Is Google’s management out of touch with how Google makes money?

I’ve never been blown away by the way Google’s management communicates with shareholders.

  1. The 10-K presents “Cost-per-click” and “aggregate paid clicks”, both of which are terrible metrics.
  2. The shareholder letters largely gloss over Google’s cash cows: its search advertising and display advertising businesses.

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Aeropostale (ARO): Teen titan or turnaround trap?

*Disclosure:  No position in ARO.  I’m not interested in buying at current levels.  This post may be a waste of your time.

After Julian Geiger left Aeropostale, his successor (Thomas Johnson) has managed to run the retailer into the ground.  On August 18, Aeropostale announced that Geiger is returning.  During Geiger’s previous reign, Aeropostale’s revenues went from $123.8M in 1997 to $1,886M in 2009.

Suppose that Geiger returns Aeropostale to its former glory several years from now.  Geiger’s last full fiscal year at the company was 2009 (Geiger officially left in Jan 2010).  In that fiscal year, Aeropostale posted GAAP net income for $149M.  Suppose that Aeropostale makes $149M, achieves a P/E multiple of 15, and has 82M shares outstanding.  The share price would be $27, roughly seven times the current share price of $3.87.  Of course, there are risks and other possible outcomes.  It is likely that Aeropostale will face the same secular headwinds affecting its peers ANF and AEO.  The profitability of all three ‘teen titans’ may be significantly lower several years from now.

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Thoughts on LVNTA, LINTA, LTRPA

Liberty Ventures is currently in the process of spinning off Liberty TripAdvisor Holdings.

  • TripAdvisor shares (normal shares and supervoting shares) will go from Ventures to TripAdvisor Holdings.
  • Holdings will take out a $400M margin loan.
  • Holdings will pay Interactive $350M for BuySeasons.  (EDIT:  This may be wrong.  See the bottom of this post.)  It will hang onto $50M.

I don’t think that Interactive, Ventures, or TripAdvisor will be that attractive.  TripAdvisor has extremely high growth and seems to be a wonderful business.  However, its multiple is very high (a P/E ratio of 66).  I think that Malone may sell his personal stake in TripAdvisor for something cheaper.

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