Overstock.com, Inc. (OSTK)

TMFInvertirmenor (< 20) Submitted: 4/19/08 4:42 PM

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Overstock May have no GAAP profits but it has cash flow.

Patrick Byrne is not really that crazy, what would you want a CEO to do when he finds out that hedge funds are manipulating the price of his company's stock?

Overstock does have a moat, it's the first mover and no one has relationships with partners like Overstock does. A competitor would likely have to pay hundreds of millions of dollars to reach Overstock's sales amount.

Even if the country was in a weak consumer environment Overstock sells hugely underpriced goods, what people want to buy...

Even if it were a loser, not even close, it trades for half of sales so if ebay offer twice the current market price it would not be paying a premium

What's to like? Um 4th best customer service in the country, huge gain potential (aftr Amazon and Netflix got gaap profitable they went up 700% in a few years), great working capital management that makes it so if they had just a 1% profit margin would give them a ROE of 28%, if they duplicated Amazon's 3.2% margin, it would be 90%, the company is currently well into the process of a turnaround and all evidence shows it goin well, a $ 3 bln lawsuit that is going well (they have a $400 mln market cap), trading for .5 of sales even though Amazon never fell below 1x sales when Wall St. thought Bezos was crazy, yes there is a lot to like about Oversotck

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YoungInvestor99 (24.21) Submitted: 4/28/08 8:42 PM

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Overstock is not even comparable to amazon.com, who do you know who has shopped on overstock.com? Who do you know who has not shopped on amazon.com?

I have never even heard overstock mentioned by anyone I know, the only way I was familiar with it prior to playing it here on CAPS was through its commercials which never got me to actually check out the site.

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TheParadox (73.36) Submitted: 5/12/08 10:51 AM

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good reply.

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Tastylunch (98.91) Submitted: 6/05/08 11:41 PM

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Their accounting is fraudulent TMFInvertirmenor imo . see why I think so here
http://caps.fool.com/Blogs/ViewPost.aspx?bpid=59302&t=01001099994698083105

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TMFInvertirmenor (< 20) Submitted: 6/06/08 4:31 PM

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It is crazy to me that so many Fools would take the word of a convicted felon, and two other bloggers (Weiss and Tracy) whose hatchet jobs coincidentily come at the same time, and never seem to be able to respond to reason, over Patrick Byrne, you may think he's crazy, but what has he done to make you think he's lying? He's the most open CEO I've seen in his letters and conference calls.

If you go to the OSTK board you'll see that Parsad has taken apart almost all of Antar's slander and Antar never debates back, probably because Antar was wrong in the first place.

If you didn't think the accounting is fradulent, what would you think about the business?

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Tastylunch (98.91) Submitted: 6/10/08 3:07 AM

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Hey TMFInvertirmenor (interesting name btw)

I'll try to respond to what you pointed out here as best as I can.

I don't like the business even if the accounting wasn't suspicious.

The Price to sales might be decent (0.68) but the price to book is awful (44.65), they have an awfully large amount of debt 6.13 (Lt debt to equity) and atrocious price to cash flow (482.20 !). So I guess I'm not seeing the the positive cash flow management here.

The consumer environment is awful right now as well and shipping is only going to get more expensive for OSTK and their customers. As I said before I find their website interface to be thoroughly underwhelming. Nice to hear they have good customer service at any rate. So I don't like the business much and certainly not enough to buy stock in it.

I don't think Amazon is really an apt comparison to OSTK. That's like trying compare Barnes and Noble to Big Lots. They aren't trying to do the same thing, their margins aren't truly comparable although both are retail. Amazon also has side businesses which OSTK doesn't as far as I know (like running other etailer's websites e.g. Toys R Us and Borders until recently and their A9 search engine)

I never thought Bezos was crazy personally, just thought he was trying to do something that was very difficult to do. Bezos imo managed the press far far better than Byrne does. There were critical articles written about him, but he never sounded so paranoid in them. Nobody ever likes a whiner about shorts, it's unseemly and shows that you can't produce the numbers to flush them out. Byrne's job should be improving profitability of OSTK, not worrying about some imaginary short conspiracy. That suggests to me that leadership is not focused on the task at hand. Byrne has a remarkable talent of saying really dumb things to the press. If I were him or the board at OSTK I would have someone else from OSTK take those interviews instead of him. They'd save themselves a lot of headaches.

Byrne does not strike me as open and honest, rather as someone by his tone and his comments who "doth protest too much". That makes me suspicious. I'll admit he will share a lot of data from time to time, but there's something in the way he presents it and interviews that doesn't make me trust him. That's purely my subjective opinion.

The best CEOs typically avoid the media as much as they can. Byrne seems to seek it out. That's a troublesome sign. IBD has shown that there is a historical inverse correlation between amount of media exposure and company performance.

