Posts tagged V
The market was up today as PIMCO is set to get their equity on, Fed Ex plans to deliver a fuckload of packages in the next year (even more packages than Victoria Givens took for delivery in 2004, and like all proper businesses, she required they all be delivered in the rear), and former Obama confidant Peter Orszag is going to C so the next time C almost brings the economy to zero, they can get a sweet deal like Goldman did. Oh wait, they already got a sweet deal. Hey Vikram, Money McBags hates to tell you how to run your business (though he would recommend doing the opposite of everything you have done in the past), but why the fuck are you spending a few hundred Gs on a guy to do something you were able to do without him? This makes as much sense as shoving shit up your ass to get rid of a superbug. But alas, Money McBags has never crippled an entire financial system, so take his advice for what it is worth.
As for macro news, initial claims for unemployment fell by 3k to 420k (or by 1k, depending if you want to use the upwardly revised number or the downwardly reported number). Analysts guessed that the number would come in at 425k so the claims were a slight beat until next week’s upward revision in the “Hold the shock and hope for no awe” strategy. While marginally beating guesses and still trending down is relatively positive news (like finding out congress extended unemployment benefits is relatively positive news for those long-term unemployed, because either way, they’re still out of fucking work with skill sets deteriorating faster Heidi Jones’ credibility), the unemployment rate has now been at 9.5% or higher for 16 consecutive months which is the longest stretch since they began keeping track of such things in 1948. Holy fucking shit. People always whine about how the 1970s were a shit environment to live through (and not just because of all of the dirty hippies with their lack of shaving and love of horrible music, but because of a little something called stagflation), but the 1970s seem like a mouthful of lobster tails and hummers compared to today.
In other macro news, the Philly Fed survey showed manufacturing rose in the Philly area in November, which would be great if whatever was produced in Philly (such as Butterscotch Krimpets, heart attacks, and the smell of despair) wasn’t likely to be stolen before it hits the economy. The survey came in at 24.3 and witch doctors (or economists, take your pick) guessed it would come in at 15. The interesting part of the guesses is not that they were off by so much (and one can’t really blame an economist for being off, after all, they are only what is a few lifeforms below human), but that not one guess was for greater than 24, proving once again that economist models are less correlated to today’s economy than laughing is correlated to a Jay Leno monologue.
Elsewhere, housing starts rose 3.9%, while housing finishes still remain flat. Most troubling was that permits for future home construction dropped to a 1.5 year low as the housing market continues to be weaker than the US educational system and about as fucked as Irish banks. And finally, the Fed may slash debit card fees that issuers charge banks by 90% as they try to take all of the fun out of usury lending. The Fed proposed a cap of $.12 per transaction which is much lower than the current 1% average and caused MA and V to plunge which likely made the looks on unsuspecting investors’ faces priceless.
Internationally, the ECB is set to double their reserves by increasing their capital to €10.76B from €5.76B which will allow them enough of a war chest to eventually bring the Spiderman Broadway play to the continent. It is the first increase in 12 years and will somehow help to better offset the risks of both more European sovereign defaults and Lucy Pinder‘s potential move to the States. The ECB is getting this infusion of capital from national central banks in just three easy annual installments and in return, the national central banks will get a Flowbee thrown in for free. Of course the decision to raise reserves will affect taxpayers but why care about taxpayers when you have a ponzi scheme to protect? But here’s the part Money McBags loves best, unlike a commercial bank, the ECB can print money and cannot go bankrupt (which makes it a better business model than Brooke Paller‘s House of Chicken and Reacharounds) , so um, 1. Why don’t they just print the excess reserves and 2. Why don’t they just not do anything since it doesn’t fucking matter? Apparently economists fear the bank could lose credibility if its losses exceeded its reserves, but when did a loss of credibility ever stop a central bank from operating?
Also in Europe, the cost of debt in Spain increased as they sold ~2.3B Euros worth of bonds at 100bps to 150bps higher than they did in November, but to be fair, these bonds did not come SWAK from Nereida Gallardo. And finally, Moody’s put Greece on review for downgrade after doing the same for Spain yesterday. That said, caring what Moody’s rates your debt is a bit like caring what Meagan Chung concludes about your hedge fund.
