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Wednesday, November 11, 2009
Sunday, November 1, 2009
Tuesday, October 27, 2009
Earnings will sink NILE
Blue Nile
Ticker: NILE
I woke up this morning and went cruising in search of the next BIDU, i.e. a stock with growth but an insanely high P/E that is too high for the earnings growth. Instead, I found a stock that has zero or negative growth and still an insanely high P/E.
Pull up a 2 year chart of NILE showing the rolling EPS. You will see yearly EPS of $0.70 - $1.00. You will also notice that when their trailing EPS was $1.00 the stock traded between $20 and $55 a share.
Now their trailing 12 month EPS is $0.71 a share and they are trading at $65.75 a nice multiple of 92 times earnings.
So if you ask Jesse Livermore or any other trend follower, they will look at the chart and say this is a nice buy, which is great, but what happens when earnings comes out on November 5th ?
A few reasons being tossed around as to why this stock has moved up so much:
1. People are comparing this stock to AMZN. However, AMZN is like Visa & Mastercard, they are more of a payment processor / middleman than an online retailer.
2. The stock has a 20% short interest. That doesn’t bother mebecause short squeezes rarely happen. Smart money short stocks and they smart money is usually correct.
3. Thinly Traded. Because the stock is thinly traded it is easily manipulated. See LNN, a stock where the market maker is the analyst too and upgrades it to outperform.
4. People believe that the consumer is going to start spending again. That is great but it doesn’t translate into earnings for Blue Nile. The recession creates babies, not weddings.
5. Every guy that bought a ring online thought it is such a great company so they decided to buy a few shares. Kind of like the people that own Starbucks from $40 a share.
In conclusion, I think NILE between $17.50 and $25.00 could be something to consider buying.
The only way I would consider it a buy at those prices would be if earnings increased to $1.25 a year.
I currently hold no position in NILE. I do plan on having a short position before they release earnings on Nov 5th.
Ticker: NILE
I woke up this morning and went cruising in search of the next BIDU, i.e. a stock with growth but an insanely high P/E that is too high for the earnings growth. Instead, I found a stock that has zero or negative growth and still an insanely high P/E.
Pull up a 2 year chart of NILE showing the rolling EPS. You will see yearly EPS of $0.70 - $1.00. You will also notice that when their trailing EPS was $1.00 the stock traded between $20 and $55 a share.
Now their trailing 12 month EPS is $0.71 a share and they are trading at $65.75 a nice multiple of 92 times earnings.
So if you ask Jesse Livermore or any other trend follower, they will look at the chart and say this is a nice buy, which is great, but what happens when earnings comes out on November 5th ?
A few reasons being tossed around as to why this stock has moved up so much:
1. People are comparing this stock to AMZN. However, AMZN is like Visa & Mastercard, they are more of a payment processor / middleman than an online retailer.
2. The stock has a 20% short interest. That doesn’t bother mebecause short squeezes rarely happen. Smart money short stocks and they smart money is usually correct.
3. Thinly Traded. Because the stock is thinly traded it is easily manipulated. See LNN, a stock where the market maker is the analyst too and upgrades it to outperform.
4. People believe that the consumer is going to start spending again. That is great but it doesn’t translate into earnings for Blue Nile. The recession creates babies, not weddings.
5. Every guy that bought a ring online thought it is such a great company so they decided to buy a few shares. Kind of like the people that own Starbucks from $40 a share.
In conclusion, I think NILE between $17.50 and $25.00 could be something to consider buying.
The only way I would consider it a buy at those prices would be if earnings increased to $1.25 a year.
I currently hold no position in NILE. I do plan on having a short position before they release earnings on Nov 5th.
Friday, June 5, 2009
The Botox Killer
PMTI
We can call this the Botox killer.
Palomar Medical Technologies today announced the FDA approval of their anti wrinkle laser device.
Maxim Group analyst Anthony Vendetti estimated the device could add between $12.5 million and $40.0 million to Palomar's 2010 revenues. (http://www.reuters.com/article/marketsNews/idINBNG35425620090605?rpc=44)
My understanding from PMTI’s most recent 10 Q (http://sec.gov/Archives/edgar/data/881695/000088169509000016/form10q.htm) is that the deal with J&J is a licensing deal. If this is the case then the estimated $10 - $40 million in revenue will flow straight to the bottom line.