The other key thing to consider is how late Overstock is trying to get into this market most of the e-commerce landscape has been pretty fixed in the last four years. The Brick and Mortar retailers have a much stronger presence online now than they once did and I would argue only they and a few select etailers have a true moat online. Ebay, Amazon and many private players are firmly entrenched with strong brands . OSTK is still not truly established. Yes they have sales, but profits are what matters. OSTK has taken a very long time to get this far, far too long. Many other online etailers have been able turn a profit in a much shorter period of time. For whatever reason there seems to be very little buzz about OTSK's actual service. They have nowhere near the branding power Amazon had from nearly day one.

I did not find Parsad's arguments on the boards to be very persuasive. If I were antar I'm not sure I'd respond to him much either, especially after reading his attack on TMFBent. People can go nuts on those who dare criticize a company, it can get ugly fast for you if you go the critical route. Look at some of the nutcases responses on Tracy's blog
http://www.sequence-inc.com/fraudfiles/2008/06/06/securities-exchange-commission-closes-inquiry-into-overstockcom/
You can't reason with those people right or wrong.

Longs tend to be more passionate than those who are critical (whether they have short positions or not) on average in my experience. Parsad should be happy Antar rips on OTSK, if Parsad is right than OSTK will shoot the moon if they get the numbers that proves him correct. So I'm not sure what he is so upset about.

I don't believe this is a smear attack by Antar and certainly not Coenen (who happens to be a respected forsenic accountant). I run a small business myself and while I'm no accounting expert OSTK's numbers looked odd to me when I read their 10-k and 10-q. I do think there is likely something going on there intentional or not.

At any rate a very high % of the very best CAPS players agree that there is something odd here or at least the business isn't so hot, so don't just take my word for it.

I should say I have no position in OSTK either way and I don't plan to and that's all I'm advocating here. I really don't care what happens to stock, company or Byrne. For the sake of the employees I hope the fraud accusation is not true. But as a investor why take the risk of possible fraud in a company that has never once turned a profit?

All I'm saying is that you have far better places to put your money.

Good luck you whatever you decide to do.

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Tastylunch (98.91) Submitted: 6/10/08 3:36 AM

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For the lazy here's the exchange I believe TMFInvertirmenor was referring to
http://boards.fool.com/Message.asp?mid=26690851&sort=whole

pretty good back and forth, pretty civil compared to other OSTK threads, looks like Sam won in that he found a possible irregularity but Parsad may be right in that it's not fraud conclusively.

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TheParadox (73.36) Submitted: 6/10/08 11:43 AM

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hey, i loved your post tasty about this one, i got out of OSTK and you convinced me i needed to turn this loss into a gain. The market is wrong on this one.

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TMFInvertirmenor (< 20) Submitted: 6/10/08 4:30 PM

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The high Price/book is because they are very asset light, a lot of their business comes from commisions where they never touch the inventory.

Theoretically they have a great business; the time between when they receive payment and when they have to pay the retailers (this is similar to Dell, Blue Nile, etc.) fuels the great returns they will have.

I agree that they can't be directly compared to Amazon or eBay, but they have established their brand pretty well, relatively, I don't remember which, but they referenced a study showing they had pretty good recognition, and their NPS shows they can fuel some pretty good growth just through referals.

A lot of smart ppl loved their business three years ago, then Byrne lost his mind temporarily and they screwed up an extreme amount.

But, he took responsibility (how many CEOs do you see doing that?) in a cc in 2006 and said how they would turnaround, so far their progress has followed that, but no one has come back and said, "Oh, they're a good business again."

The customer service has drastically improved, and the reason they aren't yet GAAP profitbale is CapEx spent before, this has been reduced a lot and their cash flow is positive.

I don't think Coenen (sp?) and Antar have ever outright accused OSTK of fraud and most of the stuff, Antar at least, brings up is just little crap that doesn't matter and the SEC has said there is nothing fradulent.

If you look on the deep capture site and OSTK's investor relations you'll prob see there's a lot more fishy stuff happening with Overstock's detractors.

I agree that Byrne may not have handled this correctly the first time, and he does accuse ppl a lot, but in the almost two years I've owned the comapny it has made a lot of illogical moves both ways, that would not have happened with most other stocks, I mean he warned in a cc that expenses would be up in Q4, then in an interview he said margins would be down (I think they mean the same thing right?) and the stock fell from the upper 30's to ten in a few weeks. Combine this with the ftds and the stock price is being manipulated, Byrne was just defending his co.

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rancidlettuce (73.75) Submitted: 6/17/08 12:33 PM

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I can't believe that anyone would say Overstock.com's customer service is good. Personally, I ordered two things from them and both orders were nightmares. I was sent the wrong thing, jerked around on the phone when trying to labels to return it and then jerked around some more when trying to get my money back after cancelling the order. Both times I had to initiate a chargeback on my credit card to get my money back. Also, I'm not alone in my experience check out their resellerrating (which in my experience been a pretty good indicator of how good/bad an online retailer is):



http://www.resellerratings.com/store/Overstock



For reference, check out Amazon's (who isn't great in the customer service department, but at least isn't terrible...):



http://www.resellerratings.com/seller1634-p2-s1-d1.html

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