In the market, as mentioned earlier Fed Ex was up despite a shitty Q as they raised their full-year forecast thanks to cost “headwinds” blowing away in the next few months (and Money McBags has no idea who “away” is, but if this is headwinds, then congratulations. And yes Money McBags realizes that was an awful pun, but if you can drop 1.5k words a day of dick jokes on the market without having to find some filler every now and again, be Money McBags’ guest). Lastly, Goldman added SBUX to their conviction buy list just days after adding AAPL to that same list which means AMZN, GOOG, and Angelina Jolie are likely next in Goldman’s attempt to replay 2003.
In small cap news, one of Money McBags long-term favorite shorts, WGO, put up a marginal Q and yet shot up 13% because either they should be valued richer than NFLX or a bunch of shorts lost their balls and got squeezed tighter than these shorts. Their quarter was almost identical to last Q which Money McBags broke down for all of you a few months ago. Revenue was flat sequentially, though up 50% y/y and earnings came in at $.13 per share (and last Q Money McBags pegged them at a $.10 to $.15 per share run rate, so guess you all very much).
There were some real positives for WGO in the Q with prices in the used markets going up, the continued shift to more expensive A Class motor homes which caused ASPs to rise 9%, slightly improved gross margins (up to 9%), and the need for fewer retail promotions (like “Buy one, save 10 factory workers’ jobs” Wednesdays). That said, dealers have now all restocked with backlog down 54%, the product remains highly discretionary and premium priced, and they’ve now had 2 quarters of flat to down sequential growth with this next q supposedly a seasonally bad Q.
So look, the management team deserves credit for keeping this company afloat, but the valuation is as cockposterous as finding Henry IV’s embalmed head. The headline number is $.13 EPS but that includes a $644k gain on sale of an assembly facility and uses only a 25% tax rate (and remember last Q Money McBags told you they are going to have to start paying taxes again this Q or next). So taking out the gain and taxing them at 35% gives them closer to $.10 in EPS which is fucking flat with the $.09 that Money McBags calculated for the last Q. So guess what? The business momo has lost its mojo. They are now at a ~$.40 run rate EPS which means they are trading at 37.5x that number. Umm, really? A company with a business that was in secular decline BEFORE the recession and has now had consecutive Qs of flat growth and is looking at re-stocked dealer inventories should be trading at 37.5x earnings? No fucking way.
And it’s not just earnings, as their EBITDA run rate is ~$28MM which means they are trading ~13x EV/EBITDA. So unless they plan on streaming movies on their RVS, selling restaurant reservations with their vehicles, or having Emma Frain install new wipers on each Winnebago, this company is epically overvalued like CFA charters, Saturday Night Live (and even though everyone knows SNL sucks, that is still overvaluing it), and foreplay. While Money McBags is well aware that one can fall in love with ideas and not rationally look at them, this makes no fucking sense and Money McBags just doesn’t see where the growth will come from now that they have gone through the restocking. They’ll generously earn $.50 per share next year and Money McBags would pay at most 15x for that so the stock has at least 50% down to go, Money McBags is going to remain shorter than Bridget the Midget here and this is a great time to add to that short because nothing should trade at ~40x EPS unless it comes with a twin sister and no gag reflex.
Writer’s Note: Money McBags is aware that today’s headline sucked, but after reading the column, you can all see there was really no theme to the day and unfortunately headlines don’t grow on trees. Money McBags hates putting out shit he is not pleased with, and while he likes the column, the headline makes his balls hurt. Alas it is late, and his inspiration has faded, so it is what it is.
7/29/10 Midevening Report: Fed warns deflation may be coming, investors run to buy protection as they don’t know who deflation slept with last
Oh shit. While most people have been spending their time worrying about the Fed printing up some inflation, Fed Bank of St. Louis President James “Jimmie B” Bullard got his academic on today and dropped some deflation all up in this bitch.
And Jimmie B aint be one of those lame ass non-voting members of the FOMC like Fed Bank of Minnesota President Narayana Kocherlakota whose last name sounds like a hella nasty venereal disease one would catch from a night with Paris Hilton (and for the record, being a Fed Bank President and yet not getting to vote as part of the FOMC is like being the fat cheerleader on the bottom of a pyramid or a bachelor party designated driver). The point is Jimmie B knows the secret handshake, he drinks the juice, and his opinion matters so when he axes everyone if they know anything about some deflation and shit, people better start listening.
