/c he needed them), so of course there is a market for AAA rated debt paper e) I don't see how the Public-Private Investment program will work for old assets because banks still will not want to sell for the prices that the PPIP should be willing to pay f) is credit really constrained to working families and businesses?
The last point is what I am most interested in. I know some of you own small businesses. Has anyone out there had his or her personal or small business access to credit lessened in the last several months? This is similar to my question regarding foreclosures in mature neighborhoods. With the credit question, I do think I will receive some "yes" responses, but I believe on a much lower scale than the pols and media would have us think.
All Tim needed to say to get securitizations going again (and loosen up credit, which is what all the back patting in DC seems to be about) was to incentivize, temporarily, investors to take the risk they were afraid to take. It is a fact that securitization markets have been closed since Fall of 2007. But if some of the same private investors that Timmy brags about in this op ed were given a tax break on gains from securitization for X amount of time, I am sure they would have come out of the woodwork sooner to buy AAA paper without the Fed needing to make any loans (take any risk itself). Private investment capital has and is afraid of getting burned by government's bumbling - see the clean energy industry - and that needs to change.
-2outof4
http://online.wsj.com/article/SB123776536222709061.html
It is written in plain English and not super long.
Basically, he says that he wants to bring mortgage rates down and get consumer and small business lending going again.
My thoughts are a) aren't the "near historic" low rates what got us where we are today? b) I hope the securities backed by SBA loans bought by the Fed were priced correctly (the SBA has proven incompetent at funding legitimate businesses in the past) c) we may have seen a rise in refi's this month, but I know two people, a coworker and a coworker's friend who refied just because it made sense, not because it was saving them from financial distress d) I think the securitization number was so high because Timmy gave a signal that at least in this program he would not completely screw private investors (b/c he needed them), so of course there is a market for AAA rated debt paper e) I don't see how the Public-Private Investment program will work for old assets because banks still will not want to sell for the prices that the PPIP should be willing to pay f) is credit really constrained to working families and businesses?
The last point is what I am most interested in. I know some of you own small businesses. Has anyone out there had his or her personal or small business access to credit lessened in the last several months? This is similar to my question regarding foreclosures in mature neighborhoods. With the credit question, I do think I will receive some "yes" responses, but I believe on a much lower scale than the pols and media would have us think.
All Tim needed to say to get securitizations going again (and loosen up credit, which is what all the back patting in DC seems to be about) was to incentivize, temporarily, investors to take the risk they were afraid to take. It is a fact that securitization markets have been closed since Fall of 2007. But if some of the same private investors that Timmy brags about in this op ed were given a tax break on gains from securitization for X amount of time, I am sure they would have come out of the woodwork sooner to buy AAA paper without the Fed needing to make any loans (take any risk itself). Private investment capital has and is afraid of getting burned by government's bumbling - see the clean energy industry - and that needs to change.
-2outof4
Tuesday, March 24, 2009
February Skepticism Returns
That deep skepticism I felt in February over the recovery bill, TARP, TALF, et al. has wooshed back with a vengeance this week.
Not that this is a surprise to me, but it seems like too many powerful interests have their hands in the cookie jar - the cookie jar that you and I pay into and will be paying into a lot more in the future.
The debacle with AIG and with what seems like taxpayers making AIG's counterparties (read Goldman Sachs and the like) whole on its varied Credit Default Swaps (CDS) is an outrage.
Meanwhile, that cheek clencher is being obfuscated by Barney and the blowhards dressing down AIG's CEO, Edward Liddy (a former Board member of Goldman by the way), over $165 million in retention bonuses.
Bare in mind that these bonuses were being contractually paid to people like this: http://www.nytimes.com/2009/03/25/opinion/25desantis.html?_r=1 The witch hunt is a complete joke.
I was criticized earlier for saying the involved parties needed to be forced to the table and work something out. Even if the counterparties settled for five cents on the dollar and some went out of business, that would be fine. The government could have just facilitated the orderly workout of AIG's other assets and liabilities, and sounder entities should have taken over custody of said assets and liabilities.