The number of shares outstanding of the registrant's common stock as of the close of business on May 3, 2009 was 18,041,090
This translates into an additional $0.50 to $2.00 per share a year.
Analysts had projected next year earnings of $0.22 a share.
So the question is where does this move stop? Do we go to $25, which is a nice round number about 11 times earnings? Do we look at their earnings a few years ago at $3 a share when the stock was trading in the $30 - $50 dollar range?
I am personally looking for a move to $25 on Monday and then we will see from there if it has the strength to go over $35 in the next few months.
Disclosure: I went long when the stock was at $16.
We can call this the Botox killer.
Palomar Medical Technologies today announced the FDA approval of their anti wrinkle laser device.
Maxim Group analyst Anthony Vendetti estimated the device could add between $12.5 million and $40.0 million to Palomar's 2010 revenues. (http://www.reuters.com/article/marketsNews/idINBNG35425620090605?rpc=44)
My understanding from PMTI’s most recent 10 Q (http://sec.gov/Archives/edgar/data/881695/000088169509000016/form10q.htm) is that the deal with J&J is a licensing deal. If this is the case then the estimated $10 - $40 million in revenue will flow straight to the bottom line.
The number of shares outstanding of the registrant's common stock as of the close of business on May 3, 2009 was 18,041,090
This translates into an additional $0.50 to $2.00 per share a year.
Analysts had projected next year earnings of $0.22 a share.
So the question is where does this move stop? Do we go to $25, which is a nice round number about 11 times earnings? Do we look at their earnings a few years ago at $3 a share when the stock was trading in the $30 - $50 dollar range?
I am personally looking for a move to $25 on Monday and then we will see from there if it has the strength to go over $35 in the next few months.
Disclosure: I went long when the stock was at $16.
Monday, January 7, 2008
Thursday, January 3, 2008
Why I bought Nutrisystem – NTRI
You are probably thinking; I don’t want to hear about NTRI, I lost money the last two quarters they announced!
Here are my reasons I can’t wait until NTRI gives 4th quarter preliminary results and next quarter guidance. They will be reporting Q4 during the week of Feb 11th and I am expecting them to give preliminary guidance sometime after Jan 28th.
I have noticed over the past couple of weeks some heavy option trades for the Jan contract. I assume they are volatility plays or someone trying to accumulate shares because they are straddle trades at the 30 strike. I personally am looking at the NTRI FEB 25 & 30 calls. Maybe the 35’s for a nice lotto ticket!
The last time NTRI gave guidance on Oct 3rd 2007, the stock dropped 35%. They mentioned, slower growth, increased competition from Alli (the weight loss drug), and higher marketing costs.
During this time, short interest has increased to 60% of the float. (That was not a typo you can go to www.shortsqueeze.com and see for yourself.)
They just announced they are expanding into Canada. It isn’t the same as if they said they are expanding into China however I do believe this is a good step in the direction of global expansion.
They said in their last report that men made up 28% of new customers. Ask Weight Watchers Intl, how many of their customers are men? Also WTW trades at 17.5 times earnings, NTRI is at 8 times.
There has been some fund buying, WS Management pick up 3 million shares on Oct 4th, the day it collapsed. Citigroup picked up 1.8 Million shares on Nov 9th.
We are in the News Years resolution season and the phones will be ringing off the hook at NTRI with people looking to sign up for the new advantage program.
NTRI has a market cap of $875 Million and their revenue for the last 12 months was $773 Million. That means they are trading at 1.13 times revenue! Remember, in Q3 revenue increased 21% even though earnings only went up a penny. They have a net profit margin of 12%.
In October the board of directors authorized an additional $100 million share repurchase. Their Q3 press release includes: ”Although we may pursue acquisitions in adjacent health and wellness categories in the future, with a strong cash position and through the recently announced $200 million credit facility, we believe the best way to return value to our shareholders is through repurchasing our shares at this time," concluded Mr. Hagan. “
I am currently Long NTRI calls.
Here are my reasons I can’t wait until NTRI gives 4th quarter preliminary results and next quarter guidance. They will be reporting Q4 during the week of Feb 11th and I am expecting them to give preliminary guidance sometime after Jan 28th.
I have noticed over the past couple of weeks some heavy option trades for the Jan contract. I assume they are volatility plays or someone trying to accumulate shares because they are straddle trades at the 30 strike. I personally am looking at the NTRI FEB 25 & 30 calls. Maybe the 35’s for a nice lotto ticket!
