August 13, 2009 –
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RELATED TICKERS: GLD
I'm not feeling as bearish on the dollar as I did a few quarters back. Gold, I expect to go up as the dollar goes down, and not expecting so much down from the dollar in, say, the next couple years, I don't expect gold to perform well. And so, I'm red thumbing gold. [more]
May 10, 2008 –
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RELATED TICKERS: WAT
Waters is a mature business. They grew nicely with the growth of the pharmaceutical business, and they will continue to grow, but they have more market share to lose than they have to gain. They already lost their position as market leader in mass spectrometry, though they are on the verge of regaining it. They are the market leader in liquid chromatography. In both markets they need to invest heavily in R&D to maintain their position, and it looks like they don’t invest quite as much as they should. They are accumulating a bit of cash – perhaps thinking to kick up R&D when forced to, but I’d be happier to see them researching proactively rather than reactively. Meanwhile, I don’t see them putting cash to work buying back shares or paying dividends, suggesting that management really is preparing to battle for its market share. [more]
May 10, 2008 –
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RELATED TICKERS: LOOP
My expectation for LoopNet is that they will end up replacing traditional brokerage match making for most of the transactions done at the lower end of the market. I expect them to succeed at this by introducing landlords and tenants for a fraction of the cost involved in traditional brokerage. While they don’t stand to pull in nearly as much in fees as for brokered deals, their cost should be very lean, and they should garner twice the market share of any brokerage house. I think they could eventually see cash from operations almost as large as the largest brokerage house currently does (CBRE), or $650 million a year. But, with LoopNet’s cash from operations currently at $30 million, that is one crazy rocket ride I’m predicting – so let me bring expectations back to earth, and explore the scenario where LoopNet’s operations give off 6 times as much cash as in ’07, instead of 20 times. They could achieve that by doubling the number of premium members, doubling the premium membership fees, getting a 15% boost from economies of scale, and selling advertising to grow operating cash by 25% to 35% more. Biz Buy Sell doesn’t have to contribute anything, and other acquisitions just have to avoid causing damage. In this scenario cash from operations reaches $180 million a year. [more]
May 10, 2008 –
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RELATED TICKERS: BWLD
End of ’07 store count was almost 500, and management was guiding towards an eventual total of 1,000 stores. I expect management’s guidance to end up being a tad conservative, with stores topping out at 1,200 at maturity. ’07 cash from operations was $43 million. ’06 was $33 million. Figure half of that increase, $5 million, can be added to the $43 million to get an estimate of $48 million for what might have been generated if the 500 stores had been open all year. Expansion is expected to include a slightly higher mix of company run stores, leading to a higher flow of cash on a per store basis. Figure the higher company store mix will increase cash from operation by 15%. Figure economies of scale to contribute a further 20% increase. Expect to see increased costs from expanding into progressively more difficult locations near the end of the expansion, and look to see this roughly balanced by marginal menu price increases. These adjustments bring cash from operations to 138% (115% times 120%) of current levels on a per store basis, and multiply that by the 240% store count for cash from operations to be at 331% of ’07 levels, or roughly $160 million. [more]
April 12, 2008 –
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RELATED TICKERS: BWLD
, LOOP
, WAT
It’s time to start digging deeper into individual companies from the list, and try to get an idea as to what they are worth. That’s a fair amount of work, which is why I’ve waited to do it until after shortening the list substantially. I am ranking the remaining companies in order of attractiveness before taking value into account, and then I’ll dig in that order in search of compelling values. [more]
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