Published: April 24, 2014
Family Dollar ("FDO") is experiencing deteriorating fundamentals due to a combination of a challenging macroeconomic backdrop for lower to middle income consumers and intense competition in the discount retailing segment.
At the macro level, weak employment and real income growth for lower and...
Published: April 16, 2014
Diamond Offshore (NYSE: DO) is an owner and operator of 41 offshore drilling rigs. Company's primary business is in providing drilling platforms to the offshore oil & gas industry, which is becoming ever growing part of the global oil production.
These platforms take up to three years to const...
Published: April 07, 2014
After Netflix's rocky 2012, it was easy for the company to improve its performance in 2013. Netflix grew after-tax profits (NOPAT) from $33 million to $148 million, and grew its NOPAT margins from 1% to just over 3%. In addition, Netflix's return on invested capital (ROIC) rose from 2% to 7%.
...
Published: April 01, 2014
I believe Lululemon Athletica is undervalued at its current price most likely due to lack of confidence in the company after several mishaps in 2013. It's been about a year since 15-20% of the company's trademark yoga pants were recalled due to the product being too sheer. The company is also sev...
Published: March 26, 2014
HealthSouth is the leader in inpatient rehabilitation, with a clear path for organic facility growth, ongoing lease de-leveraging, and favorable tailwinds from an aging population. The company trades at 8x trailing EBITDA, despite delivering consistent 5% top-line growth and 25% EBITDA margins. A...
Published: March 19, 2014
Brief:
1) AOL spun out of Time Warner four years ago and closed at $23.50 on the first day of trading.
o Since then, the company has executed superbly, making two major acquisitions, the Huffington Post, and Adap.tv, and repurchasing 25% of its shares.
o Shares peaked above $5...
Published: March 13, 2014
Capital One is a compelling investment because (i) it has attractive financial metrics, (ii) they are beginning to return capital to shareholders, (iii) it has a quality credit card and auto lending business, which is primarily driven by a strongly quantitative culture, and (iv) they are growing ...
Published: March 06, 2014
NCR is a leading provider of hardware, software, and services that allow businesses in the financial services, retail, hospitality, travel, and telecommunications industries to connect, interact, and transact with their customers. The stock has been trending downward for the past three months, of...
Published: February 28, 2014
Recommending a long investment in Kroger with a 1 year target of $47. KR represents an opportunity to invest in both stability and growth at an attractive valuation (20% discount to S&P). While the industry has grown annually at 3.2% with only one down year in 10 years (-0.1% in 2009), KR has gro...
Published: February 18, 2014
We believe shares of Hawaiian Holdings Inc. ("HA" or "Hawaiian") are grossly undervalued, reflecting a deep misunderstanding of the company's economics. In 2010, HA began investing heavily in growth, implementing a capex program to build additional capacity primarily in support of new internation...
Published: February 13, 2014
Based on my analysis, I expect LNKD to trade around $590, or at a 29% annualized return over the next 4 years, implying a 0.5x - 0.6x PEG ratio. The Company's continued use of Page views as a key metric constricts CPM. I believe the market underestimates and is overly cautious on the ramp for mob...
Published: February 07, 2014
Discovery Communications is a buy with 12 months price target of $92. DISCA offers one of the highest quality earnings mix among its peer group and the recent pullback created an opportunity. The company is a pure play cable networks company and has the highest proportion of earnings coming from ...
Published: January 31, 2014
Transocean is a deep value stock with catalysts on the horizon. The stock pushes a 6% Dividend Yield and improving Balance Sheet. Limited risk with 50% plus upside.
Over the past several weeks we have seen multiple downgrades amongst the Sell-Side into earnings on Transocean. No surprise there...
Published: January 23, 2014
Summary:
Buy J.C. Penney (JCP) current price 6.75 with expected return of 110%-120% over 12 months. Target price of $14 for 12 months.
Main Points
• Easy comps and Improved Margins will lead to Positive Momentum
• Many Near Term Catalysts
• No Liquidity Issues/ Manageable Balance Sheet/ As...
Published: January 15, 2014
Bruce Berkowitz has become one of the best-known mutual fund managers in the world. Despite struggling in 2011, his investment firm Fairholme Capital Management has been able to consistently outperform the market. Since its inception in 1999, Fairholme has produced an overall return of roughly 46...
Published: January 09, 2014
In 1982, Seth Klarman founded the Baupost Group with just $30mm. Now with current assets under management surpassing $30bn, Klarman has become one of the most successful hedge fund managers in the world. This week we take a look at some of his recent moves and how SumZero sentiment relates to tho...
Published: January 02, 2014
Quick Idea #1
Long on General Mills (GIS:US)
Contributor: Carl Aschenbrenner, Formerly at Stonebridge Capital Management, Inc.
Current Price: $49.40.
Target Price: $60.00.
Expected Return: 21.0%.