The deflationary concerns stem from a “provocative” paper Jimmie B wrote (provocative in the sense that it took a full three pages to put readers to sleep instead of the usual two, though to be fair, page one was a full picture of Katie Cleary dressed as a regression model, so whatever) in which he argued that the Fed needs to stop all of this extended period low interest rate bullshit and get their quantitative ease on by buying some debt instruments longer dated than Velveeta cheese or Betty White‘s vulva. Not only that, but Jimmie B warned that if we continue this low rate poilicy, we’re going to end up like Japan and be stuck in a long term no growth economy while living in constant fear of attacks from large fire breathing monsters like godzilla or Roseanne Barr. So goodbye inflation (for now), hello deflation. Money McBags is sure you’ll both lead to hyperinflation eventually but until then, enjoy the soup.
In other US macro news, new claims for unemployment fell by 11k to 457k, or by 7k if you use the non upwardly adjusted initial number released last week of 464k (Money McBags guessed that it would be upwardly revised to 470k, but it was only revised up 468k so good for the (No) Labor Department to only mildly be fudging the numbers). Analyst guesses were for initital claims to come in at 459k, so in theory the data was slightly better than guesses until a week from today when initial claims are revised upward to 460k+. The point is, the data isn’t just hard to believe, but there is absolutley no way economists/analysts/The Great Gazoo can make any kind of relevant guess as to what the numbers will be since their regression models are all calibrated with data from the past 70 years or whatever, when the world wasn’t as connected, volatile, and fat tailed. All one can say is that people keep losing jobs which is more challenging for a recovery than geography is for Caitlin Upton or a high five is from Verne Troyer.
Internationally, the IMF got its panties all up in a bunch about China’s trade surplus which may balloon as big as LeBron James’ ego or Sheyla Hershey‘s shirt if China doesn’t try to support domestic comsumption by letting its currency float The report would not have been published had the IMF not removed a footnote saying how they calculated the undervaluation of China’s currency and of course if the report had not been published, no one would have cared, not even the IMF’s mom.
In the market, earnings were more mixed than the reviews for Kelly Brook‘s new movie Piranha 3-D (with reviews ranging from awful to boobalicious). Sony had a strong quarter and swung back to a profit thanks to operational efficiencies, strength in emerging markets, and sales of flat screen TVs, Playstation 3, and a bunch of other shit which people can surprisingly still afford. The stock was up 7% on the day as analysts had guessed Sony would report an operating loss which shows that even Japanese analysts suck at their jobs. Other companies putting up good Qs included Radio Shack, thanks to sales of the iPhone and the four people who remembered the company was still in business, and Visa, though Visa sold off on the day as analysts were quick to cut forecasts when V’s CEO warned of new government regulation likely causing the debit market to “undergo changes” not unlike a pre-vagina’d Jamie Lee-Curtis.
That said, there were many companies that shit the proverbial bed today (and not any kind of shit, but an indian food, Jack Daniels, and Slim Jim shit). Both Nvidia and Symantec fell ~10% after they cut guidance for Q2 citing weak consumer demand which turned their semis flaccid. Kellogs was not great as they missed analyst guesses and cut their full year projections as apparently too many people were leggo-ing their eggos with waffle sales hurting the company’s margins. Kelloggs was also hurt by a $.10 per share charge as they had to recall a fuckton of cereal boxes last month after customer complained of the boxes smelling too much like wax and end of the night stripper, but even exlcuding that charge, eps of $.89 still missed analyst guesses of $.94 eps. Finally Colgate dropped nearly 7% despite beating guesses and maintaining guidance as they warned currency devaluation in Venezuela will have a bigger impact than they initially estimated. Venezuelan currency continues to struggle after home grown Stefania Fernandez won the Miss Universe pageant and decided to leave the country to travel the world.
In small cap news, a Money McBags favorite QCOR put up a good Q and shot up 23 fucking percent on the day. Holy fuck did that thing rise and Money McBags was expecting a lackluster quarter at best, so fuck him. Money McBags has broken QCOR down numerous times on WGP so if you want to understand it better, put it in the search box (and if you want to understand divnity better, put it in Alice Eve‘s box).
