SumZero News Archive

  • Buy Protection on JCP with CDS or Go Short the Stock

    Published: April 18, 2013


    I recommend investors buy protection on JC Penney CDS (short risk) at 15 pts upfront (~920 bps) with a target of ~21 pts upfront (~1,140 bps). For investors that can’t transact in CDS, I recommend shorting JC Penney stock with a target of $8 to $10 per share for a total return of 31%-44%.


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  • Wells Fargo TARP Warrants Are Cheap, Low-Risk Leverage

    Published: April 04, 2013

    Wells Fargo TARP warrants present a cheap way of leveraging onto Wells Fargo value being unlocked. The TARP warrants are the warrants the treasury forced Wells to sell during 2010. The TARP warrants strike price is $34.01 but their long duration (October 2018) and unique financial features presen...

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  • Style-Box Rotation on NYX Deal Triggers ICE Special Opp.

    Published: March 27, 2013

    Simple Summary:
    1. Great business – high barriers to entry, FCF machine, high margins, pricing power and economies of scale;
    2. Great timing – Since January, fundamentals and market sentiment have begun to rebound from cyclical trough. But the company's recent deal was timed at the bottom of th...

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  • GM Is Radically Improved. Stock Could Double.

    Published: March 15, 2013

    As a result of its bankruptcy and subsequent restructuring, GM has been radically transformed into a business with structurally higher margins and a fortress balance sheet. In coming years GM will benefit from a cyclical recovery in the US auto market, a strong new product cycle, growth in emergi...

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  • Spin-Off Alert: Dean Foods Stub Is A Cheap Pure-Play

    Published: March 07, 2013

    Dean Foods (DF) is spinning off the remainder of White Wave (WWAV), its soy milk division, in the next few months
    DF currently owns 86.7% of WWAV. If you subtract out the value of the WWAV business, the DF stub has an implied P/E of 7.43.

    Once the spin-off is complete, the Dean Foods milk bu...

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  • Skullcandy Turnaround Could Lead to Short-Squeeze

    Published: February 28, 2013

    Put your contrarian hats on for this one!


    Since its IPO in July 2011, SKUL’s share price has been in a determined downtrend. 2011/2012 bears were correct in their analysis of the company when they predicted margin difficulties related to increased marketing spend and con...

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  • Boring, But Beautiful: Disney Has 20%+ Upside

    Published: February 15, 2013

    Admittedly a boring idea, but I am recommending Walt Disney with potential upside of 20% over the next 12 months.

    The shares have done well, but lagged some other major media and entertainment stocks over the past six months as the company endured a period of slow earnings growth. I believe th...

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  • Yum! Deserves China Discount; Not China Premium

    Published: February 08, 2013

    The recent volatility in YUM’s stock provokes a vital question: What is the right valuation for a company that conducts 50% of its business in China, a country with little to no policy and regulatory visibility?

    Almost all analysts “front ran” the company’s earnings report on Monday, Feb 4 by ...

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  • A Hilariously Compelling Short on

    Published: February 01, 2013

    Conversation with Taz, an AMZN shareholder

    Me: Hey you look happy today, what’s up?
    Taz: Great quarter for AMZN!
    Me: Really? I thought they missed on revenues, missed on EPS, guided down both top and bottom line, bled cash flow like a wounded…
    Taz: Yeah but did you see that op...

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  • Peak Beer: Time to Short Sam Adams

    Published: January 04, 2013

    Boston Beer, also known by its core brand name Sam Adams, is riding the US craft beer wave sending its stock to an all time high this week. SAM is overvalued on every metric, absolute and relative, when compared to its peer and historical averages.

    The company’s growth is driven by its Twisted...

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  • Bank of America Is a "Lean, Mean, Profit-Making Machine"

    Published: December 20, 2012

    “Bank of America is a strong, well‐led company...I am impressed with the profit‐generating abilities of this franchise, and that they are acting aggressively to put their challenges behind them.” - Warren Buffett August 25, 2011

    Bank of America was on the brink of Bankruptcy just a few years a...