Timeframe: 2+ years.
Elevator Pitch: Healthy mix of snack foods favored by ag...
Published: January 02, 2014
DirecTV's current valuation at 6.5x EV/EBITDA and 10x forward P/E is too pessimistic considering the potential of a US Cable M&A/consolidation trend, DTV's core advantages, aggressive buybacks and continued growth in Latin America/US. There is also a valuation gap to US cable peers which I think ...
Published: December 17, 2013
Quick Idea #1
Long on Volkswagen Ag (VOW:GR)
Contributor: Nick Poling, Volsung Management.
Current Price: $186.15.
Target Price: $215.00.
Expected Return: 15.5%.
Timeframe: 2+ years.
Elevator Pitch: Best-in-class, investing at a level peers cannot match. Deserves to trade ...
Published: December 17, 2013
Investment Thesis:
In an environment with increasingly fewer undemanding valuations in the consumer space (though in itself not a reason), Foot Locker offers an interesting value proposition: A company with a relatively dominant market position in its industry (>20% market share and >3x as big ...
Published: December 12, 2013
Trading at nearly 40X EPS, the Market is extrapolating BWLD's historical growth rates far into the future. We believe the company's growth algorithm is fundamentally broken and the stock is poised for multiple compression as EPS growth decelerates.
Growth model is broken: inflection point in c...
Published: December 05, 2013
Smith & Wesson Holding Corporation (SWHC) manufactures firearms. It manufactures an array of handguns, modern sporting rifles, hunting rifles, black powder firearms, handcuffs, and firearm-related products and accessories.
Solid Brand
SWHC is an iconic brand (92% brand awareness) with a 160+ ye...
Published: November 21, 2013
I recommend initiate a long position in PIR ($21) with near-term target $22.50 (+8%) ahead of 12/13 earnings release and 9-12 month target of $28 = 17.5x CY2014 EPS (+38%) as guidance/consensus estimates rise on ongoing earnings beats and multiple re-inflation.
PIR missed 2Q13 earnings due to ...
Published: November 08, 2013
The investment idea came to my attention as it survived one of my favorite screens based on the work of Graham and Dodd in the Intelligent Investor, which looks for cheap valuation, a healthy dividend, and a strong balance sheet:
• Earnings Yield > 2.0x AAA Corporate Yield
NTM P/E = 13.6 E/...
Published: November 01, 2013
Berkshire Hathaway has been one of the most successful companies over the past 43 1/2 years. They have grown book value per share at about 20% per year with stock performance of a similar amount. Given their $286 billion market cap, growth going forward most likely will be only a few percentage p...
Published: October 30, 2013
This short piece clarifies our findings from our analysis of the recommendations submitted to SumZero.com. Various financial commentators have made misleading and confusing statements regarding our research and we would like to set the record straight.
In the most recent version of a paper ent...
Published: October 25, 2013
MercadoLibre (MELI) is a Latin-American e-commerce company which many bulls consider the "eBay of Latin America. " This perception has led to the severe overvaluation of this approximately $400 million in Revenue Company— being valued at approximately $6 billion at its current price of $135 per s...
Published: October 17, 2013
I recommend initiating a long position in Wolverine World Wide ("WWW" or the "Company") at today's price of $58.88 (10/3/13). WWW shares present an opportunity to invest in a high-growth, diversified, branded footwear company with several iconic brands (e.g. Sperry, Merrell, Keds).
The market ...
Published: October 10, 2013
Tale of the taper. Amidst a Fed-tapering, rising interest/ mortgage rate backdrop, Trulia (the "Company") also finds its growth rates tapering. Copycat risk is extremely high given the lack of a defensible, sustainable competitive advantage and a marginal competitive position as the #2 player in ...
Published: October 04, 2013
Oracle is a great company at a great price. As management continues to return their $14bn in free cash flow to shareholders in the coming years the stock should re-rate materially higher.
Thesis Key Points
•Critical technology for many of the world’s largestcompanies
•Very sticky biz / signi...
Published: September 27, 2013
Chico's FAS owns 4 brands - Chico's, Soma Intimates (SI), White House|Black Market (WHBM), and Boston Proper (BP). Having negative same store sales for 1 quarter despite 17 consecutive quarters of positive growth, CHS plummeted 22% to a low of $15.33 in late August 2013. The retailer of women app...
Published: September 13, 2013
The pending merger – and the potential for value creation – between OfficeMax (OMX) and Office Depot (ODP) is fundamentally misunderstood by the market, particularly as the investor base rotated from fundamental holders to merger arbitrageurs, likely due to the following factors:
(1) Corporate...
Published: September 06, 2013
Big things can sometimes come in small packages
Take, for example, 8th-grade Chinese golf prodigy Guan Tianlang. The 14-year-old announced his presence to the golfing world this spring by becoming the youngest-ever participant in the sport's most prestigious tournament: The Masters. And he bec...