As for the Q, net revenue was up12% from last year to $28.3MM and eps came in at $.14. Money McBags’ revenue estimate was pretty much right on but he had assumed $1MM higher operating costs and thus he was expecting $.13 in eps. That said, the key driver of revenue was once again MS sales of Achtar which grew 145% y/y and 32% sequentially. This drug is such a fucking hit with a demand curve more inelastic than the demand for Lucy Pinder‘s curves, that QCOR should raise the price of achtar again (and that is funny because they already raised to around 1 bazillion percent to ~$23k a vial). The company now has ~$100MM cash which they are going to continue to deploy for buybacks and most importantly they announced they are going to double the size of their sales force to better attack the nephrology market where they have just started making headway.
So here is the deal, the nephrology market could be bigger than both the IS and the MS market for QCOR becuase patients need 9 to 10 vials of achtar over the course of six months to treat NS. Anyway, these are some interesting tidbits from the call:
1. With only the equivalent of 1 rep selling to the nephrology market last Q, QCOR manged to get 4 new prescriptions. With 9 to 10 vials needed for NS patients, that is equivalent to ~$200k in net revenue for each nephrology prescription so those 4 new cases sold by effectively one full time person, should net $800k in revenue for the company. As they say in France, “not fucking bad at all.”
2. They are now going to go from 38 reps to 77 reps to be able to call on more nephrology doctors and to be able to increase the chances of someone getting drunk at the company holiday party and taking their shirt off.
3. Within the next couple of quarters, several papers on the effectiveness of Achtar will be coming out in medical journals with titles like “An Achtar a day will keep the pissing of blood away,” “Achtar: Fucking focal segmental glomerulosclerosis in the ass,” and simply, “Nephrotic Syndrome This!”
4. Out of the 8k nephrologists, fewer than 400 have written prescriptions for Achtar as QCOR hasn’t had the sales force or the published medical data to reach the rest of the doctors. Both of those are coming soon.
5. MS is now 50% of their revenue with IS at ~40%, NS ~5%, and everything else 5%.
6. Olivia Munn is still hot.
7. They are no longer going to waste their time trying to use their $100MM in cash on acquiring another drug and will just focus all of their time on Achtar. Money McBags brought this up before as a curious strategy by the management team as he didn’t understand why they would be fucking around trying to buy some do shit other drug if their growth opportunity was as good as they said it was. Now he is pleasantly pleased that they have decided to forego an acquisition and instead use their cash for buybacks, building a sales force, and one hell of a night out at their local Rick’s Cabaret.
8. The PDUFA date for IS being put on label for achtar is 9/11 which if approved, will finally allow QCOR to market to IS doctors.
Anyway, the news of a doubling of the sales force caused the stock to rocket today but Money McBags guesses a bunch of that was short covering because small stocks don’t move that quickly without some shorts puking out shares faster than an Olsen twin pukes out last night’s dinner. That said, how do we value this company going forward? They said costs will be up by ~$2MM in Q3 and $3MM in Q4 as they double the sales force and Money McBags doesn’t think that sales force will really be affective until Q1 of next year. So if Money McBags leaves IS flat for the rest of the year, grows MS by 20% in each of the next 2Qs sequentially, leaves NS as nothing, and adds the extra costs, he gets another $.32 in eps for the second half of the year or $.56 eps total in 2010.
But of course, who gives a shit about 2010 because it is 2011 where this company could start seeing even stronger growth. So if Money McBags takes 2010, grows IS by 10% (if Money McBags interpreted the CEO correctly, that business could grow 20% to 30% if the FDA allows them to put IS on label in September, so 10% growth seems like a decent enough way to discount that happening) and then grows the non-IS business by 30% (MS has been growing by 100% + y/y, but the law of large numbers and the ramp from nothing is going to have to catch up with them soon enough and NS is still so small that we’ll ignore it for now even with the ramped sales force), then he gets ~$.78 eps for next year.
Of course that completely discounts NS doing anything even with an expanded sales force which seems way too harsh as in ~6 to 8 quarters MS has gone from nothing to 1/2 of the business, but Money McBags is trying not to get too excited as they only sold 11 vials for NS 2 Qs ago and 4 this last Q. So we’ll take ~$.80 as a reasonable low end base line for 2011 and the stock is trading for ~13x that plus the ~$1.50 in cash.