The last time NTRI gave guidance on Oct 3rd 2007, the stock dropped 35%. They mentioned, slower growth, increased competition from Alli (the weight loss drug), and higher marketing costs.
During this time, short interest has increased to 60% of the float. (That was not a typo you can go to www.shortsqueeze.com and see for yourself.)
They just announced they are expanding into Canada. It isn’t the same as if they said they are expanding into China however I do believe this is a good step in the direction of global expansion.
They said in their last report that men made up 28% of new customers. Ask Weight Watchers Intl, how many of their customers are men? Also WTW trades at 17.5 times earnings, NTRI is at 8 times.
There has been some fund buying, WS Management pick up 3 million shares on Oct 4th, the day it collapsed. Citigroup picked up 1.8 Million shares on Nov 9th.
We are in the News Years resolution season and the phones will be ringing off the hook at NTRI with people looking to sign up for the new advantage program.
NTRI has a market cap of $875 Million and their revenue for the last 12 months was $773 Million. That means they are trading at 1.13 times revenue! Remember, in Q3 revenue increased 21% even though earnings only went up a penny. They have a net profit margin of 12%.
In October the board of directors authorized an additional $100 million share repurchase. Their Q3 press release includes: ”Although we may pursue acquisitions in adjacent health and wellness categories in the future, with a strong cash position and through the recently announced $200 million credit facility, we believe the best way to return value to our shareholders is through repurchasing our shares at this time," concluded Mr. Hagan. “
I am currently Long NTRI calls.
Tuesday, December 25, 2007
Why I bought Wellcare Health Plans – WCG
We all know the story… October 24th Wellcare is raided by every state and federal agency. Investors & Mutual Funds hear the words fraud and run for the exits.
On December 10th, Bruce Berkowitz of Fairholme Capital Management filed a SC 13G showing ownership of 17,465,200 (43% of the outstanding shares). As of their 3rd quarter 13F-HR they didn’t show any holdings in WCG. If this guy is willing to put around $700 million into WCG then I think I can risk a few thousand on it. See www.sec.gov
Notable Calls mentioned upgrades by CIBC & Piper Jaffray which never really mean anything because they are only giving it price targets of $60 & $66. The stock had 52 week low of $55.56 going into the Oct 25th crash!
The reason WCG doesn’t get the same volatility of an LDK is because with LDK they gave us a timeframe of when the investigation will be over. With WCG, neither the company nor the state has given us a time frame. In the past month the only excitement was a rumor that they were nearing a settlement and then on Dec 17 a specialist pushed the wrong button and unloaded 250,000 shares down to $37.50 which brought the day traders back in for a day.
Meanwhile the only thing know to the public is that a former employee has filed a whistleblower lawsuit. I recall reading somewhere that the lawsuit is sealed and the company has no idea what they are investigating. The Wall Street Journal states that the raid was because of $35 Million in fraud over a period of 5 years. Based on 40 million shares outstanding that comes to about one dollar per share.
Disclosure: Author is currently long WCG Call Options
On December 10th, Bruce Berkowitz of Fairholme Capital Management filed a SC 13G showing ownership of 17,465,200 (43% of the outstanding shares). As of their 3rd quarter 13F-HR they didn’t show any holdings in WCG. If this guy is willing to put around $700 million into WCG then I think I can risk a few thousand on it. See www.sec.gov
Notable Calls mentioned upgrades by CIBC & Piper Jaffray which never really mean anything because they are only giving it price targets of $60 & $66. The stock had 52 week low of $55.56 going into the Oct 25th crash!
The reason WCG doesn’t get the same volatility of an LDK is because with LDK they gave us a timeframe of when the investigation will be over. With WCG, neither the company nor the state has given us a time frame. In the past month the only excitement was a rumor that they were nearing a settlement and then on Dec 17 a specialist pushed the wrong button and unloaded 250,000 shares down to $37.50 which brought the day traders back in for a day.
Meanwhile the only thing know to the public is that a former employee has filed a whistleblower lawsuit. I recall reading somewhere that the lawsuit is sealed and the company has no idea what they are investigating. The Wall Street Journal states that the raid was because of $35 Million in fraud over a period of 5 years. Based on 40 million shares outstanding that comes to about one dollar per share.
Disclosure: Author is currently long WCG Call Options
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