Published: August 28, 2013
We've seen this before: an industry temporarily perceived as broken with investors fleeing the stocks en masse because of fear of regulatory changes. Remember Macondo? In 2010, there were days where there was literally no bid side in high quality driller names like Seadrill (SDRL), which subseque...
Published: August 22, 2013
The investment case for Bauer (BAU) is based on:
1. Very strong competitive position (downside protection)
2. Decent organic growth
3. Strong capital allocation
4. Leading to mid to high teens EPS growth
5. Trading at less than 1yr 10x forward earnings / free cash flow
There is no catal...
Published: August 20, 2013
SumZero recently launched a new feature on the buyside site called SZ Compensation, which is a reciprocity-based database designed to help buysiders understand personal income trends within their industry. The new database is a fully-anonymized platform (the only such feature on SumZero) allowin...
Published: August 15, 2013
I am recommending a long position in the tracking stock of Liberty Interactive (LINTA), owner of the QVC home shopping network, several niche e-commerce businesses, and a 38% equity interest in publicly-traded peer HSN, Inc. (HSNI).
QVC is a unique and high quality asset with an attractive bus...
Published: August 08, 2013
ADW Capital Partners, L.P. Seeks Company Review of Capital Allocation to Maximize
Shareholder Value:
New York, New York - 8/5/2013
Dear Members of the Board of Directors,
As a shareholder of Outerwall, Inc. (Nasdaq: OUTR) (the "Company"), we are very concerned about the Company's current ...
Published: August 01, 2013
Over the last year, Kia's stock price has decreased over 23% because of numerous operational issues. In July 2012, unionized workers at Hyundai and Kia in South Korea voted to strike, which ended in September and cost Kia ~63k units in lost output.
Compounding these events, in November 2012, K...
Published: July 18, 2013
That's the question from provocative money manager Jeff Smith, head of Starboard Value - who by the way will be presenting at the September Value Investing Congress. With a 5.7% stake, Starboard is the largest shareholder in Smithfield Foods (SFD), the world's top hog farmer and pork producer. ...
Published: July 18, 2013
Background
In January 2013, CBS announced plans to divest its outdoor division. CBS plans to sell the international outdoor business as well as IPO the domestic outdoor business after a planned REIT conversion by late 2013.
The Domestic Outdoor business is on pace to earn about $400m in EBITD...
Published: July 10, 2013
The countdown has begun to the 2nd annual Value Investing Challenge, brought to you by FactSet!
Last year’s contest was a great success with nearly 150 submissions coming in from over 120 funds across the globe. Here's a recap of last year's winner Ryan Fusaro (LionEye Capital Management) who ...
Published: July 03, 2013
SumZero member Nicholas Snyder (Union Square Research Group) offers deep, energy-related insight in this PDF which focuses on wide-spread inefficiencies in the valuation of shale assets. Using his considerable industry knowledge, Snyder offers what can be described as a how-to primer for those at...
Published: June 27, 2013
SNDK is a memory company that is in the midst of being re-rated as the industry enters a stable margin phase, due to better capex discipline from the players. While the stock has done well since the bottom, I feel it still offers a good value given its high cash balance (and greater willingness t...
Published: June 20, 2013
Thesis:
Buy VG a $627mm mkt cap provider of low, cost, high quality communications services such as voice, messaging and phone (landline and mobile) around the world over the web using VOIP to Earn a 62% Return over the next 18-24 months
Consensus’ 2014E EBITDA $133mm overlooks how much Vonag...
Published: June 13, 2013
Note from the contributor: I would like to say a special thank you to Eric Li Cheung (SumZero member at ericlc@stanfordalumni.org) for his invaluable assistance with this report.
The special committee should reject the recent take-private offer from Dole’s CEO, Murdock, of $12.00/sha...
Published: June 06, 2013
"The three most important words in any investment process are" Margin of Safety ", ie, the difference between an asset’s intrinsic value and the price at which we buy. When pessimism settles, in the economy, at a sector or concerning the performance of a particular company, it is natural for pric...
Published: May 31, 2013
At the Ira Sohn Conference earlier this month, Jonathon Jacobson of Highfields Capital Management outlined a short case against Digital Realty Trust (DLR) that was one of the best we had ever heard. Since then (and at the time of this writing), the stock has declined about 9%. DLR is heavily shor...
Published: May 24, 2013
The initial taste in people’s mouths when they hear of a Sears’s spinoff is what initially drew us to the situation. Over the last seven years, many value investors have fallen into the “SHLD” trap hoping that the market will value the assets on a “sum of the parts” / liquidation value higher tha...
Published: May 16, 2013
RT is a value play that is in the midst of a recovery/turnaround. It has a great safety net by monetizing its asset value, a strategy that management has begun to use with repeated success. RT delivers consistent cash flow yield and continues to paydown debt while still investing in new channels....