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IT Industry May Slump Until 2010
Eventhough we are melting down.... this is a great period for the long term investor to continue accumulating steadily.
Ceradyne: Tremendous Growth with Major Risks
Credit Cards and Exchanges: The Only Safe Ways to Play the Financials
Dryshippers: A Buy or a Sell?
Top 5 Stock Picks for September
I thought AUTH was expensive even at its current lows, but man, I never thought it would drop this much in one day. I feel for you, I've had my share of micro-caps dropping more than half in a short-time -this truly sucks.
Given the drop and the potential risk of losing one of their biggest customers, I am curious to know from you, is this an over reaction or was this drop well justified?
Buy-Don't Buy?
Five Retailers for Falling Gas Prices
> CMG is far from cheap with a forward P/E of 24 and a EV/EBITDA of 13.25
> DKS is probably achieving cheap status and has a solid business model and OK balance sheet. But much of its diversified inventory makes it susceptible to consumer discretionary spending. I would consider buying if it drops another 15-20% as a margin of safety.
> SHLD - There is not much of retail business model here. The retail experience sucks and if you've been to a Kmart lately you'd think you just walked in to a Bloomies because it's so pricey. Lampert is clearly way above his head on this one, he is not a retailer. The real estate angle on this one is not good enough reason to buy.
> KONA - A want to sell everything sushi/pizza/burger/tac... with a twist of hawaiian restaurant. No thanks. BWLD yes.
> JMBA - Total speculation. Put your Vegas money on this one and be ready to hold for 5 years.
The Case for Jamba Juice
While I concur with some of your points, most of your points are too anecdotal or tactical to make a case for Jamba either way.
There is a lot of pessimism built into the stock, at this level, the numbers don't mean much, the fact that it trades below book is meaningless, there are lots of micro-caps that fit that profile (e.g., VIMC, FMD come to mind).
Nonetheless, I think it comes down to three things:
Unique Value Proposition (UVP): The fact that MCD, SBUX, Dunkin, and everyone else has jumped into the smoothie business simply validates the Product category and exposes more people to the smoothie concept. Competition is alive and well, it may be in very fragmented market but it is there, and lets not forget all the near perfect substitutes in the ready to drink market. So the question is can Jamba create a UVP that can help differentiate itself and help grow their biz. model. My answer is maybe. I think serving quality drinks is a great start, but they have a bit to go in the in-store experience, your example of the 6min. brings to light the in-store issue.
Management: Contrary to other's opinion, I think management is quite competent. Their marketing is stellar, they understand operations and are lasered focus on creative a memorable customer experience so that they increase customer frequency (a key metric). Scoring the Nestle distribution deal in the RTD market by leveraging their brand was a stroke of genius. They are keenly aware of service, throughput, sizing/pricing and are working hard on fixing them. Unfortunately, that leaves little time and money to respond to indiv. shareholder letters. Judging Management responsiveness by the fact that they did not respond to your letter is a bit... petty.
Profitability: It is absolutely critical for Jamba to figure out how to make money on a $2.95 drink and still fulfill the brand promise and deliver a UVP. The scalability of the business, the mass market appeal, and most importantly the ability to make money over the long haul rests in making the $2.95 drink work for the business. This is where the futures market could come into play, along with some tight controls over operations and cost containment.
Bottomline, we are clearly in long-term speculation territory. At the next earnings meeting, pay attention to the three things above, everything else is short-term noise.
Breaking Up With Jamba Juice
Who knows, we could be looking at the next RIMM, circa Sep 30, 2002.
Breaking Up With Jamba Juice
In my view at this stage, it is less about the numbers (because there are several metrics that could help you justify goin in from a deep value perspective); and more about the strategy, business drivers and their ability to execute on that strategy.
Nonetheless, the two numbers that are worth keeping attention are Profitability and Cash Flow. It will be specially interesting to hear what they are doing about Profitability (or whether the existing plan is working to keep them above water) and their plan to generate FCF.
Aside from that, these are the things that will make or break the company or are things that you need to consider to determine whether to invest in JMBA or not.
