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rknapton (< 20)

November 2008

Recs

3

Crazy WACC

November 19, 2008 – Comments (0) | RELATED TICKERS: VOXX , CROX , SXCL

There is actually an IPO coming out tomorrow.  Grand Canyon Education Inc. (LOPE). That is crazy in this market environment.  Stocks are so cheap that issuing a new offering now weighs in far too unfavorably for those looking to raise capital through equity.  And of course debt costs more now too.  Far too many companies have been forced to postpone or cancel their IPOs all together due to the market weakness.  [more]

Recs

2

HANS and JSDA thoughts

November 05, 2008 – Comments (2) | RELATED TICKERS: MNST , JSDA , KO

Hey,

As you may know, HANS reports Q3 tomorrow.  I'll do a write up on the CC and send it along.  I'm expecting good things such as:
1. them meeting or beating the expectations (as commodity prices have come down so margins will rise, combined with the fact expectations have came down during this slowdown)
2. The majority of their buyback being completed (thus boosting EPS further)
3.  Strong sales increases in their new markets (U.K).  These numbers are coming off a very small base, so will not yet add substantially in absolute terms.
4.  Strong demand for their new "Hitman" energy shooter (which has higher margins).
5.  Additional color on their new distribution agreement with Coca-Cola.

One of the quotes from Warren Buffett I really like is:
"It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

HANS is the "wonderful" company with their 17%+ profit margin which kicks back loads of FCF that is being used to reduce their share count.  And at these valuations it is also at a "wonderful" price.

A terrible business that also reports tomorrow is Jones Soda (JSDA).  Do not forget for one second that this truly is a terrible business with their negative 47% profit margin.  You should throw up a little bit when you read that.  But now that you have wiped the vomit off yourself, I'll show you why its at a "wonderful" price. 

JSDA does $1.47 of revenues per share.  Their Shares are at $0.83 per share (basically down 98% since early 07).  Here's where it gets interesting.  They have debt of just $0.03 per share, but have cash of $0.75 per share.  So basically, taking out the $0.75 in cash from the $0.83 share price, and then adding the $0.03 in debt, you are kind of just paying $0.11 per share.  The catalyst which might be able to make that an extreme bargain is that in early October they announced they are laying off almost 40% of their workforce.  Their SG&A is exactly why they lose so much money, so if these cuts turn out to be enough, they could potentially return to profitability.  Remember this is just the fairy-tale version though.  More likely they will continue to lose a couple million dollars every quarter and eventually bleed to death (think Joy's former employer: Restore Medical).  Vomit again.  But at $0.11 it might just be a real bargain.  Just be prepared to vomit though when the more likely scenario plays out.

RK  [more]

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