Value Investing GME has a few puffs left |
- GME has a few puffs left
- Publicly Traded Sports Teams
- Has anyone read Value Investing In Asia? Thoughts?
- Blackstone Hilton LBO Research Help
- Comcast Seeks Control of Broadcaster Sky, Countering Murdoch and Disney
- Liberty Media offers $1.16 billion for 40% stake in post-bankruptcy iHeartMedia
- $CATO - Value Opportunity or Value Trap?
- Where to find short interest data over time?
- Private company S-6 filing
- Bloomberg Interview with Ray Dalio
- A question about reported Goodwill on the Lowe's 10-K.
- Home Capital Group (TSE:HCG) trading below book value -- what am I missing?
| Posted: 27 Feb 2018 05:47 PM PST GameStop is very cheap on an earnings multiple basis and also a dying business that nobody wants to invest in. With their most recent 8-K, GameStop reaffirmed their guidance for 2018 EPS hitting around the middle of $3.10-$3.40, without factoring in the tax bill. GME pays an effective tax rate of 32%, and lowering this to a conservative estimate of 20% we can estimate EPS of $3.67-$4.03 with a midpoint of $3.85. I can't predict earnings, but the positive tailwinds of the continued shortage for Nintendo Switch and the success of newer Xbox One models make me optimistic, especially considering that GME gave this exact guidance range last year and cruised comfortably over the top. GME has an AT&T-store business which I'm not too excited about, and I'm a bit worried that their guidance of $80-$95M operating contribution, about $10-$25M lower than 2016, is optimistic solely based on the fact that they have missed their estimates badly in the past. It makes some amount of sense that GME wants to leverage their SG&A by growing their footprint; good luck to them(it also makes their numbers look better, but they go into enough detail that you can figure out exactly what the impact is). When you look at the core business, things amazingly don't look so bad. The used disc business represents the largest segment of gross profit contribution to the business, about 30% of gross profit. In 2016, GME managed to sell about $2.2B worth of used games, earning a $1B gross profit. Over the past 10 years, the most they ever sold was $2.6B of used games(in 2012), earning a $1.2B gross profit. In other words, over the past 6 years, GME has lost about $200M in gross profit and seen this segment decline less than 3% per annum while gross margins slid .3%. Over that same time frame, total gross profit in the core business has slid by about $174M, even after margin contribution of $200M or so from an entirely new segment, "collectibles." It's important to think about where we are in the console cycle, with the Nintendo Switch shortage driving foot traffic into the stores, and likely with it, sales of collectibles, accessories, exclusive offers, and new discs. Reduced console sales pushing down sales of their higher-margin goods like collectibles and accessories may be the greatest threat on the downside. Factors on the upside include Xbox expanding backwards-compatibility for old games, which potentially increases the value of GME's inventory and drives resurgence in their used game business. In addition, collectibles are a bright spot and growing quickly, although still a small contributor to bottom line. If you just chart net income for GME by year over the past 10 years, there's no major deterioration in earning power that's apparent; it looks pretty flat(it's helped by debt-financed acquisitions). EPS, on the other hand, is not far from all-time highs for the business, with the difference due to buybacks. GME has their dividend and interest payments fully covered by cash flow, and I'm not too worried. In summary, you have a stock trading at 4x forward earnings and 5x forward EV/EBIT, where it seems that the market is pricing in an imminent collapse of the business that I do not believe will materialize. And fundamentally, I think AMZN is a threat to every retailer; but when you're trading at a 5x forward multiple you have less far to fall, and infinite upside. [link] [comments]  |
| Posted: 27 Feb 2018 11:10 PM PST Hey guys, Tonight I was screening some stocks and decided to check out some sports teams to see how they perform financially. It was interesting to find that many of these teams are bleeding cash and mired in debt, to put it nicely. Some examples are S.L. Benfica, FC Porto, and AS Roma (it was tougher to find North American teams). I was wondering if anyone has input into why these businesses seem to operate so poorly on average, even with some solid fan bases. Are the players these teams are purchasing out of their leagues (pun semi-intended)? Is there some other sort of financial mismanagement going on? Looking forward to hearing everyone's thoughts! [link] [comments]  |
| Has anyone read Value Investing In Asia? Thoughts? Posted: 27 Feb 2018 02:12 PM PST |
| Blackstone Hilton LBO Research Help Posted: 28 Feb 2018 01:26 AM PST I am looking to research Blackstone Hilton Leveraged Buyout that happened in 2008 in-depth for a class. Any ideas or recommendations on research or articles other than the 10-k reports. [link] [comments]  |
| Comcast Seeks Control of Broadcaster Sky, Countering Murdoch and Disney Posted: 27 Feb 2018 01:08 PM PST |
| Liberty Media offers $1.16 billion for 40% stake in post-bankruptcy iHeartMedia Posted: 27 Feb 2018 07:45 AM PST |
| $CATO - Value Opportunity or Value Trap? Posted: 27 Feb 2018 07:22 PM PST Value Investors/Security Analyzers, tl;dr $CATO is an intriguing value play that looks absurdly cheap on the surface. Would love to hear your thoughts. Looking to gauge opinions on Cato Fashions ($CATO). Like many stocks that end up being value plays, this company is clearly 'diseased' and out of fashion, but there appears to be no chance that it is terminally ill given lots of cash, zero debt, and positive cash flow (for now at least). Here is pertinent balance sheet and stock info (data from most recent 10Q/10K or recent stock price):