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  • Martha Stewart Living: 125% Upside Potential

    Published: December 03, 2012

    We believe Martha Stewart Living is a compelling turnaround story with a very favorable risk/reward profile. While sporting an enterprise value of just $125.0 million, Martha Stewart Living brands include “Martha Stewart,” one of the world’s premier lifestyle name plates, as well as “Emeril Lagas...

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  • This Is What Bill Ackman Sees When He Looks at JCP

    Published: November 29, 2012

    At a current share price of $17.29 per share JC Penney (“JCP” or “the Company”) is trading near ten-year lows and the market seems to be heavily discounting any possibility of a successful retail turnaround. Below is a short discussion of the events of Q2 and Q3 and their impact on the outlook fo...

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  • Dole Is Sitting on a Big (Old) Hidden Catalyst

    Published: November 21, 2012

    “At Baupost, we are always on the lookout for such overreactions, whether due to the disappointing earnings of a failed growth stock, a ratings downgrade of a bond, the deletion of a stock from an index or its delisting from an exchange, or the forced sale resulting from a margin call. Usuall...

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  • More Gains to Come for Resurgent Abercrombie

    Published: November 14, 2012

    Despite the macro headwinds in Europe, the returns on ANF’s international stores are excellent (35%+ after incremental non 4-wall costs) and its Direct-to-Consumer business continues to deliver healthy revenue growth (20%+) and operating margins (40%+).

    I think these two businesses will prove...

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  • ADT's Stock Has Been Orphaned; In Need of New Home

    Published: November 08, 2012

    At first glance, ADT's core line, residential & small business monitoring, doesn't look very exciting. Organic rev growth has recently averaged 3% and there is significiant customer churn, much of it driven by residential and business relocation. Significant capex is required to direct sales effo...

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  • Yum!'s China Story Is About Urbanization; Not GDP

    Published: November 06, 2012

    We believe the market is improperly valuing share of Yum! Brands. The company’s high exposure to China (~50% of revenue) coupled with the economic slowdown in that country has spooked investors. However, we believe the Chinese exposure and dynamics are misunderstood, as YUM’s growth is not as tie...

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  • The Quick Investment Case for Blackstone

    Published: October 25, 2012

    Our investment case for Blackstone is that it is a well-diversified alternative asset manager. Management fees will go up (catching up to its recent torrid net inflows), realization will increase (especially in Real Estate group) and performance fees will be earned and distributed as dividends to...

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  • GM Bull Pitch Targets China Growth and New Trucks

    Published: October 22, 2012

    Buy GM with expected return of 50%-55% over 12 months, 120-125% for 24 months. Target price of $39.00/$55.00.

    Major Thesis Points:
    *Tremendous opportunity on China Growth
    *Successfully Moving to Higher Margin Vehicles in North America; Including New Truck Launch
    *Restructured Balance Sheet ...

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  • The PC Is Not Dead; Therefore Intel Is a Buy

    Published: October 15, 2012

    I would like to recommend an investment in Intel (INTC) at the current price of ~$21.70 per share. Even though Intel is a mega cap stock, among the largest companies in the United States, I believe that conventional wisdom currently misunderstands the dynamics of the PC market and is therefore un...

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  • Consumer Resurrection Bodes Well for Carnival Cruises

    Published: October 11, 2012

    Recent booking trends support my view that demand should approach pre-Concordia disaster levels by the start of 2013’s wave season. Over the past few months, bookings have improved and based on my research, should continue to rise.

    While prices remain lower for now due to a promotional enviro...

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  • Killer Pair Trade on Walgreen's and CVS Caremark

    Published: September 19, 2012

    I would like to suggest a long Walgreen’s (WAG), short CVS (equal size) pair trade. Currently trading at 35.67 and 47.43 respectively. I expect a 20% return on the long/short position over the next year, with no market or industry correlation. Given the quantity and quality of available research...

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