PROS
A Strong Brand - You cannot discount their position in the market, they are truly the #1 brand in the marketplace.
Their product as a valid category - SBUX, Dunkin Donuts, MCD are all jumping into the smoothie market. With the possible exception of dunkin donuts, i think they are all going to fail, but along the way they would've introduced a broader market into the product category.
Nestle Distribution: This is a limited distribution agreement at the moment, but if it expands nationwide or internationally, it could certainly pave the way for JMBA to become a national brand both as a retail out and in-store
Management - To date, their management has proven very competent. They are good marketers and good operators. For good or bad, they are focused on execution and not the stock price.
CONS
> Cost of raw materials -the rise in milk, fruit and just about everything else that goes into their drinks. With cost of goods going up their margins are continually being squeezed. This is the one that I think is the hardest to solve and the one that bothers me the most because it affects their entire business model.
> The California Economy - Their concentration in CA makes them particularly suspectible to its economy. If you believe CA will whether out the real estate slump, Jamba will do well.
> Price Point -Their price points may be to high to make Jamba a truly mass-market product. Their concept is more like a Fudruckers than a McDonald's in the burger space. It will interesting to see how they do with their $2.95 drink offer.
Two closing toughts, if you put money in, go into it with a five year horizon, without any regard of what happens in between. Obviously Greg Gerber the writer of the original article had a much shorter time horizon and decided to .
AuthenTec Earnings Highlights: Record Sales, Continued Execution
I've had AUTH on my watch list since the beginning of the year. I've seen it drop about 35% since. However, after yesterday's stellar earnings announcement, I am scratching my head wondering why the big sell off today. Do you have any insight into why the market reacted so negatively to their quarterly earnings.
Are the big boys seeing something that we are not. Any insight would be greatly appreciated.
Mexx
Crocs: It's the Product, Not the Economy
I anticipate the trickling of bad news will continue quarter after quarter and the stock will continue its downward slide.
Crocs: It's the Product, Not the Economy
And do you think that seeing a bunch of medicare patients wearing crocs is going to raise the coolness quotient for the fashion conscious?
Enjoy your "bacteria free shoes..." that is real fashion statement if I every heard one!
Revised Upside Targets for Fannie and Lehman
And if you don't subscribe to his monthly service by 8/1, rates will go up 50%. Yeah right! -I'll check back on 8/2 and will report if you don't raise rates as you said.
Well-Capitalized Regional Banks: The Bottom Is In
Well-Capitalized Regional Banks: The Bottom Is In
The so called "conservative banks" are labeled conservative because they usually increase their loan loss reserves during bad times and often during good times (when they can afford to). The conservative banks will put more money aside than required by the regulators. This is not money that sits in the cash account.
You have to dig much deeper than yahoo's balance sheet numbers to figure out a banks loan loss reserves since it is usually a contra account against the loan asset base. So a bank showing say $1B in loans on their balance sheet could actually have $1.1B in outstanding loans because they have been netted out their loan portfolio by $.1B ($100Million) to account for loan loss reserves.
To determine how a bank's loan portfolio is performing charge offs as a % of loans is a good metric. charge off's for banks tend to be <1%, uptrends in charge offs could be a huge red flag.
Banks that are very profitable can afford to put more money aside for losses. Conservative banks that are very profitable are specially attractive that is why Warren Buffet is a big fan of WFC.
The big unknown in banks today is portfolio values. For banks that relied more heavily on securitization to continue growing, the well has dried up as we have already seen with mortgage companies. Banks that traditionally relied on deposits for funding and held on to their loans have had the infrastructure to service and work their loans will end up fairing much better.
Down the road (I mean, down the road), some banks may end up making a very strong come bank. Those that were too conservative in their loan loss reserves and in valuing their assets during this period of gloom and doom could potentially have write ups and release their excess loan reserves (a windfall to earnings).
Bottomline, banks with conservative loan loss reserve practices, lower charge offs as % of loans, and healthy profit margins stand better chances of surving this crisis -and it is a crisis, not just media hype.