Published: April 29, 2013
A trio of 1st year students at Columbia Business School took home a $100,000 cash prize this past week at the annual Pershing Square Challenge after presenting their pitch on Hertz Global Holdings (NYSE: HTZ). Two of the presenters are members of SumZero.
With explicit permission from the win...
Published: April 18, 2013
Jeffrey Campbell, a former analyst at Suffolk Capital Management for 11 years and current Managing Director at Rosenblatt Securities in charge of Energy, has composed a 60-page memo exclusively for SumZero members on fast-growing demand for natural gas alternatives.
Campbell teamed up with Dr....
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%.
Unde...
Published: April 08, 2013
There are few subjects more important to investors (and yet likely more overlooked) than that of portfolio management, the notion of managing a collected body of stocks rather than a series of individual positions. We have our own thoughts on the subject, but so do our members--professionals mana...
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...
Published: March 28, 2013
A confluence of potential events makes TIF an attractive short opportunity. If you think that any 3 of the following 6 catalysts will occur, consider shorting TIF.
1) Broad USD strength. If we get a sustained risk-off phase in the markets (I know, that isn’t ‘allowed’ anymore, but…), Tiffany w...
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...
Published: March 21, 2013
Bed Bath and Beyond (BBBY) is an exemplary free cash flow story which many market participants don't seem to buy at this moment. One of the market's concerns is that the current misfortunes of declining sales and a subsequent drop in multiple at Best Buy or Staples may repeat at Bed Bath and Beyo...
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...
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...
Published: March 07, 2013
Bally Gaming(BYI) sells slot machines (34% of sales), networks them and earns a recurring fee of betting pools (43% of sales), and provides player tracking, bonus-ing and slot marketing systems to casinos (23% of sales).
BYI will be the largest share gainer in the next 1-2 years, primarily fr...
Published: February 28, 2013
Put your contrarian hats on for this one!
SKUL HAS BEEN A DOG
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...
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...
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 ...
Published: February 01, 2013
Conversation with Taz, an AMZN shareholder
Introduction
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...
Published: January 24, 2013
STRZA is a very attractive spinoff opportunity trading at $15.50, with an upside target of $30-35. This was a 1:1 spinoff of Liberty Media. Technically, Starz is the parent and Liberty Media is spinning off all of it's other assets (49% ownership of Sirius XM, True Position, Atlanta Braves, Live ...
Published: January 17, 2013
This is a Q&A with the author of the recent book Quantitative Value, Wes Gray. Dr. Gray is a member of the SumZero community and his bio follows:
WESLEY R. GRAY, Ph.D., is the founder and Executive Managing Member of Empiritrage, LLC,...
Published: January 14, 2013
***UPDATE ON BUYOUT NEWS***
News of management led LBO is coming across the wires. Considering Southeastern Asset Management's cost basis in the stock (the largest shareholder behind Michael Dell), and that the company has repurchased $4.2 billion worth of shares at a price ...
Published: January 08, 2013
The following is a meaty Q&A with the authors of the recent book What’s Behind the Numbers?, Tom Jacobs and SumZero member John Del Vecchio.
Their backgrounds:
John Del Vecchio is a member of SumZero and is the cofounder an...
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...
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...
Published: December 18, 2012
Changes in technology have destroyed the profitability of multiple industries in recent years, including the newspaper and music businesses.
In the media space, the next business that will be reinvented by technology is television. The profitability of owning TV networks is being undermined b...
Published: December 13, 2012
We believe British Sky Broadcasting (“Sky” or “BSY”) is an attractive short at current levels. We think BSY’s fair price should be between £5.50 and £6.00, or c. 25% below current levels.
Sky dominates the UK Pay TV market having enjoyed almost 10 years of nearly monopolistic position. There ...
Published: December 11, 2012
Expedia is one of the best online internet travel players, driven by its scale as the world’s largest online travel agent (OTA) based on gross bookings, its well-known brands and portfolio of websites, strong and accelerating hotel room night growth, high mix of organic traffic, and portability t...