The notion that an orderly end to AIG would create financial Armageddon needs explaining to me. For example, if I have a life policy at AIG and AIG is going to fail, why couldn't the associated asset and liability on AIG's balance sheet for that policy be moved to another insurer that wants it? We could go policy by policy through AIG's book protecting the taxpayer and unsuspecting customer. Granted, the consumer may not be made completely whole, but wouldn't this be better than the mound of debt and reward for bad behavior that is being created currently?
Then there is this: http://online.wsj.com/article/SB123776518094909023.html
Spending layered on top of permanent spending increases is not the way we want to go. It just becomes increasingly clearer that government cannot seem to establish targeted programs in a time of economic crisis, instead it is using the crisis to put its programs (for better or worse) into place without a way to pay for it.
On top of that, it seems like we may just skirt the usual democratic process and use something called Reconciliation to pass everything that the administration wants: http://news.yahoo.com/s/bloomberg/20090318/pl_bloomberg/ai5mx_2yfz7s_1 I cannot make this up.
I know the ranting about spending and the like gets old (I'm the one pounding my head into the desk), but at this point of potential pivotal change, we need real work done to solve these problems - not just try to appease as many political agendas as possible because in the end it just weakens our position in the globabl market place. I am still looking for the person or entity that can provide the assist!
-2outof4
Not that this is a surprise to me, but it seems like too many powerful interests have their hands in the cookie jar - the cookie jar that you and I pay into and will be paying into a lot more in the future.
The debacle with AIG and with what seems like taxpayers making AIG's counterparties (read Goldman Sachs and the like) whole on its varied Credit Default Swaps (CDS) is an outrage.
Meanwhile, that cheek clencher is being obfuscated by Barney and the blowhards dressing down AIG's CEO, Edward Liddy (a former Board member of Goldman by the way), over $165 million in retention bonuses.
Bare in mind that these bonuses were being contractually paid to people like this: http://www.nytimes.com/2009/03/25/opinion/25desantis.html?_r=1 The witch hunt is a complete joke.
I was criticized earlier for saying the involved parties needed to be forced to the table and work something out. Even if the counterparties settled for five cents on the dollar and some went out of business, that would be fine. The government could have just facilitated the orderly workout of AIG's other assets and liabilities, and sounder entities should have taken over custody of said assets and liabilities.
The notion that an orderly end to AIG would create financial Armageddon needs explaining to me. For example, if I have a life policy at AIG and AIG is going to fail, why couldn't the associated asset and liability on AIG's balance sheet for that policy be moved to another insurer that wants it? We could go policy by policy through AIG's book protecting the taxpayer and unsuspecting customer. Granted, the consumer may not be made completely whole, but wouldn't this be better than the mound of debt and reward for bad behavior that is being created currently?
Then there is this: http://online.wsj.com/article/SB123776518094909023.html
Spending layered on top of permanent spending increases is not the way we want to go. It just becomes increasingly clearer that government cannot seem to establish targeted programs in a time of economic crisis, instead it is using the crisis to put its programs (for better or worse) into place without a way to pay for it.
On top of that, it seems like we may just skirt the usual democratic process and use something called Reconciliation to pass everything that the administration wants: http://news.yahoo.com/s/bloomberg/20090318/pl_bloomberg/ai5mx_2yfz7s_1 I cannot make this up.
I know the ranting about spending and the like gets old (I'm the one pounding my head into the desk), but at this point of potential pivotal change, we need real work done to solve these problems - not just try to appease as many political agendas as possible because in the end it just weakens our position in the globabl market place. I am still looking for the person or entity that can provide the assist!
-2outof4
Sunday, March 22, 2009
Nutter Likes to Read, but Doesn't Seem Very Innovative
Back in February I proposed this solution http://2outof4.blogspot.com/2009/02/hey-mayor-nutter-likes-libraries-too.html to Philadelphia Mayor, Michael Nutter's, problem of keeping the cities' libraries open.