That said, if NS takes off, this company easily earns more than $1 in 2012 and you can buy that kind of growth right now for 10x plus the cash which is almost as cheap as a an autographed Dick Pole. So look to buy on a pull back, and yes, this is the 1000x time Money McBags has said that and this stock has yet to pull back so time the trade as you please. Just remember, Money McBags first started writing about this stock in December when it was ~$5, so hopefully you all did your work and bought in and are now enjoying the fruits of your labor.
The market rallied today in the morning like a chubby chaser with a bottle of crisco on his way to a Peter Paul Rubens exhibit until it faded in the afternoon thanks to common sense and volume. Rallying the market in the morning was news that China is going to unpeg their currency from the dollar thanks to pressure from global leaders who felt that the currency peg gave China an unfair trade advantage in selling their cheap shit even cheaper. The announcement comes ahead of the G-20 summit in Toronto this weekend where finance ministers and central bankers from around the world will no doubt descend upon the NSFW Brass Rail and flaunt their ability to negotiate currency while manipulating bottoming assets (of course after the EU’s latest bailout, finance ministers will certainly wonder if that is a printing press in EU central bank governor Jean Claude-Trichet’s pants or if he is just happy to see them). While it’s good that China is willing to let the renminbi/yuan float (and if anyone can explain to Money McBags the difference between “renminbi” and “yuan,” other than several letters, he’ll send you a free autographed poster of Gong Li), China has stated that they will do it gradually so as to avoid a potential destabilization bubble like what happened in Japan when the yen was unpegged from the dollar in the mid-1980s or like what happened in Britney Spears’ pants after she was unpegged from Justin Timberlake. With the return of a “managed floating rate,” the yuan/renmindbi/johnson rod was up ~40 bps against the dollar to its highest level in five years which means happy endings just got a little less happy for all of us.
In US macro news, less is happening today than on a Bernie Madoff trading desk in 2006 or in a eunuch’s pants. The SEC is going after a firm called ICP Asset Management for manipulating CDOs in ways that would have made even Meggan Mallone blush. ICP is accused of pumpng up CDO prices to increase the value of their funds, pushing profits to their owners rather than their investors, and being what I believe the SEC called “a bunch of dicks.” In other news, the proposed Durbin Bill which is supposed to keep credit card companies from charging merchants exorbitant interchange fees as a way for those credit card companies to have adequate reserves when their customers charge off due to the high prices the customers have to pay for goods which of course are partly caused by merchants raising prices to make up for high credit card interchange fees (it is the least fun daisy chain Money McBags has ever encountered), is rumored to be losing steam. News today is that the bill will take out “network fees” from interchange and thus credit card companies will still be able to charge retailers the fuck out of transactions due to a semantics loophole. The result of all of this is that V and MA shot up at midday while politicians once again do their best to to take the bite out of their bark or the steam out of their cleveland steamer if you will.
In stock news Alcoa ran up today as high frequency algorithmic traders have stumbled on to the phonebook approach and are just buying the first company listed alphabetically (though a smiliar strategy worked for Malachi Constant). Actually, AA is up as over the weekend their CEO said he expects demand to grow 10% with half of that coming from China and with China releasing their yuan today, demand for imports in China should improve. In other stocks, BP is down again today because the stock hasn’t reached zero yet and Goldman Sachs cut their earnings forecast for banks causing banks to rally as investors realize trading against GS’ recommendations and thus WITH GS’ ACTUAL BOOK is the best way to make money. GS front runs and ditches shit to clients once it has appreciated more often than marginal celebrities come out as bisexual (and today it was some singer named Vanessa Carlton who claimed she is bisexual which would have made Money McBags excited if he knew who Vanessa Carlton was and if she didn’t look like the man in the relationship). Anyway, the short GS recommendation, long their actual book trade wins again.
In small cap news a Money McBags favorite KITD was down 9% on no news that Money McBags could find though he wouldn’t be shocked if they were getting ready to dilute shareholders another 25% just because they can. This company is more frustrating than a one-armed man trying to solve a rubik’s cube. That said, Money McBags still believes in the long term growth story so is not sweating their huge Euro exposure and their predilection to raise equity as a daily operating procedure. Money McBags is short on time today, so no detailed analysis of any small cap names but if the market has topped out here with the sell off in the afternoon (and Money McBags is no chartist, though he will technically analyze Hilary Rhoda‘s bollinger bands if need be), then he would be selling his illiquid names in to the downturn.