Published: December 05, 2012
American Apparel is trading at $1.00 despite increasing Same Store Sales for the past 18 months in a row. The company has stated in the past announcements if store sales continue to trend higher, the company will refinance their existing high cost debt which should trigger significant upside to t...
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...
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...
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...
Published: November 19, 2012
A weak tape, illiquidity, and (presumably) a seller playing for a takeout have created a unique opportunity to own a strong regional QSR operator with 10%+ unit growth, FY13 commodity tailwinds, and recent top-line momentum at a steep discount to its peers and its own historical valuation.
Ca...
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...
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...
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...
Published: November 01, 2012
This is an update to an article originally published on 9/18/12. You can read the original article here: http://sumzero.com/headlines/118.
Wes...
Published: October 29, 2012
What we like about a unique, well-known, enduring brand like Revlon in the beauty-products business is the steadiness of demand, high profit margins (EBITDA margin @ 20%), and the resulting predictability of free cash flow over time.
Revlon's business proved to be highly recession resistant d...
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...
Published: October 23, 2012
Given the trend toward healthier foods, Annie's stock has clearly caught this wave following the success of Hain's, Whole Foods, Chipotle, etc. The stock now trades at a level where I believe it is an attractive short.
Why Now?
Significant insider selling - the IPO sold $95mm worth of stock;...
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 ...
Published: October 19, 2012
The hedge fund industry has never been bigger. Reuters
A hedge fund manager’s life ain’t all it is cracked up to be.
Published: October 16, 2012
Corning (GLW) reminds me of other cyclical stocks that have done well once earnings estimates first start to get revised upwards. A year ago, the Street was expecting Corning to earn $2.00 per share in 2013. Today, the consensus expectation for 2013 EPS is $1.43. In early 2011, Corning was tradin...
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...
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...
Published: October 08, 2012
"The reports of my death are greatly exaggerated."
Cisco has multiple hallmarks of a high quality business: a huge installed customer base, high margins, strong returns on invested capital, a solid balance sheet, and prodigious free cash flow generation. Net of its cash, Cisco today trades for...
Published: October 04, 2012
The airline industry has historically been a by-word for value destruction, combining a capital and energy intensive business with substantial operational and financial leverage. Add in some cyclicality, sticky labor costs, and the possibility for the odd terrorist attack or crash and you have an...
Published: October 03, 2012
CDE has one of the lowest cash costs per ounce of silver in the industry at $6.41 in Q2 2012, giving it a nice buffer compared to the $35 spot price of the metal. Coeur also has extremely strong operating cash flows of $430mn over the past 12 months, $213mn in levered free cash flow, and very lit...
Published: September 28, 2012
Crown Media Holdings, Inc. (CRWN) owns and operates Hallmark Channel and Hallmark Movie Channel, pay TV networks in the United States. The company underwent a controversial debt-to-equity recapitalization in 2010 that crammed equity holders down to a 9.7% ownership stake while the debt holder, Ha...
Published: September 26, 2012
We have the opportunity to invest in a simple retail business that is misunderstood by the market. We recommend going long the stock, ABS bonds and ASC bonds as yield to event will offer a nice return.
The situation and events are as follows: SVU has approximately 40% short interest as of 8/3...
Published: September 25, 2012
This is an update to an article originally published on 8/22/12. Read the original article here: http://sumzero.com/106.
While I do not typically peddle Eric Jacks...
Published: September 24, 2012
I am recommending a short position in Pandora. At the current valuation, by my estimates, the Company needs to grow its' audience by almost 300% and increase its' mobile pricing by 120% (desktop still grows at 25%). While it may be able to accomplish one or the other, I think it is unlikely that ...
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...
Published: September 19, 2012
This is an update to an article originally published on 7/02/12. You can read the original article here: http://sumzero.com/news/82.
As predicted, Judge Stefan Puhle did a service to equity markets by throwing out the ridiculous short-selling ...