It turns out he blew an opportunity to innovatively save money, jobs, and libraries while not further burdening citizens and potentially moving more residents out to the 'burbs:
http://online.wsj.com/article/SB123747958958985749.html
Is there any thinking outside the box in big government?
-2outof4
It turns out he blew an opportunity to innovatively save money, jobs, and libraries while not further burdening citizens and potentially moving more residents out to the 'burbs:
http://online.wsj.com/article/SB123747958958985749.html
Is there any thinking outside the box in big government?
-2outof4
New Book Recommendation
The following book is a must read in my opinion, and I urge you all to sit down with it.
'Hot, Flat and Crowded' by Thomas L. Friedman is a book about the lack of a global sustainable energy system, the impediments and possibilities for developing one, the economic benefits of doing so, and how America can lead a revolution of intelligent design and revolution - once again asserting itself as a technological and manufacturing global leader. More than that though, it is a vision for our children's' future - which at its root exposes the inadequacy of our government's policy and action status quo.
From the book: "We are living at a hinge of history that is going to determine just which way this Energy-Climate Era will swing. If we are going to manage what is already unavoidable and avoid what will be truly unmanageable, we need to make sure everything we do from here on helps to build a real, sustainable, scalable solution. The clear and easy paths are closed. All that matters now is how we walk through the fire."
http://www.abebooks.com/servlet/BookDetailsPL?bi=1290189772&searchurl=an%3Dthomas%2Bfriedman%26kn%3Dflat%2Bhot%2Band%2Bcrowded%26x%3D0%26y%3D0
-2outof4
'Hot, Flat and Crowded' by Thomas L. Friedman is a book about the lack of a global sustainable energy system, the impediments and possibilities for developing one, the economic benefits of doing so, and how America can lead a revolution of intelligent design and revolution - once again asserting itself as a technological and manufacturing global leader. More than that though, it is a vision for our children's' future - which at its root exposes the inadequacy of our government's policy and action status quo.
From the book: "We are living at a hinge of history that is going to determine just which way this Energy-Climate Era will swing. If we are going to manage what is already unavoidable and avoid what will be truly unmanageable, we need to make sure everything we do from here on helps to build a real, sustainable, scalable solution. The clear and easy paths are closed. All that matters now is how we walk through the fire."
http://www.abebooks.com/servlet/BookDetailsPL?bi=1290189772&searchurl=an%3Dthomas%2Bfriedman%26kn%3Dflat%2Bhot%2Band%2Bcrowded%26x%3D0%26y%3D0
-2outof4
Friday, March 20, 2009
Tackle from the Blind Side
One of my favorite authors is Michael Lewis. Besides his great books he publishes a number of articles at places like Vanity Fair and Bloomberg News. I've been advised to read his VF article on Iceland's collapse over the weekend.
But for now, I'll give you this gem:
http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_lewis&sid=atlHxXH7FweQ
It superbly covers the misplaced blame that politicians like to assign without delving into and fixing the problems at hand. It also emphasizes something that I try and emphasize here - the correct framing of numbers as support to an argument.
Happy Friday!
-2outof4
But for now, I'll give you this gem:
http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_lewis&sid=atlHxXH7FweQ
It superbly covers the misplaced blame that politicians like to assign without delving into and fixing the problems at hand. It also emphasizes something that I try and emphasize here - the correct framing of numbers as support to an argument.
Happy Friday!
-2outof4
Technical Blog Question
Hi. You were very helpful on my last question. If I have a draft in the Edit Posts section of Blogger, how do I move it up so it becomes the most recently published post once I post it? Right now, I have had to post some old drafts that then get lost in the previously dated posts.
Thanks!
-2outof4
Thanks!
-2outof4
Optimism Around Ingenuity?
This is dated from 2/10/09, and although I do not agree with everything and have to consider the source, I love the tone and help ourselves attitude. There are a lot of great ideas as well.
Fred Smith, President and CEO of FedEx:
http://news.van.fedex.com/node/12752/print
-2outof4
Fred Smith, President and CEO of FedEx:
http://news.van.fedex.com/node/12752/print
-2outof4
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