So what does $60M get you?: (To put Enterprise Value in context, if you pay $276K for a house, and then find $215K cash inside the house, how much did you pay for the house? Answer: $61K) In FYE 1/28/17, the company had around $72M in operating cash flow and returned $77M to shareholders via dividends and buybacks (though some goes to ~2M Class B shares). If the company were to repeat this performance in FYE Jan 2018, then you'd be fully paid back in one year. Through 9 months, the company has operating cash flow of $38M and returned $61M to shareholders. If they are otherwise inept, at least management is prioritizing returning money to shareholders over value-destroying growth. Ugliness: To be clear, things are not pretty for this company. I believe the last 24 months have seen negative Y/Y same store sales growth (double digit declines for much of this period). The stock has been hammered as a result. The really good news is that all stores are leased, and lease terms are less than 5 years. A competent management should be able to identify stores with negative contribution margins that don't support the overall strategy (more on this later) and allow these leases to lapse/close down the store. Sure this will mean more impairment, but again, this doesn't require cash outflows. Strategy, from my perspective: Low cost fashion retailer concentrated in the Southeastern US, specializing in plus-sized women's clothing. Stores are in strip malls (ideally anchored by a Walmart). Stores also offer credit and layaway for purchases. Minimal online presence. Strategy, analysis (much of this is my conjecture): The Southeast is one of the poorest, and thus least healthy regions of the US (forgive the generalizations from someone from the Northeast). The combination of layaway and plus-sized clothing appears to be a pretty solid match for the region. Target customers are also likely underrepresented as Amazon Prime customers, so e-commerce threat is perhaps a bit limited. Historically, high density of stores and geographic concentration has been the winning strategy for retailers (think how Walmart grew from its Midwest base). I can't say with any confidence that this is a long-term viable retailer (i.e. 10 year horizon), but if management can't strategically close its non-performing 1,000+ stores, there should be scope for cash flow to improve. Other positives: - 13 year board member Daniel Stowe (North Carolina business owner) bought 9,500 shares in 2017 at ~$14. Insider purchases by long-time, local board members (i.e. not someone who flies in 2x a year to meet) are generally best positive predictors. Risks: - For some odd reason, this company bought an airplane in FYE Jan 2017 (long trips between Mississippi and Alabama?). This is scary, because it could be indicative that founder/CEO John Cato is a crook. He only owns 5% of Class A stock, but in total has 43% of voting power (I'm sure his cronies get his voting power over 50%). The saving grace here is Class A stock gets dividends first, so Cato will need to pay us if he's going to pay himself. - It seems like there is some financial engineering going on (credit https://seekingalpha.com/article/4139384-cato-corporation-remains-dangerous-value-trap). Somehow, this North Carolina, US retailer has $24M of unrepatriated cash outside the US. There was also a positive adjustment to gift card estimates which helped net income this year. Not hugely concerned, given that cash can't lie, however, and the company has a clean audit opinion from PwC. - This company is a real mess, and could be a value trap with inept management. 24 months of declining same store sales is brutal. If things don't turn around, the company could start bleeding cash. - While the credit/layaway business seems complementary to the strategy (and really helps profits), it could pose some risks, especially given geographic concentration. Overall: I am willing to take a flyer on the company, given very limited downside. In my view, you are paying $11.50 for a $9 bill, which also generates cash every year. I think somewhere in the $15-17 range is fair for this stock, which gives a pretty decent margin of safety. Please disagree and/or offer alternative perspectives. Forgive the long post. [link] [comments]  |
| Where to find short interest data over time? Posted: 27 Feb 2018 10:38 PM PST Gurufocus.com stopped providing short interest data, looking for a free reliable resource. Ideally this would be an online service with a chart. [link] [comments]  |
| Posted: 27 Feb 2018 08:19 PM PST Say a private company files an S-6 with the SEC. Would that document be available for search in Edgar? Unclear if only public company filings are available there or if private ones are as well. [link] [comments]  |
| Bloomberg Interview with Ray Dalio Posted: 27 Feb 2018 06:27 AM PST |
| A question about reported Goodwill on the Lowe's 10-K. Posted: 27 Feb 2018 04:48 PM PST I'm looking through Lowe's 2016 10-K and it acquired a Canadian company named RONA which was the only acquisition. An exhibit outlining what Lowe's paid for RONA states that goodwill is 976 with 107 being tax deductible but the actual goodwill exhibit under acquisitions has 1015 instead of 976. Is this due to the tax effect of the 107 being tax deductible or a foreign currency translation? [link] [comments]  |
| Home Capital Group (TSE:HCG) trading below book value -- what am I missing? Posted: 27 Feb 2018 09:20 AM PST Home Capital Group (TSE:HCG), a relatively small Canadian bank, was involved in some mild to moderate fraud and had their stock price pummeled from a high around $54 CAN to a low of $8 CAN and is current trading around $15 CAN but has a book value of $22 CAN. The fraud resulted in a run on the bank that was stabilized when Berkshire Hathaway was asked to step in. Berkshire provided a line of credit and received an equity stake. Berkshire was going to get a second tranche of equity but over 80% of shareholders voted against it stating that the company had stabilized and that they did not see the value of issuing more stock to Berkshire. Since the fraud, the company cleaned house and has a new executive team, has had two quarters of profits, and has the backing of Berkshire Hathaway. There are some lawsuits pending but most of the fines and regulatory issues are over. In addition, the lawsuits, while not insignificant, would not make a big dent on the bottom line. They have also paid off the line of credit issued by Berkshire and had EPS for Q3 of $0.37 CAN and Q4 of $0.38 CAN. Discounting the past two quarters at 12% and adding in the BV gives me a price of $34.93 CAN -- ((0.37 * 4 / 0.12) + 22.6). Given all this, what am I missing? Does the company just need time to calm fears or is there something else dragging the price down? [link] [comments]  |
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