fmahnke (97.25)

11 Comments – Post Your Own

#1) On October 24, 2009 at 12:40 PM, Teacherman1 (94.90) wrote:

I bought my washer and dryer, and later a refrigerator from them. Haven't had a recent look at them, but will put in my watch list and get back to you.

By the way, I live in Texas (Austin area) and the economy is in much better shape than most.

I suspect that when the housing market rebounds, they will do well. That makes them a longer term investment for me.

Good luck on your purchase. 

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#2) On October 24, 2009 at 3:49 PM, Teacherman1 (94.90) wrote:

I think you may be on to something here.

I believe this recent 50%+ drop in the price will be pretty short lived, and from the current price it is likely to have a 100% to 150% upside over the longer term. Maybe even 200%, if you go back a ways past their 52 week high.

Their Current Assets to Current Liabilities is 4 to 1. Their Current Assets to Total Liabilities is about 2 to 1.

Their Tangible Net Worth (basically all tangible because they carry very little GoodWill) is about 1.5 to 1.

Their cash position is not as strong as I would like, but they are aware of it and are conservatibly managing it. 

The one thing that gave me pause was the movement on their balance sheet for about $175M from short term investments to other current investments.

I finally figured out that those short term investments were their own financing accounts, and they are more properly place in other current assets.

They finance about 60% of their sales themselves and the whole operation is in house.

This is what allows them to compete head to head with WalMart, Best Buy and Target.

There has been some deterioration in their financing portfolio, but it is not as significant as some may believe.

This in house financing is one of the things that gets them repeat customers.

While the majority of their customer base is the so called "blue collar" class, they are competively priced with the larger retailers, and got my business because of availability of merchandise and quick delivery.

while this is not a "multi-bagger", it has a good upside from here in the longer term.

I noticed on some of the various web sites comments about the high unemployment rate and downturn in the Texas economey (where the vast majority of their stores are located), but that is true only in the sense of historical levels. Compared to most parts of the country, we are doing very well.

I will probably go in next week (if it stays down), but will go in piecemeal and look for more buying opportunities.

At it's price last week, the upside was about 75% to 100%, so I would not have bought then, only becuase there are still a lot of better upside stocks available.

JMO and worth exactly what I am charging for it.

Thanks for the "heads up".

 

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#3) On October 25, 2009 at 6:38 AM, fmahnke (97.25) wrote:

Teacher,

Thanks again for your input,

I'd be interested to hear where you see greater upside as I am an active investor/trader,  I looked at your Caps picks an offer some comments:

I swore off the dry bulkers based on some bad experiences, but know quite a bit about the business,  I made good money on EXM but worry about the debt,  Sector favorites are PRGN and NM but acknowledge the risk/reward profile is more muted.

As a Ohio resident who is a former division CFO of BAC, I specialize in more local banks, Hence my CRBC pick which I still think does have a greater that 100% upside potential.

I mention this because I noticed HBAN on your list I see HBAN FITB and FMER as my favorite Ohio bank shorts,  On the long side, it you like more conservative banks, check out CZNC. FPFC is a risker play which I recently sold due to upcoming earnings reports.  However, I'll buy again if they report a bad number and finally take more pain on their NPL's.  The key here is if GM Lordstown continues to ramp up, they will bennefit,

Thanks again,

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#4) On October 27, 2009 at 10:58 AM, blendersoup (< 20) wrote:

Conn's recently reported a 20% year over year decline in sales for the first half of October. August and September were reported as down 1%, but  September 08 was down 20% compared to September 07, which would suggest that September 09 was down 20% compared to a normalized 08. So with at least 6 weeks of -20% year over year sales, how do you figure this stock is a buy?

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#5) On October 27, 2009 at 11:05 AM, blendersoup (< 20) wrote:

Conn's recently reported a 20% year over year decline in sales for the first half of October. August and September were reported as down 1%, but  September 08 was down 20% compared to September 07, which would suggest that September 09 was down 20% compared to a normalized 08. So with at least 6 weeks of -20% year over year sales, how do you figure this stock is a buy?

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#6) On October 27, 2009 at 11:15 AM, blendersoup (< 20) wrote:

You are assuming 100% on the long term investments? That may not be conservative. Don't forget all the costs associated with liquidation. A better liquidation value may be more like $7.00 - right where the stock is trading. Big block of shares?Three officers bought shares recently - a whopping 18,500 shares. If that makes you feel comfortable, good luck. The Texas economy, which was better than most, now appears headed for the dumper.

How long can this company survive 20% declines in sales - and at ever-decreasing margins? Did I mention that the customers also are not paying for the merchandise at record levels.

Let's recap. Declining sales at a 20% rate, lower margins, customers who don't pay. Sounds like a bad business model to me. 

 

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#7) On October 27, 2009 at 11:39 AM, blendersoup (< 20) wrote:

Actually, the tangible net worth is about 2:1, not 1.5:1.

Some deterioration in their financing portfolio? Bad debts are going through the roof and they will probably have another large fair value adjustment to their portfolio Q3 or Q4.

The issue here appears to be survival, not stock appreciation.

 

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#8) On October 27, 2009 at 5:36 PM, fmahnke (97.25) wrote:

Blender,

Thanks for your input, which all makes sense,

Liquidation value is still a pretty good price it they can contine to post profits, and I'll try to model the income statement, based on the info you provided to see if I can get a better read on profits.

I am curious as to your take on the TX ecomony, as I live far away,  Is something going on which leads you to believe its getting worse ?

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#9) On October 27, 2009 at 5:36 PM, fmahnke (97.25) wrote:

Blender,

Thanks for your input, which all makes sense,

Liquidation value is still a pretty good price it they can contine to post profits, and I'll try to model the income statement, based on the info you provided to see if I can get a better read on profits.

I am curious as to your take on the TX ecomony, as I live far away,  Is something going on which leads you to believe its getting worse ?

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#10) On October 30, 2009 at 2:52 PM, ACPdiddy (96.90) wrote:

I would add that they have something on the order of $500 million in an off balance sheet "qualified special purpose entity".  The performance of those assets, and their ability to continue to finance those loans, is the big question.  If everything goes well there, the current stock price offers a great entry point.  If things go bad enough there, I'd say bankruptcy is a possibility.

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#11) On October 30, 2009 at 6:47 PM, PatrickCrawford1 (< 20) wrote:

Ok two variables easily forgotten about this year's so called bad numbers for Conn's.  For starters, Conn's is primarily located in Texas and Lousiana.  The reason they're having a 20% decline in sales comparatively to this time last year on top of bad economic conditions.... try Hurricane Ike... one of the most destructive hurricanes to ever hit the Texas gulf coast and the third costliest hurricane in U.S. history.  People along the Texas coast spent millions upon millions of dollars in insurance and FEMA money replacing furniture, electronics, and appliances.  And with most people not being able to return to work for several months, Conn's in house financing made it the retailer of choice in easing the financial impact on displaced families. Second variable to keep in mind here.... as far as this being a bad business model goes.... this company has been in business and successfully growing for almost 120 years.... so i think their business model is just fine. As opposed to similar Wall Street darlings like Krispy Kreme, Conn's has been expanding and opening new locations at a very controlled pace, while keeping their debt relatively low and their cash on hand at a respectable level.  Also, this company still has 30% inside ownership.... sounds like a business with leaders who believe in it.

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