A recap of ideas on this blog

Here’s a list of ideas I’ve talked about on this blog that could be relevant today.

Mining shorts roundup from Jan 2015 (last year)

COH – $8.5B mkt cap, no issues with borrow – The fundamentals for this company continues to get worse.  I think it’s crazy that Coach fetches a premium multiple relative to KORS despite having a worse CEO and having little upside due to store saturation (once the store count hits a certain level, retailers generally stop growing).

RH – $2.5B mkt cap – So I’ve been flip flopping on this one.  At one point, I tried to guess the timing on this short and thought that waiting would be a good idea.  Now, I am back to thinking that it is a good short.  The issue I see is that RH does not seem to be hitting its numbers.

Secondly, the RH Teen idea seems dumb on its surface as Buzzfeed points out.  Very few teenagers will generate the disposable income needed to buy furniture at RH prices.  Now, rich parents could pay for the furniture.  However, most teenagers aren’t that interested in buying kitschy/classy furniture.  You would prioritize for fancy clothes (to be part of the “in”/”cool” crowd), having your own car, electronics (e.g. Xbox, cell phone), etc. etc.  Status-wise, they compete on having nice clothes and having a nice car.  They aren’t at that stage in life where their house and home furnishings are a status symbol.

From the rich parent’s perspective, you may not want to spend as much on your children because they get rebellious (and less cute) as they get older.  I can see parents willing to spend a lot more money on baby and children’s furniture than teen furniture.  As teenagers grow up, what they really want is a car.  If you love (spoiling) your kid, you buy them a car.  You don’t buy them a $4,400 couch to take selfies on.  Now some rich parents might buy nice furniture for themselves to keep up with the Joneses.  But I think that the RH customer would prioritize for the rooms that guests would see the most: living room, dining room, etc.  The teenager’s bedroom is the room that guests would see the least (out of all the rooms that you can buy RH furniture for).  Somebody with extremely high income would have the means to decorate the entire house, but this is a smaller market than the entire high-end furniture market.

But maybe I am wrong.  Maybe there is a sizable market of rich parents who want to buy expensive teen furniture.

AVID – $280M mkt cap, the borrow should be fine – My short thesis seems to be playing out.  Avid acquired Orad Hi-Tec, a company that seemed suspicious to me.  Unfortunately I haven’t had time to look into Orad, but it could make the short thesis more compelling.

HOLI – $1.02B – The valuation is still high.  Read John Hempton’s 2011 post first, and then mine.

CBPO – $3.43B – The valuation is still high.

Kobex Capital – KXM on the TSX Venture – $25M, this is a long idea – The charlatan insiders have said that they will either (A) liquidate the company soon or (B) find a strategic transaction.  It’s a pile of cash with a potential catalyst.

Ideas that mostly worked out

PVCT – $72M, some borrow issues – While this stock has fallen a lot, I still think it can fall a lot further.  Even if the drug succeeds, anybody can buy it for $30/gallon online.  To purify the drug for medical purposes does not seem difficult.  Their business plan is incredibly bad.

CNIT – $51M, expensive borrow  – This mostly worked out.  I wouldn’t get too cute here especially because of the onerous borrow and risk of buy-ins.  I have covered my short.

*Disclosure:  I hold short positions in some but not all of the stocks mentioned above.  Long Kobex Capital.

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2 thoughts on “A recap of ideas on this blog

  1. Last month Avid announced office closings and layoffs but unlike 2007, 2009 and 2011 they refused to say how many people were fired. Their year end financials conference call is on Tuesday, and in advance of that they just awarded $3m in stock to officers, with half of it going to the CEO.

    Apparently their cashflow is inconsistent because earlier this month they announced a $105 million line with Cerberus Business Finance at approximately 6% with which they are paying off a $35 million loan with KeyBank.

    They’re now pushing out the predicted completion date of their subscription model ‘transformation’ to late 2017 or early